<PAGE>
As filed with the Securities and Exchange Commission on February 18, 1999
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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BUCA, INC.
(Exact name of Registrant as specified in its charter)
----------------
Minnesota 5812 41-1802364
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code
organization) Number)
1300 Nicollet Mall, Suite 3043
Minneapolis, Minnesota 55403
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Joseph P. Micatrotto
President and Chief Executive Officer
BUCA, Inc.
1300 Nicollet Mall, Suite 3043
Minneapolis, Minnesota 55403
(612) 288-2382
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Douglas P. Long, Esq. Jonathan B. Abram, Esq.
Faegre & Benson LLP Dorsey & Whitney LLP
2200 Norwest Center Pillsbury Center South, 20th Floor
90 South Seventh Street 220 South Sixth Street
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
---------------
Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed Maximum
Title of Each Class of Maximum Aggregate Amount of
Securities to be Amount to be Offering Price Offering Registration
Registered Registered(1) Per Share(2) Price(2) Fee
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<S> <C> <C> <C> <C>
Common Stock, $.01 par
value................... 3,047,500 Shares $12.50 $38,093,750 $10,591
</TABLE>
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(1) Includes 397,500 shares of common stock which may be purchased by the
underwriters to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) of the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Agreement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this Prospectus is not complete and may be changed. We may +
+not sell these securities until the Securities and Exchange Commission +
+declares our registration statement effective. This Prospectus is not an +
+offer to sell these securities and is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to completion, dated February 18, 1999
2,650,000 Shares
BUCA, INC.
Common Stock [LOGO]
$ per share
------------------------------------------------------
. BUCA, Inc. is offering . This is our initial public offering and no
2,500,000 shares and public market currently exists for our shares.
selling shareholders
are offering
150,000 shares.
. We anticipate that the . Proposed trading symbol: Nasdaq National
initial public Market--BUCA.
offering price will be
between $10.50 and
$12.50 per share.
----------
This investment involves risk. You should carefully consider the "Risk Factors"
beginning on page 7.
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------------------------------------------------------
<TABLE>
<CAPTION>
Per
Share Total
------- ------------
<S> <C> <C>
Public Offering Price..................................... $ $
Underwriting Discount.....................................
Proceeds to BUCA, Inc. ...................................
Proceeds to Selling Shareholders..........................
</TABLE>
------------------------------------------------------
------------------------------------------------------
The underwriters have a 30-day option to purchase up to 397,500 additional
shares of common stock from us and a selling shareholder to cover over-
allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved of anyone's investment in these securities or
determined if this Prospectus is truthful or complete. Any representation to
the contrary is a criminal offense.
Piper Jaffray Inc. NationsBanc Montgomery
Securities LLC
The date of this Prospectus is , 1999.
<PAGE>
BUCA (R) and BUCA di BEPPO(R), as well as certain additional names and logos
appearing in this Prospectus, are registered trademarks of BUCA, Inc. This
Prospectus also includes names and trademarks of other companies.
2
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................................................. 4
Risk Factors........................................................ 7
Use of Proceeds..................................................... 13
Dividend Policy..................................................... 13
Capitalization...................................................... 14
Dilution............................................................ 15
Selected Consolidated Financial Data................................ 16
Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 18
Business............................................................ 25
Management.......................................................... 34
Certain Relationships and Related Transactions...................... 40
Principal and Selling Shareholders.................................. 42
Shares Eligible for Future Sale..................................... 43
Description of Capital Stock........................................ 44
Underwriting........................................................ 48
Legal Matters....................................................... 50
Experts............................................................. 50
Where You Can Find More Information................................. 50
Index to Consolidated Financial Statements.......................... F-1
</TABLE>
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You should rely only on the information contained in this Prospectus. We have
not, and the underwriters have not, authorized any other person to provide you
with different information. This Prospectus is not an offer to sell, nor is it
seeking an offer to buy, these securities in any state where the offer or sale
is not permitted. The information in this Prospectus is complete and accurate
as of the date on the front cover, but the information may have changed since
that date.
3
<PAGE>
SUMMARY
The items in the following summary are described in more detail later in this
Prospectus. This summary provides an overview of selected information and does
not contain all the information you should consider. Therefore, you should also
read the more detailed information set out in this Prospectus, including the
financial statements.
Business of BUCA
BUCA, Inc. owns and operates 20 full service, dinner-only restaurants under the
name BUCA di BEPPO. Our restaurants offer high quality, immigrant Southern
Italian cuisine served family-style in large portions in a fun and energetic
atmosphere that parodies the decor and ambiance of post-War Italian/American
restaurants. Our food is based on authentic family recipes enjoyed for
generations in the villages of Southern Italy and then adapted to American
ingredients. Our menu features dishes such as the BUCA di BEPPO 1893 salad,
chicken cacciatore, spaghetti with half-pound meat balls, eggplant parmigiana,
ravioli al pomodoro, veal marsala, garlic mashed potatoes, pizza arrabiatta and
tiramisu. These dishes, often seasoned with garlic and served with vine-ripened
tomatoes, communicate the pure, powerful flavors of the immigrant Southern
Italian kitchen. Our oversized portions, served family-style on large platters,
are designed to overwhelm guests with an abundance of high quality food. In
family-style serving, each item is shared by the entire table, which encourages
guests to interact and enjoy the meal together. A full service bar featuring
affordable, quality Italian table wines complements our menu. We believe that
the generous portions, combined with an average check per guest of
approximately $20.00, including beverages, offer our guests exceptional value.
We reinforce this value by encouraging guests to take home their extra food in
our logo-bearing BUCA bags, allowing guests to enjoy an additional BUCA meal at
home.
Our BUCA di BEPPO restaurants irreverently exaggerate the cliches of post-War
Italian/American restaurants found in Little Italy in New York City, the North
End of Boston and other Italian neighborhoods of large U.S. cities. We design
our restaurants to be a fun, high-energy destination. The layout of each BUCA
di BEPPO restaurant in a market is unique, which reinforces our image as a
collection of neighborhood restaurants. Restaurant interiors are divided into a
number of distinct rooms with walls covered by hundreds of vintage photos of
Italian families and celebrities, Christmas lights displayed year-round and
other icons of Italian heritage. Boxes of pasta, cans of roasted peppers and
jugs of wine fill window sills and shelves throughout our restaurants. Lively
music from classic artists such as Frank Sinatra and Dean Martin adds to the
fun and energetic atmosphere. Restaurant exteriors feature flashing bare bulb
signage, statuary and humorous neon signs promising "elegant dining" and "air
conditioning." Our food, decor and family-style servings all promote a fun,
celebratory and socially interactive dining experience that emulates a
traditional Italian/American evening meal.
From the moment a guest walks in the front door, the BUCA experience is
enhanced by a high level of customer service provided by our knowledgeable,
energetic staff. Servers are trained to introduce guests to the BUCA di BEPPO
concept, explain the menu and encourage guest interaction. The restaurant's
general manager, known as the Paisano Partner, also interacts with guests to
make them feel welcome and is responsible for ensuring their satisfaction with
the dining experience.
We believe that our restaurants provide superior unit level economics. In
fiscal 1998, our mature restaurants (those with at least two full years of
operating history) generated average restaurant sales of approximately $3.0
million and average cash flow of approximately $693,000, or 23.5% of restaurant
sales. We believe that our Paisano Partners Program, in which Paisanos purchase
stock and receive a significant portion of their annual cash compensation based
on restaurant cash flow, motivates Paisanos to achieve significantly greater
operating efficiencies and contributes to our superior unit level economics. In
fiscal 1998, our total cash investment per restaurant averaged $1.4 million,
excluding average preopening costs per restaurant of approximately $195,000.
Our current restaurants range in size from approximately 4,500 to 10,000 square
feet, and have approximately 170 to 375 seats. We anticipate that future
restaurants will typically range in size from 7,000 to 9,000 square feet and
have from 250 to 350 seats.
We are pursuing a rapid but disciplined expansion strategy. Our objective is to
become the dominant family-style, immigrant Southern Italian restaurant in each
of our markets. We focus primarily on metropolitan markets
4
<PAGE>
with a population of at least 800,000 that can support multiple BUCA di BEPPO
restaurants. This focus allows us to build brand awareness and realize
operating and management efficiencies within each market. We intend to continue
our expansion throughout the United States with 13 openings planned in fiscal
1999, of which one has already opened, seven are under construction and the
remaining five have signed leases. By the end of fiscal 1999, we plan to have
32 restaurants open in at least 17 markets.
The BUCA di BEPPO concept was created by Philip A. Roberts, who opened the
first BUCA di BEPPO restaurant in July 1993. Joseph P. Micatrotto, a second
generation Italian immigrant, joined BUCA as President and Chief Executive
Officer in 1996 to lead our national expansion. Since Mr. Roberts opened the
first BUCA di BEPPO restaurant, the innovation of this concept has attracted
national attention as evidenced by national awards, including a 1998 "Hot
Concepts!" award from Nation's Restaurant News, and awards in all of our local
markets.
Office Location
We were incorporated on December 2, 1994 as a Minnesota corporation. Our
principal executive offices are located at 1300 Nicollet Mall, Minneapolis,
Minnesota 55403 and our telephone number is (612) 288-2382.
Risk Factors
You should carefully consider the "Risk Factors" described immediately
following this summary.
The Offering
Common stock offered:
<TABLE>
<S> <C>
By BUCA, Inc...................... 2,500,000 shares
By selling shareholders........... 150,000 shares
Total......................... 2,650,000 shares
Common stock outstanding after the offer-
ing...................................... 9,559,557 shares(/1/)
Offering price............................ $ per share
Use of proceeds........................... To fund restaurant
development, repay bank debt
and for general corporate purposes.
Proposed Nasdaq National Market symbol.... BUCA
</TABLE>
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(/1/) Based on the number of shares outstanding as of January 31, 1999.
Includes the issuance of 4,545,434 shares of common stock in connection with
the conversion of all outstanding shares of preferred stock upon the closing
of this offering. Excludes (i) 1,050,154 shares of common stock issuable upon
exercise of options outstanding as of the date of this Prospectus (at a
weighted average exercise price of $6.96 per share); (ii) 397,859 shares of
common stock issuable upon exercise of warrants outstanding as of the date of
this Prospectus (at a weighted average exercise price of $2.05 per share); and
(iii) 257,971 shares of common stock issuable (from and after the completion
of this offering) upon conversion of subordinated debt outstanding as of the
date of this Prospectus, assuming a public offering price of $11.50 per share.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED(/1/)
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DECEMBER 31, DECEMBER 28,
1996 1997 DECEMBER 27, 1998
------------ ------------ ---------------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OP-
ERATIONS DATA:
Restaurant sales.............. $11,316 $19,030 $38,483
Income from restaurant
operations................... 1,499 2,501 5,581
Operating loss................ (919) (2,399) (1,893)
Net loss...................... (1,113) (3,319) (2,946)
Net loss applicable to common
stock........................ (4,800) (5,305) (5,135)
Net loss per common share--
basic and diluted............ $ (1.96) $ (2.13) $ (2.04)
Common shares assumed
outstanding--basic and
diluted...................... 2,445 2,490 2,512
Pro forma net loss per common
share--basic and
diluted(/2/)................. $ (.42)
Common shares assumed
outstanding pro forma--basic
and diluted(/2/)............. 7,060
OPERATING DATA:
Comparable restaurant sales
increase(/3/)................ 0.2% 9.4% 13.5%
Average weekly restaurant
sales........................ $47,343 $48,307 $52,971
Restaurants open at end of
period....................... 6 11 19
<CAPTION>
DECEMBER 27, 1998
-----------------------------------------------
PRO PRO FORMA
ACTUAL FORMA(/2/) AS ADJUSTED(/2/)(/4/)
------------ ------------ ---------------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents..... $ 6,576 $ 6,576 $25,451
Total assets.................. 37,560 37,560 63,135
Total debt, including current
portion...................... 7,866 9,266 466
Redeemable stock(/5/)......... 36,973 -- --
Common shareholders'
(deficit)/equity............. (13,540) 22,033 49,408
</TABLE>
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(/1/)We changed our fiscal year-end from December 31 to the last Sunday in
December, beginning with the fiscal year ended December 28, 1997.
(/2/)Pro forma information gives effect, as of and for the period ending
December 27, 1998, to (i) the issuance of shares of common stock in
connection with the conversion of all outstanding shares of preferred
stock upon the closing of this offering; (ii) the termination of our
obligation to redeem shares of common stock held in the Parasole Employee
Stock Ownership Trust and the BUCA Employee Stock Ownership Plan (the
"Redeemable Common Stock") upon the closing of this offering; and (iii)
the repayment of outstanding subordinated and bank debt in the amount of
$6,600,000 with borrowings of $7,000,000 under our credit facility with
U.S. Bank.
(/3/)The calculation of comparable restaurant sales increase includes
restaurants open for 12 full calendar months, as adjusted to provide
comparable 52-week fiscal years.
(/4/)As adjusted to give effect as of December 27, 1998 to (i) our receipt of
the estimated net proceeds of $25,875,000 from the sale of 2,500,000
shares of common stock offered by us at an assumed initial public offering
price of $11.50 per share; (ii) application of a portion of the net
proceeds of this offering to repay amounts outstanding under our credit
facility with U.S. Bank and the resulting write-off of deferred financing
costs; and (iii) the special non-cash charge of approximately $1,300,000
related to the discount applicable to the right of holders of $1,780,000
of outstanding subordinated debt of BUCA to convert such debt into common
stock after the closing of this offering.
(/5/)Includes Series A, Series B and Series C preferred stock and the
Redeemable Common Stock.
---------------
Except as otherwise noted, all information in this Prospectus assumes (i) no
exercise of the underwriters' over-allotment option, (ii) no exercise of
options or warrants to purchase shares of common stock or the conversion of
outstanding convertible subordinated debt into shares of common stock and (iii)
the issuance of shares of common stock in connection with the conversion of all
outstanding shares of preferred stock upon the closing of this offering.
Information in this Prospectus also gives effect to a two-for-three reverse
split of the common stock effected on February 17, 1999.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors before you decide to
buy our common stock. You should also consider the other information in this
Prospectus. If any of the following risks actually occur, our business,
financial condition, operating results or cash flows, could be materially
adversely affected. This could cause the trading price of our common stock to
decline, and you may lose part or all of your investment.
This Prospectus also contains certain forward-looking statements that involve
risks and uncertainties. These statements relate to our future plans,
objectives, expectations and intentions. These statements may be identified by
the use of words such as "expects," "anticipates," "intends," "plans" and
similar expressions. Our actual results could differ materially from those
discussed in these statements. Factors that could contribute to these
differences include those discussed below and elsewhere in this Prospectus.
We May Continue to Incur Net Losses
Since we were formed, we have incurred net losses of approximately $7.6 million
through the end of fiscal 1998, primarily due to restaurant development and the
costs of hiring senior management to develop and implement our expansion
strategy. We intend to continue to expend significant financial and management
resources on the development of additional restaurants. We cannot predict
whether we will be able to achieve or sustain revenue growth, profitability or
positive cash flow in the future. See "Selected Consolidated Financial Data"
and "Management's Discussion and Analysis of Financial Conditions and Results
of Operations."
We Face Uncertainties as We Expand Operations
To continue to grow, we must open new BUCA di BEPPO restaurants on a timely and
profitable basis. We expanded from 11 restaurants at the end of fiscal 1997 to
19 restaurants at the end of fiscal 1998. We expect to open an additional 13
restaurants during fiscal 1999, one of which is already open. Our ability to
expand successfully will depend on a number of factors, some of which are
beyond our control, including the:
.identification and availability of suitable restaurant sites;
.competition for restaurant sites;
.negotiation of favorable leases;
.timely development in certain cases of commercial, residential, street
or highway construction near our restaurants;
.management of construction and development costs of new restaurants;
.securing required governmental approvals and permits;
.recruitment of qualified operating personnel (particularly Paisano
Partners and kitchen managers);
.competition in new markets; and
.general economic conditions.
We have experienced delays in restaurant openings from time to time and may
experience delays in the future. Delays or failures in opening new restaurants
could materially adversely affect our business, financial condition, operating
results or cash flows.
In addition, we contemplate entering new markets in which we have no operating
experience. These new markets may have different demographic characteristics,
competitive conditions, consumer tastes and discretionary spending
7
<PAGE>
patterns than our existing markets, which may cause our new restaurants to be
less successful in these new markets than in our existing markets.
We May Not Be Able to Achieve and Manage Planned Expansion
We face many business risks associated with rapidly growing companies,
including the risk that our existing management, information systems and
financial controls will be inadequate to support our planned expansion. We
cannot predict whether we will be able to respond on a timely basis to all of
the changing demands that our planned expansion will impose on management and
these systems and controls. If we fail to continue to improve management,
information systems and financial controls or encounter unexpected difficulties
during expansion, our business, financial condition, operating results or cash
flows could be materially adversely affected.
Furthermore, we may from time to time seek to acquire the operations of other
restaurants to expand the BUCA di BEPPO concept. To do so successfully, we
would need to identify suitable acquisition candidates, obtain financing on
acceptable terms, and negotiate acceptable acquisition terms. Even if we are
successful in making acquisitions, they may have a material adverse effect on
our operating results, particularly in the fiscal quarters immediately
following the completion of an acquisition, while the acquisition is being
integrated into our operations. We do not currently have any definitive
agreements, arrangements or understandings regarding any particular
acquisition.
We Will Experience Fluctuations in Operating Results
Our operating results will fluctuate significantly because of several factors,
including the timing of new restaurant openings and related expenses,
profitability of new restaurants, increases or decreases in comparable
restaurant sales, general economic conditions, consumer confidence in the
economy, changes in consumer preferences, competitive factors and weather
conditions. In the past, our preopening costs have varied significantly from
quarter to quarter primarily due to the timing of restaurant openings. We
typically incur most preopening costs for a new restaurant within the two
months immediately preceding, and the month of, its opening. In addition, our
labor and operating costs for a newly opened restaurant during the first three
to six months of operation are materially greater than what can be expected
after that time, both in aggregate dollars and as a percentage of restaurant
sales. Accordingly, the volume and timing of new restaurant openings in any
quarter has had and is expected to continue to have a significant impact on
quarterly preopening costs and labor and direct and occupancy costs. We
anticipate that preopening costs, labor and direct and occupancy costs will
significantly increase as a percent of restaurant sales in the second and third
quarters of fiscal 1999. Due to these factors, results for a quarter may not
indicate results to be expected for any other quarter or for a full fiscal
year. In the future, results of operations may fall below the expectations of
public market analysts and investors. In that event, the price of our common
stock would likely decrease. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
We Have Significant Future Capital Needs and Availability of Additional Funding
is Uncertain
We will need substantial capital to finance our expansion plans, which require
funds for capital expenditures, preopening costs and potential initial
operating losses related to new restaurant openings. We estimate that capital
expenditures during fiscal 1999 will be approximately $17.0 million and that
capital expenditures during future years will exceed this amount. In addition,
we have experienced negative cash flow from operations of approximately
$169,000 in fiscal 1996 and $1.5 million in fiscal 1997, while experiencing a
positive cash flow from operations of approximately $338,000 in fiscal 1998.
Although we expect that the net proceeds of this offering, combined with other
resources, will be sufficient to fund our capital requirements through at least
the next 12 months, this may not be the case. We may be required to seek
additional capital earlier than anticipated if:
.future actual cash flows from operations fail to meet our expectations;
.costs and capital expenditures for new restaurant development exceed
anticipated amounts;
.we are unable to obtain sale-leaseback financing of certain
restaurants;
.landlord contributions, loans and other incentives are lower than
expected; or
.we are required to reduce prices to respond to competitive pressures.
8
<PAGE>
In the future, we will require additional funding for our expansion plans. We
may not be able to obtain additional financing on acceptable terms. If adequate
funds are not available, we will have to curtail projected growth, which could
materially adversely affect our business, financial condition, operating
results or cash flows. Moreover, if we issue additional equity securities, your
holdings may be diluted. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
We Face Risks Because of Our Small Restaurant Base
We currently operate 20 restaurants, nine of which opened in the last 12
months. Due to our small restaurant base, poor operating results at any one or
more restaurants could materially adversely affect our business, financial
condition, operating results or cash flows. Our operating results achieved to
date may not be indicative of our future operating results with a larger number
of restaurants.
Our Operations are Susceptible to Changes in Food Costs
Our profitability depends in part on our ability to anticipate and react to
changes in food costs. We rely on SYSCO Corporation, a national food
distributor, as the primary distributor of our food. Although we believe that
alternative distribution sources are available, any increase in distribution
prices or failure to perform by SYSCO could cause our food costs to increase.
Further, various factors beyond our control, including adverse weather
conditions and governmental regulation, may affect our food costs. We cannot
predict whether we will be able to anticipate and react to changing food costs
by adjusting our purchasing practices and menu prices, and a failure to do so
could materially adversely affect our business, financial condition, operating
results or cash flows.
We Depend Upon Our Key Personnel
Our future success significantly depends on the continued services and
performance of our senior management, particularly Joseph P. Micatrotto, our
President and Chief Executive Officer, and Greg A. Gadel, our Chief Financial
Officer. Our performance also depends on our ability to motivate and retain our
other executive officers and key employees. Competition for these employees is
intense. The loss of the services of members of our senior management or the
inability to attract additional personnel as needed could materially adversely
affect our business, financial condition, operating results or cash flows. See
"Management."
Changes in Consumer Preferences or Discretionary Consumer Spending Could
Negatively Impact Our Results
Our restaurants feature immigrant Southern Italian cuisine served family-style.
Our continued success depends, in part, upon the popularity of this type of
Italian cuisine and this style of informal dining. Shifts in consumer
preferences away from our cuisine or dining style could materially adversely
affect our future profitability. Also, our success depends to a significant
extent on numerous factors affecting discretionary consumer spending, including
economic conditions, disposable consumer income and consumer confidence.
Adverse changes in these factors could reduce guest traffic or impose practical
limits on pricing, either of which could materially adversely affect our
business, financial condition, operating results or cash flows.
We Operate in a Highly Competitive Industry
The restaurant industry is highly competitive. We compete on the basis of the
taste, quality, and price of food offered, guest service, ambiance and overall
dining experience. Our competitors include a large and diverse group of
restaurant chains and individual restaurants, serving both Italian and non-
Italian cuisine. The family-style Italian sector of the restaurant industry is
growing and is attracting an increasing number of competitors. These
competitors range from independent local operators that have opened restaurants
in various markets, to well-capitalized national restaurant companies. Many of
these competitors have substantially greater financial resources and operating
histories than we do. We will likely face direct competition in each of the
markets we enter. See "Business--Competition."
9
<PAGE>
We Could Face Potential Labor Shortages
Our success depends in part upon our ability to attract, motivate and retain a
sufficient number of qualified employees, including restaurant managers,
kitchen staff and wait staff, necessary to keep pace with our expansion
schedule. Qualified individuals needed to fill these positions are in short
supply in certain areas, and the inability to recruit and retain such
individuals may delay the planned openings of new restaurants or result in high
employee turnover in existing restaurants which could have a material adverse
effect on our business, financial condition, operating results or cash flows.
Additionally, competition for qualified employees could require us to pay
higher wages to attract sufficient employees, which could result in higher
labor costs.
We are Subject to Extensive Government Regulation
The restaurant business is subject to various federal, state and local
government regulations, including those relating to the sale of food and
alcoholic beverages. While at this time we have been able to obtain and
maintain necessary governmental licenses, permits and approvals, the failure to
maintain such licenses, permits and approvals, including food and liquor
licenses, could have a material adverse effect on our operating results.
Difficulties or failure in obtaining required licenses and approvals could
result in delaying or canceling the opening of new restaurants. Local
authorities may suspend or deny renewal of our food and liquor licenses if they
determine that our conduct does not meet the standards for initial grant or
renewal. Although we have satisfied restaurant and liquor licensing for our
existing restaurants, we cannot predict whether we will be able to maintain
these approvals or obtain these approvals at future locations.
We also are subject to certain states' "dram shop" statutes. These statutes
generally provide a person injured by an intoxicated person the right to
recover damages from an establishment that served alcoholic beverages to the
intoxicated person. We carry liquor liability coverage as part of our existing
comprehensive general liability insurance. The imposition, however, of a
judgment substantially in excess of our insurance coverage, or our failure to
obtain and maintain insurance coverage, could materially and adversely affect
us.
Various federal and state labor laws govern our relationship with our employees
and affect operating costs. These laws include minimum wage requirements,
overtime, unemployment tax rates, workers' compensation rates, citizenship
requirements and sales taxes. Significant additional government-imposed
increases in minimum wages, paid leaves of absence and mandated health
benefits, or increased tax reporting and tax payment requirements for employees
who receive gratuities could materially adversely affect us. Furthermore,
changes in the laws of certain states, or a reduction in the number of states
that allow tips to be credited toward minimum wage requirements also could
materially adversely affect us. In addition, the Federal Americans with
Disabilities Act prohibits discrimination on the basis of disability in public
accomodations and employment. Although our restaurants are designed to be
accessible to the disabled, we could be required to make modifications to our
restaurants to provide service to, or make reasonable accomodation for,
disabled persons. See "Business--Government Regulation."
We Face Risk of Litigation
We are from time to time the subject of complaints or litigation from guests
alleging illness, injury or other food quality, health or operational concerns.
Adverse publicity resulting from these allegations may materially adversely
affect us and our restaurants, regardless of whether the allegations are valid
or whether BUCA is liable. In addition, employee claims against us based on,
among other things, discrimination, harrassment or wrongful termination may
divert our financial and management resources that would otherwise be used to
benefit the future performance of our operations. We have been subject to these
employee claims from time to time, and a significant increase in the number of
these claims or any increase in the number of successful claims could
materially adversely affect our business, financial condition, operating
results or cash flows.
We Face Uncertainty Regarding Risk of Year 2000 Compliance
BUCA and third parties with which we do business, rely on numerous computer
programs for day to day operations. We cannot predict whether we will be able
to effectively address our year 2000 issues in a timely and
10
<PAGE>
cost-efficient manner and without interruption to our business. We have
initiated discussions with our significant suppliers regarding their plans to
solve year 2000 issues where their systems interface with our systems or
otherwise impact our operations. We cannot predict whether year 2000
difficulties encountered by our suppliers and other third parties with whom we
do business will have a material adverse impact on our business, financial
conditions, operating results or cash flows. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Impact of Year
2000."
We Could Face Consolidated Tax Group Liability
Prior to our spin-off in late fiscal 1996, we were a member of the consolidated
tax group of Parasole Restaurant Holdings, Inc. Under the Internal Revenue
Code, as a former member of the consolidated tax group, we could be held liable
for unpaid federal tax liabilities, if any, of the consolidated tax group
through the end of 1996 in the event of nonpayment by Parasole.
Our Existing Shareholders Will Retain Significant Control
Upon completion of this offering, our executive officers, directors and
principal shareholders and their affiliates will own approximately 56.9% of the
outstanding shares of common stock (or 54.5% if the underwriters' over-
allotment option is completely exercised). As a result, they may be able to
control us and direct our affairs, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
also may delay, defer or prevent a change in control of BUCA, and make some
transactions more difficult or impossible without the support of these
shareholders. These transactions might include proxy contests, mergers, tender
offers, open market purchase programs or other purchases of common stock that
could give our shareholders the opportunity to realize a premium over the then
prevailing market price for shares of common stock. See "Management" and
"Principal and Selling Shareholders."
Our Common Stock May Not Have a Public Market
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of our common stock will be determined by
negotiations among us, the selling shareholders and the underwriters. We cannot
predict whether an active trading market for the common stock will develop or
continue after the completion of this offering or whether the market price of
our common stock will decline below the initial public offering price. See
"Underwriting."
Our Common Stock Price May Be Volatile
The market price of our common stock could fluctuate significantly in response
to quarterly operating results and other factors, including many over which we
have no control and that may not be directly related to us. The stock market
has from time to time experienced extreme price and volume fluctuations, which
have often been unrelated or disproportionate to the operating performance of
particular companies. Fluctuations or decreases in the trading price of our
common stock may adversely affect your ability to trade your shares. In
addition, such fluctuations could adversely affect our ability to raise capital
through future equity financings. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Results of Operations."
A Significant Number of Shares Will Be Eligible for Future Sale Either in the
Market or Through Exercise of Registration Rights
The 2,650,000 shares of common stock sold in this offering (and any shares sold
upon exercise of the Underwriters' over-allotment option) will be freely
tradable without restriction under the Securities Act of 1933, as amended,
except for any such shares held by our executive officers, directors and
certain principal shareholders ("affiliates"). The remaining 6,909,557 shares
of common stock are "restricted shares" within the meaning of Rule 144 under
the Securities Act and sales of these shares are subject to restrictions under
the Securities Act. Of these restricted shares, are subject to lock-up
agreements under which the holders have agreed not to sell or otherwise dispose
of any of their shares for a period of 180 days after the date of this
Prospectus without the prior written consent of Piper Jaffray Inc. In its sole
discretion and at any time without notice, Piper Jaffray may release all or
11
<PAGE>
any portion of the shares subject to the lock-up agreements. All of the
restricted shares subject to lock-up agreements will become available for sale
in the public market immediately following expiration of the 180-day lock-up
period, subject (to the extent applicable) to the volume and other limitations
of Rule 144 or Rule 701 under the Securities Act. Upon closing of this offering
restricted shares not subject to lock-up agreements or contractual
restrictions will become available for sale in the public market, subject to
the limitations of Rule 144. In addition, beginning 90 days after the date of
this Prospectus, restricted shares not subject to lock-up agreements or
contractual restrictions will become available for sale in the public market,
subject to the volume and other limitations of Rule 144. In addition, after
expiration of the lock-up period, some of our securityholders have the
contractual right to require us to register some of their shares of common
stock for future sale.
We intend to file a registration statement on Form S-8 covering all shares of
common stock issuable upon exercise of stock options in effect on the date of
this Prospectus and stock options or other stock rights to be granted under our
stock option plans. Upon this registration on Form S-8, an additional 1,034,154
shares of common stock, together with any additional shares of common stock
that will be issuable pursuant to stock options or other stock rights granted
in the future under our stock option plans, will be eligible for sale in the
public market.
Sales of substantial amounts of common stock in the public market, or the
perception that these sales may occur, could adversely affect the prevailing
market price of our common stock and our ability to raise capital through a
public offering of our equity securities. See "Shares Eligible for Future
Sale," "Principal and Selling Shareholders" and "Description of Capital Stock."
Your Holdings Will Be Diluted
The price that we are offering the shares to you in this offering is
substantially higher than the net tangible book value per share of common
stock. You will therefore incur immediate and substantial dilution of $6.41 per
share (assuming an initial public offering price of $11.50 per share). See
"Dilution."
12
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale of the 2,500,000 shares of common stock
offered by us at an assumed initial public offering price of $11.50 per share
are estimated to be approximately $25,875,000, after deducting the underwriting
discount and estimated offering expenses (approximately $29,955,000 if the
over-allotment option granted by us is exercised in full). We will not receive
any of the proceeds from the sale of shares of common stock by the selling
shareholders.
We intend to use approximately $17.0 million of the net proceeds of this
offering to finance the development of new BUCA di BEPPO restaurants during the
next twelve months and $7.0 million to retire existing bank debt. Our agreement
with our commercial lender requires us to (i) repay all amounts outstanding
under our $7.0 million term loan with the lender, which bears interest at 9.63%
and matures on December 31, 2000, and (ii) to repay all amounts outstanding in
excess of $3.0 million under our revolving line of credit with the lender,
which bears interest at lender's prevailing reference rate plus 0.75% to 1.25%
(based on the then-applicable cash flow coverage ratio) and expires on December
31, 2000. This debt was incurred to repay other BUCA debt and for the
development of restaurants. The balance of the net proceeds from this offering
will be used to finance the development of BUCA di BEPPO restaurants in
subsequent periods and for general corporate purposes. We may also use a
portion of the net proceeds for the acquisition of other restaurant operations
to expand the BUCA di BEPPO concept. We do not currently have any definitive
agreements, arrangements or understandings regarding any particular
acquisition. Pending application of the net proceeds, we intend to invest the
net proceeds in short-term, investment-grade, interest-bearing securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
DIVIDEND POLICY
We have never declared or paid cash dividends. We currently intend to retain
all future earnings for the operation and expansion of our business and do not
anticipate paying cash dividends on the common stock in the foreseeable future.
Any payment of cash dividends in the future will be at the discretion of our
Board and will depend upon our results of operations, earnings, capital
requirements, contractual restrictions and other factors deemed relevant by our
Board. In addition, our current credit facility restricts our ability to pay
cash dividends.
13
<PAGE>
CAPITALIZATION
The following table sets forth, at December 27, 1998, our consolidated cash and
cash equivalents and capitalization: (i) on an actual basis; (ii) on a pro
forma basis to reflect the issuance of common stock in connection with the
conversion of the preferred stock upon the closing of this offering and the
termination of our redemption obligations with repect to the Redeemable Common
Stock; and (iii) on a pro forma as adjusted basis to reflect the sale of the
shares of common stock offered by us by this Prospectus at an assumed initial
public offering price of $11.50 per share and the application of the estimated
net proceeds from the offering. See "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
December 27, 1998
----------------------------------------------
Pro Forma
Actual Pro Forma(/1/) As Adjusted(/1/)(/2/)
-------- -------------- ---------------------
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents....... $ 6,576 $ 6,576 $25,451
======== ======= =======
Long-term debt, less current
portion........................ $ 7,661 $ 7,661 $ 261
Redeemable stock(/3/)........... 36,973 -- --
Common stock: $.01 par value;
13,100,000 shares authorized,
1,914,359 shares issued and
outstanding, actual; 7,059,557
shares issued and outstanding,
pro forma;
9,559,557 shares issued and
outstanding, pro forma as
adjusted(/4/).................. 19 71 96
Additional paid-in capital...... -- 36,921 65,871
Accumulated deficit............. (13,266) (14,666) (16,266)
-------- ------- -------
(13,247) 22,326 49,701
Notes receivable from
shareholders................... (293) (293) (293)
Total common shareholders'
(deficit) equity ............ (13,540) 22,033 49,408
-------- ------- -------
Total capitalization.......... $ 31,094 $29,694 $49,669
======== ======= =======
</TABLE>
---------------
(/1/)Pro forma information gives effect as of December 27, 1998 to (i) the
issuance of shares of common stock in connection with the conversion of
all outstanding shares of preferred stock upon the closing of this
offering; (ii) the termination of our redemption obligations with respect
to the Redeemable Common Stock upon the closing of this offering; and
(iii) the repayment of outstanding subordinated and bank debt in the
amount of $6,660,000 with borrowings of $7,000,000 under our credit
facility with U.S. Bank.
(/2/)Adjusted to give effect to (i) our receipt of the estimated net proceeds
of $25,875,000 from the sale of 2,500,000 shares of common stock offered
by us at an assumed public offering price of $11.50 per share; (ii) the
application of a portion of the net proceeds of this offering to repay
amounts outstanding under our credit facility with U.S. Bank and the
resulting write-off of deferred financing costs; and (iii) the non-cash
charge of approximately $1,300,000 related to the discount applicable to
the right of holders of $1,780,000 of outstanding subordinated debt of
BUCA to convert such debt into common stock after the closing of this
offering.
(/3/)Includes Series A, Series B and Series C preferred stock and the
Redeemable Common Stock.
(/4/)Excludes (i) 1,050,154 shares of common stock issuable upon exercise of
options outstanding as of the date of this Prospectus; (ii) 397,859 shares
of common stock issuable upon exercise of warrants outstanding as of the
date of this Prospectus; and (iii) 257,971 shares of common stock issuable
(from and after the completion of this offering) upon conversion of
subordinated debt outstanding as of the date of this Prospectus, assuming
a public offering price of $11.50 per share. See "Management--Stock
Incentive Plans and Stock Options," "Certain Relationships and Related
Transactions" and "Description of Capital Stock."
14
<PAGE>
DILUTION
Our net tangible book value as of December 27, 1998 was approximately $22.8
million, or $3.23 per share of common stock. Net tangible book value per share
is determined by dividing BUCA's net tangible worth (tangible assets less
liabilities) by the aggregate number of shares of common stock outstanding,
giving effect to the conversion of the preferred stock and the elimination of
our redemption obligations with respect to the Redeemable Common Stock. After
giving effect to the sale of the 2,500,000 shares of common stock offered
hereby at an assumed initial public offering price of $11.50 per share and the
application of the net proceeds therefrom, our pro forma net tangible book
value as of December 27, 1998 would have been approximately $48.7 million, or
$5.09 per share of common stock. This represents an immediate increase in net
tangible book value of $1.86 per share to existing shareholders and an
immediate dilution of $6.41 per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share (mid-range)........ $11.50
Net tangible book value per share before this offering........... $3.23
Increase per share attributable to new investors................. 1.86
-----
Pro forma net tangible book value per share after this offering.... 5.09
------
Dilution per share to new investors................................ $ 6.41
======
</TABLE>
The following table sets forth as of December 27, 1998, giving effect to the
conversion of the preferred stock, the difference between the number of shares
of common stock purchased from us, the total consideration paid to us and the
average price per share paid by existing shareholders and by new investors (at
an assumed initial public offering price of $11.50 per share):
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
----------------- ------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders............. 7,059,557 73.8% $30,962,000 51.9% $ 4.39
New investors..................... 2,500,000 26.2 28,750,000 48.1 11.50
--------- ----- ----------- ----- ------
Total........................... 9,559,557 100.0% $59,712,000 100.0% $ 6.25
========= ===== =========== ===== ======
</TABLE>
Sales by the selling shareholders in this offering will reduce the number of
shares held by existing shareholders to 6,909,557, or 72.3% of the total number
of shares of common stock outstanding, and will increase the number of shares
held by new investors to 2,650,000, or 27.7% of the total number of shares of
common stock outstanding after the offering. The foregoing table excludes (i)
1,050,154 shares of common stock issuable upon exercise of options outstanding
as of the date of this Prospectus (at a weighted average exercise price of
$6.96 per share); (ii) 397,859 shares of common stock issuable upon exercise of
warrants outstanding as of the date of this Prospectus (at a weighted average
exercise price of $2.05 per share); and (iii) 257,971 shares of common stock
issuable (from and after the completion of this offering) upon conversion of
subordinated debt outstanding as of the date of this Prospectus, assuming a
public offering price of $11.50 per share. To the extent these shares are
issued, there will be further dilution to new investors. See "Management--
Employment Agreements," "Management--"Stock Incentive Plans," "Certain
Relationships and Related Transactions" and "Description of Capital Stock."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE, PER SHARE AND OPERATING DATA)
The following selected consolidated financial data for the five fiscal years
ended December 27, 1998 are derived from our audited consolidated financial
statements. The Consolidated Financial Statements and the Notes thereto for
each of the three fiscal years ended December 27, 1998, and the reports of
independent public accountants on those years, are included elsewhere in this
Prospectus. This Selected Consolidated Financial Data should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other financial information included elsewhere in this
Prospectus. We changed our fiscal year-end from December 31 to the last Sunday
in December, beginning with the fiscal year ended December 28, 1997.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 28, DECEMBER 27,
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Restaurant sales.......... $ 4,114 $ 7,142 $ 11,316 $ 19,030 $ 38,483
Restaurant costs:
Product................. 1,345 2,303 3,471 5,520 10,876
Labor................... 1,354 2,258 3,723 6,478 12,548
Direct and occupancy.... 829 1,270 2,242 3,750 7,861
Depreciation and
amortization........... 79 173 381 781 1,617
---------- ---------- ---------- ---------- ----------
Total restaurant
costs................ 3,607 6,004 9,817 16,529 32,902
---------- ---------- ---------- ---------- ----------
Income from restaurant
operations............... 507 1,138 1,499 2,501 5,581
General and administrative
expenses................. 332 656 1,988 3,760 5,579
Preopening costs.......... 151 183 430 1,140 1,895
---------- ---------- ---------- ---------- ----------
Operating income (loss)... 24 299 (919) (2,399) (1,893)
Interest expense.......... 98 219 295 497 1,036
---------- ---------- ---------- ---------- ----------
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle................ (74) 80 (1,214) (2,896) (2,929)
Provision (benefit) for
income taxes............. 1 43 (101) 72 17
---------- ---------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
change in accounting
principle................ (75) 37 (1,113) (2,968) (2,946)
Cumulative effect of
change in accounting
principle related to
preopening costs......... -- -- -- (351) --
---------- ---------- ---------- ---------- ----------
Net income (loss)......... $ (75) $ 37 $ (1,113) $ (3,319) $ (2,946)
========== ========== ========== ========== ==========
Cumulative preferred stock
dividends, accretion of
preferred stock to
redemption value, and
change in redeemable
common stock............. -- -- (3,687) (1,986) (2,189)
---------- ---------- ---------- ---------- ----------
Net income (loss)
applicable to common
stock.................... $ (75) $ 37 $ (4,800) $ (5,305) $ (5,135)
========== ========== ========== ========== ==========
Net income (loss) per
share--basic and
diluted.................. $ (.03) $ .02 $ (1.96) $ (2.13) $ (2.04)
========== ========== ========== ========== ==========
Weighted average common
shares assumed
outstanding--basic and
diluted shares .......... 2,444,666 2,444,666 2,444,666 2,490,136 2,512,309
========== ========== ========== ========== ==========
Pro forma net income
(loss) per share--
basic and diluted (/1/).. $(.42)
==========
Common shares assumed
outstanding pro forma--
basic and diluted(/1/)... 7,059,557
==========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 28, DECEMBER 27,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING DATA:
Comparable restaurant sales in-
crease(/2/)........................... 0.2% 9.4% 13.5%
Average weekly restaurant sales........ $47,343 $48,307 $52,971
Restaurants open at end of period...... 6 11 19
</TABLE>
<TABLE>
<CAPTION>
AS OF
----------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 28, DECEMBER 27,
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Cash and cash equiva-
lents.................. $1,222 $ 805 $ 5,750 $ 6,099 $ 6,576
Total assets............ 2,480 4,477 12,771 21,288 37,560
Total debt, including
current portion........ 2,062 2,907 3,940 5,460 7,866
Redeemable stock(/3/)... -- -- 11,301 21,824 36,973
Shareholders' deficit... (179) (148) (4,942) (9,284) (13,540)
</TABLE>
---------------
(/1/)Pro forma information gives effect as of December 27, 1998 to (i) the
issuance of shares of common stock in connection with the conversion of
all outstanding shares of preferred stock upon the closing of this
offering; (ii) the termination of our obligation to redeem the Redeemable
Common Stock upon the closing of this offering; and (iii) the repayment of
outstanding subordinated and bank debt in the amount of $6,600,000 with
borrowings of $7,000,000 under our credit facility with U.S. Bank.
(/2/)The calculation of comparable restaurant sales increase includes
restaurants open for 12 full calendar months, as adjusted to provide
comparable 52-week fiscal years.
(/3/)Includes Series A, Series B and Series C preferred stock and the
Redeemable Common Stock.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the financial condition and results of operations
should be read in conjunction with our Consolidated Financial Statements and
Notes thereto appearing elsewhere in this Prospectus.
Overview
We own and operate 20 full service, dinner-only restaurants that offer high
quality, immigrant Southern Italian cuisine served family-style in large
portions in a fun and energetic atmosphere that parodies the decor and ambiance
of post-War Italian/American restaurants. In late 1996, BUCA, then a wholly
owned subsidiary of Parasole Restaurant Holding, Inc., was spun-off to the
shareholders of Parasole. At the time of the spin-off, we operated five
restaurants and had recently hired Joseph P. Micatrotto as President and Chief
Executive Officer. Since then, Mr. Micatrotto has hired an experienced
management team to embark on a strategic expansion of the BUCA di BEPPO
concept, targeted at major metropolitan areas throughout the United States.
Since late 1996, we have pursued a rapid but disciplined expansion strategy,
opening two restaurants in 1996, five in 1997 and eight in 1998. We intend to
open 13 new restaurants in fiscal 1999, of which one opened in Louisville,
Kentucky, in January, seven are under construction and the remaining five have
signed leases.
We believe that the sales growth pattern of our new restaurants in the two
years after they open differs from the typical sales growth pattern for new
restaurants in other casual dining concepts. Our restaurants typically
experience lower restaurant sales during the first few periods after opening,
with gradually increasing restaurant sales during the remainder of the
restaurant's first year of operation. In the second year of operation, our
restaurants experience significant comparable restaurant sales growth. In
calculating comparable restaurant sales, we include a restaurant in the
comparable base once it has been open for 12 full calendar months. We believe
we have this "discovery" growth pattern over the first two years of operations
because we rely primarily on word-of-mouth advertising and repeat business to
generate increased restaurant sales. This new restaurant opening trend has
contributed to our high levels of comparable restaurant sales increases of 9.4%
in fiscal 1997 and 13.5% in fiscal 1998. After two years of operation, our
restaurants typically experience lower comparable restaurant sales increases
than experienced in prior periods. We expect this sales growth trend for new
restaurants to continue in the future; however, we expect that the impact of
new restaurant openings on total comparable restaurant sales will decrease as
our mature restaurant base continues to increase.
During fiscal 1997 and fiscal 1998, we expanded the use of daily specials and
began other measures to build sales in existing restaurants and reduce our
product costs as a percentage of restaurant sales. Each day, every restaurant
offers from two to four specials. These daily specials are selected from a list
of approximately 60 recipes. These daily specials typically are priced higher
than normal menu items and generate higher margins. We have increased sales of
specials from approximately 10% of restaurant sales in fiscal 1996 to
approximately 15% of restaurant sales in fiscal 1998. The increase in sales of
specials along with price increases of approximately 2% in fiscal 1997 and 3%
in fiscal 1998 have produced an increase in our average check from $17.50 in
fiscal 1996 to $18.80 in fiscal 1997 and to $20.00 in fiscal 1998. In addition
to achieving reduced costs through our sales of daily specials, we have
achieved cost efficiencies through the improved management of product
purchasing. Each restaurant orders items primarily from our national
distributor, SYSCO Corporation, on terms negotiated by our centralized
purchasing staff. We expect to introduce a new wine list in the second quarter
of fiscal 1999, which is intended to increase wine sales and reduce the cost of
wine as a percentage of wine sales.
During fiscal 1999, we expect to incur special non-cash charges in the
aggregate amount of approximately $3.0 million related to the early repayment
of debt. On February 5, 1999, we entered into a new credit facility with U.S.
Bank National Association. A portion of this facility was used to repay our
outstanding subordinated debt in the amount of $6.0 million. This early
repayment of debt resulted in a one-time extraordinary charge of approximately
$1.4 million in the first quarter of fiscal 1999. We also have outstanding $1.8
million of convertible subordinated debt that is convertible, at the option of
the holders, into common stock at a conversion price equal to 60% of the
initial public offering price. As a consequence of this right, we will
recognize a special non-cash
18
<PAGE>
charge of approximately $1.3 million in the second quarter of fiscal 1999. In
addition, the $7.0 million term loan portion of our credit facility with U.S.
Bank is required to be repaid upon the completion of this offering. This will
result in a one-time extraordinary charge of approximately $300,000 in the
second quarter of fiscal 1999 for the write-off of costs related to this loan.
Our restaurant sales are comprised almost entirely of the sales of food and
beverages. In fiscal 1998, alcohol sales accounted for 26.6% of total
restaurant sales. Product costs include the costs of food and beverages. Labor
costs include direct hourly and management wages, bonuses, taxes and benefits
for restaurant employees. Direct and occupancy costs include restaurant
supplies, marketing costs, rent, utilities, real estate taxes, repairs and
maintenance and other related costs.
Depreciation and amortization principally includes depreciation on capital
expenditures for restaurants. Preopening costs consist of direct costs related
to hiring and training the initial restaurant workforce and certain other
direct costs associated with opening new restaurants. General and
administrative expenses are composed of expenses associated with all corporate
and administrative functions that support existing operations, management and
staff salaries, employee benefits, travel, information systems and training and
market research. Management believes that future expansion and resulting
increases in restaurant sales will require proportionately smaller incremental
increases in general and administrative expenses, causing general and
administrative expenses as a percentage of sales to decrease further in the
future.
We adopted a fiscal year ending on the last Sunday in December beginning in
1997. Prior to that, our fiscal year followed the calendar year. Therefore,
fiscal 1997 included only 362 days instead of 364 days. Our fiscal quarters
include two four week periods followed by a five week period. Fiscal 2000 will
be a 53-week-year, with the final quarter of the fiscal year totaling 14 weeks.
19
<PAGE>
RESULTS OF OPERATIONS
Our operating results for fiscal years 1996, 1997 and 1998 expressed as a
percentage of restaurant sales were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 28, DECEMBER 27,
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Restaurant sales....................... 100.0% 100.0% 100.0%
Restaurant costs:
Product............................. 30.7 29.0 28.3
Labor............................... 32.9 34.0 32.6
Direct and occupancy................ 19.8 19.7 20.4
Depreciation and amortization ...... 3.4 4.1 4.2
Income from restaurant operations...... 13.2 13.1 14.5
General and administrative expenses.... 17.6 19.8 14.5
Preopening costs....................... 3.7 6.0 4.9
----- ----- -----
Operating loss......................... (8.1) (12.6) (4.9)
Interest expense....................... 2.6 2.6 2.7
----- ----- -----
Loss before income taxes and cumulative
effect of change in accounting princi-
ple................................... (10.7) (15.2) (7.6)
(Benefit) provision for income taxes... (0.9) 0.4 --
Net loss............................... (9.8)% (17.4)% (7.7)%
===== ===== =====
</TABLE>
FISCAL YEAR ENDED DECEMBER 27, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 28,
1997
RESTAURANT SALES. Restaurant sales increased by $19.5 million, or 102.2%, to
$38.5 million in fiscal 1998 from $19.0 million in fiscal 1997. The increase
was attributable to restaurant sales of $9.8 million at new restaurants opened
in fiscal 1998 and to increased sales at restaurants open prior to fiscal 1998.
Comparable restaurant sales increased by 13.5% in fiscal 1998, primarily as a
result of increased guest visits, increased sales of daily specials and a price
increase of approximately 3% in July 1998. The price increase and sales of
daily specials resulted in an increase in the average check per guest to $20.00
in fiscal 1998 from $18.80 in fiscal 1997.
PRODUCT. Product costs as a percentage of restaurant sales decreased to 28.3%
in fiscal 1998 from 29.0% in fiscal 1997. This reduction was a result of
management's efforts to reduce the cost of food products and improve margins.
We entered into an agreement with a national food distributor which reduced our
food product costs beginning in the second quarter of fiscal 1997. We also
sought to increase the percentage of daily specials that are sold at the
restaurants.
LABOR. Labor costs decreased as a percentage of restaurant sales to 32.6% in
fiscal 1998 from 34.0% in fiscal 1997. This decrease primarily resulted from
improved management of hourly staff levels and lower average wage costs because
of the opening of new stores in states that allow tips credit toward minimum
wage requirements.
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Direct and Occupancy. Direct and occupancy costs increased as a percentage of
restaurant sales to 20.4% in fiscal 1998 from 19.7% in fiscal 1997. This
increase was a result of the higher occupancy costs in our California
restaurants opened in the last half of fiscal 1997 and during fiscal 1998, as
well as an increase in supplies usage during fiscal 1998.
Depreciation and Amortization. Depreciation and amortization expenses increased
approximately $836,000 to $1.6 million in fiscal 1998 from approximately
$781,000 in fiscal 1997. This increase was the result of depreciation
recognized on capital expenditures for new restaurants.
General and Administrative. General and administrative expenses increased $1.8
million to $5.6 million in fiscal 1998 from $3.8 million in fiscal 1997.
General and administrative expenses decreased as a percentage of restaurant
sales to 14.5% in fiscal 1998 from 19.8% in fiscal 1997. This increase in
dollars was primarily the result of the addition of management personnel in
fiscal 1997 and fiscal 1998, resulting in $600,000 of additional compensation
and benefits and $300,000 of additional travel expenses, and an increase in
legal fees of $600,000. We expect that general and administrative expenses will
continue to increase in dollar amount in the future, but decrease as a
percentage of restaurant sales because our expansion plans will require
proportionately smaller incremental increases in general and administrative
expenses.
Preopening. Preopening costs increased $400,000 to $1.9 million in fiscal 1998
from $1.5 million (inclusive of the cumulative effect of the change in
accounting principle related to preopening expenses) in fiscal 1997 due to the
greater number of restaurants that were opened or under development in fiscal
1998 compared to fiscal 1997.
Interest Expense. Interest expense increased $539,000 to $1.0 million in fiscal
1998 from $497,000 in fiscal 1997 due to an increase in our long-term debt.
Provision for Income Taxes. The provision for income taxes for fiscal 1998 and
fiscal 1997 represents certain minimum state taxes based on taxable factors
other than earnings and a minor charge for federal taxes primarily related to
deferred income taxes. We did not record a tax benefit in fiscal 1998 or fiscal
1997 for the losses generated in previous years as utilization of these losses
in future periods was deemed uncertain. At December 27, 1998, we had a net
operating loss carryforward of approximately $3.5 million, and a $3.5 million
deferred tax asset related primarily to preopening costs which will reverse in
the future. The net operating loss carryforwards begin to expire in fiscal
2003. The expected income tax benefit derived by applying the statutory income
tax rate has been eliminated as a result of an increase in the deferred income
tax asset valuation allowance.
Fiscal Year Ended December 28, 1997 Compared to Fiscal Year Ended December 31,
1996
Restaurant Sales. Restaurant sales increased by $7.7 million, or 68.2%, to
$19.0 million in fiscal 1997 from $11.3 million in fiscal 1996. The increase
was attributable to restaurant sales of $7.0 million at new restaurants opened
in fiscal 1997 and to increased sales at restaurants open prior to fiscal 1997.
Increased guest visits as well as the increased sales of daily specials
contributed to the comparable restaurant sales gain of 9.4% in fiscal 1997. We
implemented a price increase of approximately 2% in June 1997. The increased
sales of daily specials and the price increase in fiscal 1997 contributed to
the increase in the average check per guest to $18.80 in fiscal 1997 from
$17.50 in fiscal 1996.
Product. Product costs as a percentage of restaurant sales decreased to 29.0%
in fiscal 1997 from 30.7% in fiscal 1996. This decrease was a result of the
agreement entered into with a national food distributor in the second quarter
of fiscal 1997, as well as efforts to reduce excess food preparation costs and
the increased sales of daily specials.
Labor. Labor costs increased as a percentage of restaurant sales to 34.0% in
fiscal 1997 from 32.9% in fiscal 1996. This increase was a result of the
increased number of new restaurants opened in fiscal 1997 compared to fiscal
1996, and the timing of these openings in each year. Labor costs at new
restaurants generally are higher both in dollars and as a percentage of
restaurant sales for the first six months after opening.
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DIRECT AND OCCUPANCY. Direct and occupancy costs decreased as a percentage of
restaurant sales to 19.7% in fiscal 1997 from 19.8% in fiscal 1996. This
decrease was primarily due to more favorable lease terms associated with new
restaurants opened in 1997.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
approximately $781,000 in fiscal 1997 from approximately $381,000 in fiscal
1996. This increase was principally the result of depreciation recognized on
capital expenditures for new restaurants opened in fiscal 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$1.8 million to $3.8 million in fiscal 1997, from $2.0 million in fiscal 1996.
General and administrative expenses increased as a percentage of restaurant
sales to 19.8% in fiscal 1997 from 17.6% in fiscal 1996. The increase in fiscal
1997 was primarily related to the costs associated with adding management staff
necessary to operate BUCA as a separate company. For most of fiscal 1996, we
operated as wholly owned subsidiary of Parasole Restaurant Holdings, Inc.
PREOPENING. Preopening costs in fiscal 1997 increased to $1.5 million
(including the cumulative effect of the change in accounting principle related
to preopening costs) from approximately $430,000 in fiscal 1996. This increase
was a result of the increased number of new stores developed in fiscal 1997 as
well as the $351,000 charge for the change in accounting principle related to
preopening costs.
INTEREST EXPENSE. Interest expense increased to approximately $497,000 in
fiscal 1997 from approximately $295,000 in fiscal 1996 due primarily to the
increase in our long-term debt.
BENEFIT/PROVISION FOR INCOME TAXES. The provision for income taxes for fiscal
1997 represents certain minimum state taxes based upon taxable factors other
than earnings and a minor charge for federal taxes primarily related to
deferred income taxes. In fiscal 1996, we recorded a benefit of $101,000
related to the net operating loss carryforwards. In fiscal 1997, the expected
income tax benefit derived by applying the statutory income tax rate has been
eliminated as a result of an increase in the deferred income tax asset
valuation allowance.
QUARTERLY RESULTS
Our quarterly operating results will fluctuate significantly as a result of a
variety of factors, including the timing of new restaurant openings and related
expenses, profitability of new restaurants, increases or decreases in
comparable restaurant sales, general economic conditions, consumer confidence
in the economy, changes in consumer preferences, competitive factors and
weather conditions. In the past, we have experienced significant variability in
preopening costs from quarter to quarter. These fluctuations are primarily a
function of the timing of restaurant openings. We typically incur the most
significant portion of preopening costs associated with a given restaurant
within the two months immediately preceding, and the month of, the opening of
the restaurant. In addition, our experience to date has been that labor and
direct and occupancy costs associated with a newly opened restaurant for the
first three to six months of operation are materially greater than what can be
expected after that time, both in aggregate dollars and as a percentage of
restaurant sales. Accordingly, the volume and timing of new restaurant openings
in any quarter has had and is expected to continue to have a significant impact
on quarterly preopening costs and labor and direct and occupancy costs. We
anticipate that this effect will significantly increase preopening costs, labor
and direct and occupancy costs as a percentage of sales in the second and third
quarters of fiscal 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since we were formed, we have incurred significant net losses, primarily due to
restaurant development and the costs of hiring senior management to develop and
implement our expansion strategy. We have generated income from our restaurant
operations, but have incurred aggregate net losses of $7.6 million. We have
funded our capital requirements through private sales of equity securities,
debt financing and sale-leaseback arrangements. Net cash used in operating
activities was $1.5 million for fiscal 1997 and net cash provided by operations
was $338,000 for fiscal 1998.
We use cash primarily to fund the development and construction of new
restaurants. Net cash used in investing activities was $8.1 million for fiscal
1997 and $15.6 million for fiscal 1998. Capital expenditures were $7.9 million
for fiscal 1997 and $17.9 million for fiscal 1998. During fiscal 1997 and 1998,
we purchased the land and building
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for our Wheeling, Cleveland and St. Paul locations. We subsequently entered
into sale-leaseback arrangements for both the Wheeling and Cleveland locations
during 1998. These purchases of land and buildings, along with our expansions
of the Seattle and St. Paul restaurants, accounted for approximately
$2.2 million of fiscal 1998 capital expenditures. We intend to open 13
restaurants in fiscal 1999, one of which has already opened. Total capital
expenditures are expected to be approximately $17.0 million in fiscal 1999.
Each new restaurant is expected to require, on average, a total cash investment
of between $1.0 million and $1.5 million, excluding preopening costs expected
to range from $175,000 to $210,000. Total capitalized investment includes the
capitalized lease value of the property, which can vary greatly depending on
the specific trade area. To date, all of our restaurants are renovations of
existing facilities. In 1999, we will build at least two restaurants based on
our prototype designs. These designs are expected to require between
$1.5 million and $2 million in total cash investment per restaurant. This
investment represents an incremental $500,000 increase over the historical cash
investment for remodeled restaurants. We plan to refinance any purchases of
land or buildings through sale-leaseback transactions. We cannot predict
whether this financing will be available when needed or on terms acceptable to
us.
Net cash provided by financing activities was $9.9 million in fiscal 1997 and
$15.8 million in fiscal 1998. Financing activities in fiscal 1997 and fiscal
1998 consisted primarily of sales of preferred stock as well as the incurrence
of additional long-term debt. We have an $8.0 million revolving line of credit
which matures on December 31, 2000 under which we currently have no borrowings
and which bears interest at the bank's reference rate plus .75% to 1.25%. We
also have a $7.0 million term loan which expires on December 31, 2000 and bears
a fixed rate of interest of 9.63%. Pursuant to the terms of the credit
agreement, the term loan must be repaid upon the consummation of this offering.
In addition, we must repay any borrowings under the revolving line of credit in
excess of $3.0 million, which will become the line's credit limit. The credit
agreement contains covenants which place restrictions on sales of properties,
transactions with affiliates, creation of additional debt, and other customary
covenants. Borrowings under the credit agreement are collateralized by
substantially all of our assets. We do not anticipate that the above covenants
and restrictions will have a significant impact on us. After this offering, we
intend to renegotiate our line of credit and we believe that the lender will be
willing to increase the amount of the line of credit on terms and conditions
which are comparable to those contained in our existing line of credit, or that
other financing will be available in an amount and on terms and conditions
which are adequate to meet our currently planned working capital and liquidity
needs. However, we cannot predict whether our existing lender will ultimately
agree to any increase or whether any alternative financing will be available.
Our capital requirements, including development costs related to the opening of
additional restaurants, have been and will continue to be significant. We will
need substantial capital to finance our expansion plans, which require funds
for capital expenditures, preopening costs and initial operating losses related
to new restaurant openings. The adequacy of available funds after this offering
and our future capital requirements will depend on many factors, including the
pace of expansion, the costs and capital expenditures for new restaurant
development and the nature of contributions, loans and other arrangements
negotiated with landlords. Although we can make no assurance, we believe that
cash flow from operations together with the net proceeds from this offering and
available borrowings will be sufficient to fund our capital requirements
through at least the next twelve months. If additional capital is required, we
may need to raise additional capital through public or private equity or debt
financings. Future capital funding transactions may result in dilution to you.
We cannot predict whether additional capital will be available on favorable
terms, if at all.
We lease restaurant and office facilities and certain real property under
operating leases expiring between fiscal 1999 and fiscal 2018. Future minimum
lease payments under operating leases, including restaurant facilities
currently under construction or yet to be constructed as of December 27, 1998
were as follows: $3.0 million in fiscal 1999, $4.0 million in fiscal 2000, $4.0
million in fiscal 2001, $4.1 million in fiscal 2002, $4.2 million in fiscal
2003 and thereafter $29.4 million.
INFLATION
The primary inflationary factors affecting our operations are food and labor
costs. A large number of our restaurant personnel are paid at rates based on
the applicable minimum wage, and increases in the minimum wage directly
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affect our labor costs. To date, inflation has not had a material impact on our
operating results. See "Risk Factors--We Face Risks Because of Our Small
Restaurant Base" and "--We are Subject to Extensive Government Regulation."
YEAR 2000 COMPLIANCE
We are aware of the issues associated with the programming code in existing
computer systems as the year 2000 approaches. The "year 2000 problem" is
pervasive and complex as virtually every computer operation will be affected in
some way by the rollover of the two digit year value to "00". The issue is
whether computer systems will properly recognize date-sensitive information
when the year changes to 2000. We have reviewed both our information technology
and our non-information technology systems to determine whether they are year
2000 compliant, and we have not identified any material systems which are not
year 2000 compliant. We have substantially completed year 2000 testing of our
systems and have identified those components deemed noncompliant. We have
initiated formal communications with all significant suppliers and service
providers to determine the extent to which we are vulnerable to those third
parties' failure to solve the year 2000 problem. We have received written
assurances of year 2000 compliance from a majority of the third parties with
whom we have relationships, including our national food distributor, and
payroll and credit card service providers. Unless public suppliers of water,
electricity and natural gas are disrupted for a substantial period of time (in
which case our business may be materially adversely affected), we believe that
our operations will not be significantly disrupted even if third parties with
whom we have relationships are not year 2000 compliant. We will develop a
contingency plan to deal with potential third party failure issues. Testing and
replacement of all systems is scheduled to be completed by June 30, 1999. A
decision to implement a contingency plan is expected by June 30, 1999. We
estimate that we incurred approximately $100,000 in fiscal 1998 to address year
2000 issues, principally testing our existing systems, and that we will incur
an additional $100,000 in fiscal 1999 to replace certain system components
deemed non-year 2000 compliant. These amounts do not include insurance proceeds
used to replace hardware and software systems destroyed in the recent fire at
our headquarters with new systems represented to be year 2000 compliant. See
"Business--Properties." However, uncertainty exists concerning the potential
costs and effects associated with any year 2000 compliance, and we intend to
continue to make efforts to ensure that third parties with whom we have
relationships are year 2000 compliant. Any year 2000 compliance problem of ours
or our vendors could materially adversely affect our business, financial
condition, operating results or cash flows, and could prohibit us from
operating our restaurants.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We are exposed to market risk from changes in interest rates on borrowings
under our revolving line of credit that bears interest from time to time at the
lending bank's reference rate plus 0.75% to 1.25%. Because we have no
borrowings under our revolving line of credit and we do not believe that the
maximum available borrowings under the revolving line of credit are material,
we do not believe this risk will be material.
We have no derivative financial instruments or derivative commodity instruments
in our cash and cash equivalents and investments. We invest our cash and cash
equivalents and investments in investment grade, highly liquid investments,
consisting of money market instruments, bank certificates of deposit and
overnight investments in commercial paper. We anticipate investing our net
proceeds from this offering in similar investment grade and highly liquid
investments pending their use as described in this Prospectus. See "Use of
Proceeds." Primarily all of our transactions are conducted, and our accounts
are denominated, in United States dollars. Accordingly, we are not exposed to
foreign currency risk.
Many of the food products purchased by us are affected by commodity pricing and
are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties and other factors which are outside our
control. To control this risk in part, we have fixed price purchase commitments
with terms of one year or less for food and supplies from vendors who supply
our national food distributor. In addition, we believe that substantially all
of our food and supplies are available from several sources, which helps to
control food commodity risks. We believe we have the ability to increase menu
prices, or vary the menu items offered, if needed in response to a food product
price increases. To compensate for a hypothetical price increase of 10% for
food and supplies, we would need to increase menu prices by an average of 3%,
which is consistent with average price increases of 3% in fiscal 1998 and 2% in
fiscal 1997. Accordingly, we believe that a hypothetical 10% increase in food
product costs would not have a material effect on our operating results.
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BUSINESS
Overview
BUCA, Inc. owns and operates 20 full service, dinner-only restaurants under the
name BUCA di BEPPO. Our restaurants offer high quality, immigrant Southern
Italian cuisine served family-style in large portions in a fun and energetic
atmosphere that parodies the decor and ambiance of post-War Italian/American
restaurants. Our food is based on authentic family recipes enjoyed for
generations in the villages of Southern Italy and then adapted to American
ingredients. Our menu features dishes such as the BUCA di BEPPO 1893 salad,
chicken cacciatore, spaghetti with half-pound meat balls, eggplant parmigiana,
ravioli al pomodoro, veal marsala, garlic mashed potatoes, pizza arrabiatta and
tiramisu. These dishes, often seasoned with garlic and served with vine-ripened
tomatoes, communicate the pure, powerful flavor of the immigrant Southern
Italian kitchen. Our oversized portions, served family-style on large platters,
are designed to overwhelm guests with an abundance of high quality food. In
family-style serving, each item is shared by the entire table, which encourages
guests to interact and enjoy the meal together. A full service bar featuring
affordable, quality Italian table wines complements our menu. We believe that
the generous portions, combined with an average check per guest of
approximately $20.00, including beverages, offer our guests exceptional value.
We reinforce this value by encouraging guests to take home their extra food in
our logo-bearing BUCA bags, allowing guests to enjoy an additional BUCA meal at
home.
Our BUCA di BEPPO restaurants irreverently exaggerate the cliches of post-War
Italian/American restaurants found in Little Italy in New York City, the North
End of Boston and other Italian neighborhoods of large U.S. cities. We design
our restaurants to be a fun, high-energy destination. The layout of each BUCA
di BEPPO restaurant in a market is unique, which reinforces our image as a
collection of neighborhood restaurants. Restaurant interiors are divided into a
number of distinct rooms with walls covered by hundreds of vintage photos of
Italian families and celebrities, Christmas lights displayed year-round and
other icons of Italian heritage. Boxes of pasta, cans of roasted peppers and
jugs of wine fill window sills and shelves throughout our restaurants. Lively
music from classic artists such as Frank Sinatra and Dean Martin adds to the
fun and energetic atmosphere. Restaurant exteriors feature flashing bare bulb
signage, statuary and humorous neon signs promising "elegant dining" and "air
conditioning." Our food, decor and family-style servings all promote a fun,
celebratory and socially interactive dining experience that emulates a
traditional Italian/American evening meal.
Our Business Strategy
Our objective is to become the dominant family-style, immigrant Southern
Italian restaurant in each of our markets. To achieve our objective, we have
developed the following strategies:
Offer Vital, Vibrant and Powerfully Flavored Food. BUCA di BEPPO restaurants
feature foods with the pure, powerful flavors of the immigrant Southern Italian
kitchen. Our BUCA di BEPPO 1893 salad, for example, combines a large bed of
greens with olives, two kinds of cheese, mortadella, pepperoni, peperoncini,
onions, cucumbers and tomatoes. Our chicken vesuvio features fresh, tender
chicken, seasoned with oregano, sauteed with spicy Italian sausage and tossed
in a sauce of olive oil, sweet white wine, garlic, chunks of tomato, broccoli,
red onion and white cannellini beans. For dessert, our cannoli's three crispy
shells are covered with powdered sugar and filled with a thick, creamy ricotta
and sweet mascarpone, sprinkled with pistachios and covered in chocolate sauce.
Create a Fun, Energetic, Destination Dining Experience. BUCA di BEPPO promotes
a fun, irreverent and socially interactive atmosphere. The family-style,
participatory dining format, "kitschy" decor, unique restaurant layouts, and
festive atmosphere all combine to make our restaurants entertaining and fun for
guests. We believe that this atmosphere results in BUCA di BEPPO restaurants
being a destination for diners who will seek out our restaurant locations. We
also believe this atmosphere is attractive for a wide variety of dining
occasions, including weekend evenings, business occasions, family celebrations
as well as regular weeknight dining.
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Provide Superior Dining Value. Our restaurants provide high quality,
moderately priced food in oversized portions. We believe that the generous
portions, combined with an average check per guest of approximately $20.00,
including beverages, offer our guests exceptional value. We reinforce this
value by encouraging guests to take home their extra food in our logo-bearing
BUCA Bags, allowing guests to enjoy an additional BUCA meal at home.
Achieve Excellent Restaurant Economics. We believe that our restaurants
provide superior unit level economics. During fiscal 1998, our mature
restaurants (those with at least two full years of operating history) generated
average restaurant sales of approximately $3.0 million and average cash flow of
approximately $693,000, or 23.5% of restaurant sales.
Leverage Our Paisano Partners Program. We believe that our Paisano Partners
Program, in which restaurant general managers purchase BUCA stock, receive
stock options and share in their restaurant's profits, enables us to attract
and retain managers with greater experience and of a higher caliber than the
industry average. We believe this program motivates our Paisanos to achieve
significantly greater operating efficiencies, results in lower turnover and
contributes to our superior unit level economics.
Pursue Rapid but Disciplined Restaurant Expansion. Since fiscal 1997, BUCA has
pursued a rapid but disciplined restaurant development strategy. Our current
development plan is to open 13 new restaurants in fiscal 1999, of which one is
already open, seven are under construction and the remaining five have signed
leases.
Create a Passionate Culture of Service. We foster a passionate culture of
guest service among our employees by emphasizing consideration of the guest
first in all decisions. From the moment a guest walks in the front door, the
BUCA di BEPPO experience is enhanced by a high level of guest service provided
by a knowledgeable, energetic staff. Servers are trained to introduce guests to
the BUCA di BEPPO concept, explain the menu and encourage guest interaction.
The Paisano also interacts with guests to make them feel welcome and is
responsible for ensuring their satisfaction with the dining experience.
The BUCA di BEPPO Concept
The BUCA di BEPPO concept was created in Minneapolis in 1993 by our founder,
Philip A. Roberts. Mr. Roberts designed the restaurants to take advantage of
the long-standing popularity of Italian cuisine and certain dominant consumer
trends, including the growing casualness of American society and an increasing
desire among consumers for value. The BUCA di BEPPO concept irreverently
exaggerates the cliches of traditional post-War neighborhood Italian/American
restaurants but also pays tribute to and emulates their reverence for food,
vibrant atmosphere, colorful decor and high degree of social interaction. After
the initial BUCA di BEPPO restaurants proved to be successful, Joseph P.
Micatrotto, a second generation Italian immigrant, joined our company as
President and CEO to help refine the concept and lead BUCA's national
expansion. The innovation of this concept has attracted national attention as
evidenced by national awards won by BUCA, including a 1998 "Hot Concepts!"
award from Nation's Restaurant News, and awards in all of our local markets.
Powerfully Flavored High Quality Food. We believe that the authenticity,
quality and consistency of our food is the most important component of our
long-term success. In contrast to the levity of our decor and ambiance, we take
menu development and food preparation very seriously. Our menu is based on
authentic family recipes enjoyed for generations in the villages of Southern
Italy and then adapted to American ingredients. We make regular trips to
Southern Italy and Sicily to find new recipes for our menu that are then
extensively tested and refined before introduction in our restaurants.
Some of our most popular menu items include the BUCA di BEPPO 1893 salad,
chicken cacciatore, spaghetti with half-pound meat balls, eggplant parmigiana,
ravioli al pomodoro, veal marsala, garlic mashed potatoes, pizza arrabiatta and
tiramisu. Our foods, often seasoned with garlic and served with vine-ripened
tomatoes, communicate
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the pure, powerful flavors of the immigrant Southern Italian kitchen. We also
offer daily specials centered around a genre of Southern Italian cooking called
"cucina di povera," which translates as "cuisine of the poor." These daily
specials consist of year-round specials such as manicotti or cannelloni as well
as seasonal specials such as mozzarella caprese that is offered only in the
summer in order to assure the availability of high quality ingredients and to
take advantage of seasonal customer demand. We believe that our daily specials
play a vital role in keeping the menu fresh and allow us to test prospective
permanent menu items. In fiscal 1998, daily specials accounted for
approximately 16% of food sales.
To ensure that the food we are serving is of consistently high quality, we have
developed extensive quality control practices. For example, every member of our
kitchen staff must participate in a thorough training program. We also have
strict specifications that ensure only high quality ingredients are used in our
food. A kitchen manager at each restaurant is responsible for making a final
check of each item to assure it meets our high quality standards before it
leaves the kitchen.
Our menu pricing is consistent within a market, but may differ slightly from
one market to the next. Menu entrees range in price from $9.95 to $19.95 and
are designed to be shared by the entire party at the table. The average check
per guest is approximately $20.00, including beverages. In fiscal 1998,
alcoholic beverages, primarily table wine, accounted for 26.6% of total
restaurant sales.
Family-Style Serving and Ambiance. BUCA di BEPPO restaurants' oversized
portions, served family-style on large platters, are designed to overwhelm
guests with an abundance of high quality food. An order of our spaghetti and
meatballs, for example, features 2.5 pounds of pasta and three half-pound
meatballs, covered by a pound of marinara sauce. Our chicken cacciatore
consists of a whole chicken served on two pounds of garlic mashed potatoes,
ladled with cacciatore sauce and weighs seven pounds. Guests can enjoy their
meal with bottles of Italian table wine of up to five liters in size.
In family-style serving, each item is shared by the entire table, which
encourages guests to interact and enjoy the meal together. We locate menu
boards on our restaurant's walls instead of distributing individual menus,
encouraging guests to wander from their seats to read the menu. Guests take
note of what other tables have ordered and may interact with other parties. We
believe the fun and socially interactive dining experience typical of a meal at
one of our restaurants differentiates us from our competitors and promotes
guest loyalty from a wide range of guests. We maintain a policy of serving
dinner-only which reinforces our family-style concept.
We believe that serving guests family-style offers us a competitive advantage.
Because larger portions are more efficient to produce and serve, cost savings
are passed along to the guest. Furthermore, by exclusively serving larger
portions, we are able to consistently and emphatically make a value statement
to our guests. We reinforce this value by encouraging guests to take home their
extra food in our logo-bearing BUCA bags, allowing them to enjoy an additional
BUCA meal at home.
Irreverent Decor and Unique Layout. Our restaurants are designed with an
irreverence that exaggerates the cliches of traditional post-War
Italian/American neighborhood restaurants. Our restaurant exteriors are
typically clad in faux flagstone and painted Tuscan red, feature flashing bare
bulb signage, statuary, fake flowers and humorous neon window signs promising
"elegant dining," "sanitary bathrooms" and "air conditioning." Our restaurant
interiors are decorated with hundreds of vintage photos of Italian and
Italian/American families and celebrities, bright strings of Christmas lights
displayed year-round and numerous other icons of Italian heritage. Boxes of
pasta, cans of olive oil and roasted peppers and jugs of wine fill window sills
and shelves throughout our restaurants. Lively music from classic artists such
as Frank Sinatra and Dean Martin adds to the fun and energetic atmosphere. The
combined effect of these exaggerated cliches is a lighthearted, tongue-in-
cheek, "kitschy" atmosphere that makes BUCA di BEPPO restaurants fun and
entertaining destinations.
The individual layout of each BUCA di BEPPO restaurant in a market is unique.
The restaurant's collection of individual dining rooms provide a variety of
seating possibilities. We believe that this individuality reinforces the
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image of BUCA as a collection of quirky neighborhood restaurants. In most of
our restaurants, for example, guests must pass through the kitchen before being
seated. Some elements such as the signage, menu and service are consistent
throughout all restaurants. All restaurants feature a visible pizza kitchen,
several distinct dining rooms and a bar that is used primarily as a waiting
area.
BUCA di BEPPO restaurants are designed to accommodate groups, with a
predominance of tables seating four to six guests and many tables seating
parties of eight or more. Additionally, most locations feature a "Pope's Table"
and a "Kitchen Table." The Pope's Table is a large table that seats 16 to 20
people and occupies a marquee location in the restaurant. The Kitchen Table
seats six to ten people in the heart of the restaurant's loud and boisterous
kitchen, providing the ultimate BUCA di BEPPO experience.
Exemplary Guest Service. At BUCA, we are committed to guest satisfaction. From
the moment guests walk in the door, they are treated as part of the BUCA di
BEPPO family. The server ensures that first-time guests understand the BUCA di
BEPPO family-style servings and provides an explanation of the menu, if
necessary. When guests are ordering, our server highlights the daily specials
and helps them determine an appropriate amount of food to order. We emphasize
to our employees that they should consider the guest first in all decisions
they make. The restaurant's Paisano Partner interacts with guests to make them
feel welcome and is responsible for ensuring their satisfaction with the dining
experience. We also contract with an independent company to send its personnel
to dine in each of our restaurants unannounced at least twice each month. After
each visit, these anonymous diners issue a written report with both subjective
impressions and objective grading of our restaurants in several operational
areas.
Unit Level Economics
During fiscal 1998, our mature restaurants (those with at least two full years
of operating history) generated average restaurant sales of approximately $3.0
million. During fiscal 1998, these mature restaurants generated average cash
flow of approximately $693,000, or 23.5% of restaurant sales, and average
restaurant operating income of approximately $593,000, or 20.0% of restaurant
sales. We currently lease all but one of our restaurant locations and plan to
lease most, if not all, of our future restaurant sites. We anticipate that, on
average, new restaurants will require a cash investment of $1.0 million to $1.5
million. In fiscal 1998, our total cash investment per restaurant averaged
approximately $1.4 million, excluding preopening costs of approximately
$195,000. Preopening costs for future restaurants are expected to range from
$175,000 to $210,000 per restaurant. However, individual unit investment costs
could vary due to a variety of factors, including competition for sites,
location, construction costs, unit size and the mix of conversions, build-to-
suit and leased locations.
Our current restaurants range in size from 4,500 to 10,000 square feet and have
approximately 170 to 375 seats. We anticipate that future restaurants will
typically range in size from 7,000 to 9,000 square feet and have approximately
250 to 350 seats. From time to time, we have expanded the size of existing
restaurants to meet demand.
28
<PAGE>
Current Restaurant Locations
We currently own and operate the following 20 restaurants, located in 11
markets:
<TABLE>
<CAPTION>
Location Date Opened Square Feet Seats
- -------- ------------- ----------- -----
<S> <C> <C> <C>
Minneapolis, Minnesota.......................... July 1993 4,465 172
St. Paul, Minnesota............................. May 1994 9,991 375
Eden Prairie, Minnesota......................... June 1995 8,025 230
Milwaukee, Wisconsin............................ November 1995 9,210 293
Palo Alto, California........................... July1996 5,192 197
Seattle, Washington............................. November 1996 8,213 328
Chicago, Illinois............................... May 1997 5,340 185
Wheeling, Illinois.............................. May 1997 6,426 225
San Francisco, California....................... August 1997 6,393 202
Lynnwood, Washington............................ November 1997 6,890 262
Pasadena, California............................ December 1997 6,739 250
Indianapolis, Indiana........................... February 1998 7,678 326
Encino, California.............................. March 1998 6,080 248
Redondo Beach, California....................... June 1998 6,152 272
Lombard, Illinois............................... July 1998 8,278 328
Scottsdale, Arizona............................. October 1998 8,230 298
Burnsville, Minnesota........................... November 1998 7,340 312
Cleveland, Ohio................................. November 1998 9,430 256
Kansas City, Kansas............................. December 1998 7,494 298
Louisville, Kentucky............................ January 1999 8,315 244
</TABLE>
We expect that twelve additional restaurants will open during the remainder of
fiscal 1999. Construction has commenced on seven of these sites, one each in
Claremont, California; Denver, Colorado; Washington, D.C.; Des Moines, Iowa;
Detroit, Michigan; Buffalo, New York; and Columbus, Ohio. In addition, we have
10 signed leases for future sites, including five sites for restaurants we
expect to open in 1999. We also have entered into a lease for a 10,000 square
foot restaurant to be opened during fiscal 2000 at Universal Studios in Los
Angeles. We are currently negotiating additional leases for potential future
locations.
Expansion Strategy and Site Selection
Beginning in fiscal 1997, following the hiring of Joseph P. Micatrotto as our
President and CEO, we accelerated our rate of restaurant expansion. Mr.
Micatrotto previously had been instrumental in the expansion of two national
restaurant chains, Chi-Chi's Mexican Restaurants and Panda Express. Today we
are focused on growing our restaurant base in a rapid but disciplined manner.
We intend to open 13 new restaurants in fiscal 1999, of which one is already
open, seven are under construction and the remaining five have signed leases.
By the end of fiscal 1999, we plan to have 32 restaurants open in at least 17
markets. We intend to continue expanding BUCA primarily in metropolitan markets
of the United States with a population of at least 800,000 which we believe can
support multiple BUCA di BEPPO restaurants. We do, however, plan to enter one
or more smaller markets within the next 12 months. We believe that the majority
of our future growth will come from opening new restaurants. From time to time,
we will evaluate opportunities to acquire and convert other restaurant
operations to the BUCA di BEPPO concept, but we do not currently have any
definitive agreements, arrangements or understandings regarding any particular
acquisition.
We have designated teams of employees that are responsible for opening new
restaurant locations, including kitchen personnel and other individuals who are
trained as hosts, servers, bartenders and managers. Our training programs
enable us to promote existing employees and managers as new restaurants open.
We believe that through our training programs and the hiring of outside
personnel we will be able to support our expansion strategy.
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<PAGE>
We believe that our concept is extremely flexible and can be successfully
operated in a number of different settings. We have located our restaurants in
both urban and suburban areas with equal success. Our restaurants have been
successfully opened both as freestanding structures and as tenants in larger
multi-purpose buildings. To date, all of our restaurant sites involved the
remodeling of existing structures. To develop efficiencies and to increase
flexibility with respect to locations, we have developed prototype designs for
new construction. While our restaurants typically share common interior decor
elements, the layouts of our restaurants differ to accommodate different types
of buildings and different square footage of available space.
We believe that a restaurant's location is a critical factor in determining its
success. Accordingly, we thoroughly analyze each prospective site before
signing a lease. Restaurant sites must be approved by the Real Estate Site
Approval Committee, consisting of two outside directors, our Chairman, CEO, CFO
and the prospective Divisional Vice President. As a dinner-only concept, we are
most concerned about locating restaurants close to areas where our guests
typically spend their evening hours. The criteria we consider when selecting a
site include: the site's visibility, traffic patterns, general accessibility
and availability of suitable parking, competition within the site's trade area,
availability of restaurant-level employees and proximity of shopping,
entertainment activities, office parks, and tourist attractions. In general, we
prefer to open our restaurants within larger metropolitan areas with higher
population densities and above-average household incomes.
Operations
Restaurant Management. Our ability to effectively manage restaurants over a
diverse geographic area will continue to be critical to our overall success. We
currently have three Divisional Vice Presidents of Operations who report
directly to the Chief Operations Officer. Each Divisional Vice President
supervises a multi-state geographic area and is expected to effectively manage
up to 15 restaurants. Our Divisional Vice Presidents supervise each Paisano
within his or her territory with the goal of achieving an expected return on
investment through the successful implementation and operation of the BUCA di
BEPPO concept. We believe that our Divisional Vice Presidents can accomplish
this broad supervisory task in large part because of the high caliber of our
Paisano Partners, who we also believe have more experience than the average
restaurant general manager in the industry. In addition, because we are a
dinner-only concept, the number of meal shifts that the Paisano Partner and,
indirectly, the Divisional Vice President, must supervise are approximately
one-half of most restaurants in the industry. The typical restaurant management
team consists of the Paisano Partner, Kitchen Manager, Assistant General
Manager and Assistant Kitchen Manager. Under the Paisano Partners Program, this
management team receives a percentage of incremental restaurant cash flow after
their restaurant achieves certain minimum performance levels. Each member of
our restaurant management team is cross-trained in all operational areas. As we
grow our restaurants and expand geographically, we expect to add additional
Divisional Vice Presidents.
Recruiting. We actively recruit and select individuals who share our passion of
guest service. Testing and multiple interviews are used to aid in the selection
of new employees at all levels. We have developed a competitive compensation
plan for restaurant management that includes a base salary, competitive
benefits package including a 401(k) plan, and participation in a management
incentive plan that rewards the restaurant management team for achieving
performance objectives. All of our employees are entitled to discounted meals
at our restaurants; in addition, all restaurant employees are invited to the
daily pre-shift meal held at each restaurant. We also enjoy the recruiting
advantage of being a one-meal-period-only restaurant concept, which provides
employees with a more regular schedule than they might have at other restaurant
concepts. In addition, because they are working only a dinner shift, where tips
are usually greater than other meals, servers realize better per hour
compensation than most other multiple meal concepts. It is our policy to
promote from within, but we recognize the need to supplement this policy with
outside recruiting at this stage of our growth and as new markets are opened.
Training. We provide all new employees with intensive training to ensure they
are provided with the tools to excel in their position. This training
encompasses classroom instruction, on-the-job training programs for each
position, and testing of the new employee's progress at pre-determined stages
within the training schedule. Each new member of the restaurant management team
receives a minimum of 12 weeks of training before being assigned to a
restaurant location. All management employees receive kitchen training. In
addition to the formal training
30
<PAGE>
programs, we maintain detailed operating procedure manuals, standards,
controls, food line management systems and a food culture book to complement
the training received at all levels.
Operational Control Systems. All of our restaurants use personal computer
systems integrated with point-of-sale and back-of-the-house management systems
to monitor restaurant sales, product costs and labor costs on a daily basis.
Financial controls are maintained through a centralized accounting system,
which includes a sophisticated theoretical food cost program and a labor
scheduling and tracking program. Physical inventories of food and beverage
items are taken on a weekly basis. Daily, weekly and monthly financial
information is provided to each restaurant and to the Divisional Vice
Presidents for analysis and comparison to our budget and to comparable
restaurants. We closely monitor restaurant sales, cost of sales, labor and
other restaurant trends on a daily, weekly and monthly basis. We believe that
our current systems are adequate for our planned expansion strategy.
Hours of Restaurant Operation. BUCA di BEPPO restaurants are open seven days a
week for dinner only, typically opening at 5:00 p.m. during the week and 4:00
p.m. on the weekends and closing at the Paisano's discretion, typically 10:00
p.m. on weekdays and 11:00 p.m. on weekends. Additionally, our restaurants open
at noon on selected holidays.
Marketing
Our marketing strategy is to communicate the BUCA di BEPPO brand through many
creative and non-traditional avenues. We focus our efforts on getting people in
the local community (particularly civic, business and media leaders) to talk
about the BUCA di BEPPO experience. During fiscal 1998, we spent an aggregate
of 2.5% of restaurant sales on marketing efforts. We expect to continue
investing approximately 2% to 3% of restaurant sales in marketing efforts in
the future, primarily in connection with the opening of new restaurants.
In connection with new restaurant openings, we contract with local public
relations firms to assist us in establishing and sustaining the BUCA di BEPPO
brand. By organizing events like pre-opening parties and concierge dinners,
these firms focus primarily on introducing BUCA di BEPPO restaurants to opinion
leaders, such as civic and media personalities, and to hospitality industry
leaders such as key hotel staff, meeting planners and convention and visitors
bureau representatives.
We sustain restaurant awareness primarily through unpaid media exposure and
word-of-mouth advertising, including grassroots neighborhood marketing efforts,
primarily by the Paisano Partner. BUCA di BEPPO restaurants have achieved
particular success by delivering a sample of menu items to drive-time radio
personalities and morning television hosts, earning free media exposure (and
often invitations for scheduled return engagements) while developing
relationships with high-profile media personalities.
To reinforce our image as a collection of unique neighborhood restaurants, the
Paisano Partner works diligently to establish a community presence. Through
ongoing neighborhood marketing efforts, supported by our marketing department,
the Paisano Partner establishes relationships with area businesses and
residents, participates in high-profile events and festivals, and takes
advantage of opportunities to introduce area residents and workers to the
restaurant. Because of their credibility as local business owners and community
members, Paisano Partners play an integral role in establishing BUCA di BEPPO
in the neighborhood.
We engage to a limited extent in paid advertising, including billboards, radio
spots, and newspaper and magazine ads. We also utilize a variety of printed
marketing materials, including restaurant location brochures, hotel concierge
cards, take-out menus and direct mailings. Typical themes in these materials
include: "Recorded Music in Every Room," "Cocktails in the Lounge and at Your
Table" and "Vinyl Booths Mean No Static Cling For the Ladies." All marketing
communications work to establish each of our restaurants as an irreverent,
distinct, casual and welcoming neighborhood immigrant Southern Italian
restaurant.
31
<PAGE>
Purchasing
We endeavor to obtain high quality menu ingredients and other supplies and
services for our operations from reliable sources at competitive prices. To
this end, we continually research and evaluate various ingredients and products
in an effort to maintain the highest quality and to be responsive to changing
consumer tastes. Our centralized purchasing staff, under the direction of our
Vice President of Purchasing, procures the products specified by our Food and
Beverage Department, specifies the products to be used at our restaurants,
designates the vendors and provides suppliers with detailed ingredient
specifications. To maximize purchasing efficiencies and to provide for the
freshest ingredients for our menu items, each restaurant's management
determines the quantities of food and supplies required. To obtain the lowest
possible prices for the required high quality and consistency, each restaurant
orders items primarily from our national food distributor, SYSCO Corporation,
on terms negotiated by our centralized purchasing staff. We believe that all
essential food and beverage products are available from several qualified
suppliers at competitive prices should an alternative source be required.
Competition
The restaurant industry is intensely competitive with respect to price,
service, the type and quality of food offered, location and other factors. We
have many well established competitors, both nationally and locally owned
Italian and non-Italian concepts, with substantially greater financial
resources and a longer history of operations than we do. We compete with other
restaurant and retail establishments for sites. Changes in consumer tastes,
economic conditions, demographic trends and the location and number of, and
type of food served by, competing restaurants could adversely affect our
business as could the unavailability of experienced management and hourly
employees.
Properties
All of our restaurants but one are located in leased facilities. Current
restaurant leases have expiration dates ranging from 2003 to 2018, with all of
the leases providing for five-year options to renew for at least one additional
term.
The building formerly housing our executive offices suffered extensive fire
damage in December 1998. Our executive offices are now temporarily located in
approximately 10,000 square feet of leased space in Minneapolis, Minnesota.
Employees
At January 31, 1999, we had 1,400 employees. Forty served in administrative or
executive capacities, 85 served as restaurant management personnel, and the
remainder were hourly restaurant personnel.
None of our employees are covered by collective bargaining agreements, and we
have never experienced an organized work stoppage or strike. We believe that
our working conditions and compensation packages are competitive and consider
relations with our employees to be very good.
Intellectual Property
We have registered the servicemarks "BUCA" and "BUCA di BEPPO" with the United
States Patent and Trademark Office. We believe that our trademarks and other
proprietary rights have significant value and are important to the marketing of
our restaurant concept. We have in the past and expect to continue to
vigorously protect our proprietary rights. We cannot predict, however, whether
steps taken by us to protect our proprietary
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<PAGE>
rights will be adequate to prevent misappropriation of these rights or the use
by others of restaurant features based upon, or otherwise similar to, our
concept. It may be difficult for us to prevent others from copying elements of
our concept and any litigation to enforce our rights will likely be costly. In
addition, other local restaurant operations with names similar to those we use
may try to prevent us from using our marks in those locales.
Government Regulations
Our restaurants are subject to regulation by federal agencies and to licensing
and regulation by state and local health, sanitation, building, zoning, safety,
fire and other departments relating to the development and operation of
restaurants. These regulations include matters relating to environmental,
building, construction and zoning requirements and the preparation and sale of
food and alcoholic beverages. Our facilities are licensed and subject to
regulation under state and local fire, health and safety codes.
Each of our restaurants is required to obtain a license to sell alcoholic
beverages on the premises from a state authority and, in certain locations,
county and/or municipal authorities. Typically, licenses must be renewed
annually and may be revoked or suspended for cause at any time. Alcoholic
beverage control regulations relate to numerous aspects of the daily operations
of each of our restaurants, including minimum age of patrons and employees,
hours of operation, advertising, wholesale purchasing, inventory control and
handling, and storage and dispensing of alcoholic beverages. We have not
encountered any material problems relating to alcoholic beverage licenses to
date. The failure to receive or retain a liquor license in a particular
location could adversely affect that restaurant and our ability to obtain such
a license elsewhere.
We are subject to "dram-shop" statutes in the states in which restaurants are
located. These statutes generally provide a person injured by an intoxicated
person the right to recover damages from an establishment that wrongfully
served alcoholic beverages to the intoxicated individual. We carry liquor
liability coverage as part of our existing comprehensive general liability
insurance, which we believe is consistent with coverage carried by other
entities in the restaurant industry. Although we are covered by insurance, a
judgement against us under a dram-shop statute in excess of our liability
coverage could have a material adverse effect on us.
Our operations are also subject to federal and state laws governing such
matters as wages, working conditions, citizenship requirements and overtime.
Some states have set minimum wage requirements higher than the federal level.
Significant numbers of hourly personnel at our restaurants are paid at rates
related to the federal minimum wage and, accordingly, increases in the minimum
wage will increase labor costs. Other governmental initiatives such as mandated
health insurance, if implemented, could adversely affect us as well as the
restaurant industry in general. We are also subject to the Americans With
Disability Act of 1990, which, among other things, may require certain
renovations to its restaurants to meet federally mandated requirements. The
cost of these renovations is not expected to materially affect us.
Legal Proceedings
From time to time, we are a defendant in litigation arising in the ordinary
course of our business, including claims resulting from "slip and fall"
accidents, claims under federal and state laws governing access to public
accommodations, employment-related claims and claims from guests alleging
illness, injury or other food quality, health or operational concerns. To date,
none of such litigation, some of which is covered by insurance, has had a
material effect on us.
33
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Set forth below is certain information concerning our executive officers,
directors and key employees:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
---- --- ------------------------------------------------
<S> <C> <C>
Joseph P.
Micatrotto(/1/) 47 President, Chief Executive Officer and Director
Greg A. Gadel 39 Chief Financial Officer, Treasurer and Secretary
Leonard A. Ghilani 38 Chief Operations Officer
Philip A.
Roberts(/1/)(/2/) 60 Chairman of the Board
Peter J. Mihajlov(/3/) 59 Director
Don W. Hays(/2/) 57 Director
John P. Whaley(/2/)(/3/) 46 Director
David Yarnell(/1/)(/3/) 43 Director
Paul Zepf(/2/) 34 Director
Daniel E. Durenberger 31 Divisional Vice President
Joseph J. Kohaut 35 Divisional Vice President
Joseph J. Talarico 44 Divisional Vice President
John J. Motschenbacher 36 Vice President of Finance and Purchasing
Robert R. Parent 51 Vice President of Development
Jennifer Percival 39 Vice President of Family Relations
Vittorio Renda 44 Vice President of Food and Beverage
Lane Schmiesing 42 Vice President of Marketing
</TABLE>
---------------
(/1/)Member of Executive Committee.
(/2/)Member of the Compensation Committee.
(/3/)Member of Audit Committee.
Joseph P. Micatrotto joined BUCA in 1996 as our President and Chief Executive
Officer. Mr. Micatrotto's twenty-five year career in restaurant management
includes being CEO of Panda Management Company, Inc. where he led the company's
expansion and president and CEO of Chi-Chi's Mexican Restaurant, Inc., where he
was instrumental in its national growth. Mr. Micatrotto is active on various
boards and industry groups. He has been nominated to the Board of Directors of
the National Restaurant Association.
Greg A. Gadel has been BUCA's Chief Financial Officer and Treasurer since 1997
and its Secretary since 1998. Prior to joining BUCA, Mr. Gadel was CFO for the
32-unit restaurant chain, Leeann Chin. In addition he previously was vice
president and controller for the largest Chi-Chi's franchisee, Consul
Corporation. He has also worked for Marriot, McDonald's and the Deloitte &
Touche LLP accounting firm, and has over 15 years experience in the restaurant
industry. Mr. Gadel is a member of the American Institute of Certified Public
Accountants.
Leonard A. Ghilani joined BUCA in 1998 as a Divisional Vice President and was
named Chief Operations Officer in 1999. He was previously with Einstein Noah
Bagel Corporation where he spent two and a half years as Vice President of
Operations. Prior to his employment with Einstein Noah Bagel Corporation, Mr.
Ghilani worked for Chi-Chi's Mexican Restaurant, Inc., where he held several
positions including Divisional Vice President, District Manager, General
Manager and Kitchen Manager.
Philip A. Roberts co-founded BUCA in 1993 and currently serves as Chairman of
our Board of Directors. Mr. Roberts is also a principal of Parasole Restaurant
Holdings, Inc., which he co-founded in 1986. Mr. Roberts has been involved in
the restaurant industry since 1977, when he co-founded with Mr. Mihajlov the
first of several privately-held restaurant companies, which later merged to
form Parasole.
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<PAGE>
Peter J. Mihajlov co-founded BUCA in 1993 and currently serves as a Director.
Mr. Mihajlov is also a principal of Parasole, which he co-founded in 1986. Mr.
Mihajlov has been in the restaurant industry since 1977, when he and Mr.
Roberts co-founded the first of several privately-held restaurant companies,
which later merged to form Parasole. Prior to that, Mr. Mihajlov served in a
variety of marketing and business management positions within The Pillsbury
Company over the course of seventeen years.
Don W. Hays co-founded BUCA in 1993 and currently serves as a Director. Mr.
Hays is also a principal of Parasole, which he co-founded in 1986. Prior to
that, Mr. Hays founded Hospitality Management Group, Inc. in 1977, which later
merged to form Parasole. Mr. Hays has been involved in the restaurant industry
since 1964, when he joined Dayton's Restaurant Division, of which he later
became Director of Operations.
John P. Whaley has served as a Director of BUCA since 1996. He is a partner of
Norwest Equity Partners and Norwest Venture Partners, and has been a partner or
officer of these and affiliated private equity investment funds since 1977. He
is also a director of several privately held companies.
David Yarnell has served as a Director of BUCA since 1996. He has been a Vice
President of Consumer Venture Partners since June 1993. He has been a General
Partner of Brand Equity Ventures since April 1997. Mr. Yarnell also serves on
the Board of Directors of Cyberian Outpost, a publicly held company.
Paul Zepf has served as a Director of BUCA since 1998. He has been a Managing
Director of Centre Partners Management L.L.C., which manages Centre Capital
Investors II, L.P. and related private equity investment funds, since 1995. He
is also a Managing Director of Corporate Advisors, L.P., which he joined in
1989. He is a director of The Learning Company, LaSalle Re Holdings Limited,
and Firearms Training Systems, Inc. He is also a director of Nationwide Credit,
Inc., a privately held company with public bonds.
Daniel E. Durenberger joined BUCA in 1993 as Paisano of the original BUCA di
BEPPO restaurant in Minneapolis, Minnesota and was promoted to his current
position of Divisional Vice President in 1998. From 1996 to 1998, Mr.
Durenberger served as Director of Training and Team Development at BUCA. Prior
to joining BUCA, he held various management positions at the Madison Hotel in
Washington, D.C.
Joseph J. Kohaut joined BUCA in 1997 as a Divisional Vice President. From 1994
to 1997, Mr. Kohaut was a regional manager with Panda Management Company, Inc.,
where he was responsible for developing his region from five to 14 operating
units. Mr. Kohaut has more than 18 years of restaurant industry experience,
including general management and operations positions with Chi-Chi's and Ground
Round prior to joining Panda.
Joseph J. Talarico joined BUCA in 1997 as a Divisional Vice President. Prior to
joining BUCA, Mr. Talarico served as Vice President of Development and Training
for the Chevy's Mexican Restaurant division of Pepsico from 1994 to 1997. For
the 12 years prior to joining Pepsico, Mr. Talarico held several positions with
Chi-Chi's, including General Manager, Area Supervisor and Vice President of
Training and Development.
John J. Motschenbacher joined BUCA as Corporate Controller in 1998 and was
named Vice President of Finance and Purchasing in 1999. Prior to joining BUCA,
Mr. Motschenbacher held the position of Controller at Cafe Odyssey, Leann Chin
and Bon Appetit. He also held various accounting positions at Consul
Corporation, the largest Chi-Chi's franchisee.
Robert R. Parent joined BUCA in 1998 as Vice President of Development. He was
previously with Don Pablo's, the Dallas-based division of Apple South, Inc.
(renamed Avado Brands, Inc.) and operator of the 93-unit Don Pablo's Mexican
restaurant chain, where he served as Senior Vice President of Development. Mr.
Parent brings 17 years of retail and restaurant site development experience to
BUCA. He previously held various real estate development positions with the Red
Lobster and Olive Garden casual dining restaurant chains.
Jennifer Percival joined BUCA in 1999 as Vice President of Family Resources.
Ms. Percival was previously with Lufthansa Service USA Corp.'s Venice Market
division, a Dallas-based company operating in-flight catering and
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<PAGE>
specialty concepts, where she served as Vice President of Human Resources for
the U.S. Ms. Percival has more than 20 years of restaurant industry and human
resources experience. Prior to her work with Lufthansa, she held various
management and human resources positions with La Madeleine and TGI Friday's
restaurant companies.
Vittorio Renda has been with BUCA since 1993, first as its Director of Culinary
Development and since 1996 as Vice President of Food and Beverage. From 1982 to
1993, Mr. Renda served in various culinary and management roles for Parasole
and its predecessor companies, with the exception of 1989-1991 when he was
General Manager and Executive Chef with the DeBartolo Corporation. Mr. Renda
developed his culinary skills working throughout Italy in the twelve years
prior to joining Parasole. Mr. Renda was born and raised in Calabria, Italy.
Lane Schmiesing joined BUCA in 1997 as Vice President of Marketing. He was
formerly with Rare Hospitality, Inc., where he spent three years as Vice
President of Marketing. He brings to BUCA 20 years of restaurant marketing
experience. He has developed award winning advertising and promotional
campaigns for such brands as Dairy Queen, Bonanza Restaurants and Longhorn
Steakhouses. A member of the Board of Directors of the Marketing Executive
Group of the National Restaurant Association, he is also a frequent guest
lecturer at colleges and universities on the topics of strategic marketing and
brand identity.
BOARD OF DIRECTORS; COMMITTEES
Our Board consists of seven members. Members of the Board are elected each year
at our annual meeting of shareholders, and serve until their respective
successors have been elected and qualified. Pursuant to the terms of Mr.
Micatrotto's employment agreement, the Board is required to use its best
efforts to cause Mr. Micatrotto to continue to be elected to the Board as long
as he is our Chief Executive Officer.
The Executive Committee of the Board, comprised of Messrs. Micatrotto, Roberts
and Yarnell, provides advice and counsel to the Chief Executive Officer
regarding the day to day operations of BUCA. While the Executive Committee may
recommend policies and actions for the Board's consideration, it does not have
the authority to take any action on behalf of the Board.
The Compensation Committee of the Board, comprised of Messrs. Roberts, Hays,
Whaley and Zepf, is responsible for reviewing and establishing the compensation
structure for our officers and directors, including salaries, participation in
incentive compensation and benefit plans, stock option plans and other forms of
compensation, and is responsible for administering our 1996 Incentive Plan and
the Stock Option Plan for Non-employee Directors. See "Stock Incentive Plan and
Stock Options."
The Audit Committee of the Board, comprised of Messrs. Mihajlov, Whaley and
Yarnell, is responsible for recommending to the Board our independent auditors,
analyzing the reports and recommendations of the auditors and reviewing
internal audit procedures and controls.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to provisions of the Minnesota Business Corporation Act, we have
adopted provisions in our Articles of Incorporation that provide that our
directors shall not be personally liable for monetary damages to the company or
our shareholders for a breach of fiduciary duty as a director to the full
extent that the act permits the limitation or elimination of the liability of
directors.
DIRECTOR COMPENSATION
Our directors are reimbursed for certain reasonable expenses incurred in
attending Board meetings. Directors who are also employees of the company
receive no remuneration for services as members of the Board or any board
committee. Directors who are not employed by the company have received certain
grants of stock options. See "Stock Incentive Plans and Stock Options."
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<PAGE>
Executive Compensation
Summary Compensation Table. The following table contains information concerning
compensation for fiscal 1998 earned by our President and Chief Executive
Officer and our Chief Financial Officer, our executive officers whose total
salary and bonus for this period exceeded $100,000.
Fiscal 1998 Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------- ------------
Other Annual Securities
Name and Salary Bonus Compensation Underlying
Principal Position ($) ($) ($) Options (#)
------------------ ------- ------ ------------ ------------
<S> <C> <C> <C> <C>
Joseph P. Micatrotto................... 300,573 39,339 65,200(/1/) 13,333
President and Chief Executive Officer
Greg A. Gadel.......................... 135,000 54,000 6,000(/2/) 23,333
Chief Financial Officer
</TABLE>
---------------
(/1/)Includes car allowance, living expenses and college tuition for Mr.
Micatrotto's child.
(/2/)Represents car allowance.
Stock Option Grants Table. The following table sets forth certain information
concerning all stock options granted during fiscal 1998 to the named executive
officers. We did not grant any stock appreciation rights or restricted stock
awards during fiscal 1998.
Fiscal 1998 Stock Option Grants
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation For
Option Term Option Term(/2/)
-------------------------------- -----------------------
Number of Percent of
Shares Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted 1998 ($/Share)(/1/) Date 5% ($) 10% ($)
---- ---------- ------------- -------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Micatrotto.... 13,333(/3/) 5.25 7.68 December 15, 2008 147,360 295,300
Greg A. Gadel........... 23,333(/4/) 9.19 7.68 December 15, 2008 257,883 516,780
</TABLE>
---------------
(/1/)The exercise price may be paid in cash, in shares of common stock valued
at fair market value on the exercise date, or in a combination of cash and
shares.
(/2/)The hypothetical potential appreciation shown in these columns reflects
the required calculations at annual assumed appreciation rates of 5% and
10%, as set by the Securities and Exchange Commission, and therefore is
not intended to represent either historical appreciation or anticipated
future appreciation of the common stock.
(/3/)The entire grant of options vested immediately upon grant and all options
are transferrable.
(/4/)The grant vests 20% per year beginning one year from the date of grant.
No stock options were exercised by the named executive officers during fiscal
1998. Mr. Micattrotto also received certain options to purchase common stock in
February 1999 in connection with the amendment of his employment agreement. See
"Employment Agreements."
Fiscal Year-End Option Value Table. The following table sets forth certain
information concerning unexercised stock options held by the named executive
officers as of fiscal 1998 year-end.
37
<PAGE>
AGGREGATE 1998 FISCAL YEAR-END OPTION VALUE TABLE
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 27, 1998 DECEMBER 27, 1998(/1/)
------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph P. Micatrotto........ 131,520 140,000 $1,016,183 $822,500
Greg A. Gadel............... 10,333 79,666 58,456 321,507
</TABLE>
---------------
(/1/)There was no public trading market for the common stock as of December
27, 1998. Accordingly, these values have been calculated, in accordance
with the rules of the SEC, on the basis of the initial public offering
price per share minus the applicable exercise price per share.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement with Joseph P. Micatrotto on July 22,
1996, which was subsequently amended and restated in February 1999. Under the
terms of the agreement, Mr. Micatrotto is currently serving as our President
and Chief Executive Officer for a term expiring on December 31, 2003. The
agreement provides that Mr. Micatrotto's annual salary will be $325,000 for
the current year, $335,000 for the year ended December 31, 2000, $350,000 for
the year ended December 31, 2001 and for the remainder of the term it will be
an amount determined by the Board, but not less than the prior year's amount.
Mr. Micatrotto is eligible to receive a yearly bonus based upon certain
performance criteria established by the Board. In connection with the
amendment of Mr. Micatrotto's employment agreement in February 1999,
Mr. Micatrotto received options to purchase 126,666 shares of our common stock
at an exercise price of $11.25 per share, 6,666 of which vest on each of
December 31, 1999, 2000 and 2001 and 53,334 of which vest on each of December
31, 2002 and 2003. We also have agreed to reimburse Mr. Micatrotto's
reasonable and necessary business expenses. Mr. Micatrotto is entitled to the
following termination benefits:
. If Mr. Micatrotto is terminated by us for cause (as defined in the
agreement) or if Mr. Micatrotto terminates his employment, he will
receive no additional compensation or termination benefits.
. If Mr. Micatrotto is terminated because of death or physical or
mental disability, he or his estate will be entitled to a
termination payment of two years' base salary then in effect,
payable in 24 equal monthly installments.
. If Mr. Micatrotto terminates his employment upon 30 days' prior
written notice following a change in control of the company (as
defined in the agreement), because his duties are substantially
reduced or negatively altered (as defined in the agreement)
without his prior written consent, or if Mr. Micatrotto's
employment is terminated by us without cause following a change in
control or within 180 days prior to a change in control and the
termination is related to the change in control, he will be
entitled to a termination payment of 18 months' base salary then
in effect, payable in 18 monthly installments. If Mr. Micatrotto
terminates employment as a result of a change in control, but his
duties have not been substantially reduced or negatively altered,
he will be entitled to a termination payment of 12 months' base
salary then in effect, payable in 12 monthly installments.
. If Mr. Micatrotto is terminated by us without cause and not
associated with a change in control, he will be entitled to a
termination payment of 18 months' base salary then in effect,
payable in 18 monthly installments.
The agreement also contains certain fringe benefits, confidentiality and non-
competition provisions. See "Executive Compensation."
38
<PAGE>
On April 1, 1997, we entered into a letter agreement with Greg A. Gadel under
which Mr. Gadel will be entitled one year's base compensation in effect at the
time of termination if his employment is terminated as a result of a change in
control of BUCA or if he terminates his employment following a change in
control if his duties are substantially reduced or negatively altered.
Stock Incentive Plan and Stock Options
1996 Stock Incentive Plan. The 1996 Stock Incentive Plan of BUCA, Inc. and
Affiliated Companies provides an incentive to our key employees through the
award of stock options, stock appreciation rights, restricted stock, restricted
stock units, stock-based awards, or other performance awards that may be
granted in cash, shares of stock, or other property and are related to
performance goals. The plan is administered by the Compensation Committee of
the Board. The committee has full power and authority, subject to the terms of
the plan, to designate participants and the type and terms of any awards. Any
options granted may be incentive stock options or nonqualified stock options,
must be for no longer than 10 years and, except under limited circumstances,
are not transferable. The base price for any stock appreciation right must be
not less than 100% of the fair market value of a share of stock at the date of
grant.
The plan will be effective until October 1, 2006, but may be amended, altered,
suspended or discontinued at any time by the Board, subject to certain limited
exceptions. We have reserved 1,500,000 shares for issuance under the plan.
Stock Option Plan for Non-Employee Directors. The Stock Option Plan for Non-
Employee Directors is also administered by the Compensation Committee of the
Board. Prior to its termination in February 1999, the plan provided for option
grants of common stock to each director who was not an employee of BUCA and had
not been an employee for at least one year, in the amount of 1,333 shares on
first election or appointment to the Board and 666 shares on each of the
following anniversaries. The purchase price was 100% of the fair market value
of the common stock, as defined in the plan, at the time the option was
granted. The term of each option is ten years; however, the option is not
exercisable for the first year and will terminate if the optionee ceases to be
a director in the one-year period following the grant of the option. The
options are not transferable other than by will or the laws of descent and
distribution. We have reserved 26,666 shares for issuance under the plan. All
options outstanding under the plan when terminated shall remain outstanding. In
connection with the termination of the plan, the Board approved grants of
options to purchase 8,000 shares of common stock to each of the six non-
employee directors of BUCA under the 1996 Stock Incentive Plan. These options
have an exercise price of $11.25 per share, are immediately exercisable and
expire 10 years after grant.
Paisano Partners Program. We have established the Paisano Partners Programs for
our general managers, kitchen managers and assistant managers. The Paisano
Partners Program for general managers has three primary components: profit
sharing, the purchase of shares of our common stock and a stock option grant.
The profit sharing component allows the general manager to participate in the
profits of the restaurant he or she manages. In order to participate in the
Paisano Partners Program, general managers are required to purchase shares of
our common stock worth approximately $20,000, at fair market value. We will
also loan the general managers the purchase price of the stock at 8% interest,
with the entire amount payable over five years. Under the stock purchase
agreement we enter into with each general manager, we have certain repurchase
rights regarding the stock. General managers also receive a one-time option
grant to purchase 2,000 shares of our common stock at fair market value on the
date of grant. The options are exercisable only upon completion of five years
of employment as a Paisano Partner and expire 10 years after the date of grant.
Participants in the Paisano Partners Program for kitchen managers participate
in profit sharing and receive a one-time option grant to purchase 1,000 shares
of our common stock on the same terms as that provided to general managers, but
have no right to purchase shares under the program. Participants in the Paisano
Partners Program for assistant managers participate in profit sharing but
receive no options and have no right to purchase shares.
Compensation Committee Interlocks and Insider Participation
Philip A. Roberts, Don W. Hays, John P. Whaley and Paul Zepf, directors of
BUCA, are members of the Board's Compensation Committee.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 30, 1996, we were spun off from our parent, Parasole Restaurant
Holdings, Inc. through a share dividend of our common stock pro rata among the
Parasole shareholders. The Parasole shareholders at the time of the dividend
included the Parasole Employer Stock Ownership Trust, owner of more than 5% of
a class of our capital stock, and Philip A. Roberts, Peter J. Mihajlov and Don
W. Hays, directors of the company and owners of more than 5% of a class of our
capital stock.
Series A Preferred Financing. In October 1996, we sold shares of Series A
Convertible Preferred Stock convertible into 1,493,331 shares of common stock
for an aggregate purchase price of $8,400,000, or $5.625 per common share. Upon
completion of this offering, all shares of our outstanding Series A Convertible
Preferred Stock will automatically convert into shares of common stock.
The following beneficial holders of more than 5% of a class of our capital
stock purchased shares of the Series A Convertible Preferred Stock having an
aggregate purchase price of at least $60,000:
<TABLE>
<CAPTION>
5% Shareholders(/1/) Shares Purchased(/2/)
-------------------- ---------------------
<S> <C>
Norwest Equity Partners V, L.P....................... 711,111
Consumer Venture Partners II, L.P.................... 266,666
Northwood Ventures................................... 266,666
Regent Capital Partners, L.P......................... 177,778
</TABLE>
---------------
(/1/)See notes to "Principal and Selling Shareholders" for information relating
to the beneficial ownership of shares and identification of affiliated
shareholders.
(/2/)Represents number of shares of common stock issuable upon conversion of
purchased shares of Series A Convertible Preferred Stock.
Series B Preferred Financing. In September 1997, we sold shares of Series B
Convertible Preferred Stock convertible into 640,739 shares of common stock for
an aggregate purchase price of $4,324,999.50, or $6.75 per common share. In
December 1997, we sold additional shares of Series B Convertible Preferred
Stock convertible into 640,738 shares of common stock for an aggregate purchase
price of $4,324,999.50, or $6.75 per common share. Upon completion of this
offering, all shares of our outstanding Series B Convertible Preferred Stock
will automatically convert into shares of common stock.
The following beneficial holders of more than 5% of a class of our capital
stock purchased shares of the Series B Convertible Preferred Stock having an
aggregate purchase price of at least $60,000:
<TABLE>
<CAPTION>
5% Shareholders(/1/) Shares Purchased(/2/)
-------------------- ---------------------
<S> <C>
Norwest Equity Partners V, L.P....................... 370,370
National Dining Concepts, Inc........................ 296,296
Walden Investors..................................... 237,036
Consumer Venture Partners II, L.P.................... 148,148
Northwood Ventures................................... 148,147
</TABLE>
---------------
(/1/)See notes to "Principal and Selling Shareholders" for information relating
to the beneficial ownership of shares and identification of affiliated
shareholders.
(/2/)Represents number of shares of common stock issuable upon conversion of
purchased shares of Series B Convertible Preferred Stock.
Series C Preferred Financing. In October 1998, we sold shares of Series C
Convertible Preferred Stock convertible into 1,092,679 shares of common stock
and related contingent value rights for an aggregate purchase price of
$8,400,007.02, or $7.6875 per common share. In December 1998, we sold
additional shares of Series C Convertible Preferred Stock convertible into
637,752 shares of common stock and related contingent value rights for an
aggregate purchase price of $5,000,000, or $7.84 per common share. The
contingent value rights entitle the holders to receive, in the aggregate, up to
610,082 shares of common stock if certain events regarding our common stock do
not occur prior to October 2001.
Upon completion of this offering, all shares of our outstanding Series C
Convertible Preferred Stock will automatically convert into shares of common
stock and the related contingent value rights will terminate. In
40
<PAGE>
connection with such conversion and termination, an aggregate of 40,195
additional shares of common stock will be issued to the holders of the Series C
Convertible Preferred Stock immediately after the completion of this offering.
The following beneficial holders of more than 5% of a class of our capital
stock purchased shares of the Series C Convertible Preferred Stock having an
aggregate purchase price of at least $60,000:
<TABLE>
<CAPTION>
5% SHAREHOLDERS(/1/) SHARES PURCHASED(/2/)
-------------------- ---------------------
<S> <C>
Centre Capital Investors II, L.P..................... 1,288,156
Norwest Equity Partners V, L.P....................... 282,802
Northwood Ventures................................... 65,040
Walden-SBIC, L.P..................................... 45,994
Regent Capital Partners, L.P......................... 48,439
</TABLE>
---------------
(/1/)See notes to "Principal and Selling Shareholders" for information relating
to the beneficial ownership of shares and identification of affiliated
shareholders.
(/2/)Represents number of shares of common stock issuable upon conversion of
purchased shares of Series C Convertible Preferred Stock.
SUBORDINATED DEBT TRANSACTIONS. In October 1997, we entered into a subordinated
loan transaction under which we borrowed $2,500,000, including $500,000 from
Regent Capital Partners, L.P. Regent is a beneficial owner of more than 5% of a
class of our capital stock. In connection with the transaction, we also issued
warrants to purchase 16,111 shares of our common stock at $0.01 per share to
Regent. In May 1998, we borrowed an additional $3,500,000, including $1,500,000
from Regent. In connection with the May transaction, we also issued warrants to
purchase 48,332 shares of our common stock at $0.01 per share to Regent. The
indebtedness was repaid by us from amounts borrowed under our current credit
facilities.
In connection with these subordinated debt transactions, we issued warrants to
purchase an aggregate of 66,663 shares of our common stock at $0.01 per share
to the purchasers of our Series B Convertible Preferred Stock. The warrants
vest upon completion of our initial public offering, but only if the public
offering price per share is less than $13.50.
AGREEMENTS WITH PARASOLE. We have entered into an Amended and Restated
Management Agreement dated January 1, 1997, as amended, with Parasole. Philip
Roberts, Don Hays and Peter Mihajlov are officers, directors and shareholders
of Parasole as well as our directors and holders of more than 5% of a class of
our capital stock. Under the management agreement, Parasole provides
development and design support in connection with our new restaurants. In
exchange for these services, we pay Parasole a fee of $12,500 for each new
restaurant we open. Prior to the amendment of the management agreement, we
agreed to pay Parasole an accounting charge of $1,000 per month for the first
24 months after a new restaurant's opening. While we no longer incur new
charges under the amended management agreement, the 24-month period has not
expired for all of our restaurants opened prior to the amendment of the
management agreement. The amount paid by us to Parasole under the management
agreement in fiscal 1996 was $354,000, in fiscal 1997 was $270,000 and fiscal
1998 was $248,000.
We have a vendor relationship with Parasole Good Earth Bakery, owned by
Parasole, through which the bakery provides various baked goods to our
restaurants in the Minneapolis/St. Paul market. The relationship can be
terminated at any time at our discretion. The amount paid by us to the bakery
in fiscal 1996 was $211,000, in fiscal 1997 was $180,000, and in fiscal 1998
was $169,000. We believe the terms of the supply arrangement are at least as
favorable as we could obtain from unrelated parties.
We have a Redemption Agreement with Parasole under which we are obligated to
repurchase shares of our common stock held by the Parasole Employee Stock
Ownership Trust under certain conditions. The Parasole Employee Stock Ownership
Plan holds a total of 499,936 shares of our common stock. Parasole has similar
obligations regarding its stock held by our ESOP.
OTHER TRANSACTIONS. Steven Roberts, son of Philip Roberts, our director and a
holder of more than 5% of a class of our capital stock, from time to time
performs architectural services for us under a letter agreement. The amount
paid by us to Mr. Roberts for these services in fiscal 1998 was $99,947.
41
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of the date of this Prospectus and as adjusted
to reflect the sale of the 2,500,000 shares of common stock offered by us by
this Prospectus by (i) each shareholder known by us to beneficially own more
than five percent of any class of our capital stock, (ii) each of our
directors, (iii) the named executive officers, (iv) all of our directors and
executive officers as a group and (v) the selling shareholders. Except as
otherwise noted below, each of the shareholders identified in the table has
sole voting and investment power with respect to the shares of common stock
beneficially owned by the person. The following table gives effect to the
conversion of all outstanding shares of our preferred stock, which will occur
automatically upon the closing of the offering and assumes that the price of
the common stock in this offering will be less than $13.50, causing certain
warrants we issued to vest.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED PRIOR TO SHARES BENEFICIALLY
THE OFFERING(/1/) SHARES OWNED AFTER OFFERING
----------------- BEING -----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ --------- ------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Norwest Equity Partners V,
L.P.(/2/).................... 1,400,072 19.8 -- 1,400,072 14.6
Centre Capital Investors II,
L.P.(/3/).................... 1,326,153 18.8 -- 1,326,153 13.9
Philip A. Roberts(/4/)........ 1,138,898 16.1 50,000 1,088,898 11.4
Peter J. Mihajlov(/5/)........ 1,138,862 16.1 50,000 1,088,862 11.4
Don W. Hays(/6/).............. 1,132,330 16.0 50,000 1,082,330 11.3
Parasole Employee Stock Owner-
ship Trust(/7/).............. 499,936 7.1 -- 499,936 5.2
Northwood Ventures(/8/)....... 491,058 6.9 -- 491,058 5.1
Consumer Venture Partners II,
L.P.(/9/).................... 431,854 6.1 -- 431,854 4.5
National Dining Concepts,
Inc.(/10/)................... 311,710 4.4 -- 311.710 3.3
Walden Investors(/11/)........ 296,420 4.2 -- 296,420 3.1
Regent Capital Partners,
L.P.(/12/)................... 299,569 4.2 -- 299,569 3.1
John P. Whaley(/13/).......... 1,400,072 19.8 -- 1,400,072 14.6
David Yarnell(/14/)........... 431,854 6.1 -- 431,854 4.5
Paul Zepf(/15/)............... 1,326,153 18.7 -- 1,326,153 13.9
Joseph P. Micatrotto(/16/).... 244,747 3.4 * 244,747 2.5
Greg A. Gadel(/17/)........... 10,335 -- -- 10,335 --
All directors and officers as
a group (9 persons).......... 5,531,701 76.0 5,381,701 55.0
</TABLE>
---------------
* Mr. Micatrotto has granted to the underwriters an option to purchase up to
an additional 16,000 shares of common stock as part of their option to cover
over-allotments, if any. This option will be exercised on a pro rata basis
with the option granted by BUCA.
(/1/)Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities and includes
shares of common stock issuable pursuant to the exercise of stock options
that are immediately exercisable or exercisable within 60 days. Unless
otherwise indicated, the persons or entities identified in this table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. Percentage ownership calculations prior to and
after the offering are based on 7,059,557 shares and 9,559,557 shares,
respectively, of common stock outstanding. As of February 17, 1999, we had
107 shareholders of record.
(/2/)Includes (i) warrants for the purchase of 19,268 shares of common stock
exercisable within 60 days held by Norwest; (ii) 6,522 shares of common
stock to be issued to Norwest upon completion of the offering; and (iii)
options for the purchase of 9,999 shares of common stock exercisable
within 60 days granted to John P. Whaley. The address for Norwest is 222
South Ninth Street, Minneapolis, Minnesota 55402.
(/3/)Includes (i) 602,561 shares owned by State Board of Administration of
Florida; (ii) 129,122 shares owned by Centre Capital Tax-Exempt Investors
II, L.P.; (iii) 86,338 shares owned by Centre Capital Offshore Investors
II, L.P.; (iv) 67,264 shares owned by Centre Partners Coinvestment, L.P.;
(v) 6,082 shares owned by Centre Parallel Management Partners, L.P.; (vi)
9,240 shares of common stock to be issued upon completion of the offering
to Centre Capital Investors II, L.P.; (vii) 14,033 shares of common stock
to be issued upon completion of the offering to State Board of
Administration of Florida; (viii) 3,007 shares of common stock to be
issued upon completion of the offering to Centre Capital Tax-Exempt
Investors II, L.P.; (ix) 2,010 shares of common stock to be issued upon
completion of the offering to Centre Capital Offshore Investors II, L.P.;
(x) 1,566 shares of common stock to be issued upon completion of the
offering to Centre Partners Coinvestment, L.P.; (xi) 141 shares of common
stock to be issued upon completion of the offering to Centre Parallel
Management Partners, L.P.; and (xii) options for the purchase of 8,000
shares of common stock exercisable within 60 days granted to Paul Zepf.
The address for Centre is 30 Rockefeller Plaza, New York, New York 10020.
42
<PAGE>
(/4/)Includes (i) 133,333 shares owned by the Roberts Family Limited
Partnership II; (ii) 106,666 shares owned by Mr. Roberts' wife; (iii)
options for the purchase of 8,000 shares of common stock exercisable
within 60 days granted to Mr. Roberts; (iv) options for the purchase of 35
shares of common stock exercisable within 60 days granted to Mr. Robert's
wife; (v) 499,936 shares of common stock held by the
Parasole ESOT, of which Mr. Roberts is a co-trustee, and (vi) 97,226 shares
of common stock held by the BUCA Employee Stock Ownership Plan, of which Mr.
Roberts is a co-trustee. The address for Mr. Roberts is 1300 Nicollet Mall,
Minneapolis, Minnesota 55403.
(/5/)Includes (i) 166,666 shares owned by the Mihajlov Family Limited
Partnership; (ii) 106,666 shares owned by Mr. Mihajlov's wife; (iii)
13,066 shares held in the Mihajlov Irrevocable Grandchildren's Trust; (iv)
options for the purchase of 8,000 shares of common stock exercisable
within 60 days granted to Mr. Mihajlov; (v) 499,936 shares of common stock
held by the Parasole ESOT, of which Mr. Mihajlov is a co-trustee; and (vi)
97,226 shares of common stock held by the BUCA Employee Stock Ownership
Plan, of which Mr. Mihajlov is a co-trustee. The address for Mr. Mihajlov
is 2908 Hennepin Avenue South, Minneapolis, Minnesota 55408.
(/6/)Includes (i) 133,333 shares owned by the Hays Family Limited Partnership;
(ii) 100,133 shares owned by Mr. Hays' wife; (iii) options for the
purchase of 8,000 shares of common stock exercisable within 60 days
granted to Mr. Hays; (iv) 499,936 shares of common stock held by the
Parasole ESOT, of which Mr. Hays is a co-trustee; and (v) 97,226 shares of
common stock held by the BUCA Employee Stock Ownership Plan, of which Mr.
Hays is a co-trustee. The address for Mr. Hays is 2908 Hennepin Avenue
South, Minneapolis, Minnesota 55408.
(/7/)The address for the Parasole ESOT is 2908 Hennepin Avenue South,
Minneapolis, Minnesota 55408.
(/8/)Includes (i) 89,466 shares owned by Northwood Capital Partners LLC; (ii)
1,350 shares of common stock to be issued upon completion of the offering
to Northwood Ventures; (iii) 149 shares of common stock to be issued upon
completion of the offering to Northwood Capital Partners LLC; (iv)
warrants for the purchase of 6,166 shares of common stock exercisable
within 60 days held by Northwood Ventures; (v) warrants for the purchase
of 1,541 shares of common stock exercisable within 60 days held by
Northwood Capital Partners LLC; and (vi) options for the purchase of 1,999
shares of common stock exercisable within 60 days granted to Henry T.
Wilson. The address for Northwood is 485 Underhill Boulevard, Syosset, New
York 11791.
(/9/)Includes (i) warrants for the purchase of 7,707 shares of common stock
exercisable within 60 days held by Consumer Venture Partners II, L.P.; and
(ii) options for the purchase of 9,333 shares of common stock exercisable
within 60 days granted to David Yarnell. The address for Consumer Venture
is 3 Pickwick Plaza, Greenwich, Connecticut 06830.
(/10/)Includes warrants to purchase 15,414 shares of common stock exercisable
within 60 days held by National Dining Concepts, Inc. As of the date of
this prospectus National Dining Concepts, Inc. holds 23.1% of our Series
B Preferred Stock and upon closing of the offering, National Dining
Concepts, Inc. will hold less than 5% of our Common Stock.
(/11/)Includes (i) 22,222 shares owned by Walden Ventures; (ii) 7,407 shares
owned by Walden Capital Partners; (iii) 172,780 shares owned by Walden-
SBIC, L.P.; (iv) 28,770 shares owned by Walden Technology Ventures II,
L.P. (v) warrants to purchase 2,697 shares of common stock exercisable
within 60 days held by Walden Investors; (vi) warrants to purchase 1,156
shares of common stock exercisable within 60 days held by Walden
Ventures; (vii) warrants to purchase 385 shares of common stock
exercisable within 60 days held by Walden Capital Partners; (viii)
warrants to purchase 6,936 shares of common stock exercisable within 60
days held by Walden-SBIC, L.P.; (ix) warrants to purchase 1,156 shares of
common stock exercisable within 60 days held by Walden Technology
Ventures II, L.P.; (x) 909 shares of common stock to be issued upon
completion of the offering to Walden-SBIC, L.P.; and (xi) 151 shares of
common stock to be issued upon completion of the offering to Walden
Technology Ventures II, L.P. As of the date of this Prospectus, Walden
holds 18.5% of our Series B Preferred Stock and upon closing of the
offering, Walden will hold less than 5% of our common stock. The address
for Walden is 750 Battery Street, Suite 700, San Francisco, California
94111.
(/12/)Includes (i) warrants to purchase 385 shares of common stock exercisable
within 60 days held by Regent Capital Partners, L.P.; (ii) warrants to
purchase 64,443 shares of common stock stock exercisable within 60 days
held by Regent Capital Partners, L.P.; and (iii) 1,117 shares of common
stock to be issued upon completion of the offering to Regent Capital
Partners, L.P. As of the date of this prospectus, Regent Capital
Partners, L.P. holds 11.9% of our Series A Preferred Stock and upon
closing of the offering, Regent Capital Partners, L.P. will hold less
than 5% of our common stock. The address for Regent Capital Partners,
L.P. is 505 Park Avenue, Suite 1700, New York, New York 10022.
(/13/)Consists of options for the purchase of 9,999 shares of common stock
exercisable within 60 days granted to Mr. Whaley and 1,390,073 shares of
common stock owned by Norwest Equity Partners V, L.P. Mr. Whaley
disclaims beneficial ownership of the 1,390,073 shares of common stock
owned by Norwest Equity Partners V, L.P.
(/14/)Consists of (i) options for the purchase of 9,333 shares of common stock
exercisable within 60 days granted to Mr. Yarnell; (ii) 414,814 shares of
common stock owned by Consumer Venture Partners II, L.P.; and (iii)
warrants for the purchase of 7,707 shares of common stock exercisable
within 60 days held by Consumer Venture Partners II, L.P.
(/15/)Consists of (i) options to purchase 8,000 shares of common stock
exercisable within 60 days granted to Mr. Zepf; and (ii) 1,318,153 shares
of common stock beneficially owned by Centre Capital Investors II, L.P.
(/16/)Includes (i) options for the purchase of 131,521 shares of common stock
exercisable within 60 days granted to Mr. Micatrotto and (ii) 97,226
shares of common stock held by the BUCA Employee Stock Ownership Plan, of
which Mr. Micatrotto is a co-trustee.
(/17/)Consists of options for the purchase of 10,335 shares of common stock
exercisable within 60 days granted to Mr. Gadel.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the consummation of this offering, the 2,650,000 shares sold in this
offering will be freely tradable without restriction under the Securities Act,
unless purchased by an "affiliate" of BUCA, as that term is defined in Rule 144
43
<PAGE>
under the Securities Act. Holders of an aggregate of shares of
Common Stock, have entered into lock-up agreements under which they have agreed
that they will not, without the prior written consent of Piper Jaffray, offer,
sell or otherwise dispose of, any shares of Common Stock, options or warrants
to acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock owned by them during the 180-day period following
the date of this Prospectus. Piper Jaffray may, in its sole discretion at any
time without notice, release any portion of the shares subject to the lock-up
agreements during the 180-day period. Upon closing of this offering,
shares of Common Stock will be eligible for immediate resale in the public
market subject to the limitations of Rule 144. Of such shares, approximately
will be eligible for resale in the public market pursuant to Rule
144(k) without regard to the volume and manner of sale limitations in Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated), including an affiliate, who has beneficially owned
shares for at least one year, within any three-month period commencing 90 days
after the date of this Prospectus, may sell a number of shares that does not
exceed the greater of (i) one percent of the number of shares of Common Stock
then outstanding (approximately 95,596 shares immediately after this offering)
or (ii) the average weekly trading volume of the Common Stock during the four
calendar weeks preceding such sale. Sales under Rule 144 are generally subject
to certain manner of sale provisions and notice requirements and to the
availability of current public information about the Company. Under Rule
144(k), a person who is not deemed to have been an affiliate of the Company at
any time during the 90 days preceding a sale, and who has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without having to comply with the manner of sale, public information,
volume limitation or notice provisions of Rule 144. Under Rule 701 under the
Securities Act, persons who purchase shares upon exercise of options granted
prior to the effective date of this offering are entitled to sell such shares
90 days after the effective date of this offering in reliance on Rule 144,
without having to comply with the holding period requirements of Rule 144 and,
in the case of non-affiliates, without having to comply with the public
information, volume limitation or notice provisions of Rule 144.
We intend to file a registration statement on Form S-8 covering all shares of
common stock issuable upon exercise of stock options in effect on the date of
this Prospectus and stock options or other benefits to be granted under our
1996 Stock Incentive Plan and Stock Option Plan for Non-Employee Directors. We
have outstanding stock options with respect to an aggregate of approximately
1,034,154 shares of common stock as of the date of this Prospectus. Upon this
registration on Form S-8, an additional 1,034,154 shares of common stock,
together with any additional shares of common stock which will be issuable
pursuant to stock options or other benefits to be granted under the 1996 Stock
Incentive Plan, will be eligible for sale in the public market.
Prior to the offering, there has been no market for the common stock, and we
cannot predict the effect, if any, that public sales of shares or the
availability of shares for sale will have on the market price prevailing from
time to time. Sales of substantial amounts of common stock in the public market
following the offering, or the perception that sales may occur, could adversely
affect the prevailing market price of the common stock and our ability to raise
capital through a public offering our equity securities. See "Risk Factors--Our
Common Stock may not have a Public Market."
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 21,893,000 shares of stock, par value $.01 per
share, of which 13,100,000 are designated as common shares, 2,396,800 are
designated as shares of Series A Convertible Preferred Stock, 2,100,000 are
designated as shares of Series B Convertible Preferred Stock, and 3,679,053 are
designated as shares of Series C Convertible Preferred Stock. Automatically
upon the closing of the offering, all outstanding shares of our preferred
stock, together with all accrued and unpaid dividends on the preferred stock,
will convert automatically into shares of common stock at the applicable
conversion price. As of the date of this Prospectus, we had 7,059,557 shares of
common stock outstanding, and 617,147 undesignated shares. In March 1999, we
will hold a shareholders' meeting for the purpose of increasing the number of
authorized shares of common stock to 20,000,000 and the number of undesignated
shares to 5,000,000 The following discussion assumes receipt of the required
approval for certain modification to the terms of the outstanding series of
preferred stock, which are necessary for the automatic conversion of the
preferred stock into common stock.
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<PAGE>
Common Stock
Holders of common stock are entitled to one vote per share on all matters to be
voted upon by shareholders. All shares of common stock rank equally as to
voting and all other matters. The shares of common stock have no preemptive or
conversion rights, no redemption or sinking fund provisions, are not liable for
further call or assessment, and are not entitled to cumulative voting rights,
except for shares of common stock held in the Parasole Employee Stock Ownership
Trust and the Buca Employee Stock Ownership Plan, which have redemption rights
that will terminate upon the closing of this offering. See Note 6 to Notes to
Consolidated Financial Statements. The outstanding shares of common stock are
fully paid and non-assessable.
Subject to the prior rights of holders of preferred stock, the holders of
common stock are entitled to receive dividends when and as declared by the
Board out of funds legally available for dividends, when, as and if declared
and paid to the holders of common stock. We have never declared or paid cash
dividends. We currently intend to retain all future earnings for the operation
and expansion of our business and do not anticipate paying cash dividends on
the common stock in the foreseeable future. See "Dividend Policy."
Upon a liquidation of the company, after creditors had been paid in full and
after shares of any series of preferred stock had received the preferential
amounts to which the shares are entitled upon liquidation, the holders of
common stock would be entitled to receive a pro rata distribution per share of
the excess amount.
We have applied for listing of the common stock on the Nasdaq National Market
under the symbol "BUCA."
Preferred Stock
Upon completion of the offering, all of our issued and outstanding Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, and Series C
Convertible Preferred Stock will be converted into an aggregate of 4,505,239
shares of common stock, at the applicable conversion price of each series of
preferred stock as provided in our Articles of Incorporation. Upon conversion,
all accrued and unpaid dividends on the preferred stock will be eliminated.
Additional Preferred Stock
The Articles of Incorporation empower the Board to issue the undesignated stock
from time to time in one or more series and to fix the designation, privileges,
preferences and rights and the qualifications, limitations and restrictions of
those shares, including dividend rights, conversion rights, voting rights,
redemption rights, terms of sinking funds, liquidation preferences and the
number of shares constituting any series or the designation of the series,
which could decrease the amount of earnings and assets available for
distribution to holders of common stock or adversely affect the rights and
powers, including voting rights, of the holders of the common stock without any
further vote or action by the shareholders. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights of the
holders of any preferred shares that may be issued by us in the future. The
issuance of new preferred stock could have the effect of delaying or preventing
a change in control of the company or make removal of management more
difficult. Additionally, the issuance of new preferred stock may have the
effect of decreasing the market price of the common stock, and may adversely
affect the voting and other rights of the holders of common stock. While we
have no present intention to issue any shares of new preferred stock, any
issuance could have the effect of making it more difficult for a third party to
acquire a majority of our outstanding voting stock.
Series A Convertible Subordinated Debentures
We have outstanding $1.8 million in principal amount of Series A Convertible
Subordinated Debentures due July 30, 2001. Under the debentures, we have agreed
to pay interest at a rate adjusted semi-annually equal to one percent in excess
of the rate announced or published by U.S. Bank National Association as its
reference or prime rate in effect on the banking day immediately prior to
January 1 and July 1 of each year. The holders may elect to have their
debentures paid in full on July 30, 1999 and receive a premium payment from us
equal to 10% of the original principal sum of the debenture. Upon completion of
this offering, the holders of the debentures will have
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<PAGE>
the right, for a period of one year, to covert the entire principal amount of
their debentures into shares of our common stock at a price per share equal to
60% of the price of the common stock being sold in this offering. If the holder
holds the debenture until maturity, the holder is entitled to a premium payment
from us equal to 20% of the original principal sum of the debenture.
STOCK OPTION
In 1998, we granted a non-qualified stock option to purchase up to 16,000
shares of our common stock at an exercise price of $6.75 per share to
1204 Harmon Partnership. The options vest in eight equal annual amounts
beginning on May 31, 1999. The option expires upon the earlier to occur of
May 31, 2008 or, at our option, upon payment to 1204 Harmon Partnership of the
excess of the fair market value of the common stock underlying the option over
the exercise price upon the occurrence of certain circumstances. The options
provide for adjustments in the number of shares (to the nearest whole share)
subject to the option and the exercise price to give effect to any distribution
of assets (other than regular dividends) or debt securities to holders of
common stock or any change made in the number of outstanding common stock by a
recapitalization, reclassification, combination, share dividend, share
division, share combination or other similar change.
WARRANTS
We issued warrants to purchase 156,800 shares of Series A Convertible Preferred
Stock at an exercise price of $3.75 per share to our placement agents in
connection with the private placement of our Series A Convertible Preferred
Stock in October 1996. These warrants became exercisable in May 1997 and expire
on October 23, 2003. Upon the closing of this offering, these warrants will
automatically convert into warrants to purchase 104,532 shares of common stock
at an exercise price of $5.625 per common share.
We issued warrants to purchase 50,000 shares of Series B Convertible Preferred
Stock at an exercise price of $4.50 per share to our placement agent in the
connection with the private placement of our Series B Convertible Preferred
Stock. These warrants become exercisable on October 31, 1997 and expire on
September 2, 2004. Upon closing of this offering, these warrants will
automatically convert into warrants to purchase 33,333 shares of common stock
at an exercise price of $6.75 per common share.
We issued warrants to purchase an aggregate of 66,663 shares of common stock at
an exercise price of $.01 per share to the purchasers of our Series B
Convertible Preferred Stock. These warrants will become vested and exercisable
if the public offering price per share in this offering is less than $13.50.
These warrants expire on September 30, 2002.
As partial consideration for subordinated loan financings of $6.0 million, we
issued warrants to purchase a total of 193,331 shares of common stock at an
exercise price of $.01 per share to our lenders. These warrants expire on
September 20, 2002 with respect to 80,555 shares and on June 30, 2003 with
respect to the remaining shares. We granted the warrantholders the right to
sell their warrants to us for a period of 30 days immediately prior to their
expiration at a purchase price equal to the fair market value of the shares of
common stock issuable upon exercise of the warrant. This right will expire upon
the closing of this offering.
All of these warrants provide for anti-dilution adjustments in the event of
stock splits, stock dividends, sales by us of our stock at, or issuance of
options or warrants containing an exercise price of, less than fair market
value or merger, consolidation, recapitalization or similar transactions.
REGISTRATION AND OTHER RIGHTS
We have granted registration rights to the holders of shares of common stock
issued in exchange for any of our preferred shares under the terms of the
Securities Purchase Agreement dated as of October 13, 1998 by and between us
and the purchasers named in the agreement. Following the closing of this
offering, approximately 4,643,104 shares of common stock, including 204,528
shares subject to outstanding warrants, will be entitled to these rights. Under
the terms of the Securities Purchase Agreement, the holders have the right to
require us to register their shares at our expense under certain circumstances.
In addition, the holders have the right to have any or all of their shares
included, at our expense, in a registration statement relating to common stock
filed by us, subject to certain limitations, including the right of an
underwriter to limit the number of the holders' shares to be
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<PAGE>
included in the registration. In connection with any registration under these
provisions, we are required to indemnify the holders participating in an
offering against certain liabilities, including civil liabilities under the
Securities Act. Warrants to purchase an aggregate of 137,865 shares of our
common stock issued in connection with the sales of the Series A Convertible
Preferred Stock and the Series B Convertible Preferred Stock contain similar
registration rights provisions.
We also granted piggyback registration rights under the warrants to purchase
193,331 shares of our common stock granted to the lenders in our subordinated
debt transactions. See "Certain Relationships and Related Transactions--
Subordinated Debt Transactions." The rights are subject to certain limitations,
including the right of an underwriter to limit the number of the holders'
shares to be included in the registration. The warrants grant the holders the
right to sell the warrants back to us for a period of 30 days prior to their
expiration at a purchase price equal to the fair market value of the shares of
common stock issuable upon exercise of the warrants and grant the holders
certain co-sale rights with respect to sales of shares by Philip A. Roberts,
Peter J. Mihajlov, Don W. Hays, Joseph P. Micatrotto or Barbara Marshall.
Under the terms of a Non-Statutory Stock Option Agreement between us and 1204
Harmon Partnership, we have granted the holder piggyback registration rights
with respect to the 16,000 shares covered by the option agreement. The rights
are subject to certain limitations, including the right of an underwriter to
limit the number of the holders' shares to be included in the registration. In
connection with any registration under these provisions, we are required to
indemnify the holder participating in an offering against certain liabilities,
including civil liabilities under the Securities Act.
Certain Provisions of Minnesota Law
Certain provisions of Minnesota law described below could have an anti-takeover
effect. These provisions are intended to provide management flexibility to
enhance the likelihood of continuity and stability in the composition of our
Board of Directors and in the policies formulated by the Board and to
discourage an unsolicited takeover of the company, if the Board determines that
such a takeover is not in the best interests of the company and our
shareholders. However, these provisions could have the effect of discouraging
certain attempts to acquire the company which could deprive our shareholders of
opportunities to sell their shares of common stock at prices higher than
prevailing market prices.
Section 302A.671 of the Minnesota Statutes applies, with certain exceptions, to
any acquisitions of our voting stock (from a person other than us, and other
than in connection with certain mergers and exchanges to which we are party)
resulting in the beneficial ownership of 20% or more of the voting stock then
outstanding. Section 302A.671 requires approval of the granting of voting
rights for the shares received pursuant to any such acquisitions by a majority
vote of our shareholders. In general, shares acquired without this approval are
denied voting rights and can be called for redemption at their then fair market
value by us within 30 days after the acquiring person has failed to deliver a
timely information statement to us or the date the shareholders voted not to
grant voting rights to the acquiring person's shares.
Section 302A.673 of the Minnesota Statutes generally prohibits any business
combination by us, or any subsidiary of us, with any shareholder that purchases
10% or more of our voting shares (an "interested shareholder") within four
years following the interested shareholder's share acquisition date, unless the
business combination is approved by a committee of all of the disinterested
members of our Board of Directors before the interested shareholder's share
acquisition date.
Section 302A.675 of the Minnesota Statutes generally prohibits an offeror from
acquiring shares of a publicly held Minnesota corporation within two years
following the offeror's last purchase of the corporation's shares pursuant to a
takeover offer with respect to that class, unless the corporation's
shareholders are able to sell their shares to the offeror upon substantially
equivalent terms as those provided in the earlier takeover offer. This statute
will not apply if the acquisition of shares is approved by a committee of all
of the disinterested members of our Board of Directors before the purchase of
any shares by the offeror pursuant to a takeover offer.
Transfer Agent and Registrar
Norwest Bank Minnesota, National Association has been appointed as the transfer
agent and registrar for our common stock.
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<PAGE>
UNDERWRITING
The underwriters named below have agreed to buy, subject to the terms and
conditions of the purchase agreement, the number of shares listed opposite
their names below. The underwriters are committed to purchase and pay for all
of the shares if any are purchased (other than those shares covered by the
over-allotment option described below).
<TABLE>
<CAPTION>
Number
Underwriters of Shares
------------ ---------
<S> <C>
Piper Jaffray Inc. .........................................
NationsBanc Montgomery Securities LLC.......................
---------
Total................................................... 2,650,000
=========
</TABLE>
The underwriters have advised us and the selling shareholders that they propose
to offer the shares to the public at $ per share. The underwriters propose
to offer the shares to certain dealers at the same price less a concession of
not more than $ per share. The underwriters may allow and the dealers may
reallow a concession of not more than $ per share on sales to certain other
brokers and dealers. After the offering, these figures may be changed by the
underwriters.
We have granted to the underwriters an option to purchase up to an additional
381,500 shares of common stock from us and Joseph P. Micatrotto has granted to
the underwriters an option to purchase up to an additional 16,000 shares of
common stock, on a pro rata basis, at the same price to the public, and with
the same underwriting discount, as set forth in the table above. The
underwriters may exercise this option any time during the 30-day period after
the date of this Prospectus, but only to cover over-allotments, if any. To the
extent the underwriters exercise the option, each underwriter will become
obligated, subject to certain conditions, to purchase approximately the same
percentage of the additional shares as it was obligated to purchase under the
purchase agreement.
We intend to use more than 10% of the net proceeds from the sale of the shares
offered by us by this Prospectus to repay indebtedness owed by us to U.S.
Bancorp. See "Use of Proceeds". U.S. Bancorp is an affiliate of Piper
Jaffray Inc., one of the underwriters. The decision of Piper Jaffray to
underwrite this offering was made independently of U.S. Bancorp, which had no
involvement in determining whether or when to underwrite this offering or the
terms of this offering. Piper Jaffray will not receive any benefit from this
offering other than its respective portion of the underwriting fees payable by
us. The offering is being made in compliance with the requirements of Rule
2710(c)(8) of the National Association of Securities Dealers, Inc. Conduct
Rules. This rule provides generally that if more than 10% of the net proceeds
from the sale of stock, not including underwriting compensation, is paid to the
underwriters or their affiliates, the initial public offering price of the
stock may not be higher than that recommended by a "qualified independent
underwriter" ("QIU") meeting certain standards set forth in Rule 2720(c)(3) of
the NASD Conduct Rules. NationsBanc Montgomery Securities LLC has agreed to act
as the QIU in pricing the offering and conducting due diligence. The initial
public offering price of the shares set forth on the cover page of this
Prospectus is no higher than the price recommended by NationsBanc Montgomery.
Moreover, NationsBanc Montgomery, as QIU, has performed due diligence
investigations and has reviewed and participated in the preparation of this
Prospectus.
The following table shows the underwriting fees to be paid to the underwriters
in connection with this offering. These amounts are shown assuming both no
exercise and full exercise of the over-allotment option.
<TABLE>
<CAPTION>
No Full
Exercise Exercise
-------- --------
<S> <C> <C>
Per Share............................................ $ $
Total................................................ $ $
</TABLE>
48
<PAGE>
Piper Jaffray acted as placement agent in connection with the private placement
of our Series A Convertible Preferred Stock in October 1996. We issued warrants
to purchase 112,000 shares of Series A Convertible Preferred Stock convertible
into 74,666 shares of common stock at an exercise price of $5.625 per common
share to Piper Jaffray for its services as placement agent. These warrants
became exercisable in May 1997 and expire on October 23, 2003. We paid Piper
Jaffray $421,000 for its services as placement agent. Piper Jaffray also
purchased 53,333 shares of Series A Convertible Preferred Stock convertible
into 35,555 shares of common stock at a price of $5.625 per common share, the
same price paid by other investors for the Series A Convertible Preferred
Stock.
Piper Jaffray also acted as placement agent in connection with the private
placement of our Series B Convertible Preferred Stock in September 1997. We
issued warrants to purchase 50,000 shares of Series B Convertible Preferred
Stock convertible into 33,333 shares of common stock at an exercise price of
$6.75 per common share to Piper Jaffray for its services as placement agent.
These warrants became exercisable on October 31, 1997 and expire on September
2, 2004. We paid Piper Jaffray $75,000 for its services as placement agent.
Standby Fund 1997, an entity controlled by affiliates of Piper Jaffray, and
Piper Jaffray also purchased a total of 55,556 shares of Series B Convertible
Preferred Stock convertible into 37,037 shares of common stock at a price of
$6.75 per common share, the same price paid by other investors for the Series B
Convertible Preferred Stock. Along with the other purchasers of Series B
Preferred Stock, Standby Fund was issued, pro rata, warrants to purchase
1,926 shares of our common stock at an exercise price of $.01 per share. These
warrants only become vested and exercisable upon completion of this offering if
the public offering price per share is less than $13.50.
Piper Jaffray has provided investment banking services to us in 1998 and 1999
and will receive fees in the amount of $45,000 for such services.
We and the selling shareholders have agreed to indemnify the underwriters and
the QIU against certain liabilities, including civil liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make in respect to those liabilities.
The underwriters have informed us that neither they, nor any member of the NASD
participating in the distribution of the offering, will make sales of the
common stock offered by this prospectus to accounts over which they exercise
discretionary authority without the prior specific written approval of the
customer.
The offering of our shares of common stock is made for delivery when, as and if
accepted by the underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offering without notice. The underwriters
reserve the right to reject an order for the purchase of shares in whole or
part.
We and each of our directors, executive officers and certain principal
shareholders and the selling shareholders have agreed to certain restrictions
on our ability to sell additional shares of our common stock for a period of
180 days after the date of this Prospectus. We have agreed not to directly or
indirectly offer for sale, sell, contract to sell, grant any option for the
sale of, or otherwise issue or dispose of, any shares of common stock, options
or warrants to acquire shares of common stock., or any related security or
instrument, without the prior written consent of Piper Jaffray. The agreements
provide exceptions for (1) sales to underwriters pursuant to the purchase
agreement (2) our sales in connection with the exercise of options granted and
the granting of options to purchase shares under our existing stock option
plans and (3) certain other exceptions.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price for the shares of common stock
offered by this Prospectus was negotiated by us and the underwriters as
recommended by the QIU. The factors considered in determining the initial
public offering price include the history of and the prospects for the industry
in which we compete, our past and present operations, our historical results of
operations, our prospects for future earnings, the recent market prices of
securities of generally comparable companies and the general condition of the
securities markets at the time of the offering and other relevant factors.
There can be no assurance that the initial public offering price of the common
stock will corresponded to the price at which the common stock will trade in
the public market subsequent to this offering or that an active public market
for the common stock will develop and continue after this offering.
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<PAGE>
To facilitate the offering, the underwriters may engage in transactions that
stabilize, maintain or otherwise affect the price of the common stock during
and after the offering. Specifically, the underwriters may over-allot or
otherwise create a short position in the common stock for their own account by
selling more shares of common stock than have been sold to them by us and the
selling shareholders. The underwriters may elect to cover any such short
position by purchasing shares of common stock in the open market or by
exercising the over-allotment option granted to the underwriters. In addition,
the underwriters may stabilize or maintain the price of the common stock by
bidding for or purchasing shares of common stock on the open market and may
impose penalty bids. If penalty bids are imposed, selling concessions allowed
to syndicate members or other broker-dealers participating in the offering are
reclaimed if shares of common stock previously distributed in the offering are
repurchased, whether in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect the
price of the common stock to the extent that it discourages resales of the
common stock. The magnitude or effect of any stabilization or other
transactions is uncertain. These transactions may be effected on the Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any
time.
LEGAL MATTERS
The validity of the shares of common stock offered by this Prospectus and
certain other legal matters will be passed upon for us by Faegre & Benson LLP,
Minneapolis, Minnesota. The validity of the shares of common stock offered by
this Prospectus will be passed upon for the underwriters by Dorsey & Whitney
LLP, Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements at December 27, 1998 and December 28,
1997 and for each of the two fiscal years in the period ended December 27,
1998, included in this prospectus and registration statement have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and elsewhere in the registration statement and are included
in reliance upon the reports of such firm given upon their authority as experts
in accounting and auditing.
The consolidated financial statements for the year ended December 31, 1996
included in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the stock
we are offering by this Prospectus. This Prospectus does not include all of the
information contained in the registration statement. You
should refer to the registration statement and its exhibits for additional
information. Whenever we make reference in this Prospectus to any of our
contracts, agreements or other documents, the references are not necessarily
complete and you should refer to the exhibits attached to the registration
statement for copies of the actual contract, agreement or other document. When
we complete this offering, we will also be required to file annual, quarterly
and special reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file with the SEC at its public reference facilities at
450 Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You may also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at
450 Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the Nasdaq
National Market. For further information on obtaining copies of our public
filings at the Nasdaq National Market you should call (212) 656-5060.
50
<PAGE>
BUCA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report........................................ F-2
Report of Independent Public Accountants............................ F-3
Consolidated Balance Sheets as of December 28, 1997 and December 27,
1998............................................................... F-4
Consolidated Statements of Operations for the fiscal years ended
December 31, 1996, December 28, 1997 and December 27, 1998 ........ F-5
Consolidated Statements of Shareholders' Deficit for the fiscal
years
ended December 31, 1996, December 28, 1997 and December 27, 1998... F-6
Consolidated Statements of Cash Flows for the fiscal years ended
December 31, 1996, December 28, 1997 and December 27, 1998......... F-7
Notes to Consolidated Financial Statements.......................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
BUCA, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of BUCA, Inc. and
Subsidiaries (the Company) as of December 28, 1997 and December 27, 1998, and
the related consolidated statements of operations, shareholders' deficit, and
cash flows for the fiscal years ended December 28, 1997 and December 27, 1998.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements
of BUCA, Inc. and Subsidiaries for the fiscal year ended December 31, 1996 were
audited by other auditors whose report, dated March 14, 1997, expressed an
unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 1997 and 1998 consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 1997 and 1998 consolidated financial statements present
fairly, in all material respects, the financial position of BUCA, Inc. and
Subsidiaries as of December 28, 1997 and December 27, 1998, and the results of
their operations and their cash flows for the fiscal years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, in fiscal 1997
the Company changed its method of accounting for preopening costs.
/s/ Deloitte & Touche LLP
February 17, 1999
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To BUCA, Inc:
We have audited the accompanying consolidated statements of operations,
shareholders' deficit and cash flows of BUCA, Inc. (a Minnesota corporation)
and Subsidiaries (the Company) for the year ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based upon our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
BUCA, Inc. and Subsidiaries for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Minneapolis, Minnesota
March 14, 1997
F-3
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 28, 1997 and December 27, 1998
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................. $ 6,099 $ 6,576
Accounts receivable........................................ 284 1,160
Inventories................................................ 545 935
Prepaids and other......................................... 457 585
------- --------
Total current assets..................................... 7,385 9,256
PROPERTY AND EQUIPMENT, net................................. 13,428 27,697
OTHER ASSETS................................................ 475 607
------- --------
$21,288 $ 37,560
======= ========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable........................................... $ 2,309 $ 3,257
Accrued expenses........................................... 962 2,638
Current maturities of long-term debt....................... 320 205
------- --------
Total current liabilities................................ 3,591 6,100
LONG-TERM DEBT, less current maturities..................... 5,140 7,661
DEFERRED RENT............................................... 17 239
OTHER LIABILITIES........................................... 127
COMMITMENTS AND CONTINGENCIES (Notes 6, 7, and 8)
REDEEMABLE STOCK (Notes 6 and 9):
Preferred stock, $.01 par value, cumulative, Series A
convertible--2,396,800 shares authorized; 2,240,000 shares
issued and outstanding.................................... 8,984 9,665
Preferred stock, $.01 par value, cumulative, Series B
convertible--2,100,000 shares authorized; 1,922,222 shares
issued and outstanding.................................... 8,777 9,441
Preferred stock, $.01 par value, cumulative, Series C
convertible--3,679,053 shares authorized; 2,614,634 shares
issued and outstanding.................................... 13,154
Common stock, $.01 par value; 601,929 shares issued and
outstanding............................................... 4,063 4,713
------- --------
21,824 36,973
SHAREHOLDERS' DEFICIT:
Undesignated stock, 617,147 shares authorized, none issued
or outstanding
Common stock, $.01 par value--13,100,000 shares authorized;
1,899,246 and 1,914,359 shares issued and outstanding,
respectively.............................................. 19 19
Accumulated deficit........................................ (9,032) (13,266)
------- --------
(9,013) (13,247)
Notes receivable from shareholders......................... (271) (293)
------- --------
Total shareholders' deficit.............................. (9,284) (13,540)
------- --------
$21,288 $ 37,560
======= ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Fiscal Years Ended December 31, 1996,
December 28, 1997 and December 27, 1998
(in thousands, except for share and per share data)
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
RESTAURANT SALES........................... $ 11,316 $ 19,030 $ 38,483
RESTAURANT COSTS:
Product................................... 3,471 5,520 10,876
Labor..................................... 3,723 6,478 12,548
Direct and occupancy...................... 2,242 3,750 7,861
Depreciation and amortization............. 381 781 1,617
---------- ---------- ----------
Total restaurant costs................. 9,817 16,529 32,902
---------- ---------- ----------
INCOME FROM RESTAURANT OPERATIONS.......... 1,499 2,501 5,581
GENERAL AND ADMINISTRATIVE EXPENSES........ 1,988 3,760 5,579
PREOPENING COSTS........................... 430 1,140 1,895
---------- ---------- ----------
OPERATING LOSS............................. (919) (2,399) (1,893)
INTEREST EXPENSE........................... 295 497 1,036
---------- ---------- ----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.. (1,214) (2,896) (2,929)
(BENEFIT) PROVISION FOR INCOME TAXES....... (101) 72 17
---------- ---------- ----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE...................... (1,113) (2,968) (2,946)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE RELATED TO PREOPENING COSTS..... (351)
---------- ---------- ----------
NET LOSS................................... $ (1,113) $ (3,319) $ (2,946)
========== ========== ==========
CUMULATIVE PREFERRED STOCK DIVIDENDS,
ACCRETION OF PREFERRED STOCK TO REDEMPTION
VALUE, AND CHANGE IN REDEEMABLE COMMON
STOCK..................................... (3,687) (1,986) (2,189)
---------- ---------- ----------
NET LOSS APPLICABLE TO COMMON STOCK........ $ (4,800) $ (5,305) $ (5,135)
========== ========== ==========
NET LOSS PER COMMON SHARE--BASIC AND
DILUTED................................... $ (1.96) $ (2.13) $ (2.04)
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES ASSUMED
OUTSTANDING--BASIC AND DILUTED............. 2,444,666 2,490,136 2,512,309
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' Deficit
(in thousands, except for share data)
<TABLE>
<CAPTION>
Notes
Common Stock Stock Additional Receivable Total
----------------- Subscription Paid-in Accumulated from Shareholders'
Shares Amount Receivable Capital Deficit Shareholders Deficit
--------- ------ ------------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1995................... 1,842,738 $18 $ (6) $ 13 $ (173) $ (148)
Collection on stock
subscription
receivable............ 6 6
Change in redeemable
common stock.......... (13) (3,373) (3,386)
Preferred stock
dividends............. (111) (111)
Accretion of preferred
stock................. (190) (190)
Net loss............... (1,113) (1,113)
--------- --- ---- ----- -------- ----- --------
BALANCE AT DECEMBER 31,
1996................... 1,842,738 18 (4,960) (4,942)
Issuance of common
stock options......... 350 350
Issuance of common
stock warrants........ 544 544
Issuance of common
stock................. 65,766 1 389 $(275) 115
Repurchase of common
stock................. (9,258) (50) (50)
Payments of notes
receivable due from
shareholders.......... 4 4
Change in redeemable
common stock.......... (677) (677)
Preferred stock
dividends............. (556) (229) (785)
Accretion of preferred
stock................. (524) (524)
Net loss............... (3,319) (3,319)
--------- --- ---- ----- -------- ----- --------
BALANCE AT DECEMBER 28,
1997................... 1,899,246 19 (9,032) (271) (9,284)
Issuance of common
stock warrants........ 761 761
Issuance of common
stock................. 25,185 200 (160) 40
Repurchase of common
stock................. (10,072) (60) (60)
Payments of notes
receivable due from
shareholders.......... 138 138
Change in redeemable
common stock.......... (650) (650)
Preferred stock
dividends............. (251) (1,041) (1,292)
Accretion of preferred
stock................. (247) (247)
Net loss............... (2,946) (2,946)
--------- --- ---- ----- -------- ----- --------
BALANCE AT DECEMBER 27,
1998................... 1,914,359 $19 $-- $ -- $(13,266) $(293) $(13,540)
========= === ==== ===== ======== ===== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Fiscal Years Ended December 31, 1996,
December 28, 1997, and December 27, 1998
(in thousands)
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.......................................... $(1,113) $(3,319) $ (2,946)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization.................... 381 781 1,617
Cumulative effect of change in accounting
principle....................................... 351
Deferred income taxes............................ 34
Loss (gain) on sale of property and equipment.... 112 (52)
Accretion of call premium........................ 50 51 51
Amortization of debt discount.................... 216
Issuance of common stock and common stock options
for services.................................... 439
Change in assets and liabilities:
Accounts receivable............................. (43) (130) (876)
Inventories..................................... (101) (247) (390)
Preopening costs................................ (134)
Prepaids and other.............................. (27) (370) (128)
Accounts payable................................ 582 985 948
Accrued expenses................................ 236 (137) 1,676
Other liabilities............................... 222
------- ------- --------
Net cash (used in) provided by operating
activities................................... (169) (1,450) 338
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment................ (2,783) (7,896) (17,864)
Escrow deposits................................... (551) (131)
Increase in other assets.......................... (33) (45) (48)
Proceeds from sale of property and equipment...... 2,263
------- ------- --------
Net cash used in investing activities......... (3,367) (8,072) (15,649)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.......... 896 2,500 3,500
Principal payments on long-term debt.............. (331) (489) (599)
Collection on stock subscription receivable....... 6
Payments of notes receivable from shareholders.... 4 80
Repurchase of common stock........................ (30)
Net proceeds from issuance of preferred stock..... 7,614 8,537 12,958
Issuance of common stock.......................... 40
Loan and lease acquisition costs.................. (251) (191)
Principal payments on note payable................ (104) (400)
Proceeds from issuance of note payable............ 400
------- ------- --------
Net cash provided by financing activities..... 8,481 9,871 15,788
------- ------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS.......... 4,945 349 477
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..... 805 5,750 6,099
------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR........... $ 5,750 $ 6,099 $ 6,576
======= ======= ========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
Fiscal Years Ended December 31, 1996, December 28, 1997,
and December 27, 1998
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business--BUCA, Inc. and Subsidiaries (BUCA or the Company) develops
and operates family-style, immigrant Southern Italian restaurants located in
Minnesota, Wisconsin, California, Illinois, Indiana, Arizona, Ohio, Kansas, and
Washington. Effective December 31, 1994, Parasole Restaurant Holdings, Inc.
(Parasole) acquired all the common stock of BUCA, which resulted in BUCA
becoming a wholly owned subsidiary of Parasole. On September 30, 1996, the
Parasole Board of Directors in a spin-off distributed all of the outstanding
common stock of BUCA pro rata to the Parasole shareholders. Prior to a written
action of the Board of Directors on May 14, 1996, the Company was known as BUCA
Ventures, Inc.
The Company incurred net losses of $1,113,000, $3,319,000 and $2,946,000 in
1996, 1997 and 1998, respectively, and as of December 27, 1998, had an
accumulated deficit of $13,266,000. Losses have been primarily attributable to
costs and expenses incurred in the completion of the development and opening of
new restaurants and the costs associated with the hiring of senior corporate
management to position the Company for its future expansion plans. Future
revenues and results from operations will depend upon various factors,
including the Company's ability to open new restaurants on a timely and
profitable basis and general economic conditions. The Company's ability to meet
its expansion plans and achieve profitability depends on its ability to obtain
additional financing for the development of new locations currently under
consideration. There are no assurances that such financing will be available on
terms acceptable or favorable to the Company.
The Company manages its operations by restaurant. All of the Company's
restaurants operate under the same concept, are marketed to similar customers,
and have comparable economic characteristics. The Company has aggregated its
operating segments into one reportable segment.
Principles of Consolidation--The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated.
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of sales and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents--The Company considers all unrestricted demand
deposits and all unrestricted highly liquid debt instruments purchased with
original maturities of three months or less to be cash equivalents. At December
28, 1997 and December 27, 1998, cash and cash equivalents consisted primarily
of money market funds.
Fair Value of Financial Instruments--At December 28, 1997 and December 27,
1998, the fair values of cash and cash equivalents, accounts receivable, and
accounts payable approximate their carrying value due to the short-term nature
of the instrument. The fair value of debt is estimated at its carrying value
based upon current rates available to the Company. The fair value of the
redeemable preferred stock is estimated at $35,375,000 based upon the December
1998 closing of the Series C preferred stock private placement.
Inventories--Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method of valuation. Inventories
consisted of the following as of December 28, 1997 and December 27, 1998 (in
thousands):
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Food and beverage............................................... $300 $521
Supplies........................................................ 245 414
---- ----
$545 $935
==== ====
</TABLE>
F-8
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Other Assets--Other assets consisted of the following as of December 28, 1997
and December 27, 1998 (in thousands):
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C> <C>
Loan and lease acquisition costs, net.......................... $300 $365
Escrow deposits................................................ 131 131
Other.......................................................... 44 111
---- ----
$475 $607
==== ====
</TABLE>
Loan and lease acquisition costs are being amortized over the term of the
related debt or lease. Accumulated amortization as of December 28, 1997 and
December 27, 1998 was $94,000 and $206,000, respectively.
Accrued expenses--Accrued expenses consisted of the following as of December
28, 1997 and December 27, 1998 (in thousands):
<TABLE>
<CAPTION>
1997 1998
---- ------
<S> <C> <C>
Accrued payroll and related benefits......................... $315 $1,117
Gift certificate liability................................... 230 518
Accrued sales taxes.......................................... 241 546
Other accrued expenses....................................... 176 457
---- ------
$962 $2,638
==== ======
</TABLE>
Recoverability of Long-Lived Assets--The Company reviews long-lived assets for
impairment whenever events or changes in circumstances indicate the carrying
value amount of an asset or group of assets may not be recoverable. The Company
considers a history of operating losses to be its primary indicator of
potential impairment. Assets are grouped and evaluated for impairment at the
lowest level for which there are identifiable cash flows, individual
restaurants. A restaurant is deemed to be impaired if a forecast of
undiscounted future operating cash flows directly related to the restaurant is
less than its carrying amount. If a restaurant is determined to be impaired,
the loss is measured as the amount by which the carrying amount of the
restaurant exceeds its fair value. Fair value is an estimate based on the best
information available, including prices for similar assets or the results of
valuation techniques such as discounted estimated future cash flows as if the
decision to continue to use the impaired restaurant was a new investment
decision. The Company generally measures fair value by discounting estimated
future cash flows.
Net Loss Per Share--Basic loss per share is computed by dividing net loss by
the weighted average number of common shares outstanding. Diluted earnings per
share assumes conversion of the convertible subordinated debentures and
convertible preferred stock as of the beginning of the year and exercise of
stock options and warrants using the treasury stock method, if dilutive.
Dilutive net loss per share for 1996, 1997, and 1998 are the same as basic net
loss per share due to the antidilutive effect of the assumed exercise of stock
options, warrants, convertible subordinated debentures, and convertible
preferred stock securities.
Diluted loss per share excludes the following due to their antidilutive effect:
<TABLE>
<CAPTION>
1996 1997 1998
------------------ ------------------ ------------------
Weighted Weighted Weighted
Average Average Average
Price Price Price
Number Of Per Number of Per Number of Per
Shares Share Shares Share Shares Share
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock warrants.......... 104,532 $5.63 218,420 $3.73 331,196 $2.46
Stock options........... 13,331 4.84 581,507 5.38 854,155 6.08
Convertible preferred
stock.................. 1,493,331 5.63 2,774,808 6.14 4,505,239 6.76
Convertible subordinated
debentures............. 565,079 3.15 565,079 3.15 439,506 4.05
--------- ----- --------- ----- --------- -----
2,176,273 $4.98 4,139,814 $5.50 6,130,096 $6.24
========= ===== ========= ===== ========= =====
</TABLE>
F-9
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Postemployment and Postretirement Benefits--The Company does not provide
postemployment health care or postretirement benefits.
Stock Compensation--The Company accounts for its stock-based compensation
awards to employees under Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and will disclose the required pro
forma effect on net loss as recommended by Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
Accounting Change--Effective January 1, 1997, the Company changed its method of
accounting for restaurant preopening costs in accordance with Statement of
Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities. Prior to
fiscal 1997, preopening costs were deferred and amortized over the initial 12
months of a restaurant's operation. Under the new method, preopening costs are
expensed as incurred. The expensing of preopening costs is prevalent in
industry practice. The change in accounting method increased the 1997 loss
before cumulative effect of change in accounting principle by $834,000.
Fiscal Year--The Company changed its fiscal year-end from December 31 to the
last Sunday in December, beginning with the fiscal year ended December 28,
1997. The fiscal years ended December 31, 1996, December 28, 1997, and December
27, 1998 were 52-week years.
Comprehensive Income--The Company does not have any items of comprehensive
income in any of the periods presented.
Accounting Pronouncements--In June 1998, the Financial Accounting Standards
Board (FASB) issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 requires companies to record derivatives on
the balance sheet as assets and liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. SFAS No. 133 is effective for fiscal years beginning
after June 15, 1999, with earlier adoption encouraged. Management has not yet
determined the effects SFAS No. 133 will have on its financial position or the
results of its operations.
2. PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for renewals and
betterments are capitalized while repairs and maintenance costs are charged to
expense. The cost of property and equipment is depreciated on the straight-line
method over their estimated useful lives. Leasehold improvements are amortized
on the straight-line method over the shorter of the life of the lease including
extensions or their estimated useful lives. Estimated useful lives are as
follows:
<TABLE>
<CAPTION>
Years
-----
<S> <C>
Leasehold improvements.............................................. 5-20
Furniture, fixtures, and equipment.................................. 5-10
Building............................................................ 20
</TABLE>
Property and equipment consisted of the following as of December 28, 1997 and
December 27, 1998 (in thousands):
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Leasehold improvements................................... $ 8,639 $19,214
Furniture, fixtures, and equipment....................... 4,991 10,869
Land..................................................... 793 267
Building................................................. 300 114
------- -------
14,723 30,464
Less accumulated depreciation and amortization........... 1,295 2,767
------- -------
$13,428 $27,697
======= =======
</TABLE>
F-10
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In 1998, the Company sold the building and land associated with a restaurant in
Illinois for approximately $1,200,000 and simultaneously entered into an
operating lease for a term of 20 years. The assets were removed from the
financial statements and a deferred gain included as other liabilities on the
consolidated balance sheet of approximately $132,000 was recorded which is
being amortized over the lease term.
Additionally, in 1998, the Company purchased the land and building associated
with a restaurant in Minnesota for approximately $375,000.
3. NOTE PAYABLE
The Company had a $1,000,000 line of credit agreement secured by the assets of
the Company that expired on June 30, 1998.
4. LONG-TERM DEBT
Long-term debt consisted of the following as of December 28, 1997 and December
27, 1998 (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Notes payable maturing October 2002, $2,500,000 and June
2003, $3,500,000, with interest payable monthly at 13.5%
and accretion of common stock warrant value of 4.4%.
Collateralized by equipment, inventory, accounts
receivable, trademarks, and copyrights. Net of discounts of
$544,000 and $1,089,000, respectively, resulting from
common stock warrants issued to lenders.................... $1,956 $4,911
Convertible subordinated debentures maturing July 2001 with
interest payable quarterly at 8.0% until January 1997, at
which time interest will be adjusted semiannually to 1.0%
in excess of the prime rate, not to exceed 12.0% per annum
(9.50% and 8.75% at December 28, 1997 and December 27,
1998, respectively); includes call premium accretion of
$165,000 and $216,000, respectively........................ 1,945 1,996
Note payable to bank in monthly installments, including
interest at 2.0% in excess of the prime rate (10.50% and
9.75% at December 28, 1997 and December 27, 1998,
respectively), maturing July 2000, with a principal balloon
payment upon maturity of $185,000, collateralized by
equipment, accounts receivable, and inventory.............. 363 296
Note payable to bank in monthly installments, including
interest at 2.0% in excess of the prime rate (10.50% and
9.75% at December 28, 1997 and December 27, 1998,
respectively), maturing May 1999, collateralized by
equipment, accounts receivable, and inventory.............. 97 29
Note payable to bank in monthly installments including
interest at 2.0% in excess of the prime rate (10.50% and
9.75% at December 28, 1997 and December 27, 1998,
respectively), maturing March 2003, collateralized by
equipment, accounts receivable, and inventory.............. 332 269
Note payable in monthly installments, including interest at
7.153%, maturing May 2006, collateralized by equipment,
guarantees of BUCA and Parasole, and the personal
guarantees of certain shareholders and the U.S. Small
Business Administration.................................... 402 365
Capitalized leases.......................................... 365 --
------ ------
Total.................................................... 5,460 7,866
Less current maturities..................................... 320 205
------ ------
Total long-term maturities............................... $5,140 $7,661
====== ======
</TABLE>
F-11
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's loan agreements, among other things, restrict additional
indebtedness and dividend payments and requires the Company to meet certain
financial covenants, the most restrictive of which includes maintaining
tangible net worth of $4,000,000. The Company was in compliance with these
financial covenants at December 27, 1998.
The holders of the convertible subordinated debentures are entitled, at their
option for a one year period commencing upon an initial public offering (IPO)
of common stock by BUCA, to convert the entire principal amount held by such
person into fully paid shares of common stock at a specified discount. The
discount amount is based upon the effective date of the IPO: a 30% discount if
the effective date is on or prior to August 1, 1997; a 40% discount if the
effective date is after August 1, 1997 but on or prior to August 1, 1999; and a
50% discount if the effective date is after August 1, 1999 but on or prior to
the conversion rights termination date of July 30, 2001. In accordance with
EITF 98-5, Accounting for Convertible Securities with Beneficial Conversion
Features or Contigently Adjustable Conversion Ratios, the Company will record
an expense associated with the beneficial conversion feature at the effective
date of the IPO. The individual holders of the debentures may elect to have the
debentures paid in full in July 1999, at which time any holder would be
entitled to a premium payment equal to 10% of the original principal sum of the
debenture. In the event the holder retains the debenture to maturity, the
holder will be entitled to a premium payment equal to 20% of the original
principal sum of the debenture. The 20% premium is being accreted over the
debenture term. The debentures are fully subordinated to all obligations of
BUCA to the bank.
The future maturities of long-term debt, excluding the discount related to
common stock warrants, are as follows (in thousands):
<TABLE>
<S> <C>
1999............................................................... $ 205
2000............................................................... 328
2001............................................................... 2,104
2002............................................................... 2,612
2003............................................................... 3,570
Thereafter......................................................... 136
------
$8,955
======
</TABLE>
On February 5, 1999, the Company refinanced its existing term debt, excluding
the convertible subordinated debentures and the note payable guaranteed by the
U.S. Small Business Administration, with a $15 million credit arrangement that
expires on December 31, 2000. The credit arrangement includes a $7 million term
loan which bears a fixed rate of interest of 9.63% and an $8 million revolving
line of credit which bears interest at prime plus .75% to 1.25%, depending on
the then-applicable cash flow coverage ratio of the Company. In accordance with
the credit agreement, the term loan must be repaid upon the consummation of an
initial public offering along with any borrowings under the revolving line of
credit in excess of $3 million. The credit agreement, among other things,
restricts additional indebtedness and requires the Company to meet certain
financial covenants. In conjunction with the refinancing, the Company will
recognize an extraordinary loss on extinguishment of debt of approximately $1.3
million in 1999 which includes deferred financing costs associated with the
refinanced debt.
5. INCOME TAXES
Deferred income taxes are recognized for the tax consequences of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each year-end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. At December 28, 1997 and December 27, 1998 the Company has
recorded a valuation allowance to reduce recorded deferred tax assets to zero.
At December 27, 1998, for income tax return purposes, the Company has estimated
net operating loss carryforwards of approximately $3,500,000. If not used,
these carryforwards will begin to expire in 2003.
F-12
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The (benefit) provision for income taxes consisted of the following for the
fiscal years ended December 31, 1996, December 28, 1997, and December 27, 1998
(in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Federal......................................... $(107) $ 34
State........................................... 6 4 $ 17
Deferred........................................ 34
----- ------- -------
(Benefit) provision for income taxes............ $(101) $ 72 $ 17
===== ======= =======
A reconciliation between taxes computed at the expected federal income tax rate
and the effective tax rate for the fiscal years ended December 31, 1996,
December 28, 1997, and December 27, 1998 is as follows (in thousands):
<CAPTION>
1996 1997 1998
----- ------- -------
<S> <C> <C> <C>
Tax benefit computed at statutory rates......... $(425) $(1,162) $(1,025)
State taxes, net of federal effect.............. (47) (129) (114)
Other........................................... 12
Change in valuation allowance................... 371 1,363 1,144
----- ------- -------
$(101) $ 72 $ 17
===== ======= =======
</TABLE>
The tax effect of significant temporary differences representing deferred tax
assets is as follows as of December 28, 1997 and December 27, 1998 (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Current:
Preopening costs......................................... $ 108 $ 228
Accrued liabilities...................................... 131
Less valuation allowance................................. (108) (359)
------ ------
$ -- $ --
====== ======
Noncurrent:
Preopening costs and property and equipment.............. $ 400 $ 873
Call premium accretion................................... 65 84
Net operating loss carryforwards......................... 1,028 1,380
Other.................................................... 49
Less valuation allowance................................. (1,493) (2,386)
------ ------
$ -- $ --
====== ======
</TABLE>
6. EMPLOYEE BENEFIT PLANS
Effective with the spin-off of BUCA discussed in Note 1, the BUCA employee
stock ownership plan (ESOP) was established for the benefit of eligible
employees of BUCA. A pro rata portion of the assets held by the Parasole ESOT
were transferred to the BUCA ESOP as of that date, and the BUCA participants
became 100% vested in their accounts. The Parasole ESOT retained the entire
unallocated stock account and the entire obligation under the loan agreement
with the bank. The BUCA ESOP was frozen upon its establishment and no
contributions were made during fiscal 1997 or 1998. BUCA's pro rata portion of
compensation expense related to the Parasole ESOT was $50,000 in 1996.
BUCA has entered into a redemption agreement with Parasole whereby BUCA has
agreed to redeem at fair value shares of BUCA stock distributed by the Parasole
ESOT if no public market exists. Additionally, the BUCA stock
F-13
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
held in the BUCA ESOP must be redeemed by the Company in accordance with the
plan agreement. At December 28, 1997 and December 27, 1998, 504,702 and 97,227
shares were held in the Parasole ESOT and BUCA ESOP, respectively. Such shares
have been classified as redeemable stock on the consolidated balance sheet.
Company employees with one year of service, age 21 or older, who worked at
least 1,000 hours in the prior year are eligible to participate in the
Company's 401(k) Plan. Under the provisions of the plan, the Company may, at
its discretion, make contributions to the 401(k) Plan. Participants are 100%
vested in their own contributions. No contributions were made by the Company
during 1996, 1997 or 1998.
7. COMMITMENTS AND CONTINGENCIES
Leases--The Company is obligated under various operating leases for restaurant
and storage space and equipment. Generally, the base lease terms are between 5
and 15 years. Certain of the leases provide for additional rents based on a
percentage of annual sales in excess of stipulated minimums. The leases also
require the Company to pay its pro rata share of real estate taxes, operating
expenses, and common area costs. In addition, the Company has received lease
incentives in connection with certain leases. The Company is recognizing the
benefits related to the lease incentives on a straight-line basis over the
applicable lease term. The Company has recorded deferred rent related to their
lease incentives of $17,000 and $239,000 as of December 28, 1997 and December
27, 1998, respectively.
Total rent expense, including real estate taxes, operating expenses, and
percentage rent, was $941,000, $1,754,000, and $3,812,000 in 1996, 1997, and
1998, respectively.
Approximate future minimum lease obligations, including units which are not yet
open and excluding percentage rents, at December 27, 1998, are as follows (in
thousands):
<TABLE>
<S> <C>
1999............................................................. $ 2,989
2000............................................................. 3,950
2001............................................................. 4,038
2002............................................................. 4,118
2003............................................................. 4,189
Thereafter....................................................... 29,405
-------
Total future minimum base rents.................................. $48,689
=======
</TABLE>
Litigation--The Company is subject to certain legal actions arising in the
normal course of business, none of which are expected to have a material effect
on the Company's results of operations, financial condition or cash flows.
8. RELATED-PARTY TRANSACTIONS
Management Agreement--The Company has entered into a management agreement with
Parasole to provide for certain management and administrative services. The
management agreement may be terminated by Parasole upon one year's written
notice and the Company may terminate the management agreement upon 60 days'
written notice. Management fees of approximately $354,000, $270,000, and
$248,000 were charged to operations in 1996, 1997, and 1998, respectively.
Purchase of Inventory--The Company has entered into a vendor relationship with
Parasole whereby the Company purchases bread products and a majority of the
dessert products offered at the Company's Minneapolis-Saint Paul metropolitan
area restaurants. The Company purchases the products at rates which management
believes
F-14
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
approximate market rates. The relationship can terminate at any time at the
discretion of the Company; however, the Company expects this relationship to
continue. The Company purchased bakery products in the amount of $211,000,
$180,000, and $169,000 in 1996, 1997, and 1998, respectively.
Employment Agreement--The Company entered into an employment agreement with one
of its officers which requires the payment of annual compensation and certain
fringe benefits through 2001 and includes bonus provisions in the form of both
a stock grant and stock options.
9. REDEEMABLE STOCK
Series A Preferred Stock Private Placement--During October 1996, the Company
issued 2,240,000 shares of Series A preferred stock in a private placement at
an offering price of $3.75 per share. This stock is convertible into 1,493,331
shares of common stock and the preferred shares are redeemable in cash on
October 1, 2003, 2004, and 2005 at the election of the holder and accumulate
dividends at a rate of $.2625 per share annually beginning October 24, 1996.
The shares are redeemable at $3.75 per share plus unpaid and accumulated
dividends. Accumulated undeclared dividends amounted to $699,000 and $1,287,000
at December 28, 1997 and December 27, 1998, respectively. Total liquidation
preference of outstanding shares is $3.75 per share plus, unpaid and
accumulated dividends. The Company received net proceeds of $7,614,000 after
the payment of $786,000 in related offering costs. The net proceeds were used
to pay off certain indebtedness and to fund expansion and operating expenses.
Series B Preferred Stock Private Placement--During 1997, the Company issued a
total of 1,922,222 shares of Series B preferred stock in a private placement at
an offering price of $4.50 per share. The stock is convertible into 1,281,477
shares of common stock and the preferred shares are redeemable in cash on
October 1, 2003, 2004, and 2005 at the election of the holder and accumulate
dividends at a rate of $.315 per share annually beginning September 3, 1997.
The shares are redeemable at $4.50 per share plus unpaid and accumulated
dividends. Accumulated undeclared dividends amounted to $197,000 and $802,000
at December 28, 1997 and December 27, 1998, respectively. Total liquidation
preference of outstanding shares is $4.50 per share plus, unpaid and
accumulated dividends. The Company received net proceeds of $8,537,000 after
the payment of $113,000 in related offering costs. The net proceeds were used
to fund expansion and operating expenses.
Series C Preferred Stock Private Placement--In October 1998, the Company sold
1,639,025 shares of Series C preferred stock in a private placement at an
offering price of $5.125 per share. The stock is convertible into 1,092,679
shares of common stock. In December 1998, the Company sold an additional
975,609 shares of Series C preferred stock at an offering price of $5.125 per
share. The stock is convertible into 637,752 shares of common stock. Preferred
shares are redeemable in cash on October 1, 2003, 2004, and 2005 at the
election of the holder and accumulate dividends at a rate of $.35875 per share
annually beginning October 13, 1998. The shares are redeemable at $5.125
(1,639,025 shares) and $5.22 (975,609 shares) per share plus unpaid and
accumulated dividends. Accumulated undeclared dividends amounted to $99,000 at
December 27, 1998. Total liquidation preference of outstanding shares is $5.125
(1,639,025) and $5.22 (975,609) per share plus, unpaid and accumulated
dividends. The Company received net proceeds of $12,958,000 after the payment
of $442,000 in related offering expenses. The net proceeds were used to fund
expansion, operating expenses, and pay off certain indebtedness.
Additionally, the purchasers of the Series C preferred stock received 2,614,634
"Contingent Value Rights" which entitles the holder to receive additional
shares of common stock if, on or prior to October 12, 2001, the Company has not
effected a qualified public offering or had a publicly traded security with an
average closing price of $18 per share for a period of at least 120 consecutive
trading days. In 1999, the Company agreed to issue 40,195 shares of common
stock contingent upon the completion of the initial public offering (IPO) in
exchange for an agreement which results in the termination of the contingent
value rights.
F-15
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Series A, B, and C preferred stock are automatically convertible to common
stock upon a public offering that meets each of the following requirements: (i)
the aggregate public offering price is $15 million, (ii) the public offering is
underwritten on a firm commitment basis by an underwriter that is a member of
the New York Stock Exchange, and (iii) the public offering price per share is
at least $18, except as one or more of such requirements may be modified or
waived by holders of two-thirds of the shares of preferred stock then
outstanding.
The carrying value of the preferred stock includes cumulative undeclared
dividends and the accretion to the redemption value.
10. SHAREHOLDERS' EQUITY
Stock Split--On February 17, 1999, the Company effected a two-for-three reverse
stock split which has been retroactively reflected in the consolidated
financial statements.
Warrants--The Company has issued warrants to placement agents and debt holders
in connection with the issuances of debt and equity securities. The warrants
are exercisable at various dates through September 2004. No warrants have been
exercised. The fair market value of the warrants were recorded as additional
paid-in capital. The excess of fair market value over exercise price is being
amortized over the respective debt maturity term. A summary of the Company's
common stock warrant activity is as follows:
<TABLE>
<CAPTION>
Number of Weighted
Common Average
Stock Price
Shares Per Share
--------- ---------
<S> <C> <C>
Warrants issued--Series A placement agents............ 104,532 $5.63
------- -----
Outstanding, December 31, 1996........................ 104,532 5.63
Warrants issued--Series B placement agents............ 33,333 6.75
Warrants issued--debt holders......................... 80,555 .01
------- -----
Outstanding, December 28, 1997........................ 218,420 3.73
Warrants issued--debt holders......................... 112,776 .01
------- -----
Outstanding and exercisable, December 27, 1998........ 331,196 $2.46
======= =====
</TABLE>
Additionally, the Company issued warrants to purchase 66,663 shares of common
stock at $.01 per share to the purchasers of Series B preferred stock. The
warrants vest upon completion of an IPO, but only if the public offering price
per share is less than $13.50.
Stock Option Plans--During 1996, the Company adopted the 1996 Incentive Stock
Option Plan (the 1996 Plan), pursuant to which options to acquire an aggregate
of 433,333 shares of the Company's common stock may be granted. Under the 1996
Plan, the Board of Directors may grant options to purchase shares of the
Company's stock to eligible employees for both incentive and nonstatutory stock
options. Options granted under the 1996 Plan vest as determined by the Board of
Directors and are exercisable for a term not to exceed ten years.
During 1998, the Board of Directors approved amendments to the 1996 Plan to
increase the number of shares available for issuance under the 1996 Plan to
1,000,000 shares.
During 1996, the Company adopted the 1996 Stock Option Plan for Nonemployee
Directors (the Directors' Plan) pursuant to which options to acquire an
aggregate of 26,667 shares of the Company's common stock may be granted to
outside directors. Under the Directors' Plan, 1,333 options will automatically
be granted to each outside director upon election to the Board of Directors,
and thereafter 667 options will be granted annually for each year of continued
service by the outside director. Options granted under the Directors' Plan vest
over one year from date of grant and are exercisable for ten years.
F-16
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A summary of the status of the Company's stock options are presented in the
table and narrative below:
<TABLE>
<CAPTION>
Options
Weighted Available
Average for
Extended Price Future
Shares Price Range Grant
-------- -------- ---------- ---------
<S> <C> <C> <C> <C>
Granted.......................... 13,331 $4.84 $4.50-5.63
-------- ----- ---------- -------
Outstanding, December 31, 1996... 13,331 4.84 1.13-5.63 413,335
=======
Granted.......................... 700,353 4.61 1.13-6.75
Terminated....................... (132,177) 1.25 1.13-5.63
-------- ----- ---------- -------
Outstanding, December 28, 1997... 581,507 5.38 1.13-6.75 111,826
=======
Granted.......................... 273,314 7.59 6.75-7.68
Terminated....................... (666) 7.68 7.68
-------- ----- ---------- -------
Outstanding, December 27, 1998... 854,155 $6.08 $1.13-7.68 172,511
======== ===== ========== =======
Exercisable, December 27, 1998... 212,109 $4.47 $1.13-7.68
======== ===== ==========
</TABLE>
During 1998, the Company granted 16,000 stock options to a landlord at a price
of $6.75 per share which were outside of the two stock option plans.
The Company has chosen to continue to account for stock-based compensation
using the intrinsic value method prescribed by APB Opinion No. 25 and related
interpretations. No compensation cost has been recognized for options issued to
employees under the Plans when the exercise price of the options granted are at
least equal to the fair value of the common stock on the date of grant. Had
compensation costs for these plans been determined consistent with SFAS No.
123, the Company's net loss would have been increased to the following pro
forma amounts for 1996, 1997, and 1998 (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net loss applicable to common stock:
As reported..................................... $4,800 $5,305 $5,135
Pro forma....................................... 4,800 5,773 5,380
Net loss per common share, basic and diluted:
As reported..................................... $(1.96) $(2.13) $(2.04)
Pro forma....................................... (1.96) (2.32) (2.14)
</TABLE>
The fair value of each option grant for the pro forma disclosure required by
SFAS No. 123 is estimated on the grant date using the Black-Scholes option-
pricing model with the following assumptions and the results for the grants:
<TABLE>
<CAPTION>
1996 1997 1998
------- --------- ---------
<S> <C> <C> <C>
Dividend yield............................. None None None
Expected volatility........................ None None None
Expected life of option.................... 7 years 7 years 7 years
Risk-free interest rate.................... 6.38% 5.76-6.70% 4.63-5.68%
</TABLE>
Paisano Partnership Program--On January 1, 1997, the Company implemented the
Paisano Partnership Program for certain restaurant employees. This program
requires restaurant general managers known as Paisano Partners to purchase
approximately $20,000 of the Company's common stock and they also receive stock
options. In addition, kitchen managers also receive stock options. The Company
allows the Paisano Partners the option to finance the
F-17
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
initial stock purchase over five years at an interest rate of 8%. At December
28, 1997 and December 27, 1998 the notes receivable balances related to this
financing were $271,000 and $293,000, respectively, were included as contra-
equity. At December 28, 1997 and December 27, 1998, 31,998 and 81,396 shares of
common stock was issued under this program.
11. SUPPLEMENTAL CASH FLOW INFORMATION:
The following is supplemental cash flow information for the years ended:
<TABLE>
<CAPTION>
1996 1997 1998
----- ---- -----
<S> <C> <C> <C>
Cash paid during year for:
Interest.............................................. $ 359 $527 $ 714
Income taxes.......................................... 9 17
Noncash investing and financing activities:
Property and equipment additions financed through
capital lease obligation............................. 18 401
Shareholder receivable from issuance of common stock.. 275 160
Shareholder receivable reduction due to retirement of
stock................................................ 58
Escrow deposit transferred to property and equipment.. 551
Accretion of redeemable preferred stock to redemption
value................................................ 190 524 247
Dividends accrued on redeemable preferred stock....... 111 785 1,292
Change in value of redeemable common stock............ 3,386 677 650
</TABLE>
F-18
<PAGE>
2,650,000 Shares
BUCA, INC.
Common Stock
[LOGO]
----------------
PROSPECTUS
----------------
Until , all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
Prospectus. This is in addition to the dealers' obligation to deliver a
Prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
Piper Jaffray Inc.
NationsBanc Montgomery Securities LLC
, 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Expenses in connection with the issuance and distribution of the shares of
Common Stock being registered hereunder, other than underwriting commissions
and expenses, are estimated below.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 10,591
NASD filing fee.................................................. 4,333
Nasdaq listing fee............................................... 53,700
Legal fees and expenses.......................................... 225,000
Accounting fees and expenses..................................... 225,000
Blue Sky fees and expenses....................................... 5,000
Printing expenses................................................ 210,000
Transfer agent fees and expenses................................. 15,000
Miscellaneous expenses........................................... 113,876
--------
Total........................................................ $862,500
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 302A.521 of the Minnesota Statutes requires the Company to indemnify a
person made or threatened to be made a party to a proceeding, by a reason of
the former or present official capacity of the person with respect to the
Company, against judgments, penalties, fines, including without limitation,
excise taxes assessed against the person with respect to an employee benefit
plan, settlements, and reasonable expenses, including attorneys' fees and
disbursements, if, with respect to the acts or omissions of the person
complained of in the proceeding, such person (1) has not been indemnified by
another organization or employee benefit plan for the same judgments,
penalties, fines, including without limitation, excise taxes assessed against
the person with respect to an employee benefit plan, settlements, and
reasonable expenses, including attorneys' fees and disbursements, incurred by
the person in connection with the proceeding with respect to the same acts or
omissions; (2) acted in good faith; (3) received no improper personal benefit,
and statutory procedure has been followed in the case of any conflict of
interest by a director; (4) in the case of a criminal proceeding, had no
reasonable cause to believe the conduct was unlawful; and (5) in the case of
acts or omissions occurring in the person's performance in the official
capacity of director or, for a person not a director, in the official capacity
of officer, committee member, employee or agent, reasonably believed that the
conduct was in the best interests of the Company, or in the case of performance
by a director, officer, employee or agent of the Company as a director,
officer, partner, trustee, employee or agent of another organization or
employee benefit plan, reasonably believed that the conduct was not opposed to
the best interests of the Company. In addition, Section 302A.521, subd. 3
requires payment by the Company, upon written request, of reasonable expenses
in advance of final disposition in certain instances. A decision as to required
indemnification is made by a majority of the disinterested Board of Directors
present at a meting at which a disinterested quorum is present, or by a
designated committee of disinterested directors, by special legal counsel, by
the disinterested shareholders, or by a court.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company pursuant to
the foregoing provisions, the Company has been informed that in the opinion of
the Commission, such indemnification is against public policy as expressed in
the Act, and is therefore unenforceable.
Under the terms of the form of Purchase Agreement filed as Exhibit 1.1 hereto,
the Underwriters have agreed to indemnify, under certain conditions, the
Company, its directors, certain of its officers and persons who control the
Company within the meaning of the Act, against certain liabilities.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
During the past three years, the Company has sold the following securities
pursuant to exemptions from registration under the Act. The sales referred to
in numbers 1, 2, 3, 4, 6, 7, 12, 14, 15, 16, 17, 20, 21, 28, 30, 33, 34, 37,
39, 40 and 41 were made in reliance upon the exemptions from registration
provided under Section 4(2) of the Act for transactions not involving a public
offering and the sales referred to in numbers 5, 8, 9, 10, 11, 13, 18, 19, 22,
23, 24, 25, 26, 27, 29, 31, 32, 35, 36 and 38 were made in reliance upon the
exemptions from registration provided pursuant to Rule 701 under the Act for
securities sold pursuant to certain compensatory benefit plans and contracts
relating to compensation, and related state securities laws. Unless otherwise
stated, all shares were issued directly by the Company, no underwriters were
involved and, except as otherwise noted below, no discount, commission or other
transaction-related remuneration was paid. Share figures have been adjusted for
the 2-for-3 reverse stock split that was effective on February 17, 1999.
1. On August 27, 1996, the Company granted options to purchase an
aggregate of 9,332 shares of the Company's common stock at $4.50 per
share to two of the Company's directors.
2. On October 23, 1996, the Company issued warrants to purchase an
aggregate of 156,800 shares of its Series A Convertible Preferred
Stock convertible into 104,532 shares of common stock at $5.625 per
common share to Piper Jaffray Inc. and Michael Bochert.
3. On October 23, 1996, the Company issued 2,240,000 shares of its Class
A Convertible Preferred Stock convertible into 1,493,331 shares of
common stock to outside investors for $8,400,000 or $5.625 per common
share.
4. On October 24, 1996, the Company granted options to purchase an
aggregate of 3,999 shares of the Company's common stock at $5.625 per
share to the Company's directors.
5. On February 1, 1997, the Company granted options to purchase an
aggregate of 78,331 shares of the Company's common stock at $5.625
per share to employees of the Company.
6. On February 1, 1997, the Company granted options to purchase 122,854
shares of the Company's common stock at $1.125 per share to Joseph P.
Micatrotto under the terms of his employment agreement with the
Company.
7. On February 1, 1997, the Company sold 16,000 shares of common stock
to Joseph P. Micatrotto under the terms of his employment agreement
with the Company for $90,000 or $5.625 per share.
8. On February 6, 1997, the Company granted options to purchase 33,333
shares of the Company's common stock at $5.625 per share to an
employee of the Company.
9. On March 1, 1997, the Company granted options to purchase 13,333
shares of the Company's common stock at $5.625 per share to an
employee of the Company.
10. On April 21, 1997, the Company sold an aggregate of 31,995 shares of
common stock to employees of the Company for $179,998.75 or $5.625
per share.
11. On June 1, 1997, the Company granted options to purchase an
aggregate of 4,000 shares of the Company's common stock at $5.625
per share to two of the Company's employees.
12. On July 8, 1997, the Company granted options to purchase 1,333
shares of the Company's common stock at $5.625 per share to a
director of the Company.
13. On August 1, 1997, the Company granted options to purchase 13,333
shares of the Company's common stock at $5.625 per share to an
employee of the Company.
14. On September 3, 1997, the Company issued warrants to purchase 50,000
shares of the Company's Class B Convertible Preferred Stock
convertible into 33,333 shares of common stock at $6.75 per common
share to Piper Jaffray Inc.
II-2
<PAGE>
15. On September 3, 1997, the Company sold an aggregate of 961,000
shares of its Class B Convertible Stock convertible into 640,739
shares of common stock to outside investors for $4,324.999.50 or
$6.75 per common share.
16. On October 24, 1997, the Company granted options to purchase an
aggregate of 1,332 shares of common stock at $6.75 per share to
directors of the Company.
17. On October 31, 1997, the Company issued warrants to purchase an
aggregate of 147,218 shares of the Company's common stock at $0.01
per share to its investors and lenders in connection with the
Company's subordinated debt transaction.
18. On November 4, 1997, the Company granted options to purchase an
aggregate of 214,327 shares of the Company's common stock at $6.75
per share to employees of the Company.
19. On December 18, 1997, the Company sold an aggregate of 11,848 shares
of common stock to employees of the Company for $79,992, or $6.75
per share.
20. On December 18, 1997, the Company granted options to purchase 51,511
shares of the Company's common stock at $1.125 per share and options
to purchase 186,666 shares of the Company's common stock at $5.675
per share to Joseph P. Micatrotto under the terms of his employment
agreement with the Company.
21. On December 19, 1997, the Company sold an aggregate of 961,000
shares of Series B Convertible Preferred Stock convertible into
640,739 shares of common stock to outside investors for
$4,324,999.50 or $6.75 per common share.
22. On January 1, 1998, the Company sold 2,962 shares of common stock to
an employee of the Company for $20,000, or $6.75 per share.
23. On February 1, 1998, the Company sold 5,924 shares of common stock
to an employee of the Company for $40,000, or $6.75 per share.
24. On February 1, 1998, the Company granted options to purchase 2,000
shares of the Company's common stock at $6.75 per share to an
employee of the Company.
25. On March 1, 1998, the Company sold 2,962 shares of common stock to
an employee of the Company for $20,000, or $6.75 per share.
26. On April 28, 1998, the Company granted options to purchase 13,333
shares of the Company's common stock at $6.75 per share to an
employee of the Company.
27. On May 1, 1998, the Company granted options to purchase 2,000 shares
of the Company's common stock at $6.75 per share to an employee of
the Company.
28. On May 18, 1998, the Company issued warrants to purchase an
aggregate of 112,776 shares of the Company's common stock at $0.01
per share to its lenders in connection with the Company's
subordinated debt transaction.
29. On June 1, 1998, the Company granted options to purchase an
aggregate of 10,000 shares of the Company's common stock at $6.75
per share and sold 8,886 shares of the Company's common stock for
$60,000, or $6.75 per share, to employees of the Company.
30. On July 1, 1998, the Company granted options to purchase 666 shares
of the Company's common stock at $6.75 per share to a director of
the Company.
II-3
<PAGE>
31. On September 1, 1998, the Company granted options to purchase an
aggregate of 8,000 shares of the Company's common stock at $6.75 per
share to employees of the Company.
32. On September 1, 1998, the Company sold an aggregate of 10,404 shares
of common stock to employees of the Company for $80,000, or $6.75
per share.
33. On October 13, 1998, the Company sold an aggregate of 1,639,025
shares of its Class C Convertible Preferred Stock convertible into
1,092,679 shares of common stock to outside investors for
$9,400,007.02 or $7.6875 per common share.
34. On October 24, 1998, the Company granted options to purchase 1,332
shares of the Company's common stock at $7.6875 per share to
directors of the Company.
35. On October 27, 1998, the Company sold 2,601 shares of common stock
to an employee of the Company for $20,000 or $7.6875 per share.
36. On October 27, 1998, the Company granted options to purchase an
aggregate of 235,983 shares of the Company's common stock at $7.6875
per share to employees of the Company.
37. On December 23, 1998, the Company issued 975,609 shares of its
Series C Convertible Preferred Stock convertible into 637,752 shares
of common stock to outside investors, for $5,000,000 or $7.84 per
common share.
38. On January 26, 1999, the Company granted options to purchase 3,333
shares of the Company's common stock at $7.6875 per share to an
employee at the Company.
39. On February 15, 1999, the Company granted options to purchase 48,000
shares of the Company's common stock at $11.25 per share to
directors of the Company.
40. On February 15, 1999, the Company granted options to purchase
126,666 shares of the Company's common stock at $11.25 per share to
Joseph P. Micatrotto.
41. On February 15, 1999, the Company agreed to issue 40,195 shares of
the Company's common stock to holders of the Series C Preferred
Stock in connection with the conversion of the Series C Preferred
Stock.
II-4
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
*1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amendment to Amended and Restated Articles of Incorporation of the
Registrant.
3.3 By-Laws of the Registrant.
*4.1 Specimen of Common Stock certificate.
*5.1 Opinion of Faegre & Benson LLP.
10.1 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated Companies.
10.2 Stock Option Plan for Non-Employee Directors
10.3 BUCA, Inc. Employee Stock Ownership Plan.
*10.4 BUCA, Inc. 401(k) Plan.
10.5 Employment Agreement dated as of July 22, 1996, between the
Registrant and Joseph P. Micatrotto, including amendments and
option agreements related thereto.
10.6 Letter Agreement dated April 1, 1997 between the Registrant and
Greg A. Gadel.
10.7 Credit Agreement dated as of February 5, 1999 between the
Registrant, as Borrower, and U.S. Bank National Association, as
Lender.
10.8 Security Agreement dated as of February 5, 1999 by the Registrant,
in favor of U.S. Bank National Association.
10.9 Form of Series A Convertible Subordinated Debenture due July 30,
2001 of the Registrant.
10.10 Form of Stock Purchase Warrant for the purchase of Series A
Convertible Preferred Stock of the Registrant.
10.11 Form of Stock Purchase Warrant for the purchase of Series B
Convertible Preferred Stock of the Registrant.
10.12 Form of Stock Purchase Warrant dated as of October 31, 1997.
10.13 Form of Stock Purchase Warrant for the purchase of common stock of
the Registrant, dated October 31, 1997.
10.14 Form of Stock Purchase Warrant for the purchase of common stock of
the Registrant, dated May 19, 1998.
10.15 Non-Statutory Stock Option Agreement between the Registrant and
1204 Harmon Partnership for the purchase of 24,000 shares of
common stock of the Registrant, dated as of June 1, 1998.
10.16 Stock Purchase Agreement dated as of September 2, 1997 between the
Registrant and the Purchasers.
10.17 Securities Purchase Agreement dated as of October 13, 1998 between
the Registrant and the Purchasers.
10.18 Redemption Agreement between BUCA, Inc. and Parasole Restaurant
Holdings, Inc. regarding the Parasole Employee Stock Ownership
Plan.
10.19 Form of BUCA, Inc. Contingent Value Rights to Receive Shares of
Capital Stock.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Faegre & Benson LLP (to be included in Exhibit No. 5.1
to the Registration Statement).
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
</TABLE>
* To be filed by amendment.
(b) Financial Statement Schedules
None required.
II-5
<PAGE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers, and controlling persons of the Company
pursuant to the provisions summarized in Item 14 above, or otherwise, the
Company has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification is
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer, or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act, and will be governed by
the final adjudication of such issue.
The undersigned Company hereby undertakes to provide to the Underwriters, at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Company under Rule 424(b)(1) or (4) or 497(h)
under the Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Minneapolis, State of
Minnesota, on February 18, 1999.
BUCA, INC.
/s/ Joseph P. Micatrotto
By___________________________________
Joseph P. Micatrotto
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities indicated
on February 18, 1999.
Signature Title
/s/ Joseph P. Micatrotto President and Chief Executive
_____________________________________ Officer
Joseph P. Micatrotto (Principal Executive Officer) and
Director
/s/ Greg A. Gadel
_____________________________________ Chief Financial Officer
Greg A. Gadel (Principal Financing and Accounting
Officer)
Don W. Hays Board of Directors
Peter J. Mihajlov
Philip A. Roberts
John P. Whaley
David Yarnell
Paul Zepf
- --------
* Joseph P. Micatrotto, by signing his name hereto, does hereby sign this
document on behalf of each of the above-named officers and/or directors of
the Company pursuant to powers of attorney duly executed by such persons.
/s/ Joseph P. Micatrotto
By___________________________________
Joseph P. Micatrotto, Attorney-in-
Fact
II-7
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
BUCA, INC.
ARTICLE I
The name of this Corporation is BUCA, Inc.
ARTICLE II
The registered office of this Corporation is located at Suite 301A, 3001
Hennepin Avenue South, Minneapolis, Minnesota 55408.
ARTICLE III
(A) Authorized Capital Stock.
(a) General. The aggregate number of shares of stock which the
corporation is authorized to issue is 28,500,000 shares, par value $.01 per
share, of which 19,650,000 are designated as common shares (the "Common Stock"),
2,396,800 are designated as series A convertible preferred stock (the "Series A
Preferred Stock"), 2,100,000 are designated as series B convertible preferred
stock (the "Series B Preferred Stock"), 3,679,053 are designated as series C
convertible preferred stock (the "Series C Preferred Stock") and 674,147 are
undesignated (the "Undesignated Capital Stock"). The shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock are
referred to herein collectively as the "Preferred Stock." The shares of Common
Stock, Preferred Stock and Undesignated Capital Stock are referred to herein
collectively as the "capital stock".
All shares of Preferred Stock which shall have been acquired by the
corporation shall have the status of Undesignated Capital Stock of the
corporation.
The rights, preferences and privileges and restrictions granted to and
imposed upon the Common Stock and the Preferred Stock are set forth in this
Article III and such rights, privileges, preferences and restrictions shall
supersede and replace in all respects Article III of the Amended and Restated
Articles of Incorporation.
(b) Authority Relative to Undesignated Preferred Stock. Authority is
hereby expressly vested in the Board of Directors of the corporation, subject to
the provisions of this Article III and to limitations prescribed by law, to
authorize the issuance from time to time of one or more series of Undesignated
Preferred Stock and, with respect to each such series, to determine or fix, by
resolution or resolutions adopted by the affirmative vote of a majority of the
whole Board of Directors providing for the issue of such series, the voting
powers, full or limited, if any, of the shares of such series and the
designations, preferences and relative, participating, optional or other special
rights and the qualifications, limitations or restrictions thereof, including,
without
<PAGE>
limitation, the determination or fixing of the rates of and terms and conditions
upon which any dividends shall be payable on such series, any terms under or
conditions on which the shares of such series may be redeemed, any provision
made for the conversion or exchange of the shares of such series for shares of
any other class or classes or of any other series of the same or any other class
or classes of the corporation's capital stock, and any rights of the holders of
the shares of such series upon the voluntary or involuntary liquidation,
dissolution or winding up of the corporation.
(B) Voting Privileges.
(a) General. Each holder of Preferred Stock shall have that number of
votes on all matters submitted to the shareholders and all matters that require
the consent or approval of holders of Preferred Stock under this Article III
that is equal to the number of shares of Common Stock into which such holder's
shares of Preferred Stock are then convertible, as hereinafter provided. Each
holder of Common Stock shall have one vote on all matters submitted to the
shareholders for each share of Common Stock standing in the name of such holder
on the books of the corporation. Except as otherwise provided herein, and except
as otherwise required by agreement or law, the shares of capital stock of the
corporation shall vote as a single class on all matters submitted to the
shareholders.
(b) Election of Directors: General. So long as any shares of Preferred
Stock are outstanding, (i) the Board of Directors of the corporation shall
consist of not more than seven (7) members (subject to increase as required in
order to effect the provisions of paragraph (c) below); (ii) the holders of the
Series A Preferred Stock, exclusively and voting as a single class, shall be
entitled, by the affirmative vote of the holders of a majority of the total
votes to which such holders are entitled, to elect two of the directors of the
corporation and to exercise any right of removal or replacement of such
directors; (iii) the holders of the Series C Preferred Stock, exclusively and
voting as a single class, shall be entitled, by the affirmative vote of the
holders of a majority of the total votes to which such holders are entitled, to
elect one of the directors of the corporation and to exercise any right of
removal or replacement of such director and, in the event the number of
directors on the corporation's Board of Directors shall be increased above seven
(7), then the holders of the Series C Preferred Stock shall have the right to
elect one or more additional directors so that the percentage of directors
elected by the holders of the Series C Preferred Stock shall not be less than
the percentage of the directors elected by such holders as of the Phase I
Closing (as defined in the 1998 Purchase Agreement (as hereinafter defined))
(provided that the first such additional director shall be elected jointly by
the holders of the Series A Preferred Stock and the Series C Preferred Stock,
voting together as a class); (iv) the holders of the Common Stock, exclusively
and voting as a single class, shall be entitled, by the affirmative vote of the
holders of a majority of the total votes to which such holders are entitled, to
elect two directors of the corporation and to exercise any right of removal or
replacement of such directors; and (v) the remaining directors shall be approved
by the affirmative vote of the holders of a majority of the total votes to which
the holders of Common Stock and Preferred Stock are entitled, voting together as
a class; provided, however, that, the incumbent chief
-2-
<PAGE>
executive officer of the corporation shall be elected as one of the remaining
directors under clause (v) above; and the other director elected pursuant to
clause (v) above shall be a person chosen jointly by the holders of Common Stock
and the holders of Preferred Stock, but in any case approved by the holders of a
majority of the Preferred Stock outstanding from time to time. Except in the
case of the directorship to be filled from time to time by the incumbent chief
executive officer of the corporation, upon expiration of the term of any
director elected pursuant to clause (v) above, or if any director shall cease to
serve in such capacity for any other reason, any new director who shall
thereafter be nominated and elected to replace such directors shall be an
individual approved by the holders of a majority of the Preferred Stock
outstanding at such time.
(c) Election of Directors: Certain Events of Default. Upon the
occurrence of an Event of Default as defined in the Stock Purchase Agreement
dated as of October __, 1998 (the "1998 Purchase Agreement") among the
corporation and the Purchasers named therein, or pursuant to Section 13.1(d) of
the Stock Purchase Agreement dated as of September 2, 1997 (the "1997 Purchase
Agreement") among the corporation and the Purchasers named therein, as each may
be amended from time to time (which amendment does not require the approval of
the shareholders of the corporation), and so long as such Event of Default
continues unremedied, then, unless such Event of Default shall have been waived
by the holders of two-thirds of the outstanding shares of Preferred Stock, the
holders of two-thirds of the outstanding shares of Preferred Stock shall be
entitled to designate a majority of the Board of Directors of the corporation as
hereinafter provided. In the event the holders of the outstanding shares of
Preferred Stock are entitled to designate a majority of the Board of Directors
of the corporation pursuant to the immediately preceding sentence, the holders
of Preferred Stock may by a consent in writing to be signed by the holders of
the minimum percentage of the voting interest of the Preferred Stock as is
required under Minnesota law and these Articles of Incorporation (but not less
than two-thirds) and delivered to the corporation without a meeting elect that
number of additional directors (the "Additional Directors") which, when combined
with the number of directors the holders of Preferred Stock have the right to
designate and have elected pursuant to paragraph (b) above, will constitute a
majority of the Board of Directors; or the corporation shall, immediately upon
receiving written notice from the holders of two-thirds of the outstanding
shares of Preferred Stock, call a special meeting of holders of Preferred Stock
to be held as soon as possible, but in any event within fifteen days of the date
of the notice of such meeting. At such special shareholders' meeting the
Additional Directors of the corporation shall be elected from designees
nominated by the holders of two-thirds of the outstanding shares of Preferred
Stock. Any right to continue to designate a majority of the Board of Directors
of the corporation shall expire, the term of office of the Additional Directors
added to the Board of Directors in accordance with the provisions of this
paragraph (c) shall expire, and the number of directors constituting the Board
of Directors shall be decreased to such number as constituted the whole Board of
Directors of the corporation prior to the election of Additional Directors in
accordance with the provisions of this paragraph (c), 90 days after the later of
(a) the curing of the Event of Default upon which the right was exercised, or
(b) the curing of any Event of Default occurring after the Event of Default upon
which such right was exercised. When, to its knowledge, any
-3-
<PAGE>
Event of Default described herein has occurred or exists, the corporation agrees
to give written notice within three business days of such Event of Default to
the holders of all outstanding shares of Preferred Stock. If the holder of any
shares of Preferred Stock shall give any notice or take any other actions in
respect of a claimed Event of Default, the corporation will forthwith give
written notice thereof to all other holders of Preferred Stock at the time
outstanding, describing such notice or action and the nature of the claimed
Event of Default.
(d) Additional Class Votes by Preferred Stock. Without the affirmative
vote or written consent of the holders (acting together as a class) of at least
two-thirds of the shares of Preferred Stock at the time outstanding, the
corporation shall not:
(i) authorize or issue any additional shares of Preferred Stock,
or any shares of stock having priority over the Preferred Stock
or ranking on a parity therewith as to the payment or
distribution of assets upon the liquidation or dissolution,
voluntary or involuntary, of the corporation; or
(ii) amend the Articles of Incorporation of the corporation so as
to alter any existing provision relating to Preferred Stock or
the holders thereof or waive any of the rights granted to the
holders of the Preferred Stock by the Articles of Incorporation
of the corporation.
(e) Vote on Sale or Merger. Without the affirmative vote or written
consent of the holders of at least two-thirds of the voting power of the Common
Stock and the Preferred Stock entitled to vote at the time outstanding (acting
together as a single class), the corporation shall not sell, lease, license or
otherwise dispose of all or substantially all of the assets of the corporation
or of any subsidiary of the corporation, or any asset or assets which have a
material effect upon the business or financial condition of the corporation or
any subsidiary of the corporation, nor shall the corporation or any subsidiary
of the corporation consolidate with or merge into any other corporation or
entity, or permit any other corporation or entity to consolidate or merge into
the corporation or any subsidiary of the corporation, or enter into a plan of
exchange with any other corporation or entity, or otherwise acquire any other
corporation or entity; provided nothing herein shall require the vote or consent
herein provided in connection with a merger or consolidation of any wholly-owned
subsidiary with another wholly-owned subsidiary or into the corporation.
(f) No Cumulative Voting. No holder of shares of capital stock of the
corporation shall have any cumulative voting rights.
(C) Preemptive Rights.
Except for the rights granted by Section 9.16 of the 1998 Purchase
Agreement, no holder of shares of any class of capital stock of the corporation
shall be entitled as such, as a matter of right, to subscribe for, purchase or
receive any part of any new or additional issue of stock of any class
whatsoever, or of securities convertible into or exchangeable for any stock of
any
-4-
<PAGE>
class whatsoever, whether now or hereafter authorized and whether issued for
cash or other consideration or by way of dividend.
(D) Dividends.
From and after the issuance thereof, (a) the Series A Preferred Stock
shall be entitled to receive cumulative cash dividends when, as, and if declared
by the Board of Directors at the annual rate of $0.2625 per share, payable
quarterly on the last days of March, June, September and December in each year,
commencing December 31, 1996, with respect to the three months then ending, (b)
the Series B Preferred Stock shall be entitled to receive cumulative cash
dividends when, as, and if declared by the Board of Directors at the annual rate
of $0.315 per share, payable quarterly on the last days of March, June,
September and December in each year, commencing September 30, 1997, with respect
to the three months then ending and (c) the Series C Preferred Stock shall be
entitled to receive cumulative cash dividends when, as and if declared by the
Board of Directors at the annual rate of $0.35875 per share, payable quarterly
on the last days of March, June, September and December in each year, commencing
September 30, 1998, with respect to the three months then ending. All such
dividends shall accrue from day to day whether or not earned or declared, and
shall be payable before any dividends on any shares of Common Stock shall be
declared or paid or set apart for payment, and shall be cumulative (whether or
not in any quarterly dividend period there shall be funds of the corporation
legally available for the payment of such dividends), so that if at any time
dividends on the outstanding Preferred Stock at such rate have not been paid
thereon, or funds set apart for the payment thereof, with respect to all
preceding quarterly dividend periods, the amount of such deficiency shall be
fully paid, or set apart for payment, before any distribution by way of dividend
or otherwise shall be declared or paid upon, or set apart for, the shares of
Common Stock or any other class of shares of the corporation ranking junior to
the Preferred Stock with respect to the payment of dividends or upon
liquidation, dissolution or winding up of the corporation. The amount of
dividends payable on the Preferred Stock for any period shorter or longer than a
full three months shall be computed on the basis of 30-day months and a 360-day
year.
No dividends shall be paid upon, or declared or set apart for, any share
of Preferred Stock for any quarterly dividend period unless at the same time a
like dividend for the same quarterly dividend period, in the same proportion to
the annual dividend rate for such Preferred Stock set forth above, shall be paid
upon, or declared and set apart for, all shares of Preferred Stock then issued
and outstanding.
Dividends on shares of capital stock of the corporation shall be payable
only out of funds legally available therefor.
(E) Other Terms of the Preferred Stock.
(a) Liquidation Preference. In the event of an involuntary or voluntary
liquidation or
-5-
<PAGE>
dissolution of the corporation at any time.
(1) The holders of shares of Series A Preferred Stock shall be
entitled to receive out of the assets of the corporation an amount equal
to the following: (i) $3.75 per share (appropriately adjusted to reflect
stock splits, stock dividends, reorganizations, consolidations and
similar changes hereafter effected) plus dividends unpaid and
accumulated or accrued thereon (collectively the "Series A Liquidation
Preference"), and (ii) an amount per share equal to the amount to which
the shares of Common Stock issuable upon conversion of such share of
Series A Preferred Stock would be entitled, after payment of all
preferences applicable to shares of capital stock as set forth in these
Amended and Restated Articles of Incorporation, had such share of Series
A Preferred Stock (and all other outstanding shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock)
been converted into Common Stock pursuant to the provisions hereof
immediately prior to such event of liquidation, dissolution or winding
up and such Common Stock shared ratably with all outstanding Common
Stock in any remaining assets or surplus funds available for
distribution;
(2) The holders of shares of Series B Preferred Stock shall be
entitled to receive out of the assets of the corporation an amount equal
to the following: (i) $4.50 per share (appropriately adjusted to reflect
stock splits, stock dividends, reorganizations, consolidations and
similar changes hereafter effected) plus dividends unpaid and
accumulated or accrued thereon (collectively the "Series B Liquidation
Preference"), and (ii) an amount per share equal to the amount to which
the shares of Common Stock issuable upon conversion of such share of
Series B Preferred Stock would be entitled, after payment of all
preferences applicable to shares of capital stock as set forth in these
Amended and Restated Articles of Incorporation, had such share of Series
B Preferred Stock (and all other outstanding shares of Series B
Preferred Stock, Series A Preferred Stock and Series C Preferred Stock)
been converted into Common Stock pursuant to the provisions hereof
immediately prior to such event of liquidation, dissolution or winding
up and such Common Stock shared ratably with all outstanding Common
Stock in any remaining assets or surplus funds available for
distribution; and
(3) The holders of shares of Series C Preferred Stock shall be
entitled to receive out of the assets of the corporation an amount equal
to the following: (i) $5.125 per share (appropriately adjusted to
reflect stock splits, stock dividends, reorganizations, consolidations
and similar changes hereafter effected) plus dividends unpaid and
accumulated or accrued thereon (collectively the "Series C Liquidation
Preference") and (ii) an amount per share equal to the amount to which
the shares of Common Stock issuable upon conversion of such shares of
Series C Preferred stock would be entitled, after payment of all
preferences applicable to shares of capital stock as set forth in these
Amended and Restated Articles of Incorporation, had such share of Series
C Preferred Stock (and all other outstanding shares of Series C
Preferred Stock, Series B Preferred Stock and Series A Preferred Stock)
been converted into Common Stock pursuant to the provisions hereof
immediately prior to such event of liquidation, dissolution or winding
up and such Common Stock shared ratably with all outstanding Common
Stock in any remaining assets or surplus funds available for
distribution;
-6-
<PAGE>
provided, however, that the amount required to be paid pursuant to clauses (i)
and (ii) of clauses (1), (2) and (3) to holders of Preferred Stock shall not
exceed $15.75 per share. In the event of either an involuntary or a voluntary
liquidation or dissolution of the corporation, payment shall be made to the
holders of shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock in the amounts herein fixed as the Series A Liquidation
Preference, Series B Liquidation Preference and Series C Liquidation Preference
before any payment shall be made or any assets distributed to the holders of the
Common Stock or any other class of shares of the corporation ranking junior to
the Preferred Stock with respect to payment upon dissolution or liquidation of
the corporation. If upon any liquidation or dissolution of the corporation the
assets available for distribution shall be insufficient to pay the holders of
all outstanding shares of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock the full amount of the liquidation preference to which
they respectively shall be entitled, the holders of such shares shall share pro
rata in any such distribution in proportion to the full amounts to which they
would otherwise be entitled.
At any time, in the event of the merger or consolidation of the
corporation into or with another corporation or the merger or consolidation of
any other corporation into or with the corporation or a plan of exchange between
the corporation and any other corporation (in which consolidation or merger or
plan of exchange any shareholders of the corporation receive distributions of
cash or securities or other property), or the sale, transfer or other
disposition of all or substantially all of the assets of the corporation, then,
subject to the provisions of this paragraph, such transaction shall be deemed,
solely for purposes of determining the amounts to be received by the holders of
the Preferred Stock in such merger, consolidation, plan of exchange, sale,
transfer or other disposition, and for purposes of determining the priority of
receipt of such amounts as between the holders of the Preferred Stock and the
holders of the Common Stock, to be a liquidation or dissolution of the
corporation if the holders of two-thirds of the outstanding shares of Preferred
Stock so elect by giving written notice thereof to the corporation at least two
days before the effective date of such transaction. If no such notice is given,
the provisions of subparagraph (c)(7) hereof shall apply. The corporation shall
give each holder of record of Preferred Stock written notice of such impending
transaction not later than 14 days prior to the shareholders' meeting or
solicitation of consents of the shareholders of the corporation to approve such
transaction, or 14 days prior to the closing of such transaction, whichever is
earlier, and shall also notify such holders in writing of the final approval of
such transaction. The first of such notices shall describe the material terms
and conditions of the transaction and of this subparagraph (a) (including,
without limiting the generality of the foregoing, a description of the value of
the consideration, if any, being offered to the holders of the Preferred Stock
in the transaction and the amount to which such holders would be entitled if
such transaction were (as described above) to be deemed to be a liquidation or
dissolution of the corporation), and the corporation shall thereafter give such
holders prompt notice of any material changes to such terms and conditions. The
transaction shall in no event take place sooner than 14 days after the mailing
by the corporation of the first notice provided for herein or sooner than ten
days after the mailing by the corporation of any notice of material changes
provided for herein;
-7-
<PAGE>
provided, however, that such periods may be reduced upon the written consent of
the holders of two-thirds of the Preferred Stock, voting together as a single
class.
The amount deemed distributed to the holders of the Preferred Stock upon
a liquidation or dissolution (including any transaction deemed a liquidation or
dissolution of the corporation as determined by the holders of two-thirds of the
outstanding shares of the Preferred Stock pursuant to the preceding paragraph)
shall be the cash or fair market value of the property, rights, or securities
distributed to such holders. The value of such property, rights, or securities
shall be determined in good faith by the Board of Directors of the corporation;
provided, however, that in the event that the amounts paid pursuant to such
merger, consolidation, plan of exchange, sale, transfer or other disposition are
in securities of another corporation (i) of a class that is traded on a national
securities exchange, the NASDAQ National Market or the NASDAQ Small Cap Market
(a "Publicly Traded Security"), the offer and sale of which shares have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
such securities shall be valued at the average closing price per share for such
securities on the 10 days preceding the date of the consummation of the merger,
consolidation, plan of exchange, sale, transfer or other disposition, or (ii) of
a class that is a Publicly Traded Security, the offer and sale of which shares
have not been registered under the Securities Act, such securities shall be
valued at 80% of the average closing price per share for such securities on the
10 days preceding the date of the consummation of the merger, consolidation,
plan of exchange, sale, transfer or other disposition, or (iii) of a class that
is not a Publicly Traded Security, such securities shall be valued based on a
valuation of an independent expert, mutually acceptable to the Board of
Directors of the corporation and the holders of two-thirds of the outstanding
shares of Preferred Stock.
Nothing hereinabove set forth shall affect in any way the right of each
holder of shares of Preferred Stock to convert such shares at any time and from
time to time in accordance with subparagraph (c) below.
(b) Redemption: Certain Events of Default. (i) On July 1, 2003, the
corporation shall give written notice to each holder of shares of Preferred
Stock, at such holder's post-office address as shown on the records of the
corporation, that such holder may elect, by written notice to the corporation
sent on or prior to August 15, 2003, to have the corporation redeem, on October
1, 2003, all or any part of a number of shares of Series A Preferred Stock equal
to such holder's pro rata portion of 30% of the number of shares of Series A
Preferred Stock issued by the corporation on or prior to December 31, 1996, all
or any part of a number of shares of Series B Preferred Stock equal to such
holder's pro rata portion of 30% of the number of shares of Series B Preferred
Stock issued by the corporation to such holder pursuant to the 1997 Purchase
Agreement, and all or any part of a number of shares of Series C Preferred Stock
equal to such holder's pro rata portion of 30% of the number of shares of Series
C Preferred Stock issued by the corporation to such holder pursuant to the 1998
Purchase Agreement. Upon receipt of such written notice from such holder, the
corporation shall be obligated to redeem for cash, out of funds legally
available therefor, the number of shares specified by such holder in such
notice, at a redemption price of $3.75 per share of Series A Preferred Stock
(appropriately adjusted to reflect
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<PAGE>
stock splits, stock dividends, reorganizations, consolidations and similar
changes hereafter effected), plus dividends unpaid and accumulated or accrued
thereon (the "Series A Redemption Price"), $4.50 per share of Series B Preferred
Stock (appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes hereafter effected), plus
dividends unpaid and accumulated or accrued thereon (the "Series B Redemption
Price") and $5.125 per share of Series C Preferred Stock (appropriately adjusted
to reflect stock splits, stock dividends, reorganizations, consolidations and
similar changes hereafter effected), plus dividends unpaid and accumulated or
accrued thereon (the "Series C Redemption Price").
On July 1, 2004, the corporation shall give written notice to each
holder of shares of Preferred Stock, at such holder's post-office address as
shown on the records of the corporation, that such holder may elect, by written
notice to the corporation sent on or prior to August 15, 2004, to have the
corporation redeem, on October 1, 2004, all or any part of a number of shares of
Series A Preferred Stock equal to such holder's pro rata portion of 30% of the
number of shares of Series A Preferred Stock issued by the corporation on or
prior to December 31, 1996 plus the number of shares previously eligible for
redemption that were not so redeemed, all or any part of a number of shares of
Series B Preferred Stock equal to such holder's pro rata portion of 30% of the
number of shares of Series B Preferred Stock issued by the corporation to such
holder pursuant to the 1997 Purchase Agreement plus the number of shares
previously eligible for redemption that were not so redeemed, and all or any
part of a number of shares of Series C Preferred Stock equal to such holder's
pro rata portion of 30% of the number of shares of Series C Preferred Stock
issued by the corporation to such holder pursuant to the 1998 Purchase Agreement
plus the number of shares previously eligible for redemption that were not so
redeemed. Upon receipt of such written notice from such holder, the corporation
shall be obligated to redeem for cash, in the amount of the Series A Redemption
Price, out of funds legally available therefor, the number of shares of Series A
Preferred Stock specified by such holder in such notice, in the amount of the
Series B Redemption Price, out of funds legally available therefor, the number
of shares of Series B Preferred Stock specified by such holder in such notice
and in the amount of the Series C Redemption Price, out of funds legally
available therefor, the number of shares of Series C Preferred Stock specified
by such holder in such notice.
On July 1, 2005, the corporation shall give written notice to each
holder of shares of Preferred Stock, at such holder's post-office address as
shown on the records of the corporation, that such holder may elect, by written
notice to the corporation sent on or prior to August 15, 2005, to have the
corporation redeem, on October 1, 2005, all or any part of the balance of the
shares of Preferred Stock held by such holder. Upon receipt of such written
notice from such holder, the corporation shall be obligated to redeem for cash,
in the amount of the Series A Redemption Price, out of funds legally available
therefor, the number of shares of Series A Preferred Stock specified by such
holder in such notice, in the amount of the Series B Redemption Price, out of
funds legally available therefor, the number of shares of Series B Preferred
Stock specified by such holder in such notice and in the amount of the Series C
Redemption Price, out of funds legally available therefor, the number of shares
of Series C
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<PAGE>
Preferred Stock specified by such holder in such notice.
References in this subparagraph (b)(i) to a holder's "pro rata portion"
shall be calculated based on such holder's record ownership of outstanding
shares of Preferred Stock as of each date notice by the corporation is given
regarding each redemption.
(ii) The corporation shall, to the extent that funds are legally
available therefor, and upon payment by the corporation in cash of the Series A
Redemption Price with respect to shares of Series A Preferred Stock, in cash of
the Series B Redemption Price with respect to shares of Series B Preferred
Stock, and in cash of the Series C Redemption Price with respect to shares of
Series C Preferred Stock, to the extent not previously redeemed pursuant to
subparagraph (b)(i) above, upon (x) the occurrence of an Event of Default as
defined in the 1998 Purchase Agreement or Section 13.1(d) of the 1997 Purchase
Agreement and (y) the written request for redemption after such Event of Default
by the holders of two-thirds of the outstanding shares of Preferred Stock,
redeem all of the shares of Preferred Stock then outstanding.
(iii) If at the time of any required redemption the funds legally
available for such redemption shall be insufficient to redeem the number of
shares of Preferred Stock specified in subparagraph (b)(i) or (b)(ii),
redemptions shall be made as among the holders of such shares of Preferred Stock
on a pro rata basis (based on the full amounts to which such holders would
otherwise be entitled to be redeemed) to the extent funds are then legally
available for such redemptions. Thereafter, as and to the extent legally
available funds for the redemption thereof exist from time to time, the
corporation shall redeem additional shares of Preferred Stock, pro rata as among
the holders thereof (based on the full amounts to which such holders would
otherwise be entitled to be redeemed), until all shares of Preferred Stock
required by this subparagraph (b) to be redeemed have been redeemed.
In the event of a redemption of less than all of the outstanding shares
of Preferred Stock pursuant to subparagraph (b)(i) or (b)(ii), redemptions as
among the holders of such shares of Preferred Stock shall be on a pro rata basis
(based on the full amounts to which such holders would otherwise be entitled to
be redeemed).
Optional redemptions of shares of Preferred Stock by the corporation
from any holder thereof in addition to the aforesaid required redemptions are
not permitted without the consent of such holder.
On or after the date fixed for redemption in subparagraph (b)(i) or
(b)(ii), each holder of shares of Preferred Stock that has elected to redeem
such shares shall surrender the certificate or certificates evidencing such
shares to the corporation at the place the corporation shall designate in the
notice and shall thereupon be entitled to receive payment. If less than all of
the shares represented by any such surrendered certificate or certificates are
redeemed, the corporation shall issue a new certificate for the unredeemed
shares.
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If the corporation deposits, on or prior to any date fixed for
redemption of shares of Preferred Stock, with any bank or trust company having
capital and surplus of at least $10,000,000, as a trust fund, a sufficient sum
to redeem, on the date fixed for redemption thereof, the shares then requested
to be redeemed by the holder thereof, with instructions and authority to such
bank or trust company to pay the redemption price on or after the date fixed for
redemption or prior thereto upon the surrender of the certificates representing
the shares then being redeemed, then and from and after the date of such
deposit, and notwithstanding that any certificate for shares so called for
redemption shall not have been surrendered for cancellation, the shares so
called for redemption shall no longer be deemed to be outstanding and all rights
with respect thereto shall forthwith cease and terminate, except only the right
of the holders thereof to receive from such bank or trust company, at any time
after the date of such deposit, the sum so deposited, without interest, and the
right to convert such shares as provided in subparagraph (c) below. Any funds so
deposited and unclaimed at the end of four years from such redemption date shall
be released or repaid to the corporation, after which the holders of the shares
so called for redemption shall be entitled to receive payment of the redemption
price only from the corporation.
(c) Conversion Right. At the option of the holders thereof, the shares
of Series A Preferred Stock shall be convertible, at the office of the
corporation (or at such other office or offices, if any, as the Board of
Directors may designate), into fully paid and nonassessable shares (calculated
as to each conversion to the nearest 1/100th of a share) of Common Stock of the
corporation, at the conversion price, determined as hereinafter provided, in
effect at the time of conversion, each share of Series A Preferred Stock being
deemed to have a value of $3.75 for the purpose of such conversion. The price at
which shares of Common Stock shall be delivered upon conversion of Series A
Preferred Stock (herein called the "Series A Conversion Price") shall be
initially $3.75 per share of Common Stock (i.e., at an initial conversion rate
of one share of Common Stock for each share of Series A Preferred Stock),
provided, however, that such initial Series A Conversion Price shall be subject
to adjustment from time to time in certain instances as hereinafter provided. In
the case of the call for redemption of any shares of Series A Preferred Stock,
such right of conversion shall cease and terminate as to the shares designated
for redemption on the day such shares are actually redeemed by the corporation.
At the option of the holders thereof, the shares of Series B Preferred
Stock shall be convertible, at the office of the corporation (or at such other
office or offices, if any, as the Board of Directors may designate), into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the corporation, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion, each
share of Series B Preferred Stock being deemed to have a value of $4.50 for the
purpose of such conversion. The price at which shares of Common Stock shall be
delivered upon conversion of Series B Preferred Stock (herein called the "Series
B Conversion Price") shall be initially $4.50 per share of Common Stock (i.e.,
at an initial conversion rate of one share of Common Stock for each share of
Series B Preferred Stock), provided, however, that such initial Series B
Conversion Price shall be subject to adjustment from time to time in certain
instances as hereinafter provided.
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<PAGE>
In the case of the call for redemption of any shares of Series B Preferred
Stock, such right of conversion shall cease and terminate as to the shares
designated for redemption on the day such shares are actually redeemed by the
corporation.
At the option of the holders thereof, the shares of Series C Preferred
Stock shall be convertible, at the office of the corporation (or at such other
office or offices, if any, as the Board of Directors may designate), into fully
paid and nonassessable shares (calculated as to each conversion to the nearest
1/100th of a share) of Common Stock of the corporation, at the conversion price,
determined as hereinafter provided, in effect at the time of conversion, each
share of Series C Preferred Stock being deemed to have a value equal to the
Series C Conversion Price (as defined below) for the purpose of such conversion.
The price at which shares of Common Stock shall be delivered upon conversion of
Series C Preferred Stock shall be $5.125 per share of Common Stock plus an
amount equal to 10% per annum computed on $5.125 for the period, if any, from
October 5, 1998, or the date the Articles of Incorporation of the corporation
are first amended to provide for the authorization of the Series C Preferred
Stock (as evidenced by the filing of such amendment with the Secretary of State
of the State of Minnesota), whichever is the last to occur (the "base date"),
until the earlier of the date of the original issuance of the shares of Series C
Preferred Stock being converted or the date of issuance by the corporation of
any contingent value rights pursuant to which such shares of Series C Preferred
Stock are issued (including any adjustments thereto, the "Series C Conversion
Price") (i.e., at an initial conversion rate at the base date of one share of
Common Stock per each share of Series C Preferred Stock, such conversion rate to
be reduced for any shares of Series C Preferred Stock issued after, or pursuant
to contingent value rights issued after, the base date to a rate determined by
dividing $5.125 by the applicable Series C Conversion Price for such shares
being converted), provided, however, that such Series C Conversion Price shall
be subject to adjustment from time to time in certain instances as hereinafter
provided. In the case of the call for redemption of any shares of Series C
Preferred Stock, such right of conversion shall cease and terminate as to the
shares designated for redemption on the day such shares are actually redeemed by
the corporation.
The following provisions shall govern such right of conversion:
(1) In order to convert shares of Preferred Stock into
shares of Common Stock of the corporation, the holder
thereof shall surrender at any office hereinabove
mentioned the certificate or certificates therefor, duly
endorsed to the corporation or in blank, and give written
notice to the corporation at such office that such holder
elects to convert such shares. Shares of Preferred Stock
shall be deemed to have been converted immediately prior
to the close of business on the day of the surrender of
such shares for conversion as herein provided, and the
person entitled to receive the shares of Common Stock of
the corporation issuable upon such conversion shall be
treated for all purposes as the record holder of such
shares of Common Stock at such time. As promptly as
practicable on or
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<PAGE>
after the conversion date, the corporation shall issue and
deliver or cause to be issued and delivered at such office
a certificate or certificates for the number of shares of
Common Stock of the corporation issuable upon such
conversion.
(2) The Series A Conversion Price, the Series B Conversion
Price and the Series C Conversion Price shall be subject
to adjustment from time to time as hereinafter provided.
Upon each such adjustment to the Series A Conversion
Price, each holder of shares of Series A Preferred Stock
shall thereafter be entitled to receive the number of
shares of Common Stock of the corporation obtained by
multiplying the Series A Conversion Price in effect
immediately prior to such adjustment by the number of
shares issuable pursuant to conversion immediately prior
to such adjustment and dividing the product thereof by the
Series A Conversion Price resulting from such adjustment.
Upon each such adjustment to the Series B Conversion
Price, each holder of shares of Series B Preferred Stock
shall thereafter be entitled to receive the number of
shares of Common Stock of the corporation obtained by
multiplying the Series B Conversion Price in effect
immediately prior to such adjustment by the number of
shares issuable pursuant to conversion immediately prior
to such adjustment and dividing the product thereof by the
Series B Conversion Price resulting from such adjustment.
Upon each such adjustment to the Series C Conversion
Price, each holder of shares of Series C Preferred Stock
shall thereafter be entitled to receive the number of
shares of Common Stock of the corporation obtained by
multiplying the Series C Conversion Price in effect
immediately prior to such adjustment by the number of
shares issuable pursuant to conversion immediately prior
to such adjustment and dividing the product thereof by the
Series C Conversion Price resulting from such adjustment.
(3) Except for (i) options to purchase shares of Common
Stock and the issuance of awards of Common Stock pursuant
to key employee and consultant benefit plans adopted by
the corporation, shares of Common Stock issued upon the
exercise of such options granted pursuant to such plans
and options granted and shares of common stock issued
pursuant to that certain employment agreement dated
October 23, 1996 between the corporation and Joseph P.
Micatrotto (provided that the aggregate number of shares
thus awarded and covered by unexercised options and thus
issued pursuant to such options shall not be in excess of
1,500,000 issued since October 23, 1996 (appropriately
adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes)),
(ii) $1,780,000 in aggregate principal amount of Series A
Convertible Subordinated Debentures due 2001 and shares of
Common Stock issued
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<PAGE>
upon conversion of such debentures (appropriately adjusted
in accordance with the terms thereof), (iii) warrants to
purchase shares of Series A Preferred Stock pursuant to
warrants granted to Michael L. Bochert dated October 23,
1996 and Piper Jaffray Inc. dated October 23, 1996, any
shares of Series A Preferred Stock issued upon exercise of
such warrants and any shares of Common Stock issued upon
conversion of such shares of Series A Preferred Stock
(appropriately adjusted in accordance with the terms
thereof), (iv) warrants to purchase up to 50,000 shares of
Series B Preferred Stock issued to Piper Jaffray, Inc. on
September 2, 1997, any shares of Series B Preferred Stock
issued upon exercise of such warrants and any shares of
Common Stock issued upon the conversion of such shares of
Series B Preferred Stock (appropriately adjusted in
accordance with the terms thereof), (v) warrants to
purchase up to 241,666 shares of Common Stock issued to
Sirrom Capital Corporation, and up to 132,917 shares of
Common Stock issued to Regent Capital Partners, L.P. and
any shares of Common Stock issued upon the exercise of
such warrants (appropriately adjusted in accordance with
the terms thereof), (vi) warrants to purchase up to
100,000 shares of Common Stock issued to the holders of
Series B Preferred Stock on October 31, 1997 and any
shares of Common Stock issued upon the exercise of such
warrants (appropriately adjusted in accordance with the
terms thereof), (vii) options to purchase up to 24,000
shares of Common Stock issued to a landlord of one of the
corporation's restaurant sites (appropriately adjusted in
accordance with the terms thereof) and (viii) securities
issued with the written consent of the holders of
two-thirds of the Preferred Stock:
If and whenever the corporation shall issue or sell
any shares of its Common Stock for a consideration
per share less than the Series A Conversion Price
in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or
sale, the Series A Conversion Price shall be
reduced to the price (calculated to the nearest
cent) determined by dividing (A) an amount equal to
the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale
multiplied by the then existing Series A Conversion
Price and (2) the consideration, if any, received
by the corporation upon such issue or sale, by (B)
an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately
prior to such issue or sale and (2) the number of
shares of Common Stock thus issued or sold. Solely
for purposes of (A) and (B) above, the term "Common
Stock outstanding" shall include those shares of
Common Stock issuable upon conversion of
outstanding shares of Preferred Stock; and
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<PAGE>
If and whenever the corporation shall issue or sell
any shares of its Common Stock for a consideration
per share less than the Series B Conversion Price
in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or
sale, the Series B Conversion Price shall be
reduced to the price (calculated to the nearest
cent) determined by dividing (A) an amount equal to
the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale
multiplied by the then existing Series B Conversion
Price and (2) the consideration, if any, received
by the corporation upon such issue or sale, by (B)
an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately
prior to such issue or sale and (2) the number of
shares of Common Stock thus issued or sold. Solely
for purposes of (A) and (B) above, the term "Common
Stock outstanding" shall include those shares of
Common Stock issuable upon conversion of
outstanding shares of Preferred Stock; and
If and whenever the corporation shall issue or sell
any shares of its Common Stock for a consideration
per share less than the Series C Conversion Price
in effect immediately prior to the time of such
issue or sale, then, forthwith upon such issue or
sale, the Series C Conversion Price shall be
reduced to the price (calculated to the nearest
cent) determined by dividing (A) an amount equal to
the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issue or sale
multiplied by the then existing Series C Conversion
Price and (2) the consideration, if any, received
by the corporation upon such issue or sale, by (B)
an amount equal to the sum of (1) the number of
shares of Common Stock outstanding immediately
prior to such issue or sale and (2) the number of
shares of Common Stock thus issued or sold. Solely
for purposes of (A) and (B) above, the term "Common
Stock outstanding" shall include those shares of
Common Stock issuable upon conversion of
outstanding shares of Preferred Stock; and
No adjustment of the Series A Conversion Price, the
Series B Conversion Price or the Series C Conversion Price,
however, shall be made in an amount less than 2% of such
conversion price in effect on the date of such adjustment, but
any such lesser adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment
which, together with any such adjustment so carried forward,
shall be an amount equal to or greater than 4% of such conversion
price then in effect.
For the purposes of this subparagraph (3), the
following provisions
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<PAGE>
(i) to (v), inclusive, shall also be applicable:
(i) In case at any time the corporation shall
grant (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase,
or any options for the purchase of, (a) Common Stock or
(b) any obligations or any shares of stock of the
corporation which are convertible into, or exchangeable
for, Common Stock (any of such obligations or shares of
stock being hereinafter called "Convertible Securities")
whether or not such rights or options or the right to
convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for
which Common Stock is issuable upon the exercise of such
rights or options or upon conversion or exchange of such
Convertible Securities (determined by dividing (x) the
total amount, if any, received or receivable by the
corporation as consideration for the granting of such
rights or options, plus the minimum aggregate amount of
additional consideration payable to the corporation upon
the exercise of such rights or options, plus, in the
case of such rights or options which relate to
Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue
of such Convertible Securities and upon the conversion
or exchange thereof, by (y) the total maximum number of
shares of Common Stock issuable upon the exercise of
such rights or options or upon the conversion or
exchange of all such Convertible Securities issuable
upon the exercise of such rights or options) shall be
less than the Series A Conversion Price, the Series B
Conversion Price or the Series C Conversion Price in
effect immediately prior to the time of the granting of
such rights or options, then the total maximum number of
shares of Common Stock issuable upon the exercise of
such rights or options or upon conversion or exchange of
the total maximum amount of such Convertible Securities
issuable upon the exercise of such rights or options
shall (as of the date of granting of such rights or
options) be deemed to have been issued for such price
per share. Except as provided in subparagraph (6) below,
no further adjustments of the Series A Conversion Price,
the Series B Conversion Price or the Series C Conversion
Price shall be made upon the actual issue of such Common
Stock or of such Convertible Securities upon exercise of
such rights or options or upon the actual issue of such
Common Stock upon conversion or exchange of such
Convertible Securities.
(ii) In case the corporation shall issue or sell
(whether directly or by assumption in a merger or
otherwise) any Convertible Securities, whether or not
the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for
which Common Stock is issuable upon such conversion or
exchange (determined by dividing (x)
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<PAGE>
the total amount received or receivable by the
corporation as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, payable to
the corporation upon the conversion or exchange thereof,
by (y) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the
Series A Conversion Price, the Series B Conversion Price
or the Series C Conversion Price in effect immediately
prior to the time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible
Securities shall (as of the date of the issue or sale of
such Convertible Securities) be deemed to be outstanding
and to have been issued for such price per share,
provided that (a) except as provided in subparagraph (6)
below, no further adjustments of the Series A Conversion
Price, Series B Conversion Price or Series C Conversion
Price shall be made upon the actual issue of such Common
Stock upon conversion or exchange of such Convertible
Securities, and (b) if any such issue or sale of such
Convertible Securities is made upon exercise of any
rights to subscribe for or to purchase or any option to
purchase any such Convertible Securities for which
adjustments of the Series A Conversion Price, the Series
B Conversion Price or the Series C Conversion Price have
been or are to be made pursuant to other provisions of
this subparagraph (3), no further adjustment of the
Series A Conversion Price, the Series B Conversion Price
or the Series C Conversion Price shall be made by reason
of such issue or sale.
(iii) In case any shares of Common Stock or
Convertible Securities or any rights or options to
purchase any such Common Stock or Convertible Securities
shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount
received by the corporation therefor, without deducting
therefrom any expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by
the corporation in connection therewith. In case any
shares of Common Stock or Convertible Securities or any
rights or options to purchase any such Common Stock or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the
corporation shall be deemed to be the fair value of such
consideration as determined by the Board of Directors of
the corporation, without deducting therefrom any
expenses incurred or any underwriting commissions,
discounts or concessions paid or allowed by the
corporation in connection therewith. In case any shares
of Common Stock or Convertible Securities or any rights
or options to purchase such Common Stock or Convertible
Securities shall be issued in connection with any merger
or consolidation in which the corporation is the
surviving
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<PAGE>
corporation, the amount of consideration therefor shall
be deemed to be the fair value as determined by the
Board of Directors of the corporation of such portion of
the assets and business of the non-surviving corporation
or corporations as such Board shall determine to be
attributable to such Common Stock, Convertible
Securities, rights or options, as the case may be. In
the event of any consolidation or merger of the
corporation in which the corporation is not the
surviving corporation or in the event of any sale of all
or substantially all of the assets of the corporation
for stock or other securities of any other corporation,
the corporation shall be deemed to have issued a number
of shares of its Common Stock for stock or securities of
the other corporation computed on the basis of the
actual exchange ratio on which the transaction was
predicated and for a consideration equal to the fair
market value on the date of such transaction of such
stock or securities of the other corporation, and if any
such calculation results in adjustment of the Series A
Conversion Price, the Series B Conversion Price or the
Series C Conversion Price, the determination of the
number of shares of Common Stock issuable upon
conversion immediately prior to such merger, conversion
or sale, for purposes of subparagraph (7) below, shall
be made after giving effect to such adjustment of the
Series A Conversion Price, the Series B Conversion Price
or the Series C Conversion Price.
(iv) In case the corporation shall take a record
of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other
distribution payable in Common Stock or in Convertible
Securities, or in any rights or options to purchase any
Common Stock or Convertible Securities, or (b) to
subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common
Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other
distribution or the date of the granting of such rights
of subscription or purchase, as the case may be.
(v) The number of shares of Common Stock
outstanding at any given time shall not include shares
owned or held by or for the account of the corporation,
and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the
purpose of this subparagraph (3).
(4) In case the corporation shall (i) declare a dividend
upon the Common Stock payable in Common Stock (other
than a dividend declared to effect a subdivision of the
outstanding shares of Common Stock, as described in
subparagraph (5) below) or Convertible Securities, or in
any
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rights or options to purchase Common Stock or
Convertible Securities, or (ii) declare any other
dividend or make any other distribution upon the Common
Stock payable otherwise than out of earnings or earned
surplus, then thereafter each holder of shares of
Preferred Stock upon the conversion thereof will be
entitled to receive the number of shares of Common Stock
into which such shares of Preferred Stock have been
converted, and, in addition and without payment
therefor, each dividend described in clause (i) above
and each dividend or distribution described in clause
(ii) above which such holder would have received by way
of dividends or distributions if continuously since such
holder became the record holder of such shares of
Preferred Stock such holder (i) had been the record
holder of the number of shares of Common Stock then
received, and (ii) had retained all dividends or
distributions in stock or securities (including Common
Stock or Convertible Securities, and any rights or
options to purchase any Common Stock or Convertible
Securities) payable in respect of such Common Stock or
in respect of any stock or securities paid as dividends
or distributions and originating directly or indirectly
from such Common Stock. For the purposes of the
foregoing a dividend or distribution other than in cash
shall be considered payable out of earnings or earned
surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of
such dividend or distribution as determined by the Board
of Directors of the corporation.
(5) In case the corporation shall at any time subdivide
its outstanding shares of Common Stock into a greater
number of shares, the Series A Conversion Price, the
Series B Conversion Price and the Series C Conversion
Price in effect immediately prior to such subdivision
shall be proportionately reduced, and conversely, in
case the outstanding shares of Common Stock of the
corporation shall be combined into a smaller number of
shares, the Series A Conversion Price, the Series B
Conversion Price and the Series C Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.
(6) If (i) the purchase price provided for in any right
or option referred to in clause (i) of subparagraph (3),
or (ii) the additional consideration, if any, payable
upon the conversion or exchange of Convertible
Securities referred to in clause (i) or clause (ii) of
subparagraph (3), or (iii) the rate at which any
Convertible Securities referred to in clause (i) or
clause (ii) of subparagraph (3) are convertible into or
exchangeable for Common Stock, shall change at any time
(other than under or by reason of provisions designed to
protect against dilution), the Series A Conversion
Price, the Series B Conversion Price and the Series C
Conversion Price then in effect hereunder shall
forthwith be increased or decreased to such Series A
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Conversion Price, Series B Conversion Price and Series C
Conversion Price as would have obtained had the
adjustments made upon the issuance of such rights,
options or Convertible Securities been made upon the
basis of (a) the issuance of the number of shares of
Common Stock theretofore actually delivered upon the
exercise of such options or rights or upon the
conversion or exchange of such Convertible Securities,
and the total consideration received therefor, and (b)
the issuance at the time of such change of any such
options, rights, or Convertible Securities then still
outstanding for the consideration, if any, received by
the corporation therefor and to be received on the basis
of such changed price; and on the expiration of any such
option or right or the termination of any such right to
convert or exchange such Convertible Securities, the
Series A Conversion Price, the Series B Conversion Price
and the Series C Conversion Price then in effect
hereunder shall forthwith be increased to such Series A
Conversion Price, Series B Conversion Price and Series C
Conversion Price as would have obtained had the
adjustments made upon the issuance of such rights or
options or Convertible Securities been made upon the
basis of the issuance of the shares of Common Stock
theretofore actually delivered (and the total
consideration received therefor) upon the exercise of
such rights or options or upon the conversion or
exchange of such Convertible Securities. If the purchase
price provided for in any right or option referred to in
clause (i) of subparagraph (3), or the rate at which any
Convertible Securities referred to in clause (i) or
clause (ii) of subparagraph (3) are convertible into or
exchangeable for Common Stock, shall decrease at any
time under or by reason of provisions with respect
thereto designed to protect against dilution, then in
case of the delivery of Common Stock upon the exercise
of any such right or option or upon conversion or
exchange of any such Convertible Security, the Series A
Conversion Price, the Series B Conversion Price and the
Series C Conversion Price then in effect hereunder shall
forthwith be decreased to such Series A Conversion
Price, Series B Conversion Price and Series C Conversion
Price as would have obtained had the adjustments made
upon the issuance of such right, option or Convertible
Security been made upon the basis of the issuance of
(and the total consideration received for) the shares of
Common Stock delivered as aforesaid.
(7) If any capital reorganization or reclassification of
the capital stock of the corporation, or consolidation
or merger of the corporation with another corporation,
or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that
holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger
or sale, and subject
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to subparagraph (a) above, lawful and adequate provision
shall be made whereby the holders of Preferred Stock
shall thereafter have the right to receive upon the
basis and upon the terms and conditions specified herein
and in lieu of the shares of the Common Stock of the
corporation immediately theretofore receivable upon the
conversion of Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with
respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of
shares of such stock immediately theretofore receivable
upon the conversion of Preferred Stock had such
reorganization, reclassification, consolidation, merger
or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such
reorganization, reclassification, consolidation, merger
or sale, and in any such case appropriate provision
shall be made with respect to the rights and interests
of the holders of Preferred Stock to the end that the
provisions hereof (including without limitation
provisions for adjustments of the Series A Conversion
Price, the Series B Conversion Price and the Series C
Conversion Price and of the number of shares receivable
upon the conversion of Preferred Stock) shall thereafter
be applicable, as nearly as may be in relation to any
shares of stock, securities or assets thereafter
receivable upon the conversion of Preferred Stock. The
corporation shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof
the successor corporation (if other than the
corporation) resulting from such consolidation or merger
or the corporation purchasing such assets shall assume
by written instrument executed and mailed to the
registered holders of Preferred Stock, at the last
addresses of such holders appearing on the books of the
corporation, the obligation to deliver to such holders
such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders
may be entitled to receive.
(8) Upon any adjustment of the Series A Conversion
Price, the Series B Conversion Price or the Series C
Conversion Price, then and in each case the corporation
shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holders of
Preferred Stock, at the addresses of such holders as
shown on the books of the corporation, which notice
shall state the conversion price resulting from such
adjustment and the increase or decrease, if any, in the
number of shares receivable at such price upon the
conversion of Preferred Stock, setting forth in
reasonable detail the method of calculation and the
facts upon which such calculation is based.
(9) In case at any time:
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(i) the corporation shall declare any
cash dividend on its Common Stock at a rate in
excess of the rate of the last cash dividend
theretofore paid;
(ii) the corporation shall pay any
dividend payable in stock upon its Common Stock
or make any distribution (other than regular
cash dividends) to the holders of its Common
Stock;
(iii) the corporation shall offer for
subscription pro rata to the holders of its
Common Stock any additional shares of stock of
any class or other rights;
(iv) there shall be any capital
reorganization, or reclassification of the
capital stock of the corporation, or
consolidation or merger of the corporation with,
or sale of all or substantially all of its
assets to, another corporation; or
(v) there shall be a voluntary or
involuntary dissolution, liquidation or winding
up of the corporation;
then, in any one or more of said cases, the
corporation shall give written notice, by first-class
mail, postage prepaid, addressed to the registered
holders of Preferred Stock at the addresses of such
holders as shown on the books of the corporation, of the
date on which (a) the books of the corporation shall
close or a record shall be taken for such dividend,
distribution or subscription rights, or (b) such
reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up shall take
place, as the case may be. Such notice shall also
specify the date as of which the holders of Common Stock
of record shall participate in such dividend,
distribution or subscription rights, or shall be
entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale,
dissolution, liquidation, or winding up, as the case may
be. Such written notice shall be given at least 20 days
prior to the action in question and not less than 20
days prior to the record date or the date on which the
corporation's transfer books are closed in respect
thereto.
(10) As used in this paragraph (c) the term "Common
Stock" shall mean and include the corporation's
presently authorized Common Stock and shall also include
any capital stock of any class of the corporation
hereafter authorized which shall not be limited to a
fixed sum or percentage in respect of the rights of the
holders thereof to participate in dividends or in the
distribution of assets upon the voluntary or involuntary
liquidation,
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dissolution or winding up of the corporation; provided
that the shares receivable pursuant to conversion of
shares of Preferred Stock shall include shares
designated as Common Stock of the corporation as of the
date of issuance of such shares of Preferred Stock, or,
in case of any reclassification of the outstanding
shares thereof, the stock, securities or assets provided
for in subparagraph (7) above.
(11) No fractional shares of Common Stock shall be
issued upon conversion, but, instead of any fraction of
a share which would otherwise be issuable, the
corporation shall pay a cash adjustment in respect of
such fraction in an amount equal to the same fraction of
the market price per share of Common Stock as of the
close of business on the day of conversion. "Market
price" shall mean if the Common Stock is traded on a
securities exchange or on the NASDAQ National Market
System, the closing price of the Common Stock on such
exchange or the NASDAQ National Market System, or, if
the Common Stock is otherwise traded in the
over-the-counter market, the closing bid price, in each
case averaged over a period of 20 consecutive business
days prior to the date as of which "market price" is
being determined. If at any time the Common Stock is not
traded on an exchange or the NASDAQ National Market
System, or otherwise traded in the over-the-counter
market, the "market price" shall be deemed to be the
higher of (i) the book value thereof as determined by
any firm of independent public accountants of recognized
standing selected by the Board of Directors of the
corporation as of the last day of any month ending
within 60 days preceding the date as of which the
determination is to be made, or (ii) the fair value
thereof determined in good faith by the Board of
Directors of the corporation as of a date which is
within 15 days of the date as of which the determination
is to be made.
(12) Each adjustment to the Series C Conversion Price
shall apply in respect of all adjustments from and after
the Phase I Closing to all Series C Preferred Shares
whether issued at the Phase I Closing or any subsequent
Phase II Closing.
(d) Mandatory Conversion. The Preferred Stock shall automatically be
converted into shares of Common Stock of the corporation, without any act by the
corporation or the holders of the Preferred Stock, concurrently with the closing
of the first public offering by the corporation of shares of Common Stock of the
corporation registered under the Securities Act in which (1) the aggregate
public offering price of the securities sold for cash by the corporation in the
offering is at least $15,000,000 or such lower amount as may be approved by the
holders of two-thirds of the shares of Preferred Stock then outstanding, (2) the
offering is underwritten on a firm commitment basis by an underwriter, or a
group of underwriters represented by an underwriter or underwriters, which is a
member of the New York Stock Exchange, unless this requirement is
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waived by the holders of two-thirds of the shares of Preferred Stock then
outstanding, and (3) the public offering price per share of Common Stock is at
least $12.00 (as adjusted from time to time to reflect stock splits, dividends,
recapitalization, combinations or the like), or such lower amount as may be
approved by the holders of two-thirds of the shares of Preferred Stock then
outstanding (a "Qualified Public Offering"). As used herein, the term "closing"
shall mean the delivery by the corporation to the underwriters of certificates
representing the shares of Common Stock of the corporation offered to the public
against delivery to the corporation by such underwriters of payment therefor.
The term "firm commitment basis" with respect to the underwriting of such public
offering shall mean a commitment pursuant to a written underwriting agreement
under which the nature of the underwriters' commitment is such that all
securities will be purchased by such underwriters if any securities are
purchased by such underwriters. Each holder of a share of Preferred Stock so
converted shall be entitled to receive the full number of shares of Common Stock
into which such share of Preferred Stock held by such holder could be converted
if such holder had exercised its conversion right at the time of closing of such
public offering. Upon such conversion, each holder of a share of Preferred Stock
shall immediately surrender such share in exchange for appropriate stock
certificates representing a share or shares of Common Stock of the corporation.
Any right to any dividends accumulated as of the date of such conversion but not
otherwise declared or set aside for payment will lapse.
ARTICLE IV
An action required or permitted to be taken by the Board of Directors of
this Corporation may be taken by written action signed by that number of
directors that would be required to take the same action at a meeting of the
Board at which all directors are present, except as to those matters requiring
shareholder approval, in which case the written action must be signed by all
members of the Board of Directors then in office.
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ARTICLE V
To the full extent that the Minnesota Statutes, Chapter 302A, as it
exists on the date hereof or may hereafter be amended, permits the limitation or
elimination of the liability of directors, a director of this Corporation shall
not be liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director. Any amendment to or repeal of this
Article V shall not adversely affect any right or protection as a director of
the Corporation for or with respect to any acts or omission of such director
occurring prior to such amendment or repeal.
ARTICLE VI
The power to adopt, amend or repeal bylaws shall be vested in the Board
of Directors of the Corporation, except to the extent otherwise limited by the
Minnesota Business Corporation Act.
ARTICLE VII
The name and address of the incorporator is:
Barry A. Gersick
2000 Midwest Plaza Building
801 Nicollet Mall
Minneapolis, MN 55402
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<PAGE>
Exhibit 3.2
ARTICLES OF AMENDMENT
OF
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
BUCA, INC.
The undersigned, Greg A. Gadel, Secretary of BUCA, Inc., a Minnesota
corporation (the "Corporation"), hereby certifies that Section A(a) of Article
III of the Corporation's Amended and Restated Articles of Incorporation has been
amended, effective at the close of business on the date of filing of these
Articles of Amendment with the Secretary of State of the State of Minnesota (the
"Effective Time"), to read in its entirety as follows:
ARTICLE III
(A) Authorized Capital Stock.
(a) General. The aggregate number of shares of stock which the
corporation is authorized to issue is 21,950,000 shares, par value $.01
per share, of which 13,100,000 are designated as common shares (the
"Common Stock"), 2,396,800 are designated as Series A convertible
preferred stock (the "Series A Preferred Stock"), 2,100,000 are
designated as series B convertible preferred stock (the "Series B
Preferred Stock"), 3,679,053 are designated as series C convertible
preferred stock (the "Series C Preferred Stock") and 674,147 are
undesignated (the "Undesignated Capital Stock"). The shares of Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
are referred to herein collectively as the "Preferred Stock." The shares
of Common Stock, Preferred Stock and Undesignated Capital Stock are
referred to herein collectively as the "capital stock".
All shares of Preferred Stock which shall have been acquired by
the corporation shall have the status of Undesignated Capital Stock of
the corporation.
The rights, preferences and privileges and restrictions granted
to and imposed upon the Common Stock and the Preferred Stock are set
forth in this Article III and such rights, privileges, preferences and
restrictions shall supersede and replace in all respects Article III of
the Amended and Restated Articles of Incorporation.
The undersigned further certifies (i) that the remainder of the Amended and
Restated Articles of Incorporation of the Corporation is hereby unchanged, (ii)
that such amendment to Section A(a) of Article III has been adopted in
accordance with the requirements of, and pursuant to, Chapter 302A of the
Minnesota Statutes; (iii) that such amendment was adopted pursuant to Section
302A.402, Subd. 3, of the Minnesota Statutes in connection with a two-for-three
combination of the Corporation's Common Stock; and (iv) that such amendment
<PAGE>
will not adversely affect the rights or preferences of the holders of
outstanding shares of any class or series of the Corporation and will not result
in the percentage of authorized shares of any class or series that remains
unissued after such combination exceeding the percentage of authorized shares of
that class or series that were unissued before the combination.
The combination giving rise to the amendment set forth above concerns a
two-for-three combination of the Common Stock of the Corporation. Such
combination is being effected as follows:
(i) Effective at the Effective Time, every three shares of Common Stock
outstanding immediately prior to the Effective Time shall be combined
into and become two shares of Common Stock, par value $.01 per share,
all of which shares shall be validly issued, fully paid and
nonassessable.
(ii) Upon surrender by a shareholder of a stock certificate or certificates
outstanding immediately prior to the Effective Time, together with such
other documents, if any, as the Chief Executive Officer or the Chief
Financial Officer of the Corporation may reasonably request on behalf of
the Corporation, a stock certificate or certificates representing two
shares of Common Stock, par value $.01 per share, for every three shares
of Common Stock represented by the stock certificate or certificates so
surrendered shall be mailed or delivered after the Effective Time to the
holder of record of the Common Stock represented by the surrendered
stock certificate or certificates; provided, however, that until such
time as a holder of a stock certificate outstanding immediately prior to
the Effective Time surrenders such stock certificate, the stock
certificate shall be deemed to represent the number of shares of Common
Stock to which such holder would be entitled upon the surrender thereof
after giving effect to the reverse stock split and combination
authorized by these resolutions. In the event that Common Stock of the
Corporation shall be transferred after the Effective Time, the stock
certificate or certificates mailed or delivered to the transferee shall
reflect the reverse stock split and combination regardless of whether
the stock certificate or certificates held by the transferor
representing such Common Stock reflected the reverse stock split and
combination.
(iii) Fractional shares of Common Stock resulting from the reverse stock split
and combination shall not remain outstanding following the Effective
Time; and that each shareholder of the Corporation who would otherwise
be entitled to a fraction of a share of Common Stock as a result of the
reverse stock split and combination will be paid an amount in cash equal
to the fair value of such fraction.
/s/ Greg A. Gadel
-------------------------------
Greg A. Gadel
2
<PAGE>
EXHIBIT 3.3
AMENDED AND RESTATED
BYLAWS
OF
BUCA, INC.
ARTICLE I
OFFICES, CORPORATE SEAL AND
SHAREHOLDER CONTROL AGREEMENT
Section 1.01. Registered and Other Offices. The registered office of the
corporation in Minnesota shall be that set forth in the Articles of
Incorporation or in the most recent amendment of the Articles of Incorporation
or statement of the Board of Directors filed with the Secretary of State of
Minnesota changing the registered office in the manner prescribed by law. The
corporation may have such other offices, within or without the State of
Minnesota, as the Board of Directors shall, from time to time, determine.
Section 1.02. Corporate Seal. If so directed by the Board of Directors by
resolution, the corporation may use a corporate seal. The failure to use such
seal, however, shall not affect the validity of any documents executed on behalf
of the corporation. The seal need only include the word "seal", but it may also
include, at the discretion of the Board of Directors, such additional wording as
is permitted by law.
Section 1.03. Shareholder Control Agreement. In the event of any conflict
or inconsistency between these Bylaws, or any amendment thereto, and any
shareholder control agreement, whenever adopted, such shareholder control
agreement shall govern.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01. Time and Place of Meetings. Regular or special meetings of
the shareholders, if any, shall be held on the date and at the time and place
fixed by the Chief Executive Officer, the Chairman of the Board, or the Board of
Directors, except that a regular or special meeting called by, or at the demand
of a shareholder or shareholders, pursuant to Minnesota Statutes, Section
302A.431, Subd. 2, shall be held in the county where the principal executive
office is located.
Section 2.02. Regular Meetings. At any regular meeting of the shareholders
there shall be an election of qualified successors for directors who serve for
an indefinite term or whose terms have expired or are due to expire within six
months after the date of the meeting. Any business appropriate for action by the
shareholders may be transacted at a regular meeting. No meeting shall be
considered a regular meeting unless specifically designated as such in the
notice of meeting or unless all the shareholders are present in person or by
proxy and none of them objects to such
<PAGE>
designation. Regular meetings may be held no more frequently than once per year.
Section 2.03. Demand by Shareholders. Regular or special meetings may be
demanded by a shareholder or shareholders, pursuant to the provisions of
Minnesota Statutes, Sections 302A.431, Subd. 2, and 302A.433, Subd. 2,
respectively.
Section 2.04. Quorum; Adjourned Meetings. The holders of a majority of the
voting power of the shares entitled to vote at a meeting constitute a quorum for
the transaction of business at such a meeting. Notwithstanding the preceding
sentence, if an action is required to be taken by the holders of a particular
series of Common Stock voting as a series, then the holders of a majority of the
voting power of the shares of such series entitled to vote at a meeting
constitute a quorum for the transaction of such business. Holders may be present
at a meeting either in person or by proxy. If a quorum is present when a duly
called or held meeting is convened, the shareholders present may continue to
transact business until adjournment, even though withdrawal of shareholders
originally present leaves less than the proportion or number otherwise required
for a quorum. In case a quorum shall not be present in person or by proxy at a
meeting, those present in person or by proxy may adjourn to such day as they
shall, by majority vote, agree upon, and a notice of such adjournment shall be
mailed to each shareholder entitled to vote a least five (5) days before such
adjourned meeting. If a quorum is present in person or by proxy, a meeting may
be adjourned from time to time without notice, other than announcement at the
meeting. At adjourned meetings at which a quorum is present in person or by
proxy, any business may be transacted at the meeting as originally noticed.
Section 2.05. Voting. At each meeting of the shareholders, every
shareholder having the right to vote shall be entitled to vote either in person
or by proxy. Unless otherwise provided by the Articles of Incorporation or a
shareholder voting agreement adopted pursuant to Minnesota Statutes, Section
302A.455, each shareholder shall have one vote for each share held. Upon demand
of any shareholder, the vote upon any question before the meeting shall be by
ballot.
Section 2.06. Notice of Meetings. Notice of all meetings of shareholders
shall be given to every holder of voting shares, except where the meeting is an
adjourned meeting and the date, time and place of the meeting were announced at
the time of adjournment. The notice shall be given at least 14, but not more
than 60 days before the date of the meeting. Notice of special meetings of
shareholders may be given upon not less than five (5) nor more than sixty (60)
days, except that written notice of a meeting at which an agreement of merger is
to be considered shall be given to all shareholders, whether entitled to vote or
not, at least fourteen (14) days prior thereto. Every notice of any special
meeting shall state the purpose or purposes for which the meeting has been
called, and the business transacted at all special meetings shall be confined to
the purpose stated in the call, unless all of the shareholders are present in
person or by proxy and none of them objects to consideration of a particular
item of business.
Section 2.07. Waiver of Notice. A shareholder may waive notice of any
meeting of shareholders. A waiver of notice by a shareholder entitled to notice
is effective whether given
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before, at or after the meeting and whether given in writing, orally or by
attendance.
Section 2.08. Authorization Without a Meeting. Any action required or
permitted to be taken at a meeting of the shareholders may be taken without a
meeting as authorized by law.
Section 2.09. Record Date. The Board of Directors may fix a time, not
exceeding sixty (60) days preceding the date of any meeting of shareholders, as
a record date for the determination of the shareholders entitled to notice of
and to vote at such meeting, notwithstanding any transfer of shares on the books
of the corporation after any record date so fixed. The Board of Directors may
close the books of the corporation against the transfer of shares during the
whole or any part of such period. If the Board of Directors fails to fix a
record date for the determination of the shareholders entitled to notice of and
to vote at any meeting of the shareholders, the record date shall be the
twentieth (120) day preceding the date of such meeting.
ARTICLE III
DIRECTORS
Section 3.01. General. Except as authorized by the shareholders pursuant to
a shareholder control agreement of unanimous affirmative vote, the business and
affairs of the corporation shall be managed by or shall be under the direction
of the Board of Directors.
Section 3.02. Number, Qualifications and Term of Office. Until the first
meeting of shareholders, the directors shall be the persons named as directors
in the Articles of Incorporation. Thereafter, the number of directors shall be
the number of Directors elected by the shareholders at any regular or special
shareholders' meeting, or by written consent of all shareholders. The Board of
Directors may increase the number of directors and fill the vacancy or vacancies
created thereby. Directors need not be shareholders. Each of the directors shall
hold office until the regular meeting of the shareholders next held after his
election, until his successor shall have been elected and shall qualify, or
until he shall resign or shall have been removed as hereinafter provided.
Section 3.03. Board Meetings; Place and Notice. Meetings of the Board of
Directors may be held from time to time at any place within or without the State
of Minnesota that the Board of Directors may designate. In the absence of
designation by the Board of Directors, Board meetings shall be held at the
principal executive office of the corporation, except as may be otherwise
unanimously agreed orally or in writing or by attendance. Special or regular
meetings of the Board of Directors may be called by the Chairman of the Board,
the Chief Executive Officer, or the Chief Financial Officer, upon not less than
five (5) days' notice. Any director may call a Board meeting by giving not less
than five (5) business days notice to all directors of the date and time of the
meeting. The notice need not state the purpose of the meeting. Notice may be
given by mail, telephone, telegram, or in person. If the meeting schedule is
adopted by the Board of Directors, or if the date and time of a Board meeting
has been announced at a previous meeting, no notice is required.
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<PAGE>
Section 3.04. Waiver of Notice. A director may waive notice of a meeting of
the Board. A waiver of notice by a director is effective, whether given before,
at or after the meeting and whether given in writing, orally or by attendance.
Section 3.05. Quorum. A majority of directors currently holding office
shall constitute a quorum for the transaction of business.
Section 3.06. Vacancies. Vacancies on the Board resulting from the death,
resignation or removal of a director, or by an increase in the number of
directors, may be filled by the affirmative vote of a majority of the remaining
directors, even though less than a quorum. Each director elected under this
Section to fill a vacancy holds office until a qualified successor is elected by
the shareholders at the next regular or special meeting of the shareholders.
Section 3.07. Committees. The Board may by resolution establish committees
in the manner provided by law. Committee members must be directors.
Section 3.08. Absent Directors. A director may give advance written consent
or opposition to a proposal to be acted on at a Board meeting. If the director
is not present at the meeting, consent or opposition to a proposal does not
constitute presence for purposes of determining the existence of a quorum, but
consent or opposition shall be counted as a vote in favor of, or against, the
proposal and shall be entered in the minutes or other record of action of the
meeting if the proposal acted on at the meeting is substantially the same or has
substantially the same effect as the proposal which the director has consented
or objected.
ARTICLE IV
OFFICERS
Section 4.01. Number. The officers of the corporation shall consist of a
Chief Executive Officer and a Chief Financial Officer. The Chief Executive
Officer shall preside at all meetings of the shareholders and shall have such
other duties as may be prescribed from time to time by the Board of Directors.
The Board of Directors may from time to time elect a Chairman who shall preside
at all meetings of the Board of Directors. The Chief Executive Officer shall
also see that all orders and resolutions of the Board of Directors are carried
into effect. The Chief Executive Officer and Chief Financial Officer shall have
such other duties as are prescribed by statute. The Board of Directors may elect
or appoint any other officers it deems necessary for the operation and
management of the corporation, each of whom shall have the powers, rights,
duties, responsibilities and terms of office determined by the Board of
Directors from time to time. Any number of offices or functions of those offices
may be held or exercised by the same person. If specific persons have not been
elected as President or Secretary, the Chief Executive Officer may execute
instruments or documents in those capacities. If a specific person has not been
elected to office of Treasurer, the Chief Financial Officer of the corporation
may sign instruments or documents in that capacity.
Section 4.02. Election and Term of Office. The Board of Directors shall
from time to time elect a Chairman of the Board of Directors, Chief Executive
Officer and Chief Financial Officer
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and any other officers or agents the Board of Directors deems necessary. Such
officers shall hold office until they are removed or their successors are
elected and qualified.
Section 4.03. Delegation of Authority. An officer elected or appointed by
the Board of Directors may delegate some or all of the duties or powers of his
office to other persons, provided that such delegation is in writing.
Section 4.04. Compensation of Officers. An officer shall be entitled only
to such compensation as shall be established by written contract or agreement
duly approved by or on behalf of the corporation, or established or approved by
resolution of the Board of Directors. Absent such written contract, agreement or
resolution of the Board of Directors, no officer shall have a cause of action
against the corporation to recover any amount due or alleged to be due as
compensation for services in his capacity as an officer of the corporation.
ARTICLE V
SHARES AND THEIR TRANSFER
Section 5.01. Certificates for Shares. Every shareholder of the corporation
shall be entitled to a certificate, to be in such form as prescribed by law and
adopted by the Board of Directors, certifying the number of shares of the
corporation owned by him. The certificates shall be numbered in the order in
which they are issued and shall be signed by the Chief Executive Officer and by
the Secretary, if one shall be elected, of the corporation; provided, however,
that when the certificate is signed by a transfer agent or registrar, the
signatures of any of such officer upon the certificate may be facsimiles,
engraved or printed thereon, if authorized by the Board of Directors. Such
certificates shall also have typed or printed thereon such legend as may be
required by any shareholder control agreement. Every certificate surrendered to
the corporation for exchange or transfer shall be cancelled, and no new
certificate or certificates shall be issued in exchange for any existing
certificate until such existing certificate shall have been so cancelled.
Section 5.02. Transfer of Shares. Transfer of shares on the books of the
corporation may be authorized only by the shareholder named in the certificate,
or the shareholder's legal representative, or the shareholder's duly authorized
attorney in fact, and upon surrender of the certificate or the certificates for
such shares. The corporation may treat, as the absolute owner of shares of the
corporation, the person or persons in whose name or names the shares are
registered on the books of the corporation.
Section 5.03. Lost Certificates. Any shareholder claiming that a
certificate for shares has been lost, destroyed or stolen shall make an
affidavit of that fact in such form as the Board of Directors shall require and
shall, if the Board of Directors so requires, give the corporation a sufficient
indemnity bond, in form, in an amount, and with one or more sureties
satisfactory to the Board of Directors, to indemnify the corporation against any
claims which may be made against it on account of the reissue of such
certificate. A new certificate shall then be issued to said shareholder for the
same number of shares as the one alleged to have been destroyed, lost or stolen.
Section 5.04. Restriction on Transfer. If the Corporation is the licensee
or holding
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company of a licensee of an on-sale liquor license in the City of Minneapolis,
the transfer of shares, without notification of the municipality issuing the
license, may result in the revocation, termination or refusal to renew such
license.
CERTIFICATION
I, DON W. HAYS, do hereby certify that I am the duly elected, qualified or
acting Secretary of BUCA, Inc., a corporation organized under the laws of the
State of Minnesota, and that the foregoing is a true and correct copy of the
Bylaws adopted by the Board of Directors of said corporation effective as of
October 14. 1996.
/s/ Don W. Hays
----------------------------------
DON W. HAYS
Secretary
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Exhibit 10.1
[Composite Copy, reflecting all
amendments as of February 15, 1999]
1996 STOCK INCENTIVE PLAN OF BUCA, INC. AND
AFFILIATED COMPANIES
I. PURPOSE
The purpose of the 1996 Stock Incentive Plan (the "Plan") is to afford
an incentive to key employees of BUCA, Inc. (the "Company") and its affiliates
to acquire a proprietary interest in the Company, to encourage such employees to
increase their efforts on behalf of the Company and remain in its employ, and to
more closely align the interests of such key employees with those of the
Company's shareholders.
II. DEFINITIONS
As used in the Plan, the following terms shall have the meanings set
forth below:
A. "Affiliate" shall mean any entity that, directly or through one or
more intermediaries, is controlled by the Company.
B. "Award" shall mean any Option, Stock Appreciation Right, Restricted
Stock, Restricted Stock Unit, Performance Award or other stock-based award
granted under the Plan.
C. "Award Agreement" shall mean any written agreement, contract or other
instrument or document evidencing any Award granted under the Plan.
D. "Board of Directors" shall mean the board of directors of the
Company.
E. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
F. "Committee" shall mean the committee appointed by the Board of
Directors to administer the Plan pursuant to Section III. If the Board fails to
appoint a committee, the Committee shall be the Board of Directors.
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G. "Common Stock" shall mean common stock, par value $.01, of the
Company.
H. "Eligible Employee" shall be any key employee, officer, consultant or
independent contractor providing services to the Company or an Affiliate as
determined by the Committee.
I. "Fair Market Value" of Common Stock on any day shall mean the fair
market value of the Common Stock determined by such methods or procedures as
shall be established from time to time by the Committee. Notwithstanding the
foregoing, for purposes of the Plan, the fair market value of the Common Stock
on a given date, if there shall be a public market for the Common Stock, shall
be the closing price of the Common Stock as reported by any exchange on which
the Common Stock is then traded or the closing price on such date as reported by
any generally recognized inter-dealer quotation system.
J. "Incentive Stock Option" shall mean a stock option granted under
Section VI.A. of the Plan that is intended to meet the requirements of Section
422 of the Code or any successor provision.
K. "Non-Qualified Stock Option" shall mean a stock option granted under
Section VI.A. which is not intended to be an Incentive Stock Option.
L. "Option" shall mean an Incentive Stock Option or a Non-Qualified
Stock Option.
M. "Optionee" shall mean a Participant who is granted an Option.
N. "Participant" shall mean an Eligible Employee who has been granted an
Option or other Award under the Plan.
O. "Performance Award" shall mean any right granted under Section VI.D.
of the Plan.
P. "Restricted Stock" shall mean any Share granted under Section VI.C.
of the Plan.
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Q. "Restricted Stock Unit" shall mean any unit granted under Section
VI.C. of the Plan evidencing the right to receive a Share (or a cash payment
equal to the Fair Market Value of a Share) at some future date.
R. "Rule 16b-3" shall mean Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934.
S. "Shares" shall mean shares of Common Stock.
T. "Stock Appreciation Right" shall mean any right granted under Section
VIB of the Plan.
III. ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the terms of
the Plan and applicable law, the Committee shall have full power and authority
to: (i) designate Participants; (ii) determine the type or types of Awards to be
granted to each Participant under the Plan; (iii) determine the number of Shares
to be covered by (or with respect to which payments, rights or other matters are
to be calculated in connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and conditions
of any Award or Award Agreement and accelerate the exercisability of Options or
the lapse of restrictions relating to Restricted Stock or Restricted Stock
Units; (vi) determine whether, to what extent and under what circumstances
Awards may be exercised in cash or Shares, or canceled, forfeited or suspended;
(vii) determine whether, to what extent, and under what circumstances cash,
Shares or other Awards or amounts payable with respect to an Award under the
Plan shall be deferred either automatically or at the election of the holder
thereof or the Committee; (viii) interpret and administer the Plan and any
instrument or agreement relating to, an Award made under, the Plan; (ix)
establish, amend, suspend or waive such rules and regulations and appoint such
agents as it shall deem proper for the
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administration of the Plan; and (x) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions under or with
respect to the Plan or any Award shall be within the sole discretion of the
Committee whose determination shall be final, conclusive and binding upon any
Participant, beneficiary of any Award and any employee of the Company or any
Affiliate.
IV. SHARES AVAILABLE FOR AWARDS
A. Shares Available. Subject to adjustment as provided in Section
VII.C., 1,500,000 Shares shall be available for granting Awards under the Plan.
If any Shares covered by an Award or to which an Award relates are not purchased
or are forfeited, or if an Award otherwise terminates without delivery of any
Shares, then the number of Shares counted against the aggregate number of Shares
available under the Plan with respect to such Award, to the extent of any such
forfeiture or termination, again shall be available for granting Awards under
the Plan. In addition, any Shares that are used by a Participant as full or
partial payment to the Company of the purchase price relating to an Award, or in
connection with the satisfaction of tax obligations relating to an Award in
accordance with the provisions of Section VIII of the Plan, shall again be
available for granting Awards under the Plan.
B. Accounting for Awards. For purposes of this Section IV, if an Award
entitles the holder thereof to receive or purchase Shares, the number of Shares
covered by such Award or to which such Award relates shall be counted on the
date of grant of such Award against the aggregate number of Shares available to
granting Awards under the Plan.
C. Incentive Stock Options and Non-Qualified Stock Options.
Notwithstanding the foregoing, the number of Shares available for granting
Incentive Stock Options and Non-Qualified
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Stock Options under the Plan shall not exceed 1,500,000, subject to adjustment
as provided in the Plan and, in the case of Incentive Stock Options, Section 422
or 424 of the Code or any successor provisions.
V. ELIGIBILITY
Employees eligible to participate in the Plan and receive Options and
Awards under the Plan shall consist of key employees of the Company and
Affiliates as determined by the Committee.
VI. AWARD
A. Options. The Committee is hereby authorized to grant Options to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
1. Exercise Price. The exercise price per Share purchasable
under an Option shall be determined by the Committee and, with respect
to non-qualified stock option grants, may be less than, equal to or
greater than the Fair Market Value of a Share as of the relevant grant
date.
2. Option Term. The term of each Option shall be fixed by the
Committee, but in no event shall the term exceed ten (10) years from the
date the Option is granted.
3. Time and Method of Exercise. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms
(including, without limitation, cash, Shares, other awards or other
property, or any combination thereof, having a Fair Market Value on the
exercise date equal to the exercise price) in which,
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payment of the exercise price with respect thereto may be made or deemed
to have been made.
4. Transferability of Options. Except as provided below, an
Option may not be sold, assigned, transferred, pledged, hypothecated or
otherwise disposed of, except by will or the laws of descent and
distribution and, during the lifetime of the optionee, may be exercised
only by such optionee. Notwithstanding the foregoing, the Committee may
determine that an Option may be transferred by the optionee to one or
more members of the optionee's immediate family, to a partnership of
which the only partners are members of the optionee's immediate family,
or to a trust established by the optionee for the benefit of one or more
members of the optionee's immediate family. The optionee's immediate
family shall be limited to the optionee's spouse, parents, children,
grandchildren and the spouses of such persons. No further transfers of
an Option may be made beyond the transfers permitted above and a
transferred Option shall remain subject to the provisions of the Plan
and any Award Agreement evidencing any Award granted under the Plan.
5. Reload Options. The Committee may grant "reload" options
separately or together with another Option, pursuant to which, subject
to the terms and conditions established by the Committee and any
applicable requirements of Rule 16b-3 or any other applicable law, the
Participant would be granted a new Option when the payment of the
exercise price of a previously granted Option is made by the delivery of
Shares of the Company's Common Stock owned by the Participant; or when
Shares are tendered or forfeited as payment of the amount to be
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withheld under applicable income tax laws in connection with the
exercise of an Option, which new Option would be an Option to purchase
the number of Shares not exceeding the sum of (a) the number of Shares
provided as consideration upon the exercise of the previously granted
Option to which such "reload" Option relates; and (b) the number of
Shares tendered or forfeited as payment of the amount to be withheld
under applicable income tax laws in connection with the exercise of the
Option to-which such "reload" Option relates. Such "reload" Options
shall have a per share exercise price equal to the Fair Market Value as
of the date of grant of the new Option.
B. Stock Appreciation Rights. The Committee is hereby authorized to
grant Stock Appreciation Rights to Participants subject to the terms of the Plan
and any applicable Award Agreement. A Stock Appreciation Right granted under the
Plan shall confer on the holder thereof a right to receive upon exercise thereof
the excess of: (i) the Fair Market Value of one (1) Share on the date of
exercise (or, if the Committee shall so determine, at any time during a
specified period before or after the date of exercise) over (ii) the grant price
of the Stock Appreciation Right as specified by the Committee, which price shall
be not less than one hundred percent (100%) of the Fair Market Value of one (1)
Share on the date of the grant of the Stock Appreciation Right. Subject to the
terms of the Plan and any applicable Award Agreement, the grant price, term,
methods of exercise, dates of exercise, methods of settlement and any other
terms and conditions of any Stock Appreciation Rights shall be as determined by
the Committee. The Committee may impose such conditions or restrictions on the
exercise of any Stock Appreciation Right as it may deem appropriate.
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C. Restricted Stock and Restricted Stock Units. The Committee is hereby
authorized to grant Awards of Restricted Stock and Restricted Stock Units to
Participants with the following terms and conditions and with such additional
terms and conditions not inconsistent with the provisions of the Plan as the
Committee shall determine:
1. Restrictions. Shares of Restricted Stock and Restricted Stock
Units shall be subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a
share of Restricted Stock or the right to receive any dividend or other
right or property with respect thereto), which restrictions may lapse
separately or in combination at such time or times, in such installments
or otherwise as the Committee may deem appropriate.
2. Stock Certificates. Any Restricted Stock granted under the
Plan shall be evidenced by the issuance of a stock certificate or
certificates, which certificate or certificates shall be held by the
Company. Such certificate or certificates shall be registered in the
name of the Participant and shall bear the appropriate legend referring
to the restrictions applicable to such Restricted Stock. In the case of
Restricted Stock Units, no certificates shall be issued at the time such
Awards are granted.
3. Forfeitures; Delivery of Shares. Except as otherwise
determined by the Committee, upon termination of employment (as
determined under criteria established by the Committee), during the
applicable restriction period, all shares of Restricted Stock and all
Restricted Stock Units at such time subject to restriction, shall be
forfeited and reacquired by the Company; provided, however, that the
Company may, when it finds that waiver would be in the best interest of
the
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Company, waive in whole or in part any or all remaining restrictions
with respect to Shares of Restricted Stock or Restricted Stock Units.
Certificates representing Shares of Restricted Stock that are no longer
subject to restriction shall be delivered to the holder thereof promptly
after the applicable restrictions lapse or are waived. Upon the lapse or
waiver of restrictions and the restricted stock period relating to
Restricted Stock Units evidencing the right to receive Shares,
certificates for such Shares shall be issued and delivered to the
holders of the Restricted Stock Units.
D. Performance Awards. The Committee is hereby authorized to grant
Performance Awards to Participants subject to the terms of the Plan and any
applicable Award Agreement. A Performance Award granted under the Plan: (i) may
be denominated or payable in cash, Shares (including, without limitation,
Restricted Stock), other securities or Awards or other property; and (ii) shall
confer upon the holder the right to receive payments, in whole or in part, upon
the achievement of such performance goals during such performance period as the
Committee may establish.
E. Other Stock Based Awards. The Committee is hereby authorized to grant
to Participants such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based upon or related to, Shares
(including without limitation, securities convertible into Shares), as are
deemed by the Committee to be consistent with the purpose of the Plan; provided,
that if at the time of such grant the Company has a class of securities
registered under the Securities Exchange Act of 1934, such grants must comply
with Rule 16b-3 and applicable laws. The Committee shall determine the terms and
conditions of such Awards. In no event shall the purchase price for any Shares
purchasable in connection with any such Award be
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less than one hundred percent (100%) of the Fair Market Value of such Shares or
other securities as of the date such purchase right is granted.
F. General Provisions.
1. Awards May Be Granted Separately or Together. Awards may, in
the discretion of the Committee, be granted alone or in addition to, in
tandem with or in substitution for any other Award.
2. Form of Payment Under Award. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be made
by the Company or an Affiliate upon the grant, exercise or payment of an
Award may be made in such form or forms as the Committee may determine
(including, without limitation, cash, Shares, other securities, other
Awards or other property or any combination thereof).
3. Restrictions. All certificates for Shares or other securities
delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such transfer restrictions as the Committee may deem
advisable under the Plan and any applicable federal or state securities
laws, and the Committee may cause a legend or legends to be placed on
any such certificates to make appropriate reference to such
restrictions.
VII. AMENDMENT AND TERMINATION; ADJUSTMENT
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an award agreement or in the Plan:
A. Amendments to the Plan. The Board of Directors of the Company may
amend, alter, suspend, discontinue or terminate the Plan at any time; provided,
however, that without the
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approval of the shareholders of the Company, no such amendment, alteration,
suspension, discontinuation or termination shall be made that, absent such
approval: (i) would cause Rule 16b-3 to become unavailable with respect to the
Plan; or (ii) would cause the Company to be unable, under the Code, to grant
Incentive Stock Options under the Plan.
B. Amendments to Awards. The Committee may waive any condition of, or
rights of the Company under any outstanding Award, prospectively or
retroactively. The Committee may not alter, suspend, discontinue or terminate
any outstanding Award, prospectively or retroactively, without the consent of
the Participant or holder or beneficiary thereof, except as otherwise provided
herein.
C. Adjustments. In the event that any dividend or other distribution,
whether in the form of cash, Shares, other securities or other property,
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-off, spin-off, combination, repurchase or exchange of
Shares or other securities of the Company or other similar corporate transaction
or event affecting the Shares would be reasonably likely to result in the
diminution or enlargement or any of the benefits or potential benefits intended
to be made available under the Plan or under an Award, the Committee shall, in
such manner as it shall deem equitable or appropriate in order to prevent such
diminution or enlargement of any such benefits or potential benefits, adjust any
or all of: (i) the number and type of Shares (or other securities or other
property) which thereafter may be made the subject of Awards; (ii) the number
and type of Shares (or other securities or other property) subject to
outstanding awards; and (iii) the purchase or exercise price with respect to any
Award; provided, however, that the number of Shares covered by any Award or to
which such Award relates shall always be a whole number.
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D. Correction of Defects, Omissions and Inconsistencies. The Committee
may correct any defect, supply any omission or reconcile any inconsistency in
the Plan or in any Award in the manner and to the extent it shall deem desirable
to carry the Plan into effect.
VIII. INCOME TAX WITHHOLDING
In order to comply with applicable federal or state income tax laws or
regulations, the Company may take such action as it deems appropriate to ensure
that all applicable federal or state payroll, withholding, income or other
taxes, which are the sole and absolute responsibility of a Participant, are
withheld or collected from such Participant. In order to assist the Participant
in paying all federal and state taxes to be withheld or collected upon exercise
or receipt of (or the lapse of restrictions relating to) an Award, the Committee
in its discretion and subject to such additional terms and conditions as it may
adopt, may permit the Participant to satisfy such tax obligation by: (i)
electing to have the Company withhold a portion of Shares otherwise to be
delivered upon exercise or receipt of (or the lapse of restrictions relating to)
such Award with a Fair Market Value equal to the amount of such taxes; or (ii)
delivering to the Company Shares other than Shares issuable upon exercise or
receipt of (or the lapse of restrictions relating to) such Award with a Fair
Market Value equal to the amount of such taxes. The election, if any, must be
made on or before the date that the amount of tax to be withheld is determined.
IX. GENERAL PROVISIONS
A. No Right to Award. No employee, Participant, or other person shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Eligible Employees, Participants or
holders or beneficiaries of Awards under the Plan.
B. Delegation. The Committee may delegate to one or more officers of the
Company or a committee of such officers the authority, subject to such terms and
limitations as the
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Committee shall determine, to grant awards to key employees who are not officers
or directors of the Company for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended.
C. Award Agreements. No Participant shall have rights under an Award
granted to such Participant unless and until an Award Agreement shall have been
duly executed on behalf of the Company.
D. No Limit on Other Compensation Agreements. Nothing contained in the
Plan shall prevent the Company from adopting or continuing in effect other or
additional compensation arrangements and such arrangements may be either
generally applicable or applicable only in specific cases.
E. No Right to Employment. The grant of an Award shall not be construed
as giving the Participant the right to be retained in the employ of the Company
or its Affiliates. In addition, the Company or its Affiliates may, at any time,
dismiss a Participant from employment.
F. Governing Law. The validity, construction and effect of the Plan and
any rules and regulations relating to the Plan shall be determined in accordance
with the internal laws of the State of Minnesota without consideration of any
conflict of law rules.
G. No Trust Fund Created. Neither the Plan nor any Award shall create or
be construed to create a trust or separate fund of any kind or a fiduciary
relationship between the Company and a Participant or any other person. To the
extent that any person acquires a right to receive payment from the Company
pursuant to an Award, such right shall be no greater than the right of any
unsecured creditor of the Company.
H. No Fractional Shares. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award.
X. EFFECTIVE DATE AND TERM
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The Plan shall be effective as of the date of its approval by the
shareholders of the Company and shall continue in effect for a period of ten
(10) years thereafter unless earlier terminated as provided herein.
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Exhibit 10.2
BUCA INC.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose. This Stock Option Plan for non-employee directors (the
"Director Plan") is intended to attract and retain the services of experienced
and knowledgeable independent directors of BUCA, Inc. (the "Company") for the
benefit of the Company and its shareholders and to provide additional incentive
for such directors to continue to work for the best interest of the Company and
its shareholders.
2. Stock Subject to the Director Plan. There are reserved for issuance
upon exercise of options granted under the Director Plan 40,000 shares of common
stock (the "Shares") of the Company. Such Shares may be authorized and unissued
Shares or previously outstanding Shares of stock then held in the Company's
treasury. If any option granted under the Director Plan shall expire or
terminate for any reason without having been exercised in full, the Shares
subject thereto shall again be available for the purpose of issuance upon the
exercise of options granted under the Director Plan.
3. Administration. The Director Plan shall be administered by the Board
of Directors of the Company (the "Board") or by any committee of the Board
designated for such purpose by the Board. The Board shall have plenary authority
to interpret the Director Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the option
grants or agreements (which shall comply with the terms and conditions of the
Director Plan) and to make all other determinations necessary or advisable for
the administration of the Director Plan. The Board's determination in all
matters shall be final.
4. Eligibility. Each Director of the Company who is not otherwise an
employee of the Company and who has not been an employee of the Company or any
of its subsidiaries for a period of at least one (1) year prior to the date of
grant of an option under the Director Plan shall automatically be granted an
option to purchase 2,000 Shares immediately upon first being elected or
appointed as a director of the Company. Thereafter, each Director remaining in
office shall be granted annually an additional option to purchase 1,000 Shares
upon his or her anniversary of participation on the Board.
Only options which do not qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended, shall be granted
under the Director Plan.
5. Option Grants.
a. The purchase price of the Shares under each option granted
under the Director Plan shall be one hundred percent (100%) of the fair
market value of the Shares at the time such option is granted. Fair
market value shall mean the final reported price of the Company's Shares
as reported on any exchange on which such Shares are listed or as
reported by the National
<PAGE>
Association of Securities Dealers Automated Quotation System or similar
inter-dealer quotation system on the date of grant, or if no quotation
is available or the Shares are not publicly traded at the date of grant,
at the fair market value as established by the Board.
b. Options shall become fully exercisable one (1) year after the
date of grant. No option shall be exercisable during such one year
period. The term of each option shall be ten (10) years from the date of
grant thereof, or such shorter period as prescribed in paragraph 5(c).
c. In the event that an Optionee shall cease to be a director in
the Company during the one year period following the date of grant of
the option, the Option shall forthwith terminate on the date the
Optionee ceases to serve as a director.
d. Upon exercise, the Option price is to be paid in full in cash,
or at the discretion of the Board, in Shares owned by the Optionee
having a fair market value on the date of exercise equal to the
aggregate option price or, at the discretion of the Board, a combination
of cash and Shares. The Board may also permit a Director to elect to pay
for such Shares, or to have any withholding obligation in connection
with the exercise of the option, satisfied, in whole or in part, by
authorizing the Company to withhold from the Shares to be issued
pursuant to any option exercise, a number of Shares having an aggregate
fair market value as of the date of exercise that would satisfy the
purchase price or the withholding amount due. Fair market value will be
determined as set forth in Section 5(a) above.
e. Nothing in the Director Plan or in any option granted pursuant
to the Director Plan shall confer on any individual any right to
continue as a director of the Company or interfere in any way with the
right of the Company to terminate the Optionee's services as a director
at any time.
f. In the event that an individual to whom an Option has been
granted under the Director Plan dies while such Option remains
unexercised, the Option theretofore granted to the Optionholder may be
exercised by the personal representative of the Optionholder at any time
during the term that the Option could have been exercised by the
Optionee.
6. Transferability and Share Rights of Holders of Options. No option
granted under the Director Plan shall be transferable other than by will or by
the laws of descent and distribution, and the option may be exercised, during
the lifetime of the holder thereof, only by the holder. The holder of an option
shall have none of the rights of the shareholder until the Shares subject
thereto have been registered in the name of the person or persons exercising
such option on the transfer books of the Company upon such exercise.
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7. Adjustments Upon Changes in Capitalization. Notwithstanding any other
provision in the Director Plan, the number and class of Shares subject to the
options and option prices of the Option covered thereby shall be proportionately
adjusted in the event of a change in the outstanding Shares by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
accommodations or exchanges of shares, split-ups, split-offs, spin-offs,
liquidations or other similar changes in capitalization, or any distribution to
common shareholders other than cash dividends and, in the event of any such
change in the outstanding Shares, the aggregate number and class of Shares
available under the Director Plan shall be proportionately adjusted by the
Board.
8. Amendments and Terminations. Unless the Director Plan shall
theretofore have been terminated as hereinafter provided, the Director Plan
shall terminate on, and no awards of options shall be made after, December 31,
2006. The Director Plan may be terminated, modified, or amended by the
shareholders of the Company. The Board may also terminate the Director Plan at
any time or may modify or amend the Director Plan in such respects as it shall
deem advisable in order to conform to any changes in the law or regulations
applicable thereto, or in respects which shall not change: (i) the total number
of Shares to which options may be granted; (ii) the class of persons eligible to
receive options under the Director Plan; (iii) the manner of determining option
prices; (iv) the period during which the options may be granted or exercised, or
(v) the provisions relating to the administration of the Plan by the Board.
9. Effectiveness of Director Plan. The Director Plan shall become
effective on the date that the Director Plan is approved by the Board of
Directors or by vote of the holders of a majority of shares present or
represented and entitled to vote at a meeting of the shareholders.
-3-
<PAGE>
Exhibit 10.3
BUCA, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
September 30, 1996
<PAGE>
BUCA, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Table of Contents
Page
----
ARTICLE 1. HISTORY AND PURPOSES OF THE PLAN.............................. 1
Section 1.1 - Creation of Plan......................................... 1
Section 1.2 - Purposes of the Plan..................................... 1
Section 1.3 - Exclusive Benefit........................................ 1
ARTICLE 2. DEFINITIONS AND GENDER........................................ 1
Section 2.1 - Definitions.............................................. 1
2.1.1 - Account................................................ 1
2.1.2 - Accounting Date........................................ 2
2.1.3 - Administrator.......................................... 2
2.1.4 - Affiliate.............................................. 2
2.1.5 - Allocation Date........................................ 2
2.1.6 - Alternate Payee........................................ 2
2.1.7 - Annual Addition........................................ 2
2.1.8 - Beneficiary or Beneficiaries........................... 3
2.1.9 - Code................................................... 3
2.1.10 - Committee............................................. 3
2.1.11 - Computation Year...................................... 3
2.1.12 - Credited Compensation................................. 3
2.1.13 - Designated Beneficiary................................ 4
2.1.14 - Disability............................................ 4
2.1.15 - Employee.............................................. 4
2.1.16 - Employer.............................................. 4
2.1.17 - Entry Date............................................ 4
2.1.18 - Fair Market Value..................................... 4
2.1.19 - 415 Compensation...................................... 5
2.1.20 - Highly Compensated Employee........................... 5
2.1.21 - Hour of Service....................................... 7
2.1.22 - Limitation Year....................................... 9
2.1.23 - Maximum Permissible Amount............................ 9
2.1.24 - Nonhighly Compensated Employee........................ 9
2.1.25 - Normal Retirement Date................................ 10
2.1.26 - One-Year Break in Service............................. 10
2.1.27 - Participant........................................... 10
2.1.28 - Participating Affiliate............................... 10
2.1.29 - Plan.................................................. 10
2.1.30 - Plan Year............................................. 10
2.1.31 - Qualified Domestic Relations Order.................... 10
2.1.32 - Stock................................................. 12
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2.1.33 - Trust................................................. 12
2.1.34 - Trust Agreement....................................... 12
2.1.35 - Trustee............................................... 13
2.1.36 - Unallocated Stock Account............................. 13
2.1.37 - Year of Service....................................... 13
Section 2.2 - Gender and Number........................................ 13
ARTICLE 3. ELIGIBILITY TO PARTICIPATE.................................... 13
Section 3.1 - Eligibility.............................................. 13
Section 3.2 - Additional Eligibility Rules............................. 13
ARTICLE 4. CONTRIBUTIONS FOR PLAN........................................ 14
Section 4.1 - Contributions............................................ 14
Section 4.2 - Time and Form of Making Employer Contribution............ 14
Section 4.3 - Make-up Contributions for Omitted Participants........... 14
ARTICLE 5. ALLOCATION OF EMPLOYER CONTRIBUTION TO ACCOUNTS............... 14
Section 5.1 - Allocation and Accrual Rules............................. 14
Section 5.2 - Restrictions on Annual Additions......................... 15
5.2.1 - Maximum Amount - Differing Allocation Dates............ 15
5.2.2 - Maximum Amount - Coincidental Allocation Date.......... 15
5.2.3 - Reduction of Annual Additions.......................... 15
5.2.4 - Effect of Reduction.................................... 16
5.2.5 - Limiting Contributions to Suspense Account............. 17
5.2.6 - Limitation if Defined Benefit Plan..................... 17
Section 5.3 - Credit to Accounts....................................... 17
Section 5.4 - Special Limitations On Allocation of Stock to
Participants Making Section 1042 Election................ 17
ARTICLE 6. INVESTMENT AND ADJUSTMENT OF ACCOUNTS......................... 18
Section 6.1 - Investment of Accounts................................... 18
Section 6.2 - Acquisition of Stock for Stock Accounts.................. 19
Section 6.3 - Authority for Trustee to Borrow.......................... 19
Section 6.4 - Release of Shares from the Unallocated Stock Account..... 19
Section 6.5 - Application of Funds..................................... 20
Section 6.6 - Adjustment of Accounts................................... 21
Section 6.7 - Voting of Stock.......................................... 22
Section 6.8 - Forfeitures.............................................. 23
ARTICLE 7. DISTRIBUTION OF BENEFITS...................................... 23
Section 7.1 - Benefits Payable......................................... 23
Section 7.2 - Mode and Timing of Paying Benefits....................... 23
Section 7.3 - Normal Retirement........................................ 25
Section 7.4 - Death.................................................... 25
Section 7.5 - Disability............................................... 27
Section 7.6 - Resignation or Discharge................................. 27
Section 7.7 - Termination of Plan...................................... 27
Section 7.8 - Claims Procedure......................................... 27
Section 7.9 - Missing Persons.......................................... 28
ii
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Section 7.10 - Diversification......................................... 28
Section 7.11 - Dividend Distribution................................... 29
Section 7.12 - Direct Rollovers........................................ 30
7.12.1 - General Rule.......................................... 30
7.12.2 - Definitions........................................... 30
7.12.3 - Procedures............................................ 31
ARTICLE 8. ADMINISTRATION................................................ 32
Section 8.1 - Administrator............................................ 32
Section 8.2 - Delegation............................................... 32
Section 8.3 - Committee................................................ 32
Section 8.4 - Reports and Records...................................... 33
Section 8.5 - Payment of Expenses...................................... 33
Section 8.6 - Indemnification.......................................... 33
ARTICLE 9. AMENDMENT TO AND TERMINATION OF PLAN.......................... 33
Section 9.1 - Amendments............................................... 33
Section 9.2 - Termination of Plan...................................... 34
Section 9.3 - Time of Termination...................................... 34
Section 9.4 - Distributions............................................ 34
Section 9.5 - Partial Termination...................................... 35
ARTICLE 10. MISCELLANEOUS................................................ 35
Section 10.1 - No Guaranty of Employment............................... 35
Section 10.2 - Construction of Agreement............................... 35
Section 10.3 - Spendthrift Provision................................... 35
Section 10.4 - Headings................................................ 36
Section 10.5 - Limitation on Employer's and Trustee's Liability........ 36
Section 10.6 - Return of Contributions................................. 36
Section 10.7 - Merger.................................................. 36
Section 10.8 - Military Leaves......................................... 36
ARTICLE 11. AGREEMENT TO PURCHASE STOCK.................................. 36
Section 11.1 - Stock Subject to this Article........................... 36
Section 11.2 - Put Option.............................................. 37
Section 11.3 - Right of First Refusal.................................. 38
Section 11.4 - Nonlapse................................................ 39
ARTICLE 12. TOP HEAVY PLAN PROVISIONS.................................... 39
Section 12.1 - Special Definitions..................................... 39
12.1.1 - Determination Date.................................... 39
12.1.2 - Key Employee.......................................... 39
12.1.3 - Permissive Aggregation Group.......................... 40
12.1.4 - Required Aggregation Group............................ 41
12.1.5 - Super Top Heavy Plan.................................. 41
12.1.6 - Top Heavy Plan........................................ 41
12.1.7 - Top Heavy Ratio....................................... 41
12.1.8 - Valuation Date........................................ 42
Section 12.2 - Minimum Allocation...................................... 42
Section 12.3 - Vested Account Balance.................................. 44
iii
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Section 12.4 - Limitation on Benefits.................................. 44
ARTICLE 13. PARTICIPATION BY AFFILIATES.................................. 44
Section 13.1 - In General.............................................. 44
Section 13.2 - Adoption................................................ 44
Section 13.3 - Administration.......................................... 45
Section 13.4 - Amendment............................................... 45
Section 13.5 - Termination or Withdrawal............................... 45
Section 13.6 - Application of Terms of the Plan........................ 46
13.6.1 - Eligibility........................................... 46
13.6.2 - Determination of Contributions........................ 46
13.6.3 - Allocation of Contributions and Forfeitures........... 46
13.6.4 - Distributions......................................... 46
Section 13.7 - Interpretation.......................................... 46
iv
<PAGE>
BUCA, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
ARTICLE 1. HISTORY AND PURPOSES OF THE PLAN
Section 1.1 - Creation of Plan. BUCA, Inc. (the "Employer"), a
corporation organized and existing under the laws of the State of Minnesota,
originally adopted this employee stock ownership plan as a frozen plan for the
benefit of its eligible employees and employees of its affiliates effective
September 30, 1996. The plan is a spin-off from the Parasole Restaurant
Holdings, Inc. Employees Stock Ownership Trust, which was originally adopted
January 1, 1989. This plan shall be known as the BUCA, Inc. Employee Stock
Ownership Plan (the "Plan"). The Plan is intended to meet the requirements of
Section 401(a) of the Code. The Plan is a stock bonus plan, is designed to
invest primarily in Stock, and is intended to be an employee stock ownership
plan within the meaning of Section 4975(e)(7) of the Code.
The provisions of this Plan shall apply only to individuals employed by
the Employer or a Participating Affiliate on or after September 30, 1996.
Section 1.2 - Purposes of the Plan. The principal purpose of the Plan
is to hold for each eligible Employee his equity interest in Stock and other
assets accumulated under the Parasole Restaurant Holdings, Inc. Employees Stock
Ownership Trust and thereby to promote in the eligible Employees a strong
interest in the successful operation of the Employer, loyalty to the Employer,
and increased productivity in their work.
Section 1.3 - Exclusive Benefit. In no event shall any part of the
principal or income held under the Plan be paid to or become vested in the
Employer, or be used for any purpose whatsoever other than for the exclusive
benefit of Participants and their Beneficiaries, except as specifically provided
herein to the contrary.
ARTICLE 2. DEFINITIONS AND GENDER
Section 2.1 - Definitions. Whenever used in the Plan, the following
terms shall have the respective meanings set forth below, unless the context
clearly requires otherwise, and when the defined meaning is intended, the term
is capitalized:
Section 2.1.1 - "Account" means the record of the combined
Stock Account and General Investments Account credited to an
individual. The Stock Account means the record of the total shares of
Stock credited to an individual under the Plan. The General Investments
Account means the record of the non-Stock amounts credited to an
individual under the Plan. Shares of common stock of Parasole
Restaurant Holdings, Inc. shall be held in a subaccount of the General
Investments Account, referred to as the Parasole Subaccount, to the
extent such shares have been allocated to Participants. A separate
Stock Account and General Investments Account shall be maintained for
each Participant. As of September 30, 1996, a Participant's Account
shall consist solely of the Stock and other amounts that were credited
to the Participant as of that date under the Parasole Restaurant
Holdings, Inc. Employees Stock Ownership Trust immediately prior to the
spin-off of this Plan.
1
<PAGE>
Section 2.1.2 - "Accounting Date" means December 31 of each
Plan Year.
Section 2.1.3 - "Administrator" means BUCA, Inc., for purposes
of Section 3(16)(A) of the Employee Retirement Income Security Act of
1974, as amended. For periods when a Committee is operating pursuant to
the provisions of Section 8.3, Administrator shall be deemed to refer
to the Committee to the extent of the duties and obligations delegated
to such Committee.
Section 2.1.4 - "Affiliate" means a group of entities,
including the Employer, which constitutes a controlled group of
corporations (as defined in Section 414(b) of the Code), a group of
trades or businesses (whether or not incorporated) under common control
(as defined in Section 414(c) of the Code), and members of an
affiliated service group (within the meaning of Section 414(m) of the
Code) and any other entity required to be aggregated with the Employer
pursuant to regulations under Section 414(o) of the Code. For purposes
of Section 5.2 of the Plan, Section 415(h) of the Code shall apply.
Section 2.1.5 - "Allocation Date" means the date with respect
to which all or a portion of Employer contributions are allocated to
Accounts.
Section 2.1.6 - "Alternate Payee" means any spouse, former
spouse, child or other dependent of a Participant who is recognized by
a domestic relations order as having a right to receive all, or a
portion of, the benefits payable under the Plan with respect to such
Participant.
Section 2.1.7 - "Annual Addition" means, with respect to each
Participant, the sum for the Limitation Year, of the following amounts
allocated to his accounts in all qualified defined contribution plans:
(1) all contributions by any Affiliate; (2) all forfeitures; (3) the
Participant's after-tax contributions, if permitted, and (4)
allocations under a simplified employee pension by any Affiliate.
Annual Additions for a Limitation Year also include amounts
allocated to the Unallocated Stock Account pursuant to Section 5.2 used
to reduce contributions for such Limitation Year. Amounts allocated to
an individual medical account, as defined in Section 415(1)(2) of the
Code, which is a part of a qualified pension or annuity plan maintained
by an Affiliate, are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from contributions which are
attributable to post-retirement medical benefits allocated to the
separate account of a Key Employee, as defined in Section 4l9A(d)(3) of
the Code, under a welfare benefit fund, as defined in Section 419(e) of
the Code, maintained by an Affiliate, are treated as Annual Additions
to a defined contribution plan.
If, for any Limitation Year, no more than one-third of the
Affiliate contributions to the Plan which are deductible under Section
404(a)(9) of the Code are allocated to Highly Compensated Employees,
then for such Limitation Year, allocations of (a) forfeitures of Stock,
if such Stock was acquired with the proceeds of a loan described in
Section 6.3, or (b) Affiliate contributions which are used to pay
interest on the loan and are deductible under Section 404(a)(9)(B) of
the Code and charged (directly or indirectly) against a Participant's
Account shall not be treated as Annual Additions.
2
<PAGE>
Section 2.1.8 - "Beneficiary" or "Beneficiaries" means such
person or persons who at any particular time shall be entitled to
receive a distribution from the Trust in the event of the death of a
Participant.
Section 2.1.9 - "Code" means the Internal Revenue Code of
1986, as amended, and any successor tax code. References to a Code
section shall be deemed to be to that section or any successor to that
section.
Section 2.1.10 - "Committee" means the administrative
committee which the Employer may establish under the provisions of
Article 8 of the Plan.
Section 2.1.11 - "Computation Year" shall mean a consecutive
12-month period used to measure service for purposes of determining an
Employee's eligibility for participation in the Plan, vesting, and
allocation of contributions. For purposes of eligibility for
participation in the Plan, the Computation Year shall mean a
consecutive 12-month period measured from the date an Employee first
completes an Hour of Service; provided, however, that if the Employee
fails to complete 1,000 Hours of Service during such initial 12-month
period, the Computation Period shall be the Plan Year commencing with
the Plan Year that includes the first anniversary of the date on which
the Employee first completes an Hour of Service, and succeeding Plan
Years. For purposes of computing service for vesting and allocation of
contributions, the Computation Period shall be each Plan Year and shall
include periods prior to the adoption of the Plan.
Section 2.1.12 - "Credited Compensation" of a Participant
means all compensation as defined in Treasury Regulation ss.
1.415-2(d)(11)(i), which consists of wages for the applicable period
within the meaning of Section 3401(a) of the Code and all other
payments of compensation to the Participant by an Affiliate (in the
course of the Affiliate's trade or business) for which the Affiliate is
required to furnish the Participant a written statement under Sections
6041(d), 6051(a)(3) and 6052 of the Code ("W-2 wages"). Credited
Compensation must be determined without regard to any rules under
section 3401(a) that limit the remuneration included in wages based on
the nature or location of the employment or the services performed.
In the case of an Employee who is a participant in a plan
sponsored by the Employer which is described in Section 125 or 401(k)
of the Code, the term Credited Compensation shall include any amount
which would be included in the definition of Credited Compensation, but
for the Employee's election to reduce his compensation and have the
amount of the reduction contributed to the cafeteria plan or 401(k)
plan on his behalf.
Amounts paid by the Employer during a Plan Year to a person
who is covered by a collective bargaining agreement to which the
Employer is a party which excludes said individual (by category or
class) from participation in the Plan for any part of a Plan Year shall
be disregarded, except to the extent specifically provided to the
contrary in said agreement. For Plan Years beginning on or after
January 1, 1997, compensation paid during a Plan Year prior to the
Entry Date when an individual first participates shall be disregarded.
Prior to January 1, 1997, Credited Compensation means compensation paid
during the entire year.
3
<PAGE>
In addition to any other limitations contained in this
definition, Credited Compensation for a Plan Year shall be limited to
$150,000 (as adjusted for cost-of-living increases pursuant to Section
401(a)(17)(B) of the Code).
Section 2.1.13 - "Designated Beneficiary" means any individual
other than the Participant's spouse designated or deemed designated by
a Participant (or if the Participant is deceased, designated or deemed
designated by the surviving spouse of the Participant) as a
Beneficiary.
Section 2.1.14 - "Disability" means a medically determinable
physical or mental impairment of a Participant which renders the
Participant permanently incapable of performing the duties which he was
employed to perform for the Employer when such impairment commenced and
also incapable of performing other work which the Employer offers to
employ him to perform at comparable compensation. The disability of a
Participant shall be determined by a licensed physician selected or
approved by the Administrator, in accordance with uniform rules
established by the Administrator.
Section 2.1.15 - "Employee" means any person, including an
officer, who is employed as a common law employee by the Employer.
An individual shall be considered to be an Employee if such
individual is a leased employee within the meaning of Section 414(n)(2)
of the Code, but only if (a) leased employees constitute more than
twenty percent (20%) of Nonhighly Compensated Employees or (b) the
individual is not covered by a qualified money purchase pension plan
maintained by the leasing organization providing a nonintegrated
employer contribution rate of at least ten percent (10%) and providing
for full and immediate vesting.
Section 2.1.16 - "Employer" means BUCA, Inc., which is a
Minnesota corporation. The term "Employer" also includes any
Participating Affiliates, except where expressly provided otherwise or
where the context indicates a narrower meaning is intended.
Section 2.1.17 - "Entry Date" for Plan Years beginning before
January 1, 1997, means each June 30 and December 31. For Plan Years
beginning on or after January 1, 1997, the Entry Dates are each January
1 and July 1.
Section 2.1.18 - "Fair Market Value" of Stock as of any date
shall be the amount determined by the Administrator in good faith and
based on all relevant factors for determining the fair market value of
such Stock. With respect to Stock not readily tradable on an
established securities market, the Administrator shall retain the
services of an outside independent appraiser to determine the fair
market value of the Stock as of any date or dates as the Administrator
shall specify, and the value so determined shall be declared to be the
Fair Market Value of such Stock on said date. For transactions with
persons who are not disqualified persons (within the meaning of Section
4975(e)(2) of the Code) such value shall be used for all of such
transactions until a new Fair Market Value has been determined by the
Administrator. For transactions with persons who are disqualified
persons, the Fair Market Value shall be determined as of the date of
the transaction. The Trustee may disregard the determination of Fair
Market Value made by
4
<PAGE>
the Administrator and make its own determination of Fair Market Value
in applying any of the provisions of the Plan, but with respect to
Stock not readily tradable on an established securities market such
determination shall be made by an outside independent appraiser
selected by the Trustee.
Section 2.1.19 - "415 Compensation" of an Employee for any
Limitation Year means the Employee's earned income, wages, salaries,
and fees for professional services and other amounts paid for personal
services actually rendered in the course of employment with the
Employer during such year to the extent that such amounts are
includible in gross income (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage
of profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under a
nonaccountable plan (as described in Treasury Regulation Section
1.62-2(c))), and excluding the following:
(a) Employer contributions to a plan of deferred
compensation which are not includible in the Employee's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified employee pension plan to the
extent such contributions are deductible by the Employee, or
any distributions from a plan of deferred compensation;
provided, however, that for Limitation Years beginning after
December 31, 1997, 415 Compensation shall include any elective
deferral (as defined in Section 402(g)(3) of the Code), and
any amount which is contributed or deferred by the Employer at
the election of the Employee and which is not includible in
the gross income of the Employee by reason of Section 125 or
457 of the Code;
(b) Amounts realized from the exercise of a
nonqualified stock option, or when restricted stock (or
property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk of
forfeiture;
(c) Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option;
and
(d) Other amounts which received special tax
benefits, or contributions made by the Employer (whether or
not under a salary reduction agreement) towards the purchase
of an annuity described in Section 403(b) of the Code (whether
or not the amounts are actually excludable from the gross
income of the Employee).
If a Participant is self-employed, his 415 Compensation shall
mean his earned income determined in accordance with Section 401(c) of
the Code.
Section 2.1.20 - "Highly Compensated Employee" includes highly
compensated active employees and highly compensated former employees.
5
<PAGE>
For Plan Years beginning before January 1, 1997, a highly
compensated active employee includes any Employee who performs service
for the Employer during the determination year and who, during the
look-back year: (i) received compensation from the Employer in excess
of $75,000 (as adjusted pursuant to Code ss. 415(d)); (ii) received
compensation from the Employer in excess of $50,000 (as adjusted
pursuant to Code ss. 415(d)) and was a member of the top-paid group for
such year; or (iii) was an officer of the Employer and received
compensation during such year that is greater than 50% of the dollar
limitation in effect under Code ss. 415(b)(i)(A). The term Highly
Compensated Employee also includes: (i) Employees who are both
described in the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is one of
the 100 employees who received the most compensation from the Employer
during the determination year; and (ii) Employees who are five-percent
owners at any time during the look-back year or determination year.
The top-paid group consists of the top 20% of Employees ranked
on the basis of compensation received during the Plan Year. For
purposes of determining the number of employees in the top-paid group,
Employees described in Code ss. 414(q)(8) and Q & A 9(b) of Treasury
Regulation ss. 1.414(q)-1T are excluded. The number of officers is
limited to 50 or, if lesser, the greater of 3 Employees or 10% of all
Employees. Further, all Affiliates are treated as one employer when
applying these rules to determine the Highly Compensated Employees.
If no officer has satisfied the compensation requirement of
(iii) above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For Plan Years beginning after December 31, 1996, a highly
compensated active employee means any Employee who performs service for
the Employer during the determination year and who: (i) received
compensation from the Employer for the look-back year in excess of
$80,000 (as adjusted pursuant to Code ss. 415(d)); or (ii) was a
five-percent owner at any time during the look-back year or
determination year.
The determination year shall be the Plan Year. The look-back
year shall be the 12-month period immediately preceding the
determination year.
A highly compensated former employee is any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active employee for
either the separation year or any determination year ending on or after
the employee's 55th birthday.
For Plan Years beginning before January 1, 1997, if an
Employee is, during a determination year or a look-back year, a family
member of either (a) a five-percent owner who is an active or former
employee or (b) a Highly Compensated Employee who is one of the ten
most highly compensated employees ranked on the basis of compensation
paid by the Employer during such year, then the family member and the
five-percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the family member and five-percent owner or
top-ten Highly Compensated Employee shall be treated as a single
Employee receiving compensation and plan
6
<PAGE>
contributions or benefits equal to the sum of such compensation and
contributions or benefits of the family member and five-percent owner
or top-ten Highly Compensated Employee. For this purpose, a "family
member" means such Employee's spouse and lineal ascendants or
descendants and the spouses of such lineal ascendants or descendants.
The family aggregation rule set forth in this paragraph shall not apply
for Plan Years beginning after December 31, 1996.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees in
the top-paid group, the top 100 Employees, the number of Employees
treated as officers and the compensation that is considered, will be
made in accordance with Code ss. 414(q) and the regulations thereunder.
For purposes of this definition, "compensation" for a determination
year or look-back year shall mean the Employee's 415 Compensation for
such period (i) without regard to Code ss. 125, and (ii) plus any
Deferred Compensation for such period.
Section 2.1.21 - "Hour of Service" means:
(a) Each hour for which an Employee is paid or
entitled to payment for the performance of duties for an
Affiliate.
(b) Each hour for which an Employee is paid, or
entitled to payment by an Affiliate on account of a period of
time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including Disability),
layoff, jury duty, military duty or leave of absence. No more
than 501 Hours of Service shall be credited under this
paragraph for any single continuous period (whether or not
such period occurs in a single Computation Year).
Notwithstanding the foregoing, Hours of Service shall not be
credited on account of payments made under a plan maintained
solely for the purpose of complying with applicable workers'
compensation, unemployment compensation, or disability
insurance laws nor shall Hours of Service be credited on
account of a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the
Employee.
(c) Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by an
Affiliate and is not otherwise credited herein. These hours
shall be credited to the Employee for the Computation Year or
Years to which the award or agreement pertains rather than the
Computation Year in which the award, agreement or payment is
made.
(d) Hours required to be credited for any period of
service with the Armed Forces of the United States which the
Employee entered from employment with an Affiliate on account
of induction or enlistment under federal law, provided the
Employee returns to employment with an Affiliate within the
period prescribed by federal law during which his reemployment
rights are protected by law or, in the
7
<PAGE>
absence of such a law, within 90 days from the date his
release or discharge from military service is available.
(e) For purposes of paragraphs (a), (b), and (c),
payments shall be deemed to be made by or due from an
Affiliate regardless of whether such payment is made by or due
from an Affiliate directly or indirectly through, among
others, a trust fund or insurer to which an Affiliate
contributes or pays premiums, regardless of whether
contributions made or due to the trust fund, insurer or other
entity are for the benefit of particular Employees or are on
behalf of a group of Employees in the aggregate.
(f) If an Employee's absence from work begins by
reason of a maternity or paternity absence described below,
the Employee shall be deemed credited with the following Hours
of Service only for purposes of determining whether the
Employee has incurred a One-Year Break in Service. The hours
deemed to be Hours of Service are those which otherwise would
normally have been credited to such Employee under this
Section, or if those hours may not be determined, eight Hours
of Service per normal work day of absence. However, no more
than 501 Hours of Service shall be credited for any single
continuous period during the Employee's maternity or paternity
absence. The hours shall be deemed to be Hours of Service in
the Computation Year in which absence from work begins if an
Employee would be prevented from incurring a One-Year Break in
Service in such Computation Year solely because the period of
absence is treated as Hours of Service, or in the immediately
following Computation Year, if the Employee would not incur a
One-Year Break in Service in the Computation Year in which the
absence begins. For purposes of this paragraph, a maternity or
paternity absence means an absence:
(i) by reason of the pregnancy of the
Employee;
(ii) by reason of the birth of a child of
the Employee;
(iii) by reason of the placement of a child
with the Employee in connection with the adoption of
such child by such Employee, or
(iv) for purposes of caring for such child
for a period beginning immediately following such
birth or placement.
However, if the Employee fails to furnish in a timely fashion
to the Administrator such information as the Administrator may
reasonably require from time to time to establish that the
absence from work is for reasons of such pregnancy, birth, or
placement of a child, such period
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shall be considered for purposes of determining whether the
Employee has incurred a One-Year Break in Service.
(g) For any circumstance where it is necessary to
determine Hours of Service, the Administrator will determine
and credit Hours of Service using the "actual hours" method.
This method means the determination of Hours of Service shall
be made from records of hours worked and hours for which the
Employer makes payment or for which payment is due from the
Employer.
(h) To the extent not otherwise provided herein, in
computing Hours of Service, the rules contained in paragraphs
(b) and (c) of Labor Regulation Section 2530.200b-2 are
incorporated herein by reference.
Hours of Service shall be determined by the Administrator from
the records determined by it to accurately reflect this information.
For purposes of computing Hours of Service, credit generally
shall not be given with respect to service with predecessor entities of
an Affiliate prior to the date it became an Affiliate, except that
credit shall be given for all periods for which credit is required to
be given pursuant to Section 414 of the Code. The Administrator also
may, in accordance with uniform rules, determine that additional credit
shall be given with respect to one or more predecessor or affiliated
entities.
Section 2.1.22 - "Limitation Year" means the twelve-month
period of January 1 to December 31.
Section 2.1.23 - "Maximum Permissible Amount" means, for a
Limitation Year, with respect to any Participant, the lesser of (1)
$30,000 (or if greater, 1/4 of the dollar limitation for defined
benefit plans in effect under Code Section 415(b)(1)(A)) or (2) 25
percent of his 415 Compensation for the Limitation Year.
If for any Limitation Year, no more than one-third of the
Affiliate contributions allocated pursuant to Section 5.1 which are
deductible under Code Section 404(a)(9) are allocated to Highly
Compensated Employees, then for said Limitation Year the dollar
limitation of this Section shall not apply to:
(A) forfeitures of Stock if such Stock was acquired
with the proceeds of a loan as described in Code Section
404(a)(9)(A), or
(B) Employer contributions to the Plan which are
deductible under Code Section 404(a)(9)(B) and charged against
the Participant's account.
Section 2.1.24 - "Nonhighly Compensated Employee" means an
Employee who is neither (a) a Highly Compensated Employee nor (b) for
Plan Years beginning before January 1, 1997, a family member of a
Highly Compensated Employee who is a 5-percent owner (as defined in
Code Section 414(q)) or in the group consisting of the ten Highly
Compensated Employees paid the greatest 415 Compensation for the Plan
Year.
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For this purpose, a "family member" means such Employee's spouse and
lineal ascendants or descendants and the spouses of such lineal
ascendants or descendants.
Section 2.1.25 - "Normal Retirement Date" means the first day
of the month in which a Participant attains age sixty-five (65).
Section 2.1.26 - "One-Year Break in Service" means a
Computation Year during which an individual completes 500 or fewer
Hours of Service. Further, solely for the purpose of determining
whether a Participant has incurred a One-Year Break in Service, Hours
of Service shall be recognized for "authorized leaves of absence." An
"authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military
service, or any other reason.
Section 2.1.27 - "Participant" shall mean any Employee who is
eligible to participate in contributions to the Plan or who maintains
an Account with a positive balance under the Plan. An Employee who
becomes a Participant shall be considered to be a Participant until the
earlier of his death, payment of all benefits from the Plan to him, or
his forfeiture of all benefits under the Plan.
Section 2.1.28 - "Participating Affiliate" means any wholly
owned subsidiary of the Employer (including subsidiaries of
subsidiaries) existing on September 30, 1996. Participating Affiliate
shall also include any other Affiliate, other than the Employer, which
has adopted this Plan and which has not terminated participation or
withdrawn pursuant to Article 13.
Section 2.1.29 - "Plan" means the BUCA, Inc. Employee Stock
Ownership Plan, the terms and provisions of which are set forth herein
as the same may be amended or restated from time to time.
Section 2.1.30 - "Plan Year" generally means the twelve-month
period of January 1 to December 31. The period from September 30, 1996,
through December 31, 1996, shall constitute a short Plan Year.
Section 2.1.31 - "Qualified Domestic Relations Order" means a
domestic relations order which creates or recognizes the existence of
an Alternate Payee's right to, or assigns to an Alternate Payee the
right to receive all or a portion of the benefits payable with respect
to the Participant under a Plan, provided the order clearly specifies
certain facts and does not alter the amount or form of benefits.
A domestic relations order means any judgment, decree, or
order, including approval of a property settlement agreement which
relates to the provision of child support, alimony payments, or marital
property rights to a spouse, former spouse, child, or other dependent
of the Participant. The order must be made pursuant to a State domestic
relations law.
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The order is deemed to clearly specify certain facts only if
it specifies:
(a) the name and last known mailing address, if any,
of the Participant and the name and mailing address, if any,
of each Alternate Payee covered by the order;
(b) the amount or percentage of the Participant's
benefits to be paid by the Plan to each such Alternate Payee,
or the manner in which such amount or percentage is to be
determined;
(c) the number of payments or period to which such
order applies; and
(d) each plan to which such order applies.
If the Administrator has reason to know of the Participant's or
Alternate Payee's current mailing address independently, an order shall
not fail to clearly specify certain facts merely because it does not
specify such address.
An order is deemed not to alter the amount or form of benefits
only if it:
(1) does not require the Plan to provide any type or
form of benefit, or any option, not otherwise provided under
the Plan;
(2) does not require the Plan to provide increased
benefits, determined on the basis of actuarial value; and
(3) does not require the payment of benefits to an
Alternate Payee which have been required to be paid to another
Alternate Payee under another order previously determined to
be a Qualified Domestic Relations Order.
In the case of any payment before a Participant has separated
from service, a domestic relations order shall not be treated as
failing to meet the requirements of not altering the amount or form of
benefits solely because such order requires that payment of benefits be
made to an Alternate Payee:
(A) following a reasonable period of time after the
Administrator determines that the order is qualified;
(B) as if the Participant had retired on the date on
which such payment is to begin under such order (but taking
into account only the present value of the benefits actually
accrued); and
(C) in any form in which such benefits may be paid
under the Plan to the Participant.
To the extent provided in any Qualified Domestic Relations
Order, the former spouse of a Participant shall be treated as a
surviving spouse of such Participant for purposes of Section 7.4.
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The Administrator shall establish reasonable procedures to
determine the qualified status of domestic relations orders and to
administer distributions under such orders. When an Administrator
receives a domestic relations order, he shall promptly notify the
Participant and any other Alternate Payee of the receipt of such order
and the Plan's procedures for determining the qualified status of such
orders. Within a reasonable period after receipt of such order, the
Administrator shall determine whether such order is a Qualified
Domestic Relations Order and notify the Participant and each Alternate
Payee of such determination.
During any period in which the issue of whether a domestic
relations order is a Qualified Domestic Relations Order is being
determined by the Administrator, a court of competent jurisdiction, or
otherwise, the Administrator shall separately account for the amounts
(the "segregated amounts") which would have been payable to the
Alternate Payee during such period if the order had been determined to
be a Qualified Domestic Relations Order. If within 18 months after the
date payments are due to commence under the order, the order, or a
modification thereof, is determined to be a Qualified Domestic
Relations Order, the Administrator shall pay the segregated amounts,
plus any interest thereon, to the person or persons entitled to them.
If within the same 18-month period it is determined that the order is
not a Qualified Domestic Relations Order, or the issue as to whether
such order is a Qualified Domestic Relations Order is not resolved, the
Administrator shall then pay the segregated amounts, plus any interest
thereon, to the person or persons who would have been entitled to such
amounts if there had been no order. However, if the Administrator is
notified that the parties are attempting to cure the defects in the
order, the Administrator shall continue to defer payment and separately
account for the amounts until the end of the 18-month period. Any
determination that an order is a Qualified Domestic Relations Order
which is made after the close of the 18-month period shall be applied
prospectively only.
Section 2.1.32 - "Stock" means any common stock of BUCA, Inc.
which at the time of acquisition for the Plan is readily tradable on an
established securities market, or if there is no common stock of BUCA,
Inc. which is so tradable at the time of acquisition, common stock of
BUCA, Inc. having a combination of the greatest voting and dividend
rights or convertible preferred stock described in Code Section
409(l)(3). Securities meeting the above requirements, but issued by a
corporation which is a member with BUCA, Inc. of a controlled group of
corporations (within the meaning of Code Section 409(l)) shall also be
considered to be Stock.
For purposes of applying the distribution rules in Article 7,
the put option rules in Section 11.2, and the right of first refusal in
Section 11.3, common stock of Parasole Restaurant Holdings, Inc. shall
also be included within the term "Stock".
Section 2.1.33 - "Trust" shall mean all assets held by the
Trustee pursuant to the terms of the Plan.
Section 2.1.34 - "Trust Agreement" means the trust agreement
with the Trustee which Employer may establish, be a party to, or amend
from time to time, containing such provisions as it deems necessary or
desirable in order to carry the provisions of the Plan into effect.
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<PAGE>
Section 2.1.35 - "Trustee" means the individuals or the
banking institution which shall accept the appointment to execute the
duties of the Trustee as set forth in this document and the Trust
Agreement.
Section 2.1.36 - "Unallocated Stock Account" shall mean Stock
and other assets held in a segregated fund (and increases attributable
to such assets) which have not been allocated to Stock Accounts because
of the limitations of Section 5.2 hereof or because they were purchased
with borrowed funds pursuant to the provisions of Article 6 hereof or
transferred to such account pursuant to the terms hereof.
Section 2.1.37 - "Year of Service" shall mean an applicable
Computation Year during which an Employee completes at least 1,000
Hours of Service.
Section 2.2 - Gender and Number. Pronoun references herein shall be
deemed to be of any gender relevant to the context, and words used in the
singular shall include the plural.
ARTICLE 3. ELIGIBILITY TO PARTICIPATE
Section 3.1 - Eligibility. Each Employee who is not already a
Participant shall commence participation in the Plan on the first Entry Date
coincident with or next following the date on which the following requirements
are first met:
a) The Employee is credited with one Year of Service for the
applicable Computation Year which ends on or prior to the Entry Date;
b) The Employee attains age 21;
c) The Employee is not an independent contractor or leased
employee within the meaning of Section 414(n) of the Code; and
d) The Employer, by action of its Board of Directors, has
caused the Plan to no longer be a frozen plan.
Notwithstanding the fact that the Plan is frozen as of September 30,
1996, any individual who (i) was a participant with a positive account balance
in the Parasole Restaurant Holdings, Inc. Employees Stock Ownership Trust as of
September 30, 1996, and (ii) either continued in employment with BUCA, Inc. or
one of its subsidiaries after September 30, 1996, or became an employee of BUCA,
Inc. or one of its subsidiaries on September 30, 1996, shall be a Participant in
this Plan effective September 30, 1996. In addition, an Employee who establishes
an Account under this Plan after September 30, 1996, as a result of a
trustee-to-trustee transfer from the Parasole Restaurant Holdings, Inc.
Employees Stock Ownership Trust (which shall be permitted in the Employer's
discretion) shall be a Participant.
Section 3.2 - Additional Eligibility Rules. Notwithstanding anything in
Section 3.1 to the contrary:
a) The Plan does not apply any break in service rule for
determining service credited for eligibility purposes.
b) An Employee who has satisfied the eligibility requirements
set forth in Section 3.1 but terminates employment prior to his initial
Entry Date will become a
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Participant on his employment recommencement date, or if later, the
date that would have been his initial Entry Date if he had not
terminated, provided he meets the requirements of Section 3.1(b) and
(c).
ARTICLE 4. CONTRIBUTIONS FOR PLAN
Section 4.1 - Contributions. The Employer may contribute to the Trust
for each Plan Year, such amount, if any, as the Board of Directors of the
Employer shall determine for such Plan Year by resolution, which resolution
shall specify the amount to be so contributed or a definite formula for
determining the amount to be so contributed. As of the date of its adoption of
this Plan, however, the Employer intends to maintain this Plan as a frozen plan
for the purpose of holding and distributing benefits accrued under a predecessor
plan.
Section 4.2 - Time and Form of Making Employer Contribution. The
Employer may make its contribution, if any, for any Plan Year, or partial
payments of such contribution, at any time during such Plan Year, or on or after
the Accounting Date for such Plan Year but not later than the date which is
prescribed by law for the filing of the Employer's federal income tax return for
such Plan Year (including extensions thereof). A contribution to a Plan may be
made in cash or in the form of Stock.
Section 4.3 - Make-up Contributions for Omitted Participants. If, after
the Employer's contribution for a Plan Year has been made and allocated, it
should appear that, through oversight or a mistake of fact or law, a Participant
(or an Employee who should have been considered a Participant) who should have
been entitled to share in such contribution received no allocation or received
an allocation which was less than he should have received, the Employer may, at
its election, and in lieu of reallocating the prior contribution, make a special
make-up contribution for the Account of such Participant in an amount adequate
to provide for him the same percentage of his Credited Compensation paid to him
within such Plan Year as would have been allocated to his Account if such
oversight or mistake had not been made.
ARTICLE 5. ALLOCATION OF EMPLOYER CONTRIBUTION TO ACCOUNTS
Section 5.1 - Allocation and Accrual Rules. Any contribution to be made
to the Trust by the Employer for a Plan Year and forfeitures, if any, shall be
allocated among the Participants who are Employees of such Employer during that
Plan Year and satisfy the eligibility requirements of Article 3, provided each
Participant meets each of the following accrual requirements:
a) He is employed by the Employer or a Participating Affiliate
on the last day of such Plan Year; and
b) He is credited with at least 1,000 Hours of Service for
such Plan Year.
An individual shall not be considered as employed on the last day of a
Plan Year solely by reason of entitlement to vacation, severance or similar
benefits if there has been any event of separation where the individual is not
to provide further services in exchange for the payments.
Any contribution to be made to the Trust by the Employer for a Plan
Year and forfeitures, if any, shall be allocated among the individuals entitled
to participate in the Employer's contribution for such Plan Year in the
proportion that the Credited Compensation for such Plan Year paid to such an
individual by the Employer bears to the Credited Compensation paid to all such
individuals by the Employer for such Plan Year.
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If more than one class of Stock is being allocated among Participants,
a separate allocation shall be made for each class or type of stock. If stock
and cash are being allocated among Participants, the stock shall be allocated
separately from the cash.
Section 5.2 - Restrictions on Annual Additions. The benefits under the
Plan shall be subject to the following rules:
Section 5.2.1 - Maximum Amount - Differing Allocation Dates.
The amount of the Annual Additions which may be allocated under this
Plan to any Participant's Account as of any Allocation Date shall not
exceed the Maximum Permissible Amount, reduced by the sum of any
allocations of Annual Additions made to the Participant's Accounts
under this Plan and any other defined contribution plan or welfare
benefit plan, as defined in Section 419(e) of the Code, maintained by
an Affiliate as of any preceding Allocation Date within the Limitation
Year. Annual Additions attributable to a welfare benefit fund will be
deemed to have been allocated prior to any defined contribution plan
allocations regardless of the actual allocation date.
Prior to determining the Participant's actual 415 Compensation
for the Limitation Year the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's 415 Compensation for the Limitation
Year, uniformly determined for all Participants similarly situated. As
soon as is administratively feasible after the end of the Limitation
Year, the Maximum Permissible Amount for the Limitation Year will be
determined on the basis of the Participant's actual 415 Compensation
for the Limitation Year.
Section 5.2.2 - Maximum Amount - Coincidental Allocation Date.
If an Allocation Date of this Plan coincides with an Allocation Date of
any other plan or fund described in Section 5.2.1, the amount of Annual
Additions to be allocated on behalf of a Participant under this Plan as
of such date shall not exceed the maximum amount described in Section
5.2.1 which can be allocated during the balance of the Limitation Year,
reduced by the allocations to be made to the other plan or fund as of
the Allocation Date without regard to the Section 5.2, but in no event
shall the remainder be less than zero. Annual Additions attributable to
a welfare benefit fund will be deemed to have been allocated prior to
any defined contribution plan allocations regardless of the actual
allocation date.
Section 5.2.3 - Reduction of Annual Additions. If the Annual
Addition under this Plan and other plans or funds on behalf of a
Participant is to be reduced as of any Allocation Date as a result of
Sections 5.2.1 and 5.2.2, such reduction shall be effected by reducing
the allocations of Annual Additions to the accounts of said Participant
under said plans and funds as follows:
(a) If all of said other plans and funds contain a
provision substantially similar to this Section 5.2, then the
reduction shall be accomplished in the following order, but
only to the extent a category of contribution is made as of
the Allocation Date to the plan to which the excess amount is
assigned under Sections 5.2.1 and 5.2.2: (i) nondeductible
voluntary contributions, (ii) salary reduction contributions
made by an Affiliate which are not matched by other
contributions by
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<PAGE>
the Affiliate, (iii) salary reduction contributions made by an
Affiliate which are matched by other contributions by the
Affiliate, (iv) contributions made by an Affiliate which are
not salary reduction contributions, including first matching
contributions made by an Affiliate, (v) forfeitures, and (vi)
any contributions to a welfare benefit fund of an Affiliate.
If contributions or forfeitures for more than one Affiliate
are present, any reduction of such amounts shall be made
proportionately. This Section 5.2.3 shall be applied to all
categories until the required reduction has been effected.
(b) If one or more of the other defined contribution
plans having an allocation date coinciding with the Allocation
Date under this Plan do not have a provision similar to this
Section 5.2, the provisions of this Section 5.2.3 shall be
applied to this Plan after giving effect to allocation of
Annual Additions of such other plans.
Section 5.2.4 - Effect of Reduction. If, as a result of the
preceding Sections of this Section 5.2, the allocation of Annual
Additions under this Plan is reduced, any reduction of Employer
contributions or forfeitures consisting of contributions or forfeitures
pursuant to Section 5.1 shall be used to purchase Stock (if the amount
is not already in the form of Stock).
(a) If an allocation of Employer contributions under
this Plan would result in an excess amount being allocated to
a Participant's Account, the Plan Administrator will allocate
and reallocate the excess amount to the remaining Participants
who are eligible for an allocation of Employer contributions
for the Plan Year in which the Limitation Year ends. This
reallocation shall be based on the allocation method of
Section 5.1 as if the Participant whose Account otherwise
would receive the excess amount in not eligible for an
allocation of Employer contributions.
(b) If the allocation and reallocation of the excess
amounts pursuant to the preceding paragraph would cause each
Participant to exceed the Maximum Permissible Amount for the
Limitation Year, then the Plan Administrator will hold the
excess amount unallocated in an Unallocated Stock Account for
said Limitation Year, and such amount shall be used to reduce
Employer contributions (including any allocation of
forfeitures) for all Participants for the next and succeeding
Limitation Years until all of such unallocated amounts have
been allocated to Participants. Stock in the Unallocated Stock
Account which has been added as a result of this Section 5.2
shall be allocated to Participants prior to allocating any
other contributions made by the Employer, in the same order in
which said Stock was added to the Unallocated Stock Account.
In the event of termination of the Plan, such amounts shall
revert to the Employer to the extent that they may not then be
allocated to any Participant pursuant to Section 5.1.
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<PAGE>
Section 5.2.5 - Limiting Contributions to Suspense Account.
The Employer shall not contribute an amount that would cause an
allocation to the suspense account under this Section 5.2 as of the
date the contribution is allocated. If the contribution is made prior
to the date as of which it is to be allocated, then such contribution
shall not exceed an amount that would cause an allocation to the
suspense account under this Section 5.2 if the date of contribution
were an Allocation Date. The suspense account shall not participate in
the allocation of investment gains or losses.
Section 5.2.6 - Limitation if Defined Benefit Plan. This
Section 5.2.6 shall apply only to Limitation Years beginning before
January 1, 2000. If a Participant is, was, or ever could become a
participant in a qualified defined benefit plan maintained by an
Affiliate, the sum of the Participant's defined contribution plan
fraction and defined benefit plan fraction shall not exceed 1.0 in any
Limitation Year. For purposes of the preceding sentence, the defined
benefit and defined contribution plan fraction shall be determined
pursuant to Section 415 of the Code. The annual benefit otherwise
payable under all defined benefit plans of the Affiliates shall be
reduced prior to reductions of Annual Additions under defined
contribution plans of the Affiliates, unless specifically provided
otherwise in such defined benefit plans.
Section 5.3 - Credit to Accounts. After the allocations of
contributions and forfeitures for a Plan Year have been made, each Stock Account
shall be credited with any Stock contributed and each General Investments
Account shall be credited with cash contributed as of the Accounting Date for
that Plan Year, but the fact that allocations are so made and credited to
Accounts shall not vest in any Participant or Beneficiary any right, title or
interest in or to any of the assets of the Trust except at the time or times and
upon the terms and conditions set forth in the Plan.
Section 5.4 - Special Limitations On Allocation of Stock to
Participants Making Section 1042 Election. No portion of the assets of the Plan
attributable to (or allocable in lieu of) Stock meeting the requirements of Code
Section 409(1) acquired by the Plan in a sale to which Code Section 1042 applies
may accrue (or be allocated directly or indirectly under any plan of an
Affiliate meeting the requirements of Code Section 401(a))-
A) During the nonallocation period, for the benefit of-
(i) any taxpayer who makes an election under Code
Section 1042(a) with respect to Stock meeting the requirements
of Code Section 409(1),
(ii) any individual who is related to the taxpayer
(within the meaning of Code Section 267(b)), or
B) For the benefit of any other person who owns (after
application of Code Section 318(a)) more than 25 percent of-
(i) any class of outstanding stock of the corporation
which issued such Stock meeting the requirements of Code
Section 409(1) or of any corporation which is a member of the
same controlled group of corporations (within the meaning of
Code Section 409(1)(A)) as such corporation, or
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(ii) the total value of any class of outstanding
stock of any such corporation.
For purposes of subparagraph (B) of this Section 5.4, Code Section
318(a) shall be applied without regard to the employee trust exception in
paragraph (2)(B)(i) of Code Section 318(a).
Paragraph (A)(ii) above shall not apply to any individual if:
i) such individual is a lineal descendant of the taxpayer, and
ii) the aggregate amount allocated to the benefit of all such
lineal descendants during the nonallocation period does not exceed more
than 5 percent of the Stock meeting the requirements of Code Section
409(1) (or amounts allocated in lieu thereof) held by the Plan which
are attributable to a sale to the Plan by any person related to such
descendants (within the meaning of Code Section 267(c)(4)) in a
transaction to which Code Section 1042 applied. The allocations under
Section 5.1 shall be limited to the extent necessary to avoid exceeding
this 5 percent limit.
A person shall be treated as exceeding the stock ownership limitation
under paragraph (B) above if such person exceeds such limitation:
i) at any time during the 1-year period ending on the date of
the Plan's acquisition of Stock in a sale to which Code Section 1042
applies, or
ii) on the date as of which such Stock is allocated to
Participants in the Plan.
For purposes of this Section 5.4, the term "nonallocation period" means
the period beginning on the date of sale of such Stock and ending on the later
of:
i) the date which is ten years after the date of sale of such
Stock, or
ii) if there is acquisition indebtedness incurred in
connection with a sale of Stock to which Code Section 1042 applies, the
date of the Plan allocation attributable to the final payment of the
acquisition indebtedness incurred in connection with such sale.
ARTICLE 6. INVESTMENT AND ADJUSTMENT OF ACCOUNTS
Section 6.1 - Investment of Accounts. Generally, assets of the Trust
are to be invested solely in Stock and held in Stock Accounts. The Trustee may
hold 100% of the assets of the Trust in Stock. However, to the extent that the
Trustee is unable to acquire Stock for Stock Accounts, the Trustee is authorized
to invest the assets in the corresponding General Investments Accounts in
securities issued or guaranteed by the United States of America, or any agency
thereof, or in short-term commercial paper, term savings accounts and
certificates of deposit (including those of the Trustee or its affiliate, if a
corporate trustee), common trust funds or collective trust funds or pooled
investments (including those of the Trustee or its affiliate, if a corporate
trustee), corporate obligations of every kind, and stocks, preferred or common,
or such funds may be held in cash to the extent the Trustee deems to be in the
best interests of the Trust. The Trustee may hold shares of Parasole Restaurant
Holdings, Inc. which shall be held in Parasole Subaccounts within Participants'
General Investments Accounts.
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To the extent it is not inconsistent with the provisions of the
Qualified Domestic Relations Order, the Committee may direct the Trustee to
invest any partitioned amount in a segregated subaccount or separate account and
to invest the account in federally insured, interest-bearing savings account(s)
or time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated subaccount remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
Section 6.2 - Acquisition of Stock for Stock Accounts. If at any time
there are balances in the General Investments Accounts, the Trustee may use said
balances or property to acquire Stock. If shares of Stock (other than Stock
attributable to excess Annual Additions pursuant to Section 5.2) are to be
acquired from the Unallocated Stock Account, Stock shall be allocated to Stock
Accounts from the Unallocated Stock Account pursuant to the rules established
under Section 6.4. The only assets in General Investments Accounts that may be
used to acquire Stock from the Unallocated Stock Account are the assets
attributable to contributions for the purpose of meeting obligations under a
loan described in Section 6.4. In order to permit the distribution of cash in
lieu of Stock to Participants or Beneficiaries, Stock may be acquired from Stock
Accounts of such Participants or Beneficiaries at the discretion of the
Employer. Stock may be purchased from an Affiliate (either authorized and
unissued or treasury shares) or from existing shareholders of an Affiliate,
including any Participant or Beneficiary of the Plan who receives a distribution
of Stock from the Trust.
Stock so acquired shall be allocated to Stock Accounts of Participants
and Beneficiaries in proportion to their respective General Investments Account
balances at the time of acquisition.
If a distribution in the form of Stock is to be made for a distributee,
and there are assets in his General Investments Account, the Trustee may
purchase Stock for his Account with said assets for the purpose of making the
distribution.
Section 6.3 - Authority for Trustee to Borrow. The Trustee is
authorized to borrow money and, if it does, it shall borrow for the sole purpose
of purchasing Stock or refinancing an exempt loan at such time or times and in
such amount as determined by the Employer, and upon the terms agreed to between
the Employer, the Trustee and the lender and subject to the terms of the Trust.
The Trustee shall not borrow money to purchase Stock, however, at any time while
the Plan remains frozen. Any Stock purchased with borrowed funds shall be placed
in the Unallocated Stock Account, and only shares of Stock held in such
Unallocated Stock Account may be pledged as security for such borrowing;
provided that Stock and other property held in the Unallocated Stock Account
pursuant to Section 5.2 shall not be pledged as security for such borrowing.
Section 6.4 - Release of Shares from the Unallocated Stock Account. As
of each Accounting Date, Stock held in the Unallocated Stock Account which has
been purchased with the proceeds of a loan shall be allocated to the Stock
Accounts of Participants as provided in this Section. Once shares of Stock have
been allocated to Stock Accounts of Participants, they shall be free from any
liens that may have existed with respect to the loan or loans used to acquire or
refinance their purchase.
The number of shares to be released as of an Accounting Date shall be
determined by multiplying the number of remaining shares of Stock purchased with
the proceeds of the loan and held in the Unallocated Stock Account on the
Accounting Date by one of the two fractions provided below. The Trustee shall
determine which fraction to use at the time of each loan. The Trustee may use
the fraction in (A) of this Section provided the following rules apply: (i) the
loan must provide for annual payments of principal and interest at a cumulative
rate that is not less rapid at any time than level annual payments
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of such amounts for 10 years; and (ii) interest included in any payment is
disregarded only to the extent that it would be determined to be interest under
standard loan amortization tables. Paragraph (A) of this Section is not
applicable from such time that, by reason of a renewal, extension, or
refinancing, the sum of the expired duration of the exempt loan, the renewal
period, the extension period, and the duration of a new exempt loan exceeds 10
years. If the loan fails to comply with these rules, the Employer shall use the
method set forth in (B) of this Section.
A) The numerator is the principal paid on the loan (whether
paid before or after the Accounting Date) with Plan Year assets, and
the denominator is the sum of the numerator and the remaining (after
the date of the application of Plan Year assets to the loan) principal
to be paid for all future years on said loan.
B) The numerator is the principal and interest paid on the
loan (whether paid before or after the Accounting Date) with Plan Year
assets, and the denominator is the sum of the numerator and the
remaining (after the date of the application of Plan Year assets to the
loan) principal and interest to be paid for all future years on said
loan.
"Plan Year assets" means any cash contributions and forfeitures
allocated to Accounts for the Plan Year and those remaining from prior Plan
Years, any non-Stock assets attributable to earnings for allocated Accounts for
the Plan Year and those remaining from prior Plan Years, and any non-Stock
earnings for the Unallocated Stock Account for the Plan Year and those remaining
from prior Plan Years attributable to Section 5.2, but only to the extent such
earnings are attributable to the sale of Stock or to cash contributions that are
made to the Plan to meet its obligations under the loan, except as specifically
provided to the contrary in Section 7.11. The future number of years under the
loan must be definitely ascertainable and must be determined without taking into
account any possible renewal or extension period. In addition, if the interest
rate under the loan is variable, the interest to be paid in future years must be
computed by using the interest rate applicable as of the end of the Plan Year
for which the fraction is to be determined.
Notwithstanding the foregoing, the number of shares of Stock released
shall be increased to the extent necessary to comply with Section 7.11 of the
Plan.
If more than one class of Stock has been purchased with proceeds of a
loan, the shares released shall be in proportion to the number of shares of each
class purchased with the loan proceeds. If there are multiple loans, funds shall
be applied in accordance with the terms of the loans or in the absence of such
terms, as directed by the Trustee. The release rules provided above shall be
applied separately with respect to each loan.
For purposes of determining a Participant's Annual Additions, the
amount of interest charged to a Participant's Account for a Plan Year shall be
the proportion of the total interest paid on loans with respect to Stock
released for the Plan Year that his allocation of Plan Year assets for the Plan
Year used in the above ratio(s) to determine the released shares of Stock for
the Plan Year bears to the total of Plan Year assets used in such ratio(s).
Section 6.5 - Application of Funds. Cash received in exchange for Stock
held in the Unallocated Stock Account may be used by the Trustee to retire or
service debt or if the terms of the applicable loan agreement provide and if
directed by the Employer, to purchase additional shares of Stock to be held in
the Unallocated Stock Account.
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Section 6.6 - Adjustment of Accounts. The Trustee shall, as of each
Accounting Date, as of the date any Stock dividends on Stock are paid, as of the
date of any recapitalization change in capital structure affecting Stock held by
the Trustee, as of the date of any acquisition of Stock for Stock Accounts, and
as of other dates specified by the Employer, adjust each General Investments
Account and Stock Account for transactions since the date of the preceding
adjustment. Separate adjustments shall be made for each Participant's Account as
follows:
a) The number of shares of Stock in each Stock Account shall
be the number of shares as of the date of the preceding adjustment, but
increased by (i) Stock allocated to it pursuant to Section 5.3, (ii)
Stock dividends on Stock previously allocated to said Account and (iii)
Stock acquired with funds from the corresponding General Investments
Account; and the number shall be decreased by distributions and
forfeitures from said Account. Each Stock Account shall also be
adjusted to reflect any change in the outstanding shares of Stock held
by the Trustee by reason of a Stock split, recapitalization,
reclassification, combination or exchange of shares of Stock, or other
similar corporate change.
b) The fair market value of each General Investments Account
shall be the fair market value of assets in such Account as of the date
of the preceding adjustment, but increased by (i) cash allocated to it
pursuant to Section 5.3, (ii) dividends (other than Stock dividends) on
Stock previously allocated to the corresponding Stock Account, and
(iii) investment gains; and shall be decreased by (A) distributions and
forfeitures from said Account, (B) amounts used to acquire Stock for
the corresponding Stock Account, and (C) investment losses.
For the purpose of the foregoing paragraph, the investment gain or loss
in each General Investments Account (excluding the Parasole Subaccount) since
the last adjustment shall be its pro rata share of the investment gain or loss
of all assets in the respective accounts for all Participants, based on the
change in fair market value of assets therein since the last adjustment and
computed in accordance with uniform valuation procedures established by the
Employer. Investment gain or loss in a Participant's Parasole Subaccount will be
determined by the fair market value of the Parasole Restaurant Holdings, Inc.
shares allocated to such Participant's account, and shall be adjusted in the
same manner as Stock Accounts.
Any expense of administering the Plan not paid by the Employer pursuant
to Section 8.5 shall be charged to the General Investments Accounts, and to the
extent necessary to Stock Accounts (and the Trustee if so instructed by the
Employer, may sell Stock in those Stock Accounts to raise cash to pay these
expenses).
Shares of Stock held in the Unallocated Stock Account and dividends
paid thereon, funds borrowed for the purchase of Stock, and interest and all
other costs attributable to the Unallocated Stock Account shall be excluded for
all purposes under this Section.
If an advance contribution is made in the form of Stock, it shall be
added to and held in the Unallocated Stock Account, and then, as of the
Accounting Date for which the contribution is made, those shares of Stock shall
be withdrawn from the Unallocated Stock Account and allocated pursuant to
Article 5.
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To the extent possible, cash contributions prior to the Accounting Date
of the Plan Year for which the contribution is made shall be used by the Trustee
to retire or service debt, or to make distributions in cash to a Participant or
Beneficiary in accordance with Article 7, or, if there is not sufficient debt or
benefits payable, the Trustee may utilize the advance contribution to purchase
additional shares of Stock for the Unallocated Stock Account. Then, as of the
Accounting Date of the Plan Year for which the contribution was made, the
contribution shall be deemed to have been made and allocated pursuant to Article
5.
Section 6.7 - Voting of Stock. The Trustee is authorized to vote the
shares of Stock held in the Trust pursuant to the terms of this Section and in a
manner consistent with Title I of the Employee Retirement Income Security Act of
1974, as amended.
To the extent required by Sections 401(a)(22) and 409(e) of the Code,
each Participant and Beneficiary will be entitled to direct the voting of Stock
allocated to his Account with respect to any corporate matter which involves the
voting of such shares and which relates to any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as the Secretary of the Treasury may prescribe in regulations. The
Employer shall establish and follow procedures to ensure that instructions
received from Participant and Beneficiaries are held in confidence and are not
revealed to any individual Trustee, or officers or employees of the Employer.
As soon as practicable after notice of any shareholders' meeting of the
issuing company is received by the Trustee, the Employer shall cause to be
prepared and delivered to each individual who has an Account a notice and a form
of proxy directing the Trustee as to how the Trustee shall vote on such matters
described in the preceding paragraph (and only such matters) at such meeting, or
any adjournment thereof, with respect to the number of shares of Stock allocated
to his Stock Account as of the most recent date for which an adjustment has been
completed pursuant to Section 6.6. The notice shall instruct each individual to
return his proxy to the Trustee or to the Trustee's agent.
Notwithstanding the foregoing, in cases where Participants are entitled
to instruct the Trustee regarding a shareholder vote but the Employer determines
it is administratively infeasible to determine the number of shares of Stock
allocated to Participants' Stock Accounts at the relevant time, the Employer
shall direct the Trustee to follow the one person-one vote method. Under this
method, each Participant who has been allocated any Stock shall cast one vote on
each issue presented to the Participants and the Trustee shall vote the shares
of Stock allocated to Participants who have given voting instructions in the
proportion determined by such instructions, pursuant to Code Section 409(e)(5).
The Trustee shall vote all shares of Stock held by it in Stock Accounts
for which it has received instructions in accordance with those instructions.
The Trustee shall vote all shares of Stock held by it in the Unallocated Stock
Account, shares of Stock allocated to Stock Accounts for which it does not have
instructions or directions, and all shares of Stock on all matters with respect
to which Participants and Beneficiaries are not entitled to vote, in accordance
with the Trustee's discretion; provided, however, that if the Trustee is a
corporation, the Trustee shall vote such shares as directed by the Board of
Directors of the Employer or a committee appointed by the Board of Directors for
such purpose.
A Participant or Beneficiary who provides instructions concerning the
voting of Stock allocated to his Stock Account shall be deemed a "named
fiduciary" (within the meaning of ERISA) with respect to the instructions.
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Notwithstanding anything herein to the contrary, with respect to all
shares of Stock acquired by, or transferred to, the Plan in connection with a
loan made after July 10, 1989, which by its terms is intended to be a securities
acquisition loan within the meaning of Code Section 133(b) (as in effect prior
to August 20, 1996) or with respect to any Stock if the Employer has any class
of registration-type securities, each Participant or Beneficiary is entitled to
direct the Trustee as to the manner in which shares of Stock allocated to his
Account are to be voted on any matters with respect to which said Stock is
entitled to vote.
Section 6.8 - Forfeitures. All General Investments Accounts and Stock
Accounts are 100% vested.
Section 6.9 - Sales of Stock. The Employer may direct the Trustee to
sell (or not to sell) shares of Stock held by the Trustee (whether in the
Unallocated Stock Account or otherwise) to any person, including an Affiliate,
provided that any sale must be at a price not less favorable to the Plan than
Fair Market Value as of the date of the sale, and provided that such sale shall
not violate any provision of a pledge or other agreement affecting said Stock.
In the event that the Employer has determined that it will not make
further contributions to the Plan or it is unable to make payments of principal
or interest when due on a loan used to purchase Stock held in the Unallocated
Stock Account, the Employer may direct the Trustee to sell any pledged Stock
held in the Unallocated Stock Account (other than shares attributable to Section
5.2) in an amount sufficient to retire the acquisition loan or to make such
payments, subject to the terms of any pledge or other agreement affecting said
Stock.
ARTICLE 7. DISTRIBUTION OF BENEFITS
Section 7.1 - Benefits Payable. The Trustee, in accordance with the
instructions of the Administrator and in the manner provided in Section 7.2,
shall pay and distribute benefits hereunder for the Plan. The Participant can
elect to receive his distribution of benefits under the Plan in cash or Stock,
except as provided in Section 6.1 and except that: (a) a fractional share of
Stock shall be converted and distributed in cash; (b) if consented to by the
distributee, part or all of a distributee's Parasole Subaccount may, in the
Administrator's discretion, be distributed in the form of Parasole Restaurant
Holdings, Inc. stock; and (c) if the articles or bylaws of the Employer restrict
the ownership of substantially all outstanding Stock to Employees or to a trust
described in Section 401(a) of the Code, part or all of a distribution may, in
the Administrator's discretion, be distributed in the form of cash.
Notwithstanding the foregoing, for purposes of Section 7.2, the
Participant's distributable Account shall not include any Stock acquired with
the proceeds of a loan described in Code Section 404(a)(9) until the close of
the Plan Year in which such loan is repaid in full.
Section 7.2 - Mode and Timing of Paying Benefits. Except as provided in
the last paragraph of this Section 7.2 (relating to active employees who have
reached age 65), distributions of vested Accounts in excess of $3,500 shall be
made in the form of a lump sum or five substantially equal annual installments
(as the distributee elects), and distributions of vested Accounts of $3,500 or
less shall be paid in a lump sum. Each installment payment shall be calculated
by dividing the vested balance by the number of installments remaining to be
paid (including the installment being determined).
Distributions shall not be made until after the fair market value of
the Stock has been determined and reported to the Trustee. If the Participant's
separation from service is for Disability or occurs after
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the Participant attains age 65, distribution shall be made at the time
determined under the following rules:
a) If the vested portion of the Account does not exceed $3,500
(and did not exceed $3,500 at the time of any earlier distribution),
the vested Account shall be distributed in a lump sum as soon as
administratively practicable, and in no event more than one year, after
the close of the Plan Year in which the Employee separates from
service.
b) If the vested portion of the Account exceeds $3,500 (or
exceeded $3,500 at the time of an earlier distribution), distribution
shall commence as soon as administratively practicable, and in no event
more than one year, after the close of the Plan Year in which the
Employee separates from service, subject to the Participant's consent
in cases of Disability.
If the Participant's separation from service is for any reason other
than Disability, death or normal retirement after reaching age 65, distribution
shall be made at the time determined under the following rules:
a) If the vested portion of the Account does not exceed $3,500
(and did not exceed $3,500 at the time of any earlier distribution),
the vested Account shall be distributed in a lump sum as soon as
administratively practicable, and in no event more than one year, after
the close of the Plan Year in which the Participant incurs five
consecutive One-Year Breaks in Service.
b) If the vested portion of the Account exceeds $3,500 (or
exceeded $3,500 at the time of an earlier distribution), distribution
shall commence as soon as administratively practicable, and in no event
more than one year, after the close of the Plan Year in which the
Participant incurs five consecutive One-Year Breaks in Service, subject
to the Participant's consent.
For purposes of determining when an Employee is eligible for a distribution, an
Employee will not be deemed to have separated from service until his or her date
of severance with the Employer and with all Affiliates. An Employee will not be
deemed to have separated from service merely because the Affiliate for whom he
works ceases to be a member of a controlled group of corporations with the
Employer provided that the individual continues to work in the same position
after the change. In that case, a separation from service occurs when the
individual terminates employment with the former Affiliate or its successor.
A Participant must consent in writing to any distribution required
under this Article 7 if the present value of the Participant's vested Account,
at the time of the distribution to the Participant, exceeds $3,500 and the
Participant has not attained age 65. In any event, payment of benefits shall
commence not later than the 60th day after the close of the Plan Year in which
the latest of the following events occurs: (1) the date the Participant attains
his Normal Retirement Date, or (2) the date he terminates his employment with
the Employer.
The distribution of a Participant's benefits shall meet the
requirements of Sections 401(a)(9) and 411(d)(6)(C) of the Code, and those
provisions are incorporated into the Plan by reference. Distributions mandated
under Section 401(a)(9) shall be paid in the form prescribed under the rules set
forth in this
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Section 7.2. For years beginning before January 1, 1997, required distributions
must commence not later than April 1 of the calendar year following the calendar
year in which the Participant attains age 70 1/2. For years beginning after
December 31, 1996, required distributions must commence by April 1 of the
calendar year following the later of (i) the calendar year in which the
Participant attains age 70 1/2, or (ii) if the Participant is not a 5% owner (as
defined in Section 416 of the Code), the calendar year in which the Participant
retires.
Except as provided in the next paragraph, distributions may only be
made from the Plan on account of the Participant's retirement, death,
Disability, other termination of employment with the Employer, or attainment of
age 70 1/2.
After a Participant attains age 65, the Participant, until he retires,
has a continuing election to receive all or any portion of his Account. A
Participant must make an election under this paragraph on a form prescribed by
the Committee at any time during the Plan Year for which his election is to be
effective. In his written election, the Participant must specify the percentage
or dollar amount he wishes the Trustee to distribute to him. The Participant's
election relates solely to the percentage or dollar amount specified in his
election form and his right to elect to receive an amount, if any, for a
particular Plan Year greater than the dollar amount or percentage specified in
his election form terminates on the Accounting Date. The Trustee must make a
distribution to a Participant in accordance with his election under this
paragraph within the 90 day period (or as soon as administratively practicable)
after the Participant files his written election with the Trustee. The Trustee
will distribute the balance of the Participant's Account not distributed
pursuant to his elections(s) in accordance with the other distribution
provisions of the Plan.
Section 7.3 - Normal Retirement. The entire Account of a Participant,
as last adjusted pursuant to Section 6.6, shall be distributed to him at the
time and in the manner specified in Section 7.2 upon his termination of
employment with the Employer at or after his Normal Retirement Date.
The value of the Account shall be determined as of the Accounting Date
coincident with or immediately preceding (1) the date a properly completed and
executed form requesting a distribution is received by the Employer, or (2) if
later, the date specified in the distribution request form.
Section 7.4 - Death. The entire Account of a Participant as adjusted
pursuant to Section 6.6 shall be distributed upon his death to his surviving
spouse (who shall be the Participant's Beneficiary), or if none or if the
surviving spouse consents to receiving less than the entire Account in the
manner described hereinafter, to his nonspouse Beneficiaries (as hereinafter
provided). The distribution shall be in the form of a lump sum payment and shall
be made as soon as administratively practicable after the date of death, and in
no event more than one year after the close of the Plan Year in which the death
occurs. A surviving spouse's consent to a waiver of benefits must be in writing,
acknowledging the effect of such waiver and the Beneficiaries (specified by name
or by class, contingent or not), and witnessed by a plan representative or
notary public. A spouse may not revoke a consent without the written consent of
the Participant. The consent of the Participant's surviving spouse is not
necessary if the surviving spouse cannot be located.
If distribution is to be made to the Participant's nonspouse
Beneficiaries, it shall be made to the person or persons and in the proportions
designated by him in a writing signed and filed with the Employer prior to his
death. Any beneficiary designation may be revoked or changed by written
instrument signed and so filed prior to his death. No change may be made by a
married Participant without the written consent of the Participant's spouse as
provided above. If a Participant designates
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<PAGE>
more than one person to receive such death benefit and if any shall predecease
him or die prior to complete distribution to him of his share without provision
having been made for such contingency in the designation, the Trustee, pursuant
to Employer instructions, shall distribute that share or the balance thereof to
the surviving designee or designees proportionately as the portion designated by
the Participant for each bears to the total portion designated for all
survivors.
If a Participant files no designation or revokes a designation
previously filed without filing a new designation, or if all persons so
designated shall predecease the Participant or die prior to complete
distribution to them, the Trustee, pursuant to Employer instructions, shall
distribute such death benefit or balance thereof to the following who shall be
deemed Beneficiaries: to such Participant's surviving spouse, or if none, to
such Participant's surviving issue per stirpes and not per capita, or if none,
then to the Participant's estate.
In the event a Participant dies after the payment of benefits is deemed
to have commenced within the meaning of Code Section 401(a)(9) and the
regulations thereunder, any remaining payments shall continue to the
Participant's Beneficiary on the same basis as payable prior to the
Participant's death. If a Participant (or spouse of such individual, as provided
hereinafter) dies before he has begun to receive any distributions of his
interest under the Plan or before distributions are deemed to have begun
pursuant to regulations, the Participant's Account shall be distributed to his
Beneficiary by December 31 of the fifth year after the calendar year of the
Participant's death.
This five-year distribution rule shall not apply if: (1) the portion of
a Participant's interest to which the surviving spouse is entitled will be
distributed over the life of the surviving spouse (or over a period not
extending beyond the life expectancy of the surviving spouse, which may be
recalculated at least once annually), where the distributions each year must be
at least an amount determined by dividing the balance at the beginning of the
time of distribution by the number of years remaining in the payment period; and
(2) the distributions commence no later than the date on which the Participant
would have attained age 70 1/2. If the surviving spouse dies before payments are
required to commence, the five-year distribution rule and the exceptions to it,
are to be applied as if the surviving spouse were the Participant.
Notwithstanding the preceding, if any death benefit from a Plan becomes
payable to the spouse of the deceased Participant or to the trustees of a trust
to which a transfer from the estate of the deceased Participant would qualify
for the marital deduction described in Section 2056 of the Code, the death
benefits shall be paid to the spouse or such trustees within the discretion
given under the Plan to the Employer only in such a manner that will qualify the
death benefits for the marital deduction described in Section 2056 of the Code
and, unless specifically directed by a Participant to the contrary pursuant to
an effective beneficiary designation, any benefits remaining after the death of
the spouse shall be paid to the spouse's estate or such trustees, as the case
may be.
A Beneficiary shall be entitled to disclaim all or any portion of the
distribution payable under this Section from the Plan. In the event such a
disclaimer is made, the disclaimed amount shall be payable in the manner
specified in the Participant's beneficiary designation, or if not so specified,
to the remaining Beneficiary or Beneficiaries as if the disclaiming Beneficiary
died on the date before the Participant's death. A Beneficiary who disclaims any
distribution shall not have any power of appointment over the amount disclaimed
nor any other power of any nature to direct or control the disposition of the
disclaimed amount.
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Section 7.5 - Disability. The entire Account of a Participant as
adjusted pursuant to Section 6.6 shall be distributed to him at the time and in
the manner specified in Section 7.2 upon his termination of employment because
of his Disability.
Section 7.6 - Resignation or Discharge. If an Employee ceases to be
employed by the Employer or any Affiliate prior to his Normal Retirement Date
for any reason other than death or Disability, the Trustee shall distribute to
him his entire General Investments Account and Stock Account, as adjusted
pursuant to Section 6.6 and at the time and in the manner specified in Section
7.2. Participants are 100% vested in their Accounts.
Any Participant who received a distribution from the Parasole
Restaurant Holdings, Inc. Employees Stock Ownership Plan on termination of
employment on or before September 30, 1996, which was less than the value of his
Account and resumes employment covered under this Plan shall be entitled to
repay the amount so distributed without regard to the limitations on Annual
Additions specified in Section 5.2. Employment or re-employment with a
Participating Affiliate after September 30, 1996, shall not be considered
"covered under this Plan" as long as the Plan remains frozen. At any time when
the Plan is no longer frozen, deemed distributions of zero vested Accounts shall
be automatically treated as repaid upon re-employment which is covered under
this Plan. The right to repay a lump sum distribution (or to be treated as
having repaid a deemed distribution) shall expire on the earlier of a date five
years after the terminated Employee resumes employment covered under the Plan or
the occurrence of five consecutive One-Year Breaks in Service after receiving
the actual or deemed distribution. In the event an Employee elects to repay in
full the distribution (or is treated as having repaid a deemed distribution) as
provided in this Section, the value of any amounts forfeited hereunder shall be
restored by the Employer, unadjusted by any gains or losses, within a reasonable
time after such repayment.
Section 7.7 - Termination of Plan. Notwithstanding any provision of the
Plan to the contrary, except Sections 9.4 and 10.6, if the Plan is terminated,
or if the Employer begins making contributions to the Plan and later completely
discontinues contributions to the Plan, the Trust shall be adjusted as of the
date of such termination or discontinuance and after crediting any increase or
charging any decrease in the manner provided in Section 6.6 to all Accounts then
existing, the Trustee shall hold or distribute the full amount then credited to
each Participant's Account (which shall be 100% vested, to the extent not
previously forfeited, as a result of the termination) as provided in Article 7.
If the Plan shall at any time be terminated (or if contributions are
completed discontinued), the Trust shall continue and the Trustee shall continue
to act until all assets of the Trust have been distributed in accordance with
the terms of the Plan.
Section 7.8 - Claims Procedure. The Administrator shall notify a
Participant in writing within 90 days of his written application for benefits of
his eligibility or noneligibility for benefits under the Plan. If the
Administrator determines that a Participant is not eligible for benefits or full
benefits, the notice shall set forth (1) the specific reasons for such denial,
(2) a specific reference to the provision of the Plan on which the denial is
based, (3) a description of any additional information or material necessary for
the claimant to perfect his claim and a description of why it is needed, and (4)
an explanation of the Plan's claims review procedure and other appropriate
information as to the steps to be taken if the Participant wishes to have his
claim reviewed. If the Administrator determines that there are special
circumstances requiring additional time to make a decision, the Administrator
shall notify the Participant of the special circumstances and the date by which
a decision is expected to be made, and may extend the time for up to an
additional 90-day period. If a Participant is determined by the
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<PAGE>
Administrator to be not eligible for benefits, or if the Participant believes
that he is entitled to greater or different benefits, he shall have the
opportunity to have his claim reviewed by the Administrator by filing a petition
for review with the Administrator within 60 days after receipt by him of the
notice issued by the Administrator. Said petition shall state the specific
reasons the Participant believes he is entitled to benefits or greater or
different benefits. Within 60 days after receipt by the Administrator of said
petition, the Administrator shall afford the Participant (and his counsel, if
any) an opportunity to present his position to the Administrator orally or in
writing, and said Participant (or his counsel) shall have the right to review
the pertinent documents. The Administrator shall notify the Participant of its
decision in writing within said 60-day period, stating specifically the basis of
said decision written in a manner calculated to be understood by the Participant
and the specific provisions of the Plan on which the decision is based. If,
because of the need for a hearing, the 60-day period is not sufficient, the
decision may be deferred for up to another 60-day period at the election of the
Administrator, but notice of this deferral shall be given to the Participant.
In the event of the death of a Participant, the same procedure shall be
applicable to his Beneficiaries.
Section 7.9 - Missing Persons. The amount of a Participant's Account
which is otherwise considered as non-forfeitable shall be forfeited and
reallocated to other Participants as if it were a contribution made pursuant to
Section 4.1 for the Plan Year ending 4 years after the later of (i) termination
of employment of the Participant for whom such Account was maintained, or (ii)
the last date a payment from said Account was made, if at least one such payment
was made, or (iii) the first date a payment was directed to be made from said
Account by the Administrator if no payments had been made, if the Administrator,
after diligent inquiry, is unable to locate the Participant or his Beneficiary
for purposes of making distribution. Prior to the forfeiture of his or her
Account, a Participant who cannot be located after diligent inquiry shall be
deemed to have elected distribution in the form of cash and such person's
Account may be invested by the Trustee in an interest bearing savings account.
Notwithstanding the foregoing, if at any subsequent date such person is located,
the Employer shall contribute an amount to the Trust, to be placed in an Account
for such individual, in an amount equal to the amount of reduction of Employer
contributions effected pursuant to the preceding sentence attributable to his
Account, but reduced by any amount paid by the Trustee or Employer to any state
or political subdivision under any escheat law or statute. The amount shall
first be allocated from forfeitures, and to the extent necessary, from Employer
or Participating Affiliate contributions, as determined by the Administrator.
Section 7.10 - Diversification. Each Qualified Participant (as defined
below) may elect within 90 days after the close of each Plan Year in the
Qualified Election Period (as defined below) to withdraw all or any part of the
excess of 25% of his Adjusted Account Balance (as defined below) over the sum of
the number of shares of Stock (adjusted for Stock splits, etc.) previously
withdrawn pursuant to this Section 7.10. The resulting number of shares shall be
rounded to the nearest whole integer. In the case of the election year in which
a Qualified Participant can make his last withdrawal pursuant to this Section,
"50%" shall be substituted for "25%" in the preceding sentence. The distribution
shall be made in cash or in Stock as provided in Section 7.1 and shall be made
within 90 days after the election period with respect to which the election is
made.
For purposes of this Section:
a) "Qualified Participant" means any Employee who has
completed at least 10 years of participation under the Plan and has
attained the age of 55.
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b) "Qualified Election Period" for an individual means the 6
Plan Year period beginning with the Plan Year in which the individual
becomes a Qualified Participant.
c) "Adjusted Account Balance" of a Qualified Participant means
the sum of all prior distributions of Stock made pursuant to this
Section in the current Plan Year or prior Plan Years and the Stock
(acquired by or contributed to the Plan after December 31, 1986) in the
person's Stock Account as of the last day of the Plan Year preceding
the applicable Qualified Election Period.
Notwithstanding anything herein to the contrary, if the Fair Market
Value of Stock allocated to a Participant's Account on or before the last day of
the Plan Year immediately before an election period during which the Participant
is eligible to make a diversification election is $500 or less (and never
exceeded this amount), then the above diversification of investment rules shall
not apply. In determining whether the Fair Market Value of allocated Stock is
$500 or less, Stock acquired after December 31, 1986, which was allocated or
acquired for Accounts of all ESOPs or tax credit ESOPs maintained by Affiliates
shall be aggregated.
This Section 7.10 shall apply separately to a Participant's Parasole
Subaccount, substituting "Parasole Restaurant Holdings, Inc. stock" in place of
"Stock", to the extent Parasole Restaurant Holdings, Inc. stock is determined by
the Employer or by the Internal Revenue Service to be employer securities for
purposes of Section 401(a)(28) of the Code.
Section 7.11 - Dividend Distribution. Any cash dividend paid with
respect to any BUCA Stock or Parasole Restaurant Holdings, Inc. stock owned by
the Plan, whether allocated or unallocated, shall be applied as follows:
a) If there is outstanding indebtedness of the Trustee under
loan(s) the proceeds of which were used to purchase Stock, then such
dividend may be used to service such indebtedness. Such dividend shall
be treated as Plan Year assets for purposes of Section 6.4; provided
that with respect to a dividend on allocated Stock, such dividend may
only be used to service debt to the extent that the following sentence
is satisfied. To the extent that a dividend on allocated Stock is used
to service indebtedness, the Trustee shall allocate to the Stock
Account to which such dividend would have been allocated, Stock from
the Unallocated Stock Account having a Fair Market Value not less than
the dividend used to service the indebtedness, and for this purpose,
the Fair Market Value of Stock allocated as a result of the application
of a cash dividend on Stock held in the Unallocated Stock Account shall
be taken into account in determining whether this requirement has been
satisfied. Provided, however, a dividend shall not reduce the number of
shares of Stock in the Unallocated Stock Account below one. The Trustee
shall determine which indebtedness is to be reduced if there is more
than a single loan in existence. Allocation of Stock through the use of
a cash dividend shall be made as of the Plan Year the dividend would
have been otherwise allocated to the Stock Account;
b) Such dividend may be paid directly to Participants or
Beneficiaries of the Account to which the dividend is to be allocated
as provided in Code Section 404(k)(2); or
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c) Such dividend may be retained in the Accounts to which the
dividend is to be allocated. A dividend shall be allocated among
Accounts based upon the number of shares of Stock held in each Account
and shall be credited to General Investments Accounts.
In applying this Section 7.11 to dividends paid on Parasole Restaurant
Holdings, Inc. stock, the term "Stock" shall be interpreted to include Parasole
Restaurant Holdings, Inc. stock to the extent Parasole Restaurant Holdings, Inc.
stock is determined by the Employer or by the Internal Revenue Service to
constitute "applicable employer securities" as defined in Section 404(k) of the
Code.
Section 7.12 - Direct Rollovers.
Section 7.12.1 - General Rule. If a "distributee" of any
"eligible rollover distribution":
(1) elects to have such eligible rollover
distribution paid directly to an "eligible retirement plan,"
and
(2) specifies the eligible retirement plan to which
such eligible rollover distribution is to be paid (in such
form and at such time as the Administrator may prescribe),
such eligible rollover distribution shall be made in the form of a
"direct rollover" to the eligible retirement plan so specified by the
distributee.
Notwithstanding the foregoing, this Section 7.12 shall apply
only to the extent the eligible rollover distribution would be
includable in gross income if not transferred as provided above.
Section 7.12.2 - Definitions.
A "direct rollover" is an eligible rollover distribution that
is paid directly to an eligible retirement plan for the benefit of the
distributee.
"Distributee" means the Participant, the surviving spouse of a
Participant, or an Alternate Payee who is a spouse or former spouse of
a Participant.
An "eligible retirement plan" is an individual retirement
account described in Code Section 408(a), an individual retirement
annuity (other than an endowment contract) described in Code Section
408(b), a qualified defined contribution retirement plan that accepts
rollover distributions, or an annuity plan described in Code Section
403(a) that accepts rollover distributions. Notwithstanding the
foregoing, if the distributee is the Participant's surviving spouse,
"eligible retirement plan" shall mean either an individual retirement
account or an individual retirement annuity (other than an endowment
contract).
Eligible rollover distribution" means any
distribution of all or any portion of the balance to the credit of an
employee in a qualified plan, provided, however, that an eligible
rollover distribution does not include:
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(1) any distribution that is one of a series of
substantially equal periodic payments, not less frequently
than annually, for the life or life expectancy of the
distributee, or for the joint lives or life expectancies of
the distributee and his or her Designated Beneficiary, or for
a specified period of 10 years or more;
(2) any distribution to the extent such distribution
is required under Code Section 401(a)(9), relating to minimum
distribution requirements;
(3) the portion of any distribution that is not
includable in income (determined without regard to the
exclusion for net unrealized appreciation described in Code
Section 402(e)(4));
(4) returns of Code Section 401(k) elective deferrals
that are returned as a result of the Code Section 415
limitations;
(5) corrective distributions of excess contributions
and excess deferrals under qualified cash or deferred
arrangements and corrective distribution of excess aggregate
contributions together with the income allocable to these
corrective distributions;
(6) loans treated as distributions under Code Section
72(p) and not exempted by Section 72(p)(2);
(7) loans in default that are deemed distributions;
(8) dividends paid on employer securities as
described in Code Section 404(k);
(9) the cost of life insurance coverage (P.S. 58
costs).
Section 7.12.3 - Procedures.
(a) In General. The Administrator may prescribe any
procedure for a distributee to elect a direct rollover
provided the procedure is reasonable. Such procedures may
include any reasonable requirement for information or
documentation from the distributee.
(b) Notice. At least thirty (30) days and no more
than ninety (90) days before making any distribution subject
to this Section 7.12, the Administrator shall provide to the
distributee a written explanation of the rules concerning
direct rollovers, income tax withheld on distributions not
rolled over, and any other information required by Code
Section 402(f) (the "402(f) notice"). A distributee may waive
the 30-day notice requirement, provided the distributee has
been advised of the right to take at least 30 days to make the
direct rollover election.
(c) $500 Rule. A distributee may elect to have a
portion of an eligible rollover distribution paid to an
eligible retirement plan in a
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direct rollover and to have the remainder paid to the
distributee only if the portion paid to the eligible
retirement plan equals at least $500.
(d) Direct Rollover to One Account Only. An eligible
rollover distribution (or portion thereof) may be distributed
in a direct rollover only to a single eligible retirement plan
selected by the distributee.
(e) $200 Rule. A distributee may not elect a direct
rollover with respect to eligible rollover distributions
during a year if such distributions are reasonably expected to
total less than $200.
(f) Method of Making a Direct Rollover. The
Administrator may accomplish a direct rollover by any
reasonable means of direct payment to an eligible retirement
plan including providing a distributee with a check payable to
the eligible retirement plan with instructions to the
distributee to deliver the check to the eligible retirement
plan.
(g) Default Option. If the distributee does not so
elect or does not provide the required information in the form
and at the time required by the Administrator, the
Administrator shall direct the Trustee to make the
distribution directly to the distributee and to withhold
income taxes on such distribution equal to 20% of the value of
such distribution (or such other amount provided under Code
Section 3405(c), as amended). Provided, however, that the
Administrator shall not make a distribution under this default
option unless the distributee is provided with the 402(f)
notice. The Administrator shall not withhold tax from an
eligible rollover distribution if such distribution is not
subject to a direct rollover election because the distribution
was not reasonably expected to total $200 in the year.
ARTICLE 8. ADMINISTRATION
Section 8.1 - Administrator. The Employer shall be a named fiduciary
and the Administrator of the Plan, and, as Administrator, shall administer the
Plan in accordance with its terms and shall have all powers necessary to carry
out its terms. In the event the Employer ceases business operations pursuant to
a plan of liquidation, the Trustee shall assume the powers and responsibilities
of the Administrator until all assets in the Trust have been distributed.
Section 8.2 - Delegation. The Employer shall have the power, by
resolution of its Board of Directors, to delegate specific fiduciary duties and
responsibilities (other than those of the Trustee with respect to the custody
and control of the assets of the Trust). Such delegations may be to officers or
other employees of the Employer or to other individuals or entities. Any
delegation by the Employer may, if specifically stated, allow further
delegations by the individual or entity to whom the delegation has been made.
Any delegation may be rescinded by the Employer at any time.
Section 8.3 - Committee. The Employer in the exercise of its power to
delegate fiduciary duties pursuant to Section 8.2, may establish a Committee and
appoint its members to assist in the
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administration of the Plan. The Committee, if so established, shall be a named
fiduciary and, unless otherwise provided by resolution of the Board of Directors
of the Employer shall have the power and responsibility to:
a) Adopt rules and regulations, not inconsistent with the
declared purposes and specific provisions of the Plan for their
administration;
b) Interpret and construe the provisions of the Plan;
c) Determine from time to time the status of all Employees,
Participants, and Beneficiaries for the purposes of the Plan;
d) Determine the rights of Employees, Participants, and
Beneficiaries to benefits under the Plan, the amount thereof and the
method and time or times of payment of the same; and
e) Instruct the Trustee as to the disbursement of the assets
of the Trust.
Any member of the Committee may resign by delivering a copy of his
written resignation to the Employer and may be removed by resolution of the
Board of Directors of the Employer. Vacancies shall be filled by the Board of
Directors of the Employer.
Section 8.4 - Reports and Records. The Employer and those to whom the
Employer has delegated fiduciary duties shall keep records of all their
proceedings and actions, and shall maintain all such books of account, records
and other data as shall be necessary for the proper administration of the Plan
and to comply with applicable law.
Section 8.5 - Payment of Expenses. The Employer may pay all expenses of
administering the Plan, including but not limited to Trustee's fees and expenses
incurred by persons or entities to whom fiduciary duties have been delegated. If
said expenses are not paid by the Employer, they shall be a lien against and
paid from the assets of the Trust (subject to the procedures and limitations
contained in other sections of the Plan), except for the items, the payment of
which would constitute a prohibited transaction.
Section 8.6 - Indemnification. To the extent permitted by law, the
Employer shall indemnify members of a Committee, if one is created, individual
Trustees and others to whom the Employer has delegated fiduciary duties against
any and all claims, loss, damages, expense and liability arising from their
responsibilities in connection with the Plan which are not covered by insurance
(without recourse) paid for by the Employer, unless the same is determined to be
due to gross negligence or intentional misconduct. The Employer shall also
indemnify any corporate Trustee with respect to any liability resulting from the
use of the Fair Market Value of Stock determined by the Administrator (or an
independent outside appraiser used by the Administrator).
ARTICLE 9. AMENDMENT TO AND TERMINATION OF PLAN
Section 9.1 - Amendments. The Employer shall have the right at any time
and from time to time by resolution adopted by its Board of Directors to modify
or amend the Plan in full or in part in any respect, and each such amendment
shall become effective as of any current, prior or later date specified in such
resolution upon the filing with the Trustee of a certified copy of the
resolution of its Board of Directors containing such amendment; provided,
however, that:
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a) No such amendment shall substantially enlarge the duties
and responsibilities of the Trustee without its written consent
thereto;
b) No such amendment shall either directly or indirectly have
the effect of giving the Employer any interest in any part of the
corpus or income of the Trust or cause such assets to be used for or
diverted to purposes other than for the exclusive benefit of
Participants and their Beneficiaries except as specifically provided
herein to the contrary; and
c) No such amendment shall reduce the vested amount properly
credited to any Account of a Participant or Beneficiary without his
consent except to the extent necessary or advisable, in the judgment of
the Board of Directors of the Employer to comply with any requirement
of statutory or general law or to enable the Trust to qualify or remain
qualified as an employees' trust exempt from taxation under Federal
laws or to enable the contributions by the Employer hereunder to be
deductible under the provisions of any applicable law or regulation in
computing income subject to any tax based on or measured by income.
Any such amendment shall be by resolution of the Board of Directors of
the Employer (except any amendment necessary to initially qualify the Plan under
Section 401(a) of the Code may be made by the authorized officers of the
Employer). Any amendment adopted under the provisions of this Section shall be
deemed a part of the Plan as if incorporated herein, and the Plan shall be
deemed accordingly amended.
Section 9.2 - Termination of Plan. The Employer is not and shall not be
under any obligation or liability whatsoever to make contributions or to
maintain the Plan for any given length of time and may, in its sole and absolute
discretion, continue to maintain the Plan as a frozen plan or terminate its
participation in the Plan at any time without any liability whatsoever for such
failure to make contributions or for such termination of the Plan.
Section 9.3 - Time of Termination. The Plan hereby created shall
terminate as of the date specified by resolution by the Board of Directors of
the Employer terminating the Plan or as of the date all Accounts have been
distributed pursuant to the terms of the Plan.
Section 9.4 - Distributions. Upon termination of the Plan or the
complete discontinuance of contributions by the Employer (if the Plan has
earlier ceased to be a frozen plan) for any reason whatsoever, the Trustee
shall, if requested by the Employer, distribute to the Employer the shares of
Stock held by the Trustee in the Unallocated Stock Account directly attributable
to outstanding loans made by the Employer (but not having a Fair Market Value in
excess of the amount of such loans (principal and interest) at the time of the
distribution), and such distribution shall constitute a full release and
indemnity of the Trust and Trustee by the Employer for any such loan or loans.
Alternatively, the Employer may direct the Trustee to sell sufficient shares of
unallocated Stock (to the Employer or another purchaser) to enable it to pay off
the remaining debt. Any remaining shares or proceeds from the sale of shares
held in the Unallocated Stock Account of the Plan shall, subject to the terms of
the pledge agreement, be allocated as of the date of termination or
discontinuance to all Participants (active or inactive) who have an Account
under the Plan, in proportion to the number of shares of Stock allocated to
their Stock Accounts as of said date without regard to this Section. Such
amounts shall not be considered as Annual Additions.
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In the event of termination of the Plan, or the complete discontinuance
of contributions to the Plan by the Employer, all assets of the Trust allocated
to General Investments or Stock Accounts shall be nonforfeitable, except to the
extent specifically provided herein to the contrary, and shall be held or
distributed in accordance with the provisions of Section 7.7.
Section 9.5 - Partial Termination. Upon termination of the Plan with
respect to a group of Participants which constitutes a partial termination of
the Plan, the Trustee shall allocate and segregate for the benefit of such
Participants, the proportionate interest of such persons in the Trust, as
determined by the Trustee. The Accounts of all such persons shall become
nonforfeitable to the extent required by law and the Trustee shall hold or
distribute the segregated assets of the Trust to said persons according to the
provisions of Section 7.7 as if it were total termination of the Plan.
ARTICLE 10. MISCELLANEOUS
Section 10.1 - No Guaranty of Employment. The adoption and maintenance
of the Plan and Trust shall not be deemed to be a contract between the Employer
and any Employee. Nothing herein contained shall be deemed to give any Employee
the right to be retained in the employ of the Employer or to interfere with the
right of the Employer to discharge any Employee, at any time, nor shall it be
deemed to give the Employer the right to require any Employee to remain in its
employ, nor shall it interfere with the Employee's right to terminate his
employment at any time.
Section 10.2 - Construction of Agreement. This Plan shall be construed
according to the laws of the State of Minnesota to the extent not preempted by
Federal law; provided, however, that if any provision is susceptible to more
than one interpretation, such interpretation shall be given thereto as is
consistent with this Plan and the Trust being a qualified plan and trust within
the meaning of Code Section 401. If any provision of this instrument shall be
held by a court of competent jurisdiction to be invalid or unenforceable, the
remaining provisions hereof shall continue to be fully effective. If any
provision is determined, by the Administrator, a governmental agency or a court
of competent jurisdiction, to be in violation of any statute, regulations,
rulings or case law, such provision may be eliminated or modified by the
Employer as necessary to bring it into compliance, and Participants and
Beneficiaries shall have no enforceable rights under the noncomplying
provisions.
The Employer, or the Committee to the extent of its delegated powers,
has exclusive authority to determine conclusively for all parties all questions
arising in the administration of the Plan, except as the Plan may expressly and
unambiguously give discretionary power to Participants or Beneficiaries. The
Employer (or Committee) has discretionary authority to interpret and construe
the terms of the Plan and to determine all questions of eligibility and status
of Employees, Participants and Beneficiaries under the Plan and the amounts of
their respective interests. Employer (or Committee) determinations are binding
on all persons, subject to the claims procedures under the Plan.
Section 10.3 - Spendthrift Provision. To the maximum extent permitted
by law, benefits payable hereunder, and any interest of a Participant or
Beneficiary in the Trust shall not be subject to assignment, transfer or
anticipation or otherwise alienable either by voluntary or involuntary act or by
operation of law, nor subject to attachment, execution, garnishment,
sequestration or other seizure, under any legal or equitable process. However,
the benefits payable hereunder and any interest of a Participant in the Trust
may be subject to the creation, assignment, or recognition of a right pursuant
to a Qualified Domestic Relations Order.
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Section 10.4 - Headings. Headings and sub-headings herein are inserted
for convenience of reference only and are not to be considered in the
interpretation or the construction of the provisions of the Plan.
Section 10.5 - Limitation on Employer's and Trustee's Liability.
Neither the Trustee nor the Employer guarantees the benefits payable under the
Plan or Trust, and payments which are specified to be made to Participants and
Beneficiaries shall be made exclusively from the assets of the Trust.
Section 10.6 - Return of Contributions. In no event shall any part of
the Trust assets be paid to or become vested in the Employer, or be used for any
purpose whatsoever other than for the exclusive benefit of Participants and
their Beneficiaries, except as specifically provided herein to the contrary, and
except that contributions of the Employer may be returned if:
1) The contribution was conditioned on the qualification of
the Plan under Section 401(a) of the Code, the Plan does not so
qualify, and the contribution is returned within one year after the
Plan is found to not so qualify;
2) The contribution was made due to a mistake of fact, the
contribution is returned within one year of the mistaken payment of the
contribution and the return satisfies the requirements of the last
paragraph of this Section; or
3) The contribution was conditioned on its deductibility, the
deduction is disallowed, the contribution is returned within one year
of the disallowance of the deduction, and the return satisfies the
requirements of the last paragraph of this Section.
The return of a contribution to the Employer satisfies the requirements
of this paragraph if the amount so returned (a) does not exceed the amount which
would have been contributed had there been no mistake of fact or error in
determining the deduction, as the case may be, (b) does not include the net
earnings attributable to such contribution, (c) is reduced by any net losses
attributable to the contribution, and (d) does not reduce the Account of any
Participant to less than such Account would have been had the returned
contribution never been made.
Section 10.7 - Merger. The Plan shall not be merged or consolidated
with any other plan and no assets or liabilities of the Plan shall be
transferred to any other plan unless each person having an interest in the Trust
would (if the Plan were then terminated) receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated).
Section 10.8 - Military Leaves. Notwithstanding any provision of this
plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Code ss. 414(u).
ARTICLE 11. AGREEMENT TO PURCHASE STOCK
Section 11.1 - Stock Subject to this Article. This Article shall apply
to Stock acquired by the Trust and distributed to Participants or their
Beneficiaries hereunder for any periods when ownership of the Stock is not
restricted to active Employees and the Plan. Each certificate representing
shares of Stock acquired by the Trust and each Stock certificate representing
shares of Stock distributed to a Participant or Beneficiary hereunder shall be
endorsed substantially as follows:
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"The shares represented by this certificate are
subject to the provisions of the BUCA, Inc. Employee Stock
Ownership Plan, a copy of which is on file with the Secretary
of the Company at its registered office, the provisions of
which include restrictions on transferability and a right of
the shareholder to require the Employer to purchase shares
represented by this certificate under circumstances provided
for therein."
In addition, to the extent applicable, the following legend will be placed on
each Stock certificate distributed under the Plan:
"The shares represented by this certificate have not
been registered under the Federal Securities Act of 1933 or
under any applicable state securities law and may not be sold
or otherwise disposed of for value, or transferred, except
pursuant to registration, exemption from registration, or
operation of law. The holder is required to obtain an opinion
of legal counsel satisfactory to the Company to the effect
that the shares may be transferred without registration if any
exemption is claimed."
Provided, however, that failure to so endorse any of such Stock
certificates shall not render this Section invalid or inapplicable. The Employer
shall keep a copy of the Plan available for inspection by all properly
interested parties at its registered office.
Section 11.2 - Put Option. No Stock shall be subject to any put, call
or other option, or buy-sell or similar arrangement when held by or distributed
from the Plan, except for the following put option and the right of first
refusal set forth in Section 11.3.
Any share of Stock distributed from the Plan shall be subject to the
following put option if such Stock is not or ceases to be publicly traded or
becomes subject to a trading limitation. This Stock will be considered as
publicly traded at any time if it is then listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of 1934 or is
quoted on a system sponsored by a national securities association registered
under Section 15A(b) of the Securities Exchange Act. The Stock will be treated
as subject to a "trading limitation" only if any federal or state securities
law, or any regulation thereunder, makes the Stock not as freely tradable as
Stock not subject to such restrictions.
The put option is exercisable only by the Participant who receives such
shares from the Plan, by his donees, or by a person (including an estate or its
distributee) to whom the Stock passes by reason of a Participant's death. The
put option will apply only if, within the put option periods described
hereinafter, the Stock is not or ceases to be publicly traded without
restriction. The first put option period shall be for 60 days following the date
the stock is distributed to any individual who may exercise the put option. If
the individual does not exercise the put option within such 60-day period, then
such option shall lapse and a second and final put option period shall commence
in the Plan Year following the Plan Year within which the first 60-day option
period lapsed. This final put option period shall be for 60 days after
individuals holding the put option are notified of the Fair Market Value.
If, within either or both of said put option periods, the Stock was
publicly traded without restrictions, but ceases to be publicly traded without
restriction, the Administrator will notify each such security holder in writing
on or before the tenth day after the date the Stock ceases to be so traded that
for the remainder of the put option period the Stock is subject to the put
option. If such notice is not
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given within ten days, a day shall be added to the duration of the put option
during which the Stock issued to be publicly traded without restriction for each
day after said ten-day period such notice has not been given. Such notice must
inform distributees of the terms of the put option they are to hold.
The put option requires the Employer to purchase the Stock and is to be
exercised by the holder notifying the Administrator in writing that the put
option is being exercised. The Plan is granted the option to assume the rights
and obligations of the Employer at the time the put option is exercised. The
period during which a put option is exercisable does not include any time when
the distributee is unable to exercise it because the Employer is prohibited from
honoring it by applicable federal or state law. The price of the put option
shall be the Fair Market Value of the Stock as of the most recent Accounting
Date at the time of the exercise of the put option; except in the case of a
transaction between the Plan and a disqualified person, as defined in Section
4975(e)(2) of the Code, in which case the price must be determined as of the
date of the transaction. Notwithstanding the above, if the Administrator
determines that there has been a significant change in the value of the Stock,
it may cause a more current determination of Fair Market Value to be used for
transactions with non-disqualified persons on and after such date as the
Administrator may determine.
The payment terms shall be as described below, unless the Employer or
Plan, as the case may be, specifies payment at an earlier period of time. When
the Employer is repurchasing the Stock under the put option where the Account in
question has been distributed in a lump sum payment, the Employer may exercise
its option to repurchase the Stock on an installment basis over a period of five
(5) years with the first payment being made within 30 days of the exercise of
the put option. If the holder agrees, the repurchase period may be extended to a
total of ten (10) years. A reasonable rate of interest must be paid on any
deferred payments. The Administrator shall determine this rate in accordance
with uniform rules. The seller must be given a promissory note, the full payment
of which could be required by the holder if the repurchaser defaults in the
payment of a scheduled installment payment, plus adequate security in accordance
with Treasury Regulation Section 54.4975-7(b)(12)(iv) (or any successor
regulation).
If the distribution of the Account is in a form other than a lump sum
distribution, the Stock shall be paid for within 30 days from the date of the
exercise of the option as to each partial distribution.
Payment under the put option described above shall not be restricted by
the terms of any loan.
Section 11.3 - Right of First Refusal. Any share of Stock shall be
subject to the following right of first refusal if such Stock is not publicly
traded at the time the right may be exercised. This Stock will be considered as
publicly traded at any time if it is then listed on a national securities
exchange registered under Section 6 of the Securities Exchange Act of 1934 or is
quoted on a system sponsored by a national securities association registered
under Section l5A(b) of the Securities Exchange Act.
The right of first refusal applies to any holder who receives the Stock
or to whom the Stock passes from the Plan. It does not apply in the case where
there is no distribution of Stock due to a provision in the bylaws or Articles
of Incorporation of the Employer prohibiting a non-Employee from owning Stock.
Such holder may not transfer or in any way dispose of such Stock without first
offering to sell the Stock to the Plan. Such offer shall be made in the form of
a written notice to the Trustee and the Employer disclosing: (1) the name(s) of
the proposed transferee(s) of the Stock; (2) the certificate number and number
of shares of the Stock proposed to be transferred; (3) the proposed price; and
(4) all other terms of the proposed transfer.
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Within 14 days after such notice is given, the Trustee shall have the
option to purchase all or a part of such Stock. If the Trustee decides to
exercise this right of first refusal, the price shall be the Fair Market Value
of the Stock as of the most recent Accounting Date at the time of the exercise
of the right (except in the case of a transaction between the Plan and a
disqualified person, as defined in Section 4975(e)(2) of the Code, in which case
the price must be determined as of the date of the transaction) or the proposed
price and other terms of the transfer, whichever is greater.
In the event that the Trustee notifies the Employer that the Trustee
does not intend to exercise the option to purchase the Stock and in the event
the 14-day period has not expired, the Employer shall have the option to
purchase all or a part of such securities, for the purchase terms described
previously, which option must be exercised within 14 days after such notice is
given to the Trustee.
In the event that neither the Trustee nor the Employer exercises the
option to purchase such Stock, the holder shall have the right to transfer or
otherwise dispose of such Stock in accordance with the terms of the transfer set
forth in the written notice to the Trustee and the Employer, provided such
transfer is effected within 15 days after the expiration of the 14-day option
period. If the transfer is not effected within such period, the Plan and the
Employer must again be given an option to purchase, as provided in this Section.
Section 11.4 - Nonlapse. The provisions under Sections 11.1, 11.2 and
11.3 shall not lapse and shall continue to be applicable to Stock even if the
Plan terminates or ceases to be an employee stock ownership plan described in
Section 4975(e)(7) of the Code.
ARTICLE 12. TOP HEAVY PLAN PROVISIONS
Notwithstanding any provision of the Plan to the contrary, the
provisions of this Article shall govern for any Plan Year in which the Plan is a
Top Heavy Plan as of the Determination Date of the Plan.
Section 12.1 - Special Definitions. Whenever used in this Plan the
following terms shall have the respective meanings set forth below, unless the
context clearly requires otherwise, and when the defined meaning is intended the
term is capitalized.
Section 12.1.1 - "Determination Date" for a plan year of a
plan means the last day of the preceding plan year of the plan, or in
the case of the first plan year of the plan, the last day of such plan
year.
Section 12.1.2 - "Key Employee" means any Employee or former
Employee (including any deceased Employee) of an Affiliate who, at any
time during the Plan Year containing the Determination Date for the
Plan Year which is being tested for top heaviness or during any of the
four (4) preceding Plan Years--which period is referred to as the
"testing period"--is (a) an officer (that is, an administrative
executive who is in regular and continued service) of an Affiliate (but
in no event shall more than fifty persons or, if lesser, the greater of
3 persons or ten percent (10%) of the number of employees of all
Affiliates as of the Determination Date for the Plan Year which is
being tested for top heaviness, be treated as officers) if such
person's 415 Compensation for any of said Plan Years in which he was an
officer exceeds 50% percent of the maximum dollar limitation of Code
Section 415(b)(1)(A) for the calendar year in which ends the Plan Year
which is being tested for top heaviness; (b) one of ten Employees
owning
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(or considered as owning within the meaning or based on the principles
of Code Section 318) during a Plan Year in the testing period both more
than 1/2% ownership interest and the largest percentage ownership
interest in any of the Affiliates during such Plan Year of ownership if
such person's 415 Compensation exceeds the maximum dollar limitation of
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year
ends; (c) a person owning (or considered as owning within the meaning
or based on the principles of Code Section 318) five percent (5%) or
more of the outstanding interest in any Affiliate; or (d) a person
owning (or considered as owning within the meaning or based on the
principles of Code Section 318) one percent (1%) of the outstanding
interest in any Affiliate if such person's 415 Compensation for the
Plan Year exceeds $150,000.
There is no minimum number of officers that must be taken into
account, and the limited number of officers considered shall be those
with the highest one-year 415 Compensation received while an officer
for the Plan Year including the Determination Date for the Plan Year
which is being tested for top heaviness and the preceding four Plan
Years.
For purposes of determining under (b), above, the persons
owning the largest interests, if two persons have the same interest,
the person whose 415 Compensation for the Plan Year of ownership in the
testing period is the highest, shall be deemed to have a larger
interest. If a person's ownership changes during a Plan Year, his
interest is the largest interest owned at any time during the Plan
Year. For Plan Years beginning after December 31, 1988, for purposes of
this Article 12, 415 Compensation shall be adjusted to include amounts
that would otherwise be excluded from a Participant's gross income by
reason of application of Code Sections 125, 402(a)(8), 402(h)(1)(B)
and, in the case of Employer contributions made pursuant to a salary
reduction agreement, 415 Compensation shall include amounts that would
otherwise be excluded from a Participant's gross income by reason of
the application of Code Section 403(b).
For purposes of applying subparagraph (C) of Code Section
318(a)(2), five percent (5%) shall be substituted for fifty percent
(50%). A person's interest in all outstanding stock or all outstanding
stock with voting power shall be utilized in the determination of
ownership interest in a corporation. A person's interest in capital or
profits shall be utilized in the determination of ownership interest in
a noncorporate entity. The rules of subsections (b), (c), and (m) of
Code Section 414 shall not be applicable for purposes of determining
ownership in Affiliates under this paragraph for purposes of testing
the five percent (5%) and one percent (1%) limits but shall be taken
into account in determining whether an individual has 415 Compensation
in excess of $150,000. A beneficiary of a deceased Participant who was
a Key Employee shall be considered to be the Key Employee with respect
to the benefits received.
Section 12.1.3 - "Permissive Aggregation Group" means the
Required Aggregation Group of plans plus any other plan or plans of the
Employer or the Affiliates which, when considered as a group with the
Required Aggregation Group, would continue to satisfy the requirements
of Code Sections 401(a)(4) and 410.
40
<PAGE>
Section 12.1.4 - "Required Aggregation Group" means:
(a) Each qualified plan maintained by Affiliates in
which at least one Key Employee participates; and
(b) Any other qualified plan of Affiliates which
enables such plan to meet the requirements of Code Sections
401(a)(4) and 410.
The Required Aggregation Group shall include any terminated
plan maintained by Affiliates during the five-year period ending on the
Determination Date if the plan would have been included in the Required
Aggregation Group had it not been terminated.
Section 12.1.5 - "Super Top Heavy Plan" means a qualified plan
maintained by the Employer or an Affiliate where, as of the
Determination Date for the plan year, the plan would meet the test for
a Top Heavy Plan if ninety percent (90%) were substituted for sixty
percent (60%) in each place it appears in the definition of a Top Heavy
Plan.
Section 12.1.6 - "Top Heavy Plan" means a qualified plan
maintained by the Employer or an Affiliate where, as of the
Determination Date for the Plan Year, any of the following exists:
(a) The Top Heavy Ratio for such plan exceeds sixty
percent (60%) and the plan is not a part of any Required
Aggregation Group or Permissive Aggregation Group of plans;
(b) Such plan is a part of a Required Aggregation
Group of plans (but not a part of a Permissive Aggregation
Group) and the Top Heavy Ratio for the group of plans exceeds
sixty percent (60%); or
(c) Such plan is a part of a Required Aggregation
Group and a Permissive Aggregation Group and the Top Heavy
Ratio for the Permissive Aggregation Group exceeds sixty
percent (60%).
Section 12.1.7 - "Top Heavy Ratio" for a group of qualified
plans maintained by an Affiliate means a fraction, the numerator of
which is the sum of account balances under the defined contribution
plans (including any simplified employee benefit plan) for all Key
Employees and the present value of accrued benefits under the defined
benefit plans for all Key Employees, and the denominator of which is
the sum of the account balances under the defined contribution plans
(including any simplified employee benefit plan) for all participants
and the present value of accrued benefits under the defined benefit
plans for all participants as of the Determination Date. Both the
numerator and denominator of the Top Heavy Ratio are adjusted for a
distribution of any part of an account balance or an accrued benefit
made in the five-year period ending on the Determination Date.
For purposes of determining the Top Heavy Ratio, the following
rules apply. The value of account balances and the present value of
accrued benefits will be determined as of the most recent Valuation
Date that falls within or ends with the
41
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twelve-month period ending on the Determination Date. Contributions
allocated to accounts for the first year of a plan which are to be
allocated as of a date not later than the Determination Date but have
not been made as of that date shall be counted as a part of the account
balance. A similar rule shall apply for all years of plans subject to
minimum funding standards, including contributions which have been
waived, or not made and result in a funding deficiency. The account
balances and accrued benefits of a participant who is not a Key
Employee but who previously was a Key Employee will be disregarded. The
accrued benefit of a person who has not performed any services for the
Employer or Participating Affiliate during the five (5) year period
ending on the Determination Date is excluded from the calculation to
determine top heaviness. The account balances and accrued benefits
under plans other than said plan being tested for top heaviness which
are maintained by an entity other than the Employer attributable to
periods such entity was not an Affiliate shall be disregarded. The
beneficiaries of account balances and accrued benefits of a deceased
participant shall be treated as a participant with respect to the
benefits received.
The calculation of the Top Heavy Ratio, and the extent to
which distributions, rollovers, and transfers are taken into account
will be made in accordance with Code Section 416 and the regulations
thereunder. When aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the Determination
Dates that fall within the same calendar year. The present value of
accrued benefits for a defined benefit plan shall be determined as of
the Determination Date using reasonable actuarial assumptions specified
by the Employer, but if none are specified, then an interest rate of
five percent (5%) per annum and the 1984 Unisex Pension Mortality Table
shall be used. The references to plans only include qualified plans.
Section 12.1.8 - "Valuation Date" for purposes of determining
the value of plan accounts of a Top Heavy Plan shall be the same date
as the Determination Date.
Section 12.2 - Minimum Allocation. The provisions of this Section shall
not apply to an individual to the extent the individual is covered under any
other plan or plans of the Employer or its Affiliate, and the Employer has
provided that the minimum allocation or benefit requirement applicable to Top
Heavy Plans will be met other than as provided in this Section. Any contribution
to be made to the Trust by the Employer for a Plan Year and forfeitures, if any,
shall be allocated among the individuals entitled to participate in Employer's
contribution to the Trust for the Plan Year in the proportion that the 415
Compensation for the Plan Year paid by the Employer to each such individual
bears to the 415 Compensation paid by the Employer to all such individuals.
Allocations shall be made even though, under other Plan provisions, the
individual would not otherwise be entitled to receive an allocation for the Plan
Year because of: (i) the individual's failure to complete 1,000 Hours of Service
during the Plan Year; (ii) the individual's failure to make mandatory
contributions to the Plan; or (iii) the individual's Credited Compensation was
less than a stated amount. In the event the Employer or an Affiliate maintains
any other plan which with this Plan is a part of a Permissive Aggregation Group
and any other plans not in the Permissive Aggregation Group to which the
Employer or an Affiliate contributes, the following rules shall apply to the
allocation of Employer contributions and forfeitures, if any, pursuant to this
Section.
a) If such other plan or plans are defined contribution plans,
and an individual does not participate in such other plan or plans, the
Employer's contributions
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and forfeitures, if any, credited to the Account of an individual who
is not a Key Employee for the Plan Year shall in no event be less than
the lesser of (i) three percent (3%) of the individual's 415
Compensation (four percent (4%) of an individual's (whether or not the
individual is a Key Employee) 415 Compensation if the Plan is Top Heavy
and the limitations of Section 12.4 would otherwise apply); or (ii) the
percentage of 415 Compensation allocated under this Plan and all other
defined contribution plans to the accounts of the Key Employee whose
total allocation (expressed as a percentage of 415 Compensation) of
Employer and Affiliate contributions and forfeitures, if any, is the
highest for the Plan Year.
b) If such other plan or plans are defined contribution plans
and the individual participates in at least two (2) defined
contribution plans, the minimum Employer contribution described in
subsection (a) above shall be reduced by the contributions of the
Employer and Affiliates and forfeitures, if any, made on the
individual's behalf to each other plan or plans in which the individual
also participates.
c) If such other plan or plans include a defined benefit plan
in which an individual does not participate and this Plan enables the
defined benefit plan to meet the requirements of Code Sections
401(a)(4) and 410 and is a part of a Required Aggregation Group,
Employer contributions and forfeitures, if any, credited to the Account
of an individual who is not a Key Employee shall not be less than three
percent (3%) of his 415 Compensation (four percent (4%) of an
individual's 415 Compensation (whether or not the individual is a Key
Employee) if the Plan is Top Heavy and the limitations of Section 12.4
would otherwise apply), reduced by Employer and Affiliate contributions
or forfeitures, if any, made and required to be made on the
individual's behalf under any other defined contribution plan
maintained by the Employer or Affiliate in which the individual
participates.
d) If such other plan or plans include a defined benefit plan
in which an individual does participate, the amount of Employer
contributions and forfeitures, if any, credited to the Account of an
individual who is not a Key Employee shall in no event be less than
five percent (5%) of his 415 Compensation (seven and one-half percent
(7 1/2%) of an individual's 415 Compensation (whether or not the
individual is a Key Employee) if the Plan is Top Heavy and the
limitations of Section 12.4 would otherwise apply), reduced by Employer
and Affiliate contributions, and forfeitures, if any, to his account in
any other defined contribution plan in which the individual
participates (including any provisions in the plan that provides for a
minimum benefit), and reduced further by the comparable contribution
that would have to be made to this Plan to provide the individual's
accrued benefit (including any provisions in the plan that provides for
a minimum benefit) under the defined benefit plan.
In the event the Employer or an Affiliate does not maintain any other
plan which with this Plan is a part of a Permissive Aggregation Group, the
following rules shall apply to the allocation of Employer contributions and
forfeitures, if any, pursuant to this Section. The Employer contributions and
forfeitures, if any, credited to the Account of an individual who is not a Key
Employee for the Plan Year shall in no event be less than the lesser of three
percent (3%) of the individual's 415 Compensation, or the percentage of 415
Compensation allocated under this Plan to the Account of the Key Employee whose
total allocation (expressed as a percentage of 415 Compensation) of Employer
contributions and forfeitures, if any, is the highest for the Plan Year.
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Any amounts not allocated because of the limitations set forth
previously in this Section shall be allocated in accordance with the allocation
provisions set forth in Article 5 of the Plan. The minimum allocation set forth
in subparagraphs (a) and (b) of this Section is determined without regard to any
Social Security contribution. The amount of the minimum allocations described in
this Section shall be computed as of the last day of the plan year for each plan
that is within the same calendar year.
Section 12.3 - Vested Account Balance. For any Plan Year in which this
Plan is Top Heavy, an individual's benefit within the meaning of Code Section
411(a)(7) shall remain 100% vested.
Section 12.4 - Limitation on Benefits. If the Participant is a
Participant in the Plan and any defined benefit plan maintained by the Employer
or an Affiliate, the sum of such Participant's defined benefit plan fraction and
defined contribution plan fraction, as determined pursuant to Code Section
415(e) (as modified by Code Section 416(h)) for any plan year may not exceed one
(1). The Employer may, in calculating the defined contribution plan fraction,
elect to apply the transitional rule provided in Code Section 415(e)(6) as
modified by Code Section 416(h)(4). Provided the Plan is not a Super Top Heavy
Plan, and Code Section 416(h) would otherwise be applicable to the Plan, a
Participant's defined benefit plan fraction will be determined solely in
accordance with Code Section 415(e) and additional minimum contributions or
benefits will be provided all Participants in accordance with Section 12.2.
ARTICLE 13. PARTICIPATION BY AFFILIATES
Section 13.1 - In General. The Employer may be a member of a group of
corporations or businesses which is an Affiliate, and one or more of said group
of corporations or businesses may wish to adopt this Plan. The provisions of
this Article set forth the terms and conditions relating to said adoption of
this Plan by an Affiliate.
Section 13.2 - Adoption. The Employer may permit any Affiliate to adopt
this Plan and thereby become a Participating Affiliate by action by the
Affiliate's Board of Directors or other governing body and by the execution of a
written acceptance of such adoption by the Employer. If the Employer makes a
contribution (as common paymaster) on behalf of a wholly-owned subsidiary of the
Employer, that action shall constitute the subsidiary's adoption of this Plan by
action of its sole shareholder and shall also constitute acceptance by the
Employer. As a result, the subsidiary shall become a Participating Affiliate
without any further action by the Employer or the subsidiary and shall be deemed
to have adopted the Plan effective as of the first day of the Plan Year for
which the contribution was made. Unless otherwise specified, the terms and
conditions of the Plan applicable to Employees of the Employer shall be
applicable to Employees of Participating Affiliates. Notice of this adoption
shall be given by the Employer to the Trustee. The adoption shall specify the
effective date of the adoption and any other special provisions applicable to
the Participating Affiliate. For example, a special definition of Credited
Compensation, eligibility or benefit accrual provisions may be applicable to the
Participating Affiliate. After the effective date of the adoption by the
Participating Affiliate, the Plan shall apply to common law employees of the
Participating Affiliate who shall be considered as Employees.
The adoption of this Plan by the Participating Affiliate shall not be
deemed to be a contract between the Participating Affiliate and any of its
Employees. In addition, the Participating Affiliate does not guarantee the
benefits payable under the Plan and Trust Agreement. Except as specifically
provided in the Plan to the contrary, in no event shall any part of the Trust
assets be paid to or become vested in the Participating Affiliate.
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Section 13.3 - Administration. In the event that a Participating
Affiliate adopts this Plan, except for the specific provisions contained in the
adoption document, in this Article, or in any resolution made by the Employer's
Board of Directors, the Employer shall have complete authority and control to
administer the Plan and to delegate specific fiduciary duties and
responsibilities and shall be deemed the Administrator for all purposes. Any
administration or delegation pursuant to this Plan may be rescinded by the
Employer at any time. The Employer in its sole discretion shall also have the
authority to allocate the responsibility for payment of expenses of the
administration of the Plan among itself and the various Participating
Affiliates, to the extent not paid by the Plan or Trust.
Section 13.4 - Amendment. Whether or not Affiliates have adopted this
Plan, only the Employer shall have the right to amend this Plan and to specify
the effective date of such amendment. However, any amendment of this Plan shall
be communicated to each Participating Affiliate. Unless a Participating
Affiliate elects to withdraw from the Plan within five days of notice of the
amendment, it shall be deemed to have agreed to and accepted the amendment. No
notice shall be required if the Board of Directors of the Participating
Affiliate consists of the same persons as the Board of Directors of the
Employer.
Section 13.5 - Termination or Withdrawal. Any Participating Affiliate
may discontinue contributions or withdraw from the Plan by delivering a notice
adopted by the Participating Affiliate's Board of Directors or other governing
body to the Employer, specifying the date of its discontinuance or withdrawal.
The Employer shall certify such discontinuance or withdrawal to the Trustee or
insurer, if any. Such notice shall specify whether such Participating Affiliate
intends to continue a plan through the use of a separate document. If a
Participating Affiliate completely discontinues contributions to the Plan, is
adjudicated bankrupt, has its assets assigned to or for the benefit of
creditors, or is dissolved, such an event shall terminate its participation in
the Plan. A withdrawal or termination of participation by a Participating
Affiliate shall not constitute a termination of the Plan, unless the Employer
and all Participating Affiliates withdraw and/or terminate their participation
in the Plan. A withdrawal or termination of participation in the Plan by a
Participating Affiliate shall not constitute a partial termination of the Plan,
unless specified in writing by the withdrawing Participating Affiliate, or
except as may result by operation of law.
If a Participating Affiliate is withdrawing from the Plan and has
established a substantially identical plan, the Trustee of this Plan shall
transfer the assets of Participants who are employed by the withdrawing
Participating Affiliate at the time of the withdrawal to the funding agent of
said plan. If a Participating Affiliate is withdrawing or terminating from the
Plan and has not established a substantially identical plan within a reasonable
period, the Trustee shall: (a) transfer any assets in the Unallocated Stock
Account established in accordance with Section 5.2 attributable to the
Participating Affiliate's contributions to said Affiliate to the extent it may
not then be allocated pursuant to Section 5.1 to the Accounts of Participants
who are employed by the withdrawing Participating Affiliate at the time of the
withdrawal or termination; and (b) declare all Accounts of Participants who are
employed by the withdrawing Participating Affiliate at the time of the
termination or withdrawal as non-forfeitable, credit any increase or charge any
decrease to all such Accounts then existing in the manner provided in Article 6,
and hold or distribute the full amount then credited to each such Account as
provided in Section 7.2. The provisions of Section 9.4 shall only apply if the
entire Plan is being terminated. In such event, any allocation to Participants
shall be made to Participants employed by all Participating Affiliates and the
Employer in proportion to their Credited Compensation as of the date of the
allocation in that Plan Year.
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Section 13.6 - Application of Terms of the Plan.
Section 13.6.1 - Eligibility. Eligibility to participate in
the Plan shall be determined separately with respect to each
Participating Affiliate.
Section 13.6.2 - Determination of Contributions. The Employer
and each Participating Affiliate shall determine and make its own
contributions to the Plan, including the individual discretion to make
a special contribution for the Accounts of Employees who received less
of an allocation due to an oversight or mistake of fact or law. If
according to the Plan amounts previously forfeited are to be restored
by the Employer, the Participating Affiliate or Employer who last
employed the individual to whom the forfeiture was attributable shall
restore such forfeiture. Each Participating Affiliate may make its
contribution under the Plan for any Plan Year, or partial payments of
such contribution, at any time during such Plan Year or within the time
following the close of such Plan Year which is prescribed by law for
the filing of the Participating Affiliate's Federal income tax return
(or a consolidated return, if applicable) for its fiscal year for
Federal income tax purposes within or with which the Plan Year ends
(including extensions thereof). The provisions of Section 10.6 shall
apply to the contributions of each Participating Affiliate.
Section 13.6.3 - Allocation of Contributions and Forfeitures.
Contributions made by a Participating Affiliate under the Plan shall be
allocated among eligible Participants in proportion to the Credited
Compensation (defined as if the Participating Affiliate were the
Employer) paid by such Participating Affiliate for the period with
respect to which the contributions are made. However, the Employer may
adopt a rule requiring contributions to the Plan by the Employer and
each Participating Affiliate to be aggregated and allocated as a single
contribution. Forfeitures from a Participant's account shall be
allocated among the Participants or shall reduce the contributions of
the Employer or Participating Affiliate (as the terms of the Plan
require) with respect to the last Employer or Participating Affiliate
the forfeiting Participant worked for prior to the forfeiture date in
the same manner as would contributions made by said Employer or
Participating Affiliate. If active employment at the end of the Plan
Year by a Participant is a requirement prior to allocation of a
contribution or forfeiture to a Participant, a Participant is actively
employed if employed by an Affiliate or the Employer on the last day of
the Plan Year. If such individual works for more than one Participating
Affiliate and/or Employer during a Plan Year, and contributions under
the Plan are allocated on Credited Compensation up to a maximum dollar
amount, the contributions and forfeitures to be allocated pursuant to
this Plan shall be made on the pro rata portion of the maximum dollar
amount of such eligible Participant's Credited Compensation paid by
such Participating Affiliate or Employer.
Section 13.6.4 - Distributions. No distributions with respect
to termination of employment shall be made until termination of
employment with all Affiliates whether or not they are participating in
this Plan.
Section 13.7 - Interpretation. If any question arises with respect to
the interpretation of this Plan due to the existence of Participating Affiliates
that have adopted the Plan, the Employer shall establish uniform rules to
resolve such questions that shall conclusively bind all Participating Affiliates
and their Employees.
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Dated as of September 30, 1996.
EMPLOYER:
BUCA, INC.
By /s/ Joseph P. Micatrotto
---------------------------------
Its Chief Executive Officer
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 22nd day of July, 1996 by and between
BUCA, Inc., a Minnesota corporation (the "Company") and Joseph P. Micatrotto
(the "Employee").
WHEREAS, the Company desires to employ Employee to devote full time
service to the business of the Company and Employee desires to be so employed.
NOW THEREFORE, IN CONSIDERATION Of the premises and the terms and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions hereof, the Company
shall employ Employee and Employee agrees to be so employed in the capacity of
President for a term commencing July 22, 1996, and ending on December 31, 2001.
2. Duties. Employee shall diligently and conscientiously devote his full
and exclusive time and attention to the discharge of his duties as President and
Chief Operating Officer. In such capacity, Employee shall at all times discharge
said duties in consultation with and under the supervision of the Board of
Directors of the Company. Employee shall perform such duties as may from time to
time be given to him by the Board of Directors. In addition, so long as Employee
shall be employed in the capacity of President and Chief Operating Officer, the
Board of Directors shall use its best efforts to cause Employee to be elected to
the Board of Directors.
3. Base Salary. Commencing at the effective date hereof and continuing
through and including December 31, 2001, the Company shall pay to Employee for
services rendered hereunder as base compensation:
Period Monthly Salary
------ --------------
July 22, 1996 to January 31, 1997 $ 1,000.00
February 1, 1997 to July 21, 1997 $ 20,833.33
July 22, 1997 to July 21, 1998 $ 22,916.67
July 22, 1998 to July 21, 1999 $ 25,000.00
July 22, 1999 to December 31, 2001 To be determined by Board
of Directors, but not
less than $25,000
4. Stock Grant. If Employee is employed by the Company on February 1,
1997, he shall receive a number of shares of common stock of the Company
determined by dividing $125,520 by $3.75, reduced by the number of shares valued
at $3.75 per share equal in amount to Employee's share of payroll withholding
with respect to the stock grant. Employee may elect to pay a portion of his
share of payroll withholding with respect to the stock grant but in no event
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<PAGE>
shall the net number of shares delivered to Employee after reduction for payroll
withholding exceed 25,000 shares.
5. Stock Option. If Employee is employed by the Company on February 1,
1997, the Company shall grant to Employee a ten year option to purchase 184,281
shares of the Company's common stock, at an initial exercise price of $.75 per
share. The option granted hereunder shall become vested and exercisable in
accordance with the following vesting schedule:
Number of Shares
Date of Exercise Exercisable
---------------- -----------
Grant to July 21, 1997 0
July 22, 1997 to July 21, 1998 30,014
July 22, 1998 to July 21, 1999 65,784
July 22, 1999 to July 21, 2000 99,641
July 22, 2000 to July 21, 2001 139,083
July 22, 2001 to Expiration 184,281
The stock option shall be evidenced by a non-transferrable stock option
agreement containing the terms set forth in this Section 5 and such other terms
not inconsistent therewith as may be determined by the Board of Directors. Such
terms shall include customary provisions for adjustment in the number of shares
subject to the option and exercise price per share for future changes in the
capitalization of the Company.
6. Performance Stock Option Plan. In lieu of a cash bonus, for each
Incentive Period during the term of this Agreement beginning February 1, 1997,
Employee shall have the opportunity to earn additional stock options based on
the achievement of performance goals established by Employee and the Board of
Directors at or prior to the beginning of each Incentive Period. The maximum
number of shares that may be covered by an option awarded hereunder shall not
exceed 27,000 shares for the initial Incentive Period starting February 1, 1997
and ending December 31, 1997. Subsequent Incentive Periods will start on January
1st and end on December 31st of each year during the balance of this Agreement.
The maximum number of shares that may be covered by the option award during each
of those subsequent Incentive Periods will be 22,000 shares. The maximum number
of shares available hereunder shall be proportionately adjusted for any stock
split, stock dividend, reverse stock split or other similar restructuring of the
outstanding common stock of the Company. The exercise price of the options
granted hereunder shall be 20% of the fair market value of the Common Stock of
the Company at the beginning of each calendar year. For purposes of this
Agreement, the fair market value of the Common Stock on February 1, 1997, shall
be $3.75 per share. Such options shall be evidenced by stock option agreements
containing terms substantially equivalent to the stock option described in
Section 5, except that the options under this Section 6 shall be fully vested
and exercisable as of the date of grant.
7. Limitation on Stock Transfers. All of the shares of common stock of
the
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Company which may be granted to Employee under this Agreement or which may be
issued to Employee upon exercise of an option granted hereunder will not be
registered under the Securities Act of 1933 and may not be sold or transferred
in the absence of such registration or an exemption therefrom. Unless there is a
public market for the common stock of the Company, Employee shall not sell or
transfer any shares of common stock of the Company without first offering such
shares to the Company. The Company shall have sixty (60) days from the date of
receipt of any offer from Employee to sell his shares to purchase the stock so
offered. If the Company fails to purchase such shares, Employee may sell the
shares free of the restriction provided herein on terms not less favorable than
the offer made to the Company. If the sale is not completed within sixty (60)
days following the expiration of the offer to the Company, the shares shall
thereafter be subject to the rights of the Company to purchase such shares.
8. Expenses. The Company shall reimburse Employee for all reasonable and
necessary expenses incurred by him in carrying out his duties under this
Agreement. Employee shall present to the Company from time to time an itemized
statement of account of such expenses in such form as may be required by the
Company. In recognition of Employee's need for an automobile for business
purposes, the Company will provide Employee with a $600 per month automobile
allowance. The Company will reimburse Employee for legal and other consulting
fees incurred in connection the negotiation of this Agreement in an amount not
to exceed $5,000.00.
9. Fringe Benefits. Employee shall be entitled to participate in such
fringe benefit programs maintained by the Company as are available for other
employees similarly situated. Commencing November 1, 1996, the Company shall (i)
provide Employee with term life insurance having a death benefit of $1,000,000;
(ii) obtain and pay the premium for standard family coverage for Employee and
his family in the Company's group health plan; and (iii) provide Employee with
long-term disability insurance with a benefit equal to 60% of his base salary.
The Company will reimburse Employee for actual costs incurred by him with
respect to continuing his previous employer's health insurance and existing
individually owned disability coverage from July 21, 1996 to October 31, 1996 or
until the insurance provided above is in place. The Company shall also pay
college tuition costs (excluding room and board) for Employee's son Justin,
directly to the college or university attended by Justin at or before such time
that tuition is due, so long as the Company is presented with a fee or other
statement by Employee in adequate time for the Company to make such payment, up
to a maximum of $20,000 per year and $80,000 in the aggregate, provided that the
college program shall be completed by December 31, 2001.
10. Living Expenses/Relocation Allowance. From September 1, 1996 to the
earlier of the date Employee moves to a permanent location for the Company or
February 28, 1998, Employee shall be entitled to a living allowance of $1,500.00
per month. The allowance shall be payable by the Company on the last day of the
month for said month. At the time of Employee's relocation, Employee shall be
entitled to a relocation allowance of $50,000.00. Relocation expense
reimbursement in excess of $50,000.00 shall require prior Board approval.
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<PAGE>
11. Termination. Employee's employment hereunder shall be terminated
upon the happening of any of the following events:
(a) Expiration of the term of this Agreement, without renewal;
(b) Death of the Employee;
(c) Notice to Employee that his employment is terminated due to
Employee's inability to perform his usual and customary duties by reason of
physical or mental disability;
(d) Without cause by the Company at any time upon thirty (30) days prior
written notice to Employee;
(e) By Employee upon thirty (30) days prior written notice to the
Company;
(f) By Employee, if, following a Change in Control of the Company as
defined below, Employee's duties are Substantially Reduced or Negatively
Altered, as defined below, without his prior written consent, upon thirty (30)
days prior written notice to the Company; or
(g) At any time without notice by the Company for cause.
For purposes of this Section, "Cause" means (i) Employee's conviction of
a felony which constitutes a crime involving moral turpitude; (ii) Employee's
misappropriation of funds, fraud or embezzlement; or (iii) Employee's willful or
gross and repeated neglect of duties hereunder, or willful or gross repeated
misconduct in the performance of such duties, so as to have a material adverse
effect on the business, operations, assets, properties, or financial condition
of Company, taken as a whole, determined in good faith by two-thirds of the
Company's board of directors.
For purposes of this Section, "Physical or Mental Disability" means any
ailment or incapacity which prevents Employee from performing the duties
incident to the Employee's employment hereunder which has continued for a period
of either (i) 90 consecutive days in any 12-month period or (ii) 180 days in any
12-month period, and which is expected to be of permanent duration.
For purposes of this section, a "Change in Control" with respect to the
Company shall have occurred on the earliest of the following dates:
(i) The date after the date of this Agreement that any entity or
person (including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act")) shall have become
the beneficial owner of, or shall have obtained voting control over,
fifty percent (50%) or more of the outstanding common shares of the
Company;
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(ii) The date the shareholders of the Company approve a
definitive agreement: (A) to merge or consolidate the Company with or
into another corporation, or to merge another corporation into the
Company, in which the Company is not the continuing or surviving
corporation or pursuant to which any common shares of the Company would
be converted into cash, securities of another corporation, or other
property, other than a merger or consolidation of the Company in which
holders of common shares of the Company immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation or its parent corporation immediately after the merger as
immediately before; or (B) to sell or otherwise dispose of substantially
all the assets of the Company; or
(iii) The date there shall have been a change in a majority of
the Board of Directors of the Company within a twelve (12) month period
unless the nomination for election by the Company's shareholders of each
new director was approved by the vote of two-thirds of the directors
then still in office who were in office at the beginning of the twelve
(12) month period.
Notwithstanding the foregoing, a "Change in Control" with respect to the Company
shall not be deemed to have occurred by reason of a private placement of
securities of the Company that is authorized by the Board of Directors, or by a
change in the directors occurring as a result of the exercise of rights
conferred in any agreement between the Company and investors in any such private
placement of securities.
"Substantially Reduced or Negatively Altered" means, without Employee's express
written consent:
(i) the assignment to Employee of any duties inconsistent with
Employee's positions, duties, responsibilities and status with Company
or a change in Employee's reporting responsibilities, titles or offices,
or any removal of Employee from, or any failure to re-elect Employee to,
any of such positions, except in connection with the termination of
Employee's employment for cause, upon the physical or mental disability
or death of Employee, or upon the voluntary termination by Employee;
(ii) a reduction in Employee's Base Salary below the minimum Base
Salary in Section 3 hereof;
(iii) requiring Employee to move his residence more than 100
miles, except as contemplated in Section 10;
(iv) the failure by Company to continue in effect benefit plans
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substantially equivalent to the benefit plans in effect at the effective
date of this Agreement or established during the term of this Agreement;
the taking of any action by Company not required by law which would
adversely affect Employee's participation in or materially reduce
Employee's benefits under any of such plans or deprive Employee of any
material fringe benefit enjoyed by Employee; or the failure by Company
to provide Employee with the number of paid vacation days, holidays and
personal days to which Employee was then entitled in accordance with
Company' normal leave policy in effect at the effective date of this
Agreement; or
(v) failure of any successor to the Company not otherwise bound
by this Agreement to expressly assume and agree to perform the
obligations of the Company under this Agreement.
12. Effect of Termination. If Employee is terminated by the Company for
cause as defined in Section 11(g) or if Employee terminates employment under
Section 11(e), Employee shall be paid only to the date of actual termination of
employment and Employee shall not be entitled to any additional compensation for
the year in which termination of employment occurs or any other termination
payment.
If Employee is terminated by reason of death or physical or mental
disability, Employee or his estate shall be entitled to a termination payment
equal to two (2) year's base salary then in effect and the options previously
granted under Section 5 hereof shall be fully vested, immediately exercisable
and non-forfeitable. The termination payment in the case of termination due to
physical or mental disability shall be made in 24 substantially equal monthly
installments and shall be reduced by all disability insurance payments received
by Employee during such period under disability insurance policies provided by
the Company under Section 9 hereof.
If Employee terminates employment for the reason specified in Section
11(f) or Employee is terminated by the Company without cause following a "Change
in Control", or within one-hundred eighty (180) days prior to "Change in
Control" and such termination is related to the "Change in Control", Employee
shall be entitled to a termination payment of $400,000 payable in eighteen (18)
monthly installments beginning on the first day of the month following
termination of employment, all stock options previously granted to Employee
under Section 5 shall be fully vested, immediately exercisable and
non-forfeitable, all performance stock options which could be earned during the
balance of the term of the Agreement under Section 6 shall be deemed fully
earned and the Company shall continue Employee's health benefits for one (1)
year or, at its option, pay Employee's COBRA coverage premiums during the COBRA
period. If Employee terminates employment as a result of a "Change in Control"
but Employee's duties have not been "substantially reduced or negatively
altered", Employee shall be entitled to a termination payment of $250,000
payable in 12 monthly installments beginning the first day of the month
following termination of employment and the stock option previously granted to
Employee under Section 5 hereof shall be fully vested, immediately exercisable
and non-
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forfeitable.
If Employee is terminated by the Company without cause and other than
associated with a "Change in Control" as outlined above, Employee shall be
entitled to a termination payment of $400,000 payable in 18 monthly installments
beginning on the first day of the month following termination of employment and
the options previously granted under Section 5 hereof shall be fully vested,
immediately exercisable and non-forfeitable.
13. Excise Tax. Unless otherwise prohibited by applicable law, if an
amount paid to Employee under this Agreement is subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, or any successor provision
thereto, Company shall pay to Employee an additional amount in cash equal to the
amount necessary to cause the aggregate remuneration received by Employee under
this Agreement, including such additional cash payment (net of all federal,
state, and local income taxes and all taxes payable as a result of the
application of Sections 280G and 4999 of the Internal Revenue Code or any
successor provisions thereto) to be equal to the aggregate remuneration
executive would have received, excluding such additional payment (net of all
federal, state, and local income taxes), if Section 280G and 4999 (and any
successors thereto) have not been enacted into law. The adjustments, if any,
required by this section shall be determined by tax counsel selected by
Company's independent accountants with Employee's approval.
14. Confidentiality. "Confidential Information" means any information or
compilation of information possessed by the Company that derives independent
economic value, actual or potential, from not being generally known to, and not
being readily ascertainable by proper means by other persons who can obtain
economic value from its disclosure or use, including but not limited to: (a) any
information not generally known in the industry of the Company regarding the
Company's pricing of services, research, development, marketing, servicing,
business systems, and techniques; (b) financial information concerning the
Company; and (c) any information that the Company may from time to time
designate as "confidential," "proprietary," or "trade secrets" which is not
generally known in the industry of the Company.
The Employee may have access to Confidential Information which the
Company desires to protect at all times. The Employee understands, acknowledges,
and agrees that the Company has expended substantial sums of money, time and
effort in developing such Confidential Information and the Company will be
substantially harmed in the competitive marketplace if the Confidential
Information is used to its detriment or to the benefit of others.
In recognition of the foregoing, the Employee agrees that:
(a) The Employee will not, during or after employment with the
Company, directly or indirectly knowingly use or disclose any
Confidential Information to any other person, firm or company,
or in any way use for his benefit, or to the detriment of the
Company,
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any information or knowledge obtained during the course of his
employment with the Company, except as required in the conduct
of the Company's business or as authorized in writing by the
Company; and
(b) All memoranda, notes, records, papers and other documents and
all copies thereof relating to the Company's operations and all
objects related thereto are and remain the property of the
Company; including, but not limited to, those developed,
investigated, or considered by the Company. The Employee will
not copy or duplicate any of the aforementioned documents or
objects nor use any information contained therewith, except for
the Company's benefit, either during or after his employment.
15. Covenant Not To Compete. The parties agree that the Company would be
substantially harmed if the Employee competes with the Company during employment
with the Company or after termination of employment with the Company. Therefore,
in exchange for the benefits provided to the Employee hereunder, the Employee
agrees that during his employment with the Company and for a period of one (1)
year after termination of such employment for any reason, the Employee will not
directly or indirectly, without the written consent of the Company:
(01) Own, operate or render services to any entity engaged,
directly or indirectly, in owning or operating Italian restaurants
within fifty (50) miles of any restaurant owned or managed by the
Company; or
(02) Hire, offer to hire, entice away, or in any other way,
persuade or attempt to persuade any entity or any employee, officer,
agent, independent contractor, supplier, customer, or subcontractor of
the Company to discontinue their relationship with the Company;
16. Disparagement. The Company and Employee agree that during and after
the term of this Agreement, they will not knowingly vilify, disparage, slander
or defame the other party or, in the case of the Company, its officers,
directors, employees, business or business practices.
17. Remedy. Employee and Company acknowledge that in the event of a
breach of this Agreement by either party, money damages would be inadequate and
the non-breaching party would have no adequate remedy at law. Accordingly, in
the event of any controversy concerning the rights or obligations under this
Agreement, such rights or obligations shall be enforceable in a court of equity
by a decree of specific performance. Such remedy, however, shall be cumulative
and nonexclusive and shall be in addition to any other remedy to which the
parties may be entitled to by law.
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<PAGE>
18. Notices. All notices required or permitted to be given under this
Agreement shall be given by certified mail, return receipt requested, to the
parties at the following addresses or to such other addresses as either may
designate in writing to the other party:
If to Company: BUCA, INC.
3001 Hennepin Avenue South
Suite 301A
Minneapolis, Minnesota 55408
If to Employee: Joseph P. Micatrotto
1440 Glencoe Drive
Arcadia, California 91006
19. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Minnesota.
20. Entire Contract. This Agreement constitutes the entire understanding
and agreement between the Company and Employee with regard to the matters stated
herein. There are no other agreements, conditions or representations, oral or
written, express or implied, with regard to the employment of Employee by the
Company. This Agreement may be amended only in writing, signed by both parties
hereto.
21. Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Company, its successors and assigns, and shall inure to the
benefit of and be binding upon the Employee, his heirs, distributees and
personal representatives. In the event of Employee's death, any amounts payable
hereunder shall be paid in accordance with the terms of this Agreement to
Employee's designee, or if there is no such designee, to Employee's estate.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
BUCA, INC.
By: /s/ Philip A. Roberts
--------------------------------
Its: CEO
------------------------------
/s/ Joseph P. Micatrotto
-----------------------------------
Joseph P. Micatrotto
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<PAGE>
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 27th day of January, 1997 by and between
BUCA, Inc., a Minnesota corporation (the "Company") and Joseph P. Micatrotto
(the "Employee").
WHEREAS, the Company and Employee entered into an Employment Agreement
on or about July 22, 1996.
WHEREAS, the Company and Employee desire to make certain modifications
to the Employment Agreement relating to the issuance of a stock grant to
Employee.
NOW THEREFORE, IN CONSIDERATION of the premises and the terms and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Paragraph 4 of the Employment Agreement shall be amended to read as
follows:
Stock Grant. If Employee is employed by the Company on February 1, 1997,
he shall receive a payment of $125,520, payable in 24,000 shares of common stock
of the Company (valued at $3.75 per share) and $35,520 in cash, provided the
cash portion shall be reduced by an amount equal to Employee's share of payroll
withholding with respect to the $125,520 payment.
2. Except as is explicitly inconsistent, modified, supplemented or
amended by the express terms hereof, the Employment Agreement is hereby ratified
and confirmed.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
BUCA, INC.
By: /s/ Peter J. Mihajlov
--------------------------------
Its: CFO
------------------------------
/s/ Joseph P. Micatrotto
-----------------------------------
Joseph P. Micatrotto
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STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT made as of the 1st day of February, 1997, by and
between BUCA, INC., hereinafter called the "Company," and JOSEPH MICATROTTO,
hereinafter referred to as the "Optionee."
W I T N E S S E T H:
WHEREAS, the Company and Optionee desire to confirm their agreement with
respect to the grant of a stock option to employee in connection with his
employment with the Company.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the parties hereto agree as
follows:
I.
Grant of Option
---------------
The Company hereby grants to Optionee the right and option (hereinafter
called the "Option") to purchase all or any part of an aggregate of One Hundred
Eighty Four Thousand Two Hundred Eighty One (184,281) shares of Common Stock of
the Company (the "Shares") such number being subject to adjustment as provided
in Section VI hereof on the terms and conditions herein set forth.
II.
Purchase Price
--------------
Subject to the provisions of Section VI hereof, the purchase price of
the Shares covered by the Option shall be $0.75 per Share.
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III.
Term, Exercise and Vesting of Option
------------------------------------
The term of the Option shall be for a period of ten (10) years from
February 1, 1997 and shall expire at the close of business on January 31, 2007
subject to earlier termination as provided in Section V hereof.
The option granted hereunder shall become vested and shall become
exercisable, in whole or in part, at the times and as to the number of Shares
set forth in the following schedule:
Number of Shares
Date of Exercise Exercisable
---------------- -----------
Grant to July 21, 1997 0
July 22, 1997 to July 21, 1998 30,014
July 22, 1998 to July 21, 1999 65,784
July 22, 1999 to July 21, 2000 99,641
July 22, 2000 to July 21, 2001 139,083
July 22, 2001 to Expiration 184,281
Notwithstanding the foregoing, the Option shall be fully vested and the Option
shall become immediately exercisable upon the occurrence of any of the following
events: (i) death of the Optionee; (ii) termination of Optionee's employment
with the Company by reason of "physical or mental disability" of Optionee, as
that term is defined in the Employment Agreement effective July 22, 1996 between
Optionee and the Company ("Employment Agreement"); (iii) termination of
Optionee's employment by the Company within one-hundred eighty (180) days prior
to "Change in Control" and such termination is related to the "Change in
Control," as that term is defined in the Employment Agreement; (iv) termination
of Optionee's employment with the Company by Optionee as a result of a "Change
in Control;" and (vi) termination of Optionee's employment by the Company
without cause.
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<PAGE>
IV.
Nontransferability of Option Rights
-----------------------------------
The Option shall not be transferable otherwise than by will, or the laws
of descent and distribution, and the Option may be exercised, during the
lifetime of the Optionee only by him. More particularly (but without limiting
the generality of the foregoing), the Option may not be assigned, transferred
(except as provided above), pledged, or hypothecated in any way, and shall not
be subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and without effect.
V.
Termination of Employment
-------------------------
Upon Optionee's termination of employment with the Company for any
reason, any option or unexercised portion thereof shall be vested to the extent
provided in Section III and may be exercised at any time prior to expiration of
the option. The non-vested portion of the Option shall thereupon lapse and
terminate.
VI.
Changes in Capital Structure
----------------------------
If all, or any portion of the Option shall be exercised subsequent to
any share dividend in stock of the Company, recapitalization, merger,
consolidation, exchange of shares or reorganization as a result of which shares
of any class shall be issued in respect to outstanding Common Stock or Common
Stock shall be changed into the same or a different number of shares of the same
or another class or classes, the person or persons so exercising the Option
shall
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receive, for the aggregate price paid upon such exercise, the aggregate number
and class of shares to which they would have been entitled if Common Stock (as
authorized at the date hereof) had been purchased at the date hereof for the
same aggregate price (on the basis of the price per share set forth in Section
II hereof) and had not been disposed of.
VII.
Method of Exercising Option
---------------------------
Subject to the terms and conditions of this Option Agreement, the Option
may be exercised by written notice to the Company at its principal office and
place of business in the State of Minnesota. Such notice shall state the
election to exercise the Option and the number of shares in respect of which it
is being exercised, and shall be signed by the person so exercising the Option.
Such notice shall be accompanied by the payment of the full purchase price of
such Shares.
The Company promptly shall cause a certificate for the number of Shares
purchased to be issued to Optionee. If the Optionee shall so request in the
notice exercising the Option, the certificate shall be registered in the name of
the Optionee and another person jointly, with right of survivorship, and shall
be delivered as provided above to or upon the written order of the person
exercising the Option.
VIII.
Rights as Shareholder
---------------------
The holder of this Option shall have no interest in any Shares of common
stock of the Company other than the right to purchase shares as provided herein.
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IX.
No Registration
---------------
Optionee acknowledges that the shares of common stock of the Company
covered by this option have not been and will not be, upon exercise of this
option, registered under the Securities Act of 1933. Optionee represents that he
is acquiring the Shares for investment purposes and he is able to bear the
economic risk of the investment for an indefinite period of time since the
Shares so acquired cannot be sold unless they are subsequently registered or an
exemption from such registration is available. Optionee agrees that a legend may
be placed on the stock certificates acknowledging the restrictions on subsequent
distribution of the Shares.
X.
Employment
----------
Nothing in this Agreement shall be deemed to grant any right of
continued employment or limit or waive the right to terminate optionee's
employment with the Company at any time, with or without cause.
XI.
Governing Laws
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, successors, assigns and representatives and
shall be governed by the laws of the State of Minnesota.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Stock Option Agreement
to be duly executed by its officers thereunto duly authorized, and the Optionee
has hereunto set his hand, all on the day and year first above written.
BUCA, INC.
By: /s/ Peter J. Mihajlov, CFO
------------------------------
/s/ Joseph P. Micatrotto
-----------------------------------
Joseph P. Micatrotto
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AMENDMENT NO 2 TO EMPLOYMENT AGREEMENT
AMENDMENT NO. 1 TO STOCK OPTION AGREEMENT
THIS AGREEMENT is made as of the 18th day of December, 1997 (the
"Amendment") by and between BUCA, Inc., a Minnesota corporation (the "Company"),
and Joseph P. Micatrotto (the "Employee").
WHEREAS, the Company and Employee entered into an Employment
Agreement dated as of July 22, 1996 (as amended to the date hereof, the
"Employment Agreement").
WHEREAS, the Company and Employee entered into a Stock Option
Agreement dated as of February 1, 1997 (the "Option Agreement"); and
WHEREAS, the Company and Employee desire to make certain
modifications to the Employment Agreement and the Option Agreement.
NOW THEREFORE, in consideration of the premises and the terms and
conditions hereinafter set forth, the parties hereto agree as follows:
1. Section 5 of the Employment Agreement is hereby amended to
reflect an option grant of an aggregate of 30,014 shares, all of which became
vested and exercisable as of July 22, 1997 (as reflected in paragraph 3 below),
and Employee waives and forfeits any and all rights thereunder with respect to
any option contained in paragraph 5 of the Employment Agreement in excess of
such 30,014 shares.
2. Section 6 of the Employment Agreement is hereby deleted in its
entirety and Employee waives and forfeits any and all rights thereunder.
3. The Option Agreement is hereby amended to provide and reflect
that Employee hereby waives and forfeits any and all rights thereunder to
acquire any shares of Common Stock of the Company other than the 30,014 shares
that became vested and exercisable as of July 22, 1997 (as provided in Article
III of the Option Agreement); the options covering the remaining 154,267 shares
originally evidenced by the Option Agreement are hereby terminated and canceled.
4. Except as is explicitly inconsistent, modified, supplemented
or amended by the express terms hereof, each of the Employment Agreement and the
Option Agreement shall remain in full force and effect.
5. This Amendment No. 2 to the Employment Agreement and
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Amendment No. 1 to Stock Option Agreement shall be governed by and construed
under the Laws of the State of Minnesota applied to agreements made and to be
performed in the State of Minnesota without regard to the conflict of laws
principles thereof. This Amendment may be executed in counterparts, each of
which shall be deemed an original, but each of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment the
day and year first above written.
BUCA, INC.
By /s/ Greg A. Gadel
----------------------------------
Its CFO
-------------------------------
/s/ Joseph P. Micatrotto
-------------------------------------
Joseph P. Micatrotto
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STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT is made as of the 18th day of
December, 1997, by and between BUCA, Inc., hereinafter referred to as the
"Company," and JOSEPH P. MICATROTTO, hereinafter referred to as the "Optionee."
W I T N E S S E T H:
WHEREAS, the Company maintains the 1996 Stock Incentive Plan of
BUCA, Inc. and Affiliated Companies (as in effect on the date hereof and as
amended from time to time hereafter, the "Plan");
WHEREAS, the Board of Directors of the Company has approved
amendments to the Plan increasing the aggregate number of shares available for
issuance under the Plan (the "Amendments") to 1,000,000 shares and will submit
the Amendments for approval of the Company's shareholders (the "Shareholders")
at a Special Meeting of Shareholders to be held in January, 1998 (the
"Shareholders Meeting");
WHEREAS, the Company intends to carry out the purposes of the
Plan by providing Optionee options to purchase Common Stock of the Company, in
accordance with the terms of the Plan and those hereof; and
WHEREAS, Optionee wishes to receive options to purchase Common
Stock in accordance with such terms;
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration, the parties
hereto agree as follows:
I.
Grant of Option
---------------
The Company hereby grants to Optionee the right and option
(hereinafter called the "Option") to purchase all or any part of an aggregate of
357,267 shares of Common Stock of the Company (the "Shares"), such number being
subject to adjustment as provided in Article VII hereof, on the terms and
conditions herein set forth. The Option is not intended to be an "incentive
stock option" within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code").
II.
Purchase Price
--------------
Subject to the provisions of Article VI hereof, the purchase
price of the Shares
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covered by the Option shall be the per Share prices set forth in Article III
hereof.
III.
Term, Purchase Price and Exercise and Vesting of Option
-------------------------------------------------------
The term of the Option shall be for a period of ten (10) years
from December 18, 1997 and shall expire at the close of business on December 17,
2007 subject to earlier termination as provided in Paragraph V hereof.
Notwithstanding the foregoing, the Option shall expire on the day of the Special
Meeting if the Shareholders do not approve the Amendments at the Special
Meeting.
The Option granted hereunder shall become vested and shall become
exercisable, in whole or in part, at the exercise prices and at the times and as
to the number of Shares set forth in the following schedule. The exercise
schedule shall be cumulative; thus, to the extent the Option has not already
been exercised and has not expired, terminated or been canceled, the Optionee
may at any time, and from time to time, purchase all or any portion of the
Shares then purchasable under the exercise schedule.
Number of Shares as to Which
Option Becomes Exercise
Date of Vesting Exercisable as of Such Date Price Per Share
--------------- --------------------------- ---------------
December 18, 1997 77,267 $ .75
December 31, 1998 70,000 3.75
December 31, 1999 70,000 3.75
December 31, 2000 70,000 3.75
December 31, 2001 70,000 3.75
Notwithstanding the foregoing, the Option shall be fully vested and the Option
shall become immediately exercisable upon the occurrence of any of the following
events: (i) death of the Optionee; (ii) termination of Optionee's employment
with the Company by reason of "physical or mental disability" of Optionee, as
that term is defined in the Employment Agreement effective July 22, 1996 between
Optionee and the Company (as in effect on the date hereof and as amended from
time to time hereafter, the "Employment Agreement"); (iii) termination of
Optionee's employment by the Company within one-hundred eighty (180) days prior
to "Change in Control" and such termination is related to the "Change in
Control," as that term is defined in the Employment Agreement; (iv) termination
of Optionee's employment with the Company by Optionee as a result of a "Change
in Control;" and (vi) termination of Optionee's employment by the Company
without cause.
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<PAGE>
IV.
Nontransferability of Option Rights
-----------------------------------
The Option shall not be transferable otherwise than by will, or
the laws of descent and distribution, and the Option may be exercised, during
the lifetime of the Optionee, only by him. More particularly (but without
limiting the generality of the foregoing), the Option may not be assigned,
transferred (except as provided above), pledged, or hypothecated in any way, and
shall not be subject to execution, attachment, or similar process. Any attempted
assignment, transfer, pledge, hypothecation, or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment, or
similar process upon the Option, shall be null and void and without effect.
V.
Termination of Employment
-------------------------
Upon Optionee's termination of employment with the Company for
any reason, any Option or unexercised portion thereof shall be vested to the
extent provided in Article II and may be exercised at any time prior to
expiration of the Option. The non-vested portion of the Option shall thereupon
lapse and terminate.
VI.
Changes in Capital Structure
----------------------------
If all, or any portion of the Option shall be exercised
subsequent to any share dividend in stock of the Company, recapitalization,
merger, consolidation, exchange of shares or reorganization as a result of which
shares of any class shall be issued in respect to outstanding Common Stock or
Common Stock shall be changed into the same or a different number of shares of
the same or another class or classes, the person or persons so exercising the
Option shall receive, for the aggregate price paid upon such exercise, the
aggregate number and class of shares to which they would have been entitled if
Common Stock (as authorized at the date hereof) had been purchased at the date
hereof for the same aggregate price (on the basis of the price per share set
forth in Paragraph II hereof) and had not been disposed of.
VII.
Method of Exercising Option
---------------------------
Subject to the terms and conditions of this Option Agreement, the
Option may be exercised by written notice to the Company at its principal office
and place of business in the State of Minnesota. Such notice shall state the
election to exercise the Option and the number of shares in respect to which it
is being exercised, and shall be signed by the person so exercising the Option.
Such notice shall be accompanied by the payment of the full purchase price of
such shares and the delivery of such payment to the Treasurer of the Company. In
lieu of payment in cash, Optionee may elect to pay for the shares in respect of
which the option
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<PAGE>
is being exercised by delivering to the Company certificates for shares of
Common Stock of the Company in transferable form having a Market Price equal to
the aggregate purchase price for the shares being purchased. The term Market
Price means with respect to the Common Stock the last reported sale price or, if
none, the average of the last reported closing bid and ask prices on any
national securities exchange or quoted in the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") on the trading day preceding the
date of exercise or if not so listed or quoted, the average of the reported
closing bid and ask prices in any recognized over-the-counter market on such
date. If no public market exists for the Shares, the purchase price for the
Shares shall be paid in cash.
The certificate for the Shares as to which the Option shall have
been so exercised shall be registered in the name of the person exercising the
Option. If the Optionee shall so request in the notice exercising the Option,
the certificate shall be registered in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered as provided
above to or upon the written order of the person exercising the Option. In the
event the Option shall be exercised pursuant to Section VII hereof by any person
or persons other than the Optionee, such notice shall be accompanied by
appropriate proof of the right of such person to exercise the Option.
VIII.
Withholding
-----------
The Company may, in its discretion, and subject to such rules as
may be adopted from time to time by the Committee, permit or require Optionee to
satisfy, in whole or in part, any withholding tax obligations that may arise in
connection with the grant or exercise of this Optionee by having the Company
hold back some portion of the shares which would otherwise be delivered pursuant
to the exercise of the option or by delivering to the Company a payment equal to
the withholding tax in cash or shares of Common Stock or a combination thereof.
The shares so delivered shall be valued at the Market Price as of the time of
exercise of the option or the date of the taxable event, if different.
IX.
Rights as Shareholder
---------------------
The holder of this Option shall have no interest in any Shares of
Common Stock of the Company other than the right to purchase Shares as provided
herein.
X.
No Registration
---------------
Optionee acknowledges that the shares of Common Stock of the
Company covered by this Option have not been and will not be, upon exercise of
this Option, registered under the Securities Act of 1933, as amended. Optionee
represents that he is acquiring the
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<PAGE>
Shares for investment purposes and he is able to bear the economic risk of the
investment for an indefinite period of time since the Shares so acquired cannot
be sold unless they are subsequently registered or an exemption from such
registration is available. Optionee agrees that a legend may be placed on the
stock certificates acknowledging the restrictions on subsequent distribution of
the Shares.
XI.
Employment
----------
Nothing in this Agreement shall be deemed to grant any right of
continued employment or limit or waive the right to terminate Optionee's
employment with the Company at any time, with or without cause.
XII.
Governing Laws
--------------
This Agreement shall be binding upon and insure to the benefit of
the parties hereto and their heirs, successors, assigns and representatives and
shall be governed by the laws of the State of Minnesota.
XIII.
Miscellaneous
-------------
If there is any inconsistency between the provisions of this
Agreement and the Plan, the provisions of the Plan shall govern. This Agreement
shall be binding in all respects on the heirs, representatives, successors and
assigns of the Optionee. This Agreement and the Plan set forth the entire
agreement and understanding of the parties with respect to the grant and
exercise of this Option and the administration of the Plan. Other than as
provided in the Plan, this Agreement may be amended, waived, modified or
canceled only by a written instrument executed by the parties hereto or, in the
case of waiver, by the party waving compliance. By execution hereof, the
Optionee acknowledges having received a copy of the Plan.
-5-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Stock Option
Agreement to be duly executed by its officer thereunto duly authorized, and the
Optionee has hereunto set his hand, all on the day and year fist above written.
BUCA, INC.
By /s/ Greg A. Gadel
------------------------------
Its CFO
----------------------------
/s/ Joseph P. Micatrotto
---------------------------------
Joseph P. Micatrotto
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<PAGE>
Exhibit 10.6
BUCA, Inc.
BUCA LITTLE ITALY
BEPPO LITTLE ITALY
4/1/97
Mr. Greg Gadel
14122 Westridge Drive
Eden Prairie, MN 55347
Dear Greg:
The purpose of this letter is to memorialize the mutual understanding
between BUCA, INC. and you regarding your entitlement to severance pay in the
event that your employment is terminated in connection with a change in control
of the Company. We have agreed that if your employment with BUCA, INC. is
terminated as a result of a change in control of BUCA or following the change in
control you terminate employment with BUCA because your duties are
"substantially reduced or negatively altered," you will be entitled to a
severance payment equal to one year's base compensation in effect at the time of
your termination of employment. The severance pay will be payable at the same
time or in the same manner as your base salary. The company may prepay all or
part of the severance pay at any time. For purposes of this letter agreement,
the phrases "change in control" and "substantially reduced or negatively
altered" shall have the meanings ascribed to them in your Non-Qualified Stock
Option Agreement.
This letter expresses our complete agreement with regard to severance
pay to be made to you and supersedes any previous discussions or writings on
this subject between us. No severance pay will be paid if your employment is
terminated for any other reason unless otherwise agreed in writing at the time
of your termination. If the foregoing reflects your understanding of our
agreement, please acknowledge below.
Sincerely,
BUCA, INC.
/s/ Joseph P. Micatrotto
- --------------------------------
Joseph P. Micatrotto
The foregoing is accepted and agreed on this 8 day of April, 1997.
/s/ Greg A. Gadel
- --------------------------------
Greg A. Gadel
<PAGE>
EXHIBIT 10.7
EXECUTION COPY
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of February 5, 1999, is by and between
BUCA, INC., a Minnesota corporation (the "Borrower"), and U.S. BANK NATIONAL
ASSOCIATION, a national banking association (the "Bank").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement the following terms
shall have the following respective meanings (and such meanings shall be equally
applicable to both the singular and plural form of the terms defined, as the
context may require):
"Advance": As defined in Section 2.1.
"Advance Date": The date of the making of any Advance hereunder.
"Affiliate": When used with reference to any Person, (a) each Person that,
directly or indirectly, controls, is controlled by or is under common control
with, the Person referred to, (b) each Person which beneficially owns or holds,
directly or indirectly, five percent or more of any class of voting stock of the
Person referred to (or if the Person referred to is not a corporation, five
percent or more of the equity interest), (c) each Person, five percent or more
of the voting stock (or if such Person is not a corporation, five percent or
more of the equity interest) of which is beneficially owned or held, directly or
indirectly, by the Person referred to, and (d) each of such Person's officers,
directors, joint venturers and partners. The term control (including the terms
"controlled by" and "under common control with") means the possession, directly,
of the power to direct or cause the direction of the management and policies of
the Person in question.
"Applicable Fee Percentage": The Applicable Fee Percentage set forth in the
table below as in effect from time to time determined based on (a) for the
period from the Closing Date until April 30, 1999, a Cash Flow Leverage Ratio
deemed to be greater than 3.00 to 1.00, and (b) from and after May 1, 1999, the
Cash Flow Leverage Ratio calculated as of the end of the most recent fiscal
quarter of the Borrower for which the Borrower has furnished the financial
statements and reports required under Section 5.1(d) (adjustments to the
Applicable Fee Percentage to become effective as of the first day of the month
following receipt of the financial statements required under Section 5.1(d)):
<PAGE>
Applicable
Cash Flow Leverage Ratio (in each case, to 1.00) Fee Percentage
------------------------------------------------ --------------
Less than or equal to 2.00 0.25%
Greater than 2.00 to less than or equal to 3.00 0.375%
Greater than 3.0 0.50%
Notwithstanding the foregoing, if the Borrower has not furnished the financial
statements and reports required under Section 5.1(d) for any fiscal quarter by
the required date, the Applicable Fee Percentage shall be calculated as if the
Cash Flow Leverage Ratio as of the end of such fiscal quarter was greater than
3.00 to 1.00 for the period from the first day of the fiscal quarter first
occurring after such required date until the first day of the month following
the month in which such financial statements and reports are delivered.
"Applicable Margin": The Applicable Margin set forth in the table below as
in effect from time to time determined based on (a) for the period from the
Closing Date until April 30, 1999, a Cash Flow Leverage Ratio deemed to be
greater than 3.00 to 1.00, and (b) from and after May 1, 1999, the Cash Flow
Leverage Ratio calculated as of the end of the most recent fiscal quarter of the
Borrower for which the Borrower has furnished the financial statements and
reports required under Section 5.1(d) (adjustments to the Applicable Margin to
become effective as of the first day of the month following receipt of the
financial statements required under Section 5.1(d)):
Applicable
Cash Flow Leverage Ratio (in each case, to 1.00) Fee Percentage
------------------------------------------------ --------------
Less than or equal to 2.00 0.75%
Greater than 2.00 to less than or equal to 3.00 1.00%
Greater than 3.0 1.25%
Notwithstanding the foregoing, if the Borrower has not furnished the financial
statements and reports required under Section 5.1(d) for any fiscal quarter by
the required date, the Applicable Margin shall be calculated as if the Cash Flow
Leverage Ratio as of the end of such fiscal quarter was greater than 3.00 to
1.00 for the period from the first day of the fiscal quarter first occurring
after such required date until the first day of the month following the month in
which such financial statements and reports are delivered.
"Average Annual Comparable Restaurant Sales Growth": For any date of
determination, the percentage annual increase in Total Restaurant Sales for
Comparable Restaurants calculated by comparing (a) Total Restaurant Sales for
Comparable Restaurants for
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<PAGE>
the twelve consecutive fiscal months ended on such date of determination, to (b)
Total Restaurant Sales for Comparable Restaurants for the 12 consecutive fiscal
months ended on the last day of the fiscal month which ended 12 fiscal months
prior to such date of determination, in each case determined on a consolidated
basis in accordance with GAAP.
"Average Restaurant Annual Cash Flow": For any date of determination, (a)
the sum of (i) the aggregate Restaurant Net Income of the Borrower and the
Subsidiaries for the immediately preceding twelve fiscal month period, plus (ii)
Interest Expense, depreciation and amortization, and Corporate Overhead Expense
for the immediately preceding 12 fiscal month period , plus (iii) Pre-Opening
Expense, if any, charged to Restaurants for the immediately preceding twelve
fiscal month period (in an amount not to exceed the lesser of (A) $200,000 per
Restaurant and (B) $2,000,000 in the aggregate for all Restaurants for any
twelve fiscal month period), divided by (b) the number of Restaurants open
during the entire thirteen fiscal months prior to such determination date, in
each case determined on a consolidated basis in accordance with GAAP.
"Bank": As defined in the opening paragraph hereof.
"Board": The Board of Governors of the Federal Reserve System or any
successor thereto.
"Borrower": As defined in the opening paragraph hereof.
"Business Day": Any day (other than a Saturday, Sunday or legal holiday in
the State of Minnesota) on which national banks are permitted to be open in
Minneapolis, Minnesota.
"Capital Expenditures": For any period, the sum of all amounts that would,
in accordance with GAAP, be included as additions to property, plant and
equipment on a consolidated statement of cash flows for the Borrower and the
Subsidiaries during such period, in respect of (a) the acquisition,
construction, improvement, replacement or betterment of land, buildings,
machinery, equipment or of any other fixed assets or leaseholds, (b) to the
extent related to and not included in (a) above, materials and contract labor
(excluding expenditures properly chargeable to repairs or maintenance in
accordance with GAAP), and (c) other capital expenditures and other uses
recorded as capital expenditures or similar terms having substantially the same
effect.
"Capitalized Lease": A lease of (or other agreement conveying the right to
use) real or personal property with respect to which at least a portion of the
rent or other amounts thereon constitute Capitalized Lease Obligations.
"Capitalized Lease Obligations": As to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real or personal property which obligations are
required to be classified and accounted for as
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<PAGE>
a capital lease on a balance sheet of such Person under GAAP (including
Statement of Financial Accounting Standards No. 13 of the Financial Accounting
Standards Board), and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP (including such Statement No. 13).
"Cash Flow Leverage Ratio": For any date of determination, the ratio of
(a) the sum (without duplication) of
(i) the aggregate principal amount as of that date of all outstanding
Capitalized Lease Obligations of the Borrower and the Subsidiaries and
that portion of Total Liabilities bearing interest, plus (ii) the
product of (A) Operating Lease Payments for the immediately preceding
six-fiscal month period, times (B) two, times (C) eight,
to
(b) the sum of
(i) the product of (A) EBITDA for the immediately preceding six-month
period, times (B) two, plus (ii) the product of (A) Operating Lease
Payments for the immediately preceding six-fiscal month period, times
(B) two,
in each case, determined on a consolidated basis in accordance with GAAP.
"Century Bank": Century Bank, a national banking association.
"Century Bank Letters of Credit": The following letters of credit issued by
Century Bank for the account of the Borrower:
(a) Letter of Credit No. 269, dated March 16, 1998, in the face amount of
$125,000 and naming Six Point Co., as beneficiary, with an expiration date
of March 13, 2009;
(b) Letter of Credit No. 270, dated March 29, 1998, in the face amount of
$146,875 and naming U.S. Restaurant Properties Operating L.P., as
beneficiary, with an expiration date of April 1, 1999; and
(c) Letter of Credit No. 290, dated May 20, 1998, in the face amount of
$175,000 and naming Greek Eastern Orthodox Church of Minneapolis,
Minnesota, as beneficiary, with an expiration date of July 31, 2000.
"Change of Control": Either (a) the first day on which a majority of the
members of the Board of Directors of the Borrower are not Continuing Directors,
or (b) at any time prior to the occurrence of an Initial Public Offering, the
first day on which the Board of Directors of
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<PAGE>
the Borrower does not include (x) at least one member designated by Norwest
Equity Partners V, L.P., and (y) at least one member designated by a group
composed of Centre Capital Investors II, L.P., Centre Capital Tax-Exempt
Investors II, L.P., Centre Capital Offshore Investors II, L.P., Centre Parallel
Management Partners, L.P., Centre Partners Coinvestment, L.P. and the State
Board of Administration of Florida. For purposes of this provision, "Continuing
Directors" means any member of the Board of Directors of the Borrower who (i)
was a member of such Board on the date of this Agreement, or (ii) was nominated
for election or elected or appointed to such Board by the Board of Directors of
the Borrower at a time when a majority of the Board of Directors of the Borrower
consisted of Continuing Directors.
"Closing Date": February 5, 1999.
"Code": The Internal Revenue Code of 1986, as amended.
"Commitments": The Revolving (A) Commitment, the Revolving (B) Commitment
and the Term Loan Commitment.
"Comparable Restaurant": Each Restaurant continuously owned and operated by
the Borrower or a Subsidiary during the 24 fiscal months of the Borrower prior
to the date of determination.
"Contingent Obligation": With respect to any Person at the time of any
determination, without duplication, any obligation, contingent or otherwise, of
such Person guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner, whether
directly or otherwise: (a) to purchase or pay (or advance or supply funds for
the purchase or payment of) such Indebtedness or to purchase (or to advance or
supply funds for the purchase of) any direct or indirect security therefor, (b)
to purchase property, securities or services for the purpose of assuring the
owner of such Indebtedness of the payment of such Indebtedness, (c) to maintain
working capital, equity capital or other financial statement condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
otherwise to protect the owner thereof against loss in respect thereof, or (d)
entered into for the purpose of assuring in any manner the owner of such
Indebtedness of the payment of such Indebtedness or to protect the owner against
loss in respect thereof; provided, that the term "Contingent Obligation" shall
not include endorsements for collection or deposit, in each case in the ordinary
course of business.
"Corporate Overhead Expense": For any month of the Borrower's Fiscal Year,
all expenses of the Borrower and the Subsidiaries during such period which are
not properly allocable to the restaurants including, but not limited to,
compensation and benefit expenses for corporate staff; rent, occupancy and
telephone expenses for corporate offices; professional fees; travel and
entertainment expense; market-wide advertising expenses; automobile expense; and
other general administrative expenses attributable to corporate functions.
Corporate Overhead Expense shall not include depreciation, amortization,
interest expense, the Origination Fee, the Revolving Commitment Fees or the
Participation Fees.
-5-
<PAGE>
"Current Liabilities": As of any date, the consolidated current liabilities
of the Borrower and the Subsidiaries, determined in accordance with GAAP.
"Default": Any event which, with the giving of notice (whether such notice
is required under Section 7.1, or under some other provision of this Agreement,
or otherwise) or lapse of time, or both, would constitute an Event of Default.
"EBIT": For any period of determination, the consolidated net income of the
Borrower and the Subsidiaries before deductions, without duplication, for
(a) income taxes,
(b) Interest Expense,
(c) nonrecurring litigation and legal expenses in an amount not to
exceed (i) $350,000 if such period includes the fiscal month ended June 28,
1998, (ii) $250,000 if such period includes the fiscal month ended December
27, 1998, and (iii) without duplication, $600,000, if such period includes
the fiscal months ended June 28, 1998 and December 27, 1998, and
(d) loss relating to the early extinguishment of Indebtedness of the
Borrower to Sirrom and Regent under the Existing Credit Documents in an
amount not to exceed $1,400,000 if such period included the Closing Date,
all as determined in accordance with GAAP.
"EBITDA": For any period of determination, the consolidated net income of
the Borrower and the Subsidiaries before deductions, without duplication, for
(a) income taxes,
(b) Interest Expense,
(c) depreciation and amortization,
(d) nonrecurring litigation and legal expenses in an amount not to
exceed (i) $350,000 if such period includes the fiscal month ended June 28,
1998, (ii) $250,000 if such period includes the fiscal month ended December
27, 1998, and (iii) without duplication, $600,000, if such period includes
the fiscal months ended June 28, 1998 and December 27, 1998, and
(e) loss relating to the early extinguishment of Indebtedness of the
Borrower to Sirrom and Regent under the Existing Credit Documents in an
amount not to exceed $1,400,000 if such period included the Closing Date,
all as determined in accordance with GAAP.
-6-
<PAGE>
"ERISA": The Employee Retirement Income Security Act of 1974, as -----
amended.
"ERISA Affiliate": Any trade or business (whether or not incorporated) that
is a member of a group of which the Borrower is a member and which is treated as
a single employer under Section 414 of the Code.
"Event of Default": Any event described in Section 7.1.
"Existing Credit Documents": (a) that certain Secured Promissory Note dated
October 31, 1997 made by the Borrower in favor of Sirrom in the original
principal amount of $2,000,000, (b) that certain Secured Promissory Note dated
October 31, 1997 made by the Borrower in favor of Regent in the original
principal amount of $500,000, (c) that certain Secured Promissory Note dated May
19, 1998 made by the Borrower in favor of Sirrom in the original principal
amount of $2,000,000, (d) that certain Secured Promissory Note dated May 19,
1998 made by the Borrower in favor of Regent in the original principal amount of
$1,500,000, and (e) that certain Promissory Note dated July 31, 1995 made by the
BUCA (Eden Prairie), Inc. in favor of Century Bank in the original principal
amount of $500,000, that certain Promissory Note dated March 15, 1996 made by
BUCA (DT Milwaukee), Inc. in favor of Century in the original principal amount
of $440,000, that certain Promissory Note dated May 9, 1994 made by BUCA (Gannon
Road), Inc. in favor of Century in the original principal amount of $300,000,
and that certain Promissory Note dated June 1, 1997 made by the Borrower in the
maximum principal amount of $1,000,000.
"Fiscal Year": The fiscal year of the Borrower, which ends on the last
Sunday of each December. The fiscal quarters and the fiscal months of the
Borrower through December 31, 2000 are set forth in Schedule 1.1-1.
"Fixed Charge Coverage Ratio": For any date of determination, the ratio of
(a) the sum of (i) the product of (A) EBITDA for the immediately preceding
six-fiscal month period, times (B) two, plus (ii) the product of (A)
Operating Lease Payments for the immediately preceding six-fiscal
month period, times (B) two
to
(b) the sum (without duplication) of (i) the product of (A) Interest
Expense for the immediately preceding six-fiscal month period,
excluding the loss relating to the early extinguishment of
Indebtedness of the Borrower to Sirrom and Regent under the Existing
Credit Documents in an amount not to exceed $1,400,000 if such period
included the Closing Date, times (B) two, plus (ii) all required
principal payments with respect to Total Liabilities (including but
not limited to all such payments with respect to Capitalized Lease
Obligations of the Borrower and the Subsidiaries) for the immediately
preceding twelve-fiscal month period, plus (iii) the product of (A)
Operating Lease Payments for the immediately preceding six-fiscal
month period,
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<PAGE>
times (B) two, plus (iv) the product of (A) depreciation expense of
the Borrower and the Subsidiaries for the immediately preceding
six-fiscal month period, times (B) two, plus (v) the product of (A)
income taxes of the Borrower and the Subsidiaries accrued for the
immediately preceding six-fiscal month period, times (B) two.
in each case determined on a consolidated basis in accordance with GAAP.
"GAAP": Generally accepted accounting principles set forth in the opinions
and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of any date of determination.
"Guarantors": The Persons listed on Schedule 1.1-2 .
"Guaranty": Any of the guaranties of any Guarantor in the form of Exhibit
1.1-1, as the same may be amended, supplemented, restated or otherwise modified
and in effect from time to time.
"Holding Account": A deposit account belonging to the Bank into which the
Borrower may be required to make deposits pursuant to the provisions of this
Agreement, such account to be under the sole dominion and control of the Bank
and not subject to withdrawal by the Borrower, with any amounts therein to be
held for application toward payment of any outstanding Letters of Credit when
drawn upon. The Holding Account shall be a money market savings account or
substantial equivalent (or other appropriate investment medium as the Borrower
may from time to time request and to which the Bank in its sole discretion shall
have consented) and shall bear interest in accordance with the terms of similar
accounts held by the Bank for its customers.
"Immediately Available Funds": Funds with good value on the day and in the
city in which payment is received.
"Indebtedness": With respect to any Person at the time of any
determination, without duplication: (a) all obligations of such Person for
borrowed money, (b) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (c) all obligations of such
Person upon which interest charges are customarily paid or accrued (other than
trade payables), (d) all obligations of such Person under conditional sale or
other title retention agreements relating to property purchased by such Person,
(e) all obligations of such Person issued or assumed as the deferred purchase
price of property or services, (f) all obligations of others secured by any Lien
on property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Capitalized Lease Obligations of such
Person, (h) all obligations of such Person in respect of interest rate
protection agreements, (i) all obligations of such Person, actual or contingent,
as an account party in respect of letters of credit or bankers' acceptances, (j)
all Contingent Obligations of such Person, and (k) all obligations of any
partnership or joint venture of a nature described in clauses (a) through (j)
above as to which such Person is or may become personally liable as a partner or
joint venturer.
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"Initial Public Offering": The closing of a sale by the Borrower for cash
of any class of stock of the Borrower registered in accordance with the
Securities Act of 1933, as amended.
"Interest/Operating Lease Payments Coverage Ratio": For any date of
determination, the ratio of
(a) the product of (i) the sum of the following for the immediately
preceding six-fiscal month period (A) EBIT, plus (B) Pre-Opening
Expense, plus (C) Operating Lease Payments, times (ii) two
to
(b) the product of (i) the sum of the following for the immediately
preceding six-fiscal month period (A) Interest Expense, excluding the
loss relating to the early extinguishment of Indebtedness of the
Borrower to Sirrom and Regent under the Existing Credit Documents in
an amount not to exceed $1,400,000 if such period included the Closing
Date, plus (B) Operating Lease Payments, times (ii) two,
in each case determined on a consolidated basis in accordance with GAAP.
"Interest Expense": For any period of determination, the aggregate
consolidated amount, without duplication, of interest paid, accrued or scheduled
to be paid, in respect of any Indebtedness of the Borrower and the Subsidiaries,
including (a) all but the principal component of payments in respect of
conditional sale contracts, Capitalized Leases and other title retention
agreements, (b) commissions, discounts and other fees and charges with respect
to letters of credit and bankers' acceptance financings, and (c) net costs under
interest rate protection agreements, in each case determined in accordance with
GAAP.
"Investment": The acquisition, purchase, making or holding of any stock or
other security, any loan, advance, contribution to capital, extension of credit
(except for trade and customer accounts receivable for inventory sold or
services rendered in the ordinary course of business and payable in accordance
with customary trade terms), any acquisitions of real or personal property
(other than real and personal property acquired in the ordinary course of
business, including real property and Restaurant equipment acquired in
anticipation of any sale leaseback transaction involving such property) and any
purchase or commitment or option to purchase stock or other debt or equity
securities of or any interest in another Person or any integral part of any
business of another Person or all or substantially all of the assets comprising
any such business or integral part thereof. The amount of any Investment shall
be the original cost of such Investment plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.
"Letter of Credit": Any Letter of Credit issued by the Bank for the account
of the Borrower pursuant to the terms of this Agreement.
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"Letter of Credit Commitment": $1,000,000.
"Letter of Credit Fee": As defined in Section 2.8(d).
"Letter of Credit Obligations": At the time of any determination, the
aggregate amount available to be drawn on all outstanding Letters of Credit plus
all Unpaid Drawings with respect to any Letter of Credit on such date.
"Lien": With respect to any Person, any security interest, mortgage,
pledge, lien, charge, encumbrance, title retention agreement or analogous
instrument or device (including the interest of each lessor under any
Capitalized Lease), in, of or on any assets or properties of such Person, now
owned or hereafter acquired, whether arising by agreement or operation of law.
"Loan": The Revolving Loan or the Term Loan.
"Loan Documents": All agreements, instruments and documents heretofore,
herewith or hereafter executed and delivered by the Borrower or any Subsidiary
pursuant to, or in connection with, this Agreement, including, without
limitation, this Agreement, the Notes and each Security Document, together with
any subordination agreements, powers of attorney, consents, assignments,
contracts, notices, financing statements and any and all other writings pursuant
to or in aid of any of the foregoing.
"Material Adverse Occurrence": Any occurrence of whatsoever nature
(including, without limitation, any adverse determination in any litigation,
arbitration, or governmental investigation or proceeding) which (a) has
materially adversely affected the present, or which is reasonably likely to
materially adversely affect the prospective, financial condition or operations
of the Borrower and the Subsidiaries, taken as a whole, or (b) impair the
ability of the Borrower or the Subsidiaries, taken as a whole, to perform their
respective obligations under the Loan Documents or any writing executed pursuant
thereto.
"Multiemployer Plan": A multiemployer plan, as such term is defined in
Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date, within
the five years preceding the Closing Date, or at any time after the Closing
Date) for employees of the Borrower or any ERISA Affiliate.
"Note": The Term Note or the Revolving Note.
"Obligations": The Borrower obligations in respect of the due and punctual
payment of principal and interest on the Notes when and as due, whether by
acceleration or otherwise, and all fees (including Revolving Commitment Fees),
expenses, indemnities, reimbursements and other obligations of the Borrower
under this Agreement or any other Borrower Loan Document, in all cases whether
now existing or hereafter arising or incurred.
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"Operating Lease": Any lease of real or personal property that is not a
Capitalized Lease.
"Operating Lease Payments": For any period, all payments consisting of
monthly rent and percentage of revenue or earnings made by the Borrower and the
Subsidiaries, on a consolidated basis, during such period under Operating
Leases.
"Partially-Owned Subsidiaries": Subsidiaries in which the Borrower,
directly or through its Wholly-Owned Subsidiaries, owns less than 100% of the
securities or other ownership interests having ordinary voting power for the
election of a majority of the board of directors or other Persons performing
similar functions.
"Participation Fees": As defined in Section 8.6 .
"PBGC": The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.
"Person": Any natural person, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or political
subdivision or any other entity, whether acting in an individual, fiduciary or
other capacity.
"Plan": Each employee benefit plan (whether in existence on the Closing
Date or thereafter instituted), as such term is defined in Section 3 of ERISA,
maintained for the benefit of employees, officers or directors of the Borrower
or of any ERISA Affiliate.
"Pledge Agreement": The Pledge Agreement of the Borrower in the form of
Exhibit 1.1-2, as the same may be supplemented, amended or otherwise modified
and in effect from time to time.
"Pre-Opening Expense": Those expenses identified on the Borrower's
consolidated financial statements as "restaurant start-up costs".
"Prohibited Transaction": The respective meanings assigned to such term in
Section 4975 of the Code and Section 406 of ERISA, but excluding any exempt
transaction as provided thereunder.
"Reference Rate": The rate of interest from time to time publicly announced
by the Bank as its "reference rate." The Bank may lend to its customers at rates
that are at, above or below the Reference Rate. For purposes of determining any
interest rate hereunder or under any other Loan Document which is based on the
Reference Rate, such interest rate shall change as and when the Reference Rate
shall change.
"Regent": Regent Capital Partners, L.P., a Delaware limited partnership.
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"Regulatory Change": Any change after the Closing Date in federal, state or
foreign laws or regulations or the adoption or making after such date of any
interpretations, directives or requests applying to a class of banks including
the Bank under any federal, state or foreign laws or regulations (whether or not
having the force of law) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reportable Event": A reportable event as defined in Section 4043 of ERISA
and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and of Section 302 of ERISA shall be
a Reportable Event regardless of the issuance of any waiver in accordance with
Section 412(d) of the Code.
"Restaurant": A restaurant location owned or leased by the Borrower or any
Subsidiary and operated by the Borrower or any Subsidiary as a restaurant.
"Restaurant Net Income": The net income of a Restaurant determined in
accordance with GAAP.
"Restricted Payments": With respect to the Borrower and the Partially-Owned
Subsidiaries, collectively, all dividends or other distributions of any nature
(whether in cash, securities of the Borrower or the Partially- Owned
Subsidiaries, assets or otherwise) on or in respect of, and all payments on, any
class of equity securities (including warrants, options or rights therefor but
excluding Indebtedness which is convertible into common or preferred stock which
is itself not convertible into Indebtedness) issued by the Borrower or the
Partially-Owned Subsidiaries, whether such securities are authorized or
outstanding on the Closing Date or at any time thereafter, and any redemption or
purchase of, or distribution in respect of, any of the foregoing, whether
directly or indirectly.
"Revolving (A) Commitment": The obligation of the Bank to make Advances to
the Borrower in an aggregate principal amount outstanding at any time not to
exceed the Revolving (A) Commitment Amount upon the terms and subject to the
conditions and limitations of this Agreement.
"Revolving (A) Commitment Amount": Initially $4,000,000 but as the same may
be reduced from time to time pursuant to Section 2.7.
"Revolving (A) Note": A promissory note of the Borrower in the form of
Exhibit 1.1-3, as the same may be amended, restated or otherwise modified and in
effect from time to time.
"Revolving (B) Commitment": The obligation of the Bank to make Advances to
the Borrower in an aggregate principal amount outstanding at any time not to
exceed the Revolving (B) Commitment Amount upon the terms and subject to the
conditions and limitations of this Agreement.
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"Revolving (B) Commitment Amount": Initially, zero; provided that the
Revolving (B) Commitment Amount shall be $4,000,000 (as the same may be reduced
from time to time pursuant to Section 2.7) if the Total Restaurant Sales for the
twelve fiscal months ending June 27, 1999 is equal to or greater than one
hundred and three percent (103%) of the Total Restaurant Sales for the twelve
fiscal months ending June 28, 1998. For the purpose of determining the Revolving
(B) Commitment Amount, only Restaurants which were open thirteen fiscal months
prior June 27, 1999, shall be included in the calculation of the Total
Restaurant Sales.
"Revolving (B) Note": A promissory note of the Borrower in the form of
Exhibit 1.1-4 , as the same may be amended, restated or otherwise modified and
in effect from time to time.
"Revolving Commitment Ending Date": December 31, 2000.
"Revolving Commitment Fees": As defined in Section 2.8(c).
"Revolving Loan": As defined in Section 2.1.
"Revolving Note": Either of the Revolving (A) Note or the Revolving (B)
Note.
"SBA Loan": The Indebtedness described on Schedule 6.13.
"Security Agreement (Guarantor)": Any of the security agreements of any
Guarantor in the form of Exhibit 1.1-5, as the same may be amended,
supplemented, restated or otherwise modified and in effect from time to time,
provided that, on the Closing Date, and subject to the provisions of Section
5.15, neither BUCA (Wheeling), Inc. nor BUCA (DT Milwaukee), Inc. shall be
required to enter into a Security Agreement (Guarantor).
"Security Agreement (Borrower)": The security agreement of the Borrower in
the form of Exhibit 1.1-6, as the same may be amended, supplemented, restated or
otherwise modified and in effect from time to time.
"Security Documents": The Security Agreement (Borrower), the Pledge
Agreement, the Trademark Assignment, each Guaranty, each Security Agreement
(Guarantor) and all other agreements, documents and instruments delivered
pursuant hereto or thereto or in connection herewith or therewith creating,
perfecting or otherwise providing for any Lien to secure the Obligations, in
each case as amended, supplemented, restated or otherwise modified and in effect
from time to time.
"Sirrom": Sirrom Capital Corporation, a Tennessee corporation.
"Subordinated Debentures": The Series A Convertible Subordinated Debentures
in the amount of approximately $1,800,000 issued by the Borrower (formerly known
as BUCA Ventures, Inc.) pursuant to that certain Purchase Agreement for Series A
Convertible Subordinated Debentures dated as of August 1, 1994.
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"Subordinated Debt": The Subordinated Debentures and any other Indebtedness
of the Borrower or any Subsidiary, now existing or hereafter created, incurred
or arising, which other Indebtedness is subordinated in right of payment to the
payment of the Obligations in a manner and to an extent (a) that the Bank has
approved in writing prior to the creation of such other Indebtedness, or (b) as
to any such other Indebtedness existing on the date of this Agreement, that the
Bank has approved as Subordinated Debt in a writing delivered by the Bank to the
Borrower on or prior to the Closing Date.
"Subsidiary": Any corporation or other entity of which securities or other
ownership interests having ordinary voting power for the election of a majority
of the board of directors or other Persons performing similar functions are
owned by the Borrower either directly or through one or more Subsidiaries.
"Term Loan": As defined in Section 2.1.
"Term Loan Commitment": The agreement of the Bank to make a Term Loan to
the Borrower in the amount specified in Section 2.1 upon the terms and subject
to the conditions of this Agreement.
"Term Note": A promissory note of the Borrower in the form of Exhibit
1.1-7, as the same may be amended, supplemented, restated or otherwise modified
and in effect from time to time.
"Termination Date": The earliest of (a) the Revolving Commitment Ending
Date, (b) the date on which the Total Revolving Commitment is terminated
pursuant to Section 7.2 or (c) the date on which the Revolving (A) Commitment
Amount and the Revolving (B) Commitment Amount are reduced to zero pursuant to
Section 2.7.
"Total Liabilities": At the time of any determination, the amount, on a
consolidated basis, of all items of Indebtedness of the Borrower and the
Subsidiaries that would constitute "liabilities" shown on the face of a
consolidated balance sheet of the Borrower prepared in accordance with GAAP.
"Total Restaurant Sales": The net sales of the Borrower and the
Subsidiaries arising out of the operation of Restaurants, determined on a
consolidated basis in accordance with GAAP.
"Total Revolving Commitment": Collectively, the Revolving (A) Commitment
and the Revolving (B) Commitment.
"Total Revolving Commitment Amount": The sum of (a) the Revolving (A)
Commitment Amount, plus (b) the Revolving (B) Commitment Amount.
"Total Revolving (A) Outstandings": As of any date of determination, the
sum of (a) the aggregate unpaid principal balance of the Advances evidenced by
the Revolving (A) Note
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outstanding on such date, plus (b) the product of (i) the aggregate maximum
amount of Letter of Credit Obligations outstanding on such date times (ii) the
result of (A) the Revolving (A) Commitment Amount divided by (B) the Total
Revolving Commitment Amount.
"Total Revolving (B) Outstandings": As of any date of determination, the
sum of (a) the aggregate unpaid principal balance of the Advances evidenced by
the Revolving (B) Note outstanding on such date, plus (b) the product of (i) the
aggregate maximum amount of Letter of Credit Obligations outstanding on such
date times (ii) the result of (A) the Revolving (B) Commitment Amount divided by
(B) the Total Revolving Commitment Amount.
"Total Revolving Outstandings": As of any date of determination, the sum of
(a) Total Revolving (A) Outstandings plus (b) Total Revolving (B) Outstandings.
"Trademark Assignment": The Collateral Assignment of Trademarks by the
Borrower in the form of Exhibit 1.1-8, as the same may be supplemented, amended,
or otherwise in effect from time to time.
"Unpaid Drawings": As defined in Section 2.12.
"Unused Revolving (A) Commitment": As of any date of determination, the
amount by which the Revolving (A) Commitment Amount exceeds the Total Revolving
(A) Outstandings on such date.
"Unused Revolving (B) Commitment": As of any date of determination, the
amount by which the Revolving (B) Commitment Amount exceeds the Total Revolving
(B) Outstandings on such date.
"Wholly-Owned Subsidiaries": Subsidiaries in which the Borrower, directly
or through the Subsidiaries which are not Partially-Owned Subsidiaries, owns
100% of the securities or other ownership interests having ordinary voting power
for the election of a majority of the board of directors or other Persons
performing similar functions.
Section 1.2 Accounting Terms and Calculations. Except as may be expressly
provided to the contrary herein, all accounting terms used herein shall be
interpreted and all accounting determinations hereunder shall be made in
accordance with GAAP. To the extent any change in GAAP affects any computation
or determination required to be made pursuant to this Agreement, such
computation or determination shall be made as if such change in GAAP had not
occurred unless the Borrower and the Bank agree in writing on an adjustment to
such computation or determination to account for such change in GAAP.
Section 1.3 Computation of Time Periods. In this Agreement, in the
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".
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Section 1.4 Other Definitional Terms. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. References to Sections, Exhibits, schedules and like references are
to this Agreement unless otherwise expressly provided. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". All
incorporation by reference of covenants, terms, definitions or other provisions
from other agreements are incorporated into this Agreement as if such provisions
were fully set forth herein, include all necessary definitions and related
provisions from such other agreements but including only amendments thereto
agreed to by the Bank, and shall survive any termination of such other
agreements until the obligations of the Borrower under this Agreement and the
Notes are irrevocably paid in full, all Letters of Credit have expired without
renewal or been returned to the Bank, and the commitments of the Bank to advance
funds to the Borrower are terminated.
ARTICLE II
Part A -- Terms of Lending
TERMS OF THE CREDIT FACILITIES
Section 2.1 Lending Commitments. On the terms and subject to the conditions
hereof, the Bank agrees to make the following lending facilities available to
the Borrower:
2.1(a) Revolving Credit. On the terms and subject to the conditions
hereof, the Bank agrees to make a loan (the "Revolving Loan") to the
Borrower on a revolving basis available as advances (each, an "Advance") at
any time and from time to time,
(i) with respect to the Revolving (A) Commitment, from the date
which is the later of (A) the Closing Date and (B) and the date upon
which the Bank has received a certificate in the form of Exhibit 2.1,
until the Termination Date, during which period the Borrower may
borrow, repay and reborrow in accordance with the provisions hereof,
provided, the unpaid principal amount of outstanding Advances in
respect of the Revolving (A) Commitment shall not at any time exceed
the Revolving (A) Commitment Amount, and
(ii) with respect to the Revolving (B) Commitment, from September
30, 1999 until the Termination Date, during which period the Borrower
may borrow, repay and reborrow in accordance with the provisions
hereof, provided, the unpaid principal amount of outstanding Advances
in respect of the Revolving (B) Commitment shall not at any time
exceed the Revolving (B) Commitment Amount.
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2.1(b) Term Loan. A term loan (the "Term Loan") from the Bank to the
Borrower on the Closing Date in the amount of $7,000,000.
2.1(c) Letters of Credit. Letters of Credit to support the Borrower's
business operations.
Section 2.2 Procedure for Loans.
2.2(a) Procedure for Revolving Loans. Any request by the Borrower
for an Advance on the Revolving Loan hereunder shall be in writing or
by telephone and must be given so as to be received by the Bank not
later than 12:00 noon (Minneapolis time) on the requested Advance
Date. Each request for an Advance hereunder shall be irrevocable and
shall be deemed a representation by the Borrower that on the requested
Advance Date and after giving effect to the requested Advance the
applicable conditions specified in Article III have been and will be
satisfied. Each request for an Advance hereunder shall specify (a) the
requested Advance Date and (b) the amount of the Advance which shall
be in a minimum amount of $50,000. The Bank may rely on any telephone
request for an Advance hereunder which it believes in good faith to be
genuine; and the Borrower hereby waives the right to dispute the
Bank's record of the terms of such telephone request. Unless the Bank
determines that any applicable condition specified in Article III has
not been satisfied, the Bank will make available to the Borrower at
the Bank's principal office in Minneapolis, Minnesota in Immediately
Available Funds not later than 5:00 p.m. (Minneapolis time) on the
requested Advance Date the amount of the requested Advance.
2.2(b) Procedure for Term Loan. No later than 12:00 noon
(Minneapolis time) one Business Day prior to the requested date for
the making of the Term Loan, the Borrower shall deliver to the Bank a
written notice of borrowing wherein the Borrower shall specify the
date (which shall be a Business Day) and the account to which the Bank
should transfer the proceeds thereof. The request for the Term Loan
shall be deemed a representation by the Borrower that on the requested
date and after giving effect to the Term Loan the applicable
conditions specified in Article III have been and will be satisfied.
Unless the Bank determines that any applicable condition specified in
Article III has not been satisfied, the Bank will make the proceeds of
the Term Loan available to the Borrower at the Bank's main office on
the requested date.
Section 2.3 Notes. The Advances on the Revolving Loan shall be evidenced by
a Revolving (A) Note payable to the order of the Bank in a principal amount
equal to the Revolving (A) Commitment Amount originally in effect and a
Revolving (B) Note payable to the order of the Bank in a principal amount equal
to the Revolving (B) Commitment Amount originally in effect. The Term Loan shall
be evidenced by a Term Note payable to the order of the Bank in the principal
amount of the Term Loan. The Bank shall enter in its records the amount of the
Term Loan, the various Advances made and the payments made thereon, and the Bank
is authorized by the Borrower to enter into its records, a record of such Term
Loan, Advances and payments; provided, however that the failure by the Bank to
make any such entry or any error in making such entry shall not limit or
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otherwise affect the obligation of the Borrower hereunder and on the Notes, and,
in all events, the principal amounts owing by the Borrower in respect of the
Revolving (A) Note and the Revolving (B) Note shall be the aggregate amount of
all Advances made by the Bank with respect to each of the Revolving (A)
Commitment and the Revolving (B) Commitment, less all payments of principal
thereof made by the Borrower and the principal amount owing by the Borrower in
respect of the Term Note shall be the aggregate amount of the Term Loan less all
payments of principal thereof made by the Borrower. The records of the Bank
shall be rebuttable presumptive evidence of the principal amount owing and
unpaid on the Revolving Notes and the Term Note and the amount available for
draw under the Letter of Credit Commitment, respectively.
Section 2.4 Interest Rates, Interest Payments and Default Interest.
2.4(a) The Advances. Interest shall accrue and be payable on the
Revolving Loans as follows:
(i) Subject to paragraph (ii) below, each Advance shall bear
interest on the unpaid principal amount thereof at a varying rate per
annum equal to the sum of (A) the Reference Rate, plus (B) the
Applicable Margin.
(ii) Upon the occurrence and during the continuance of any Event
of Default, each Advance shall, at the option of the Bank and upon
written notice to the Borrower, bear interest on the unpaid principal
amount thereof at a varying rate per annum equal to the sum of (A) the
Reference Rate, plus (B) the Applicable Margin, plus (C) 2.0%.
(iii) Interest shall be payable on the first day of each month,
upon any permitted prepayment (on the amount prepaid), and on the
Termination Date; provided that interest under Section 2.4 (a) (ii)
shall be payable on demand.
2.4(b) The Term Loan. Interest shall accrue and be payable on the Term
Loan as follows:
(i) Subject to paragraph (ii) below, the Term Loan shall bear
interest on the unpaid principal amount thereof at a fixed rate per
annum of 9.63%.
(ii) Upon the occurrence and during the continuance of any Event
of Default, the Term Loan shall, at the option of the Bank and upon
written notice to the Borrower, bear interest on the unpaid principal
amount thereof at a fixed rate per annum of 11.63%.
(iii) Interest shall be payable (A) on the first day of each
month; (B), upon any permitted prepayment (on the amount prepaid); and
(C) on the earlier of (I) the scheduled maturity date of the Term Note
or (II) an Initial Public Offering; provided that interest under
Section 2.4 (b) (ii) shall be payable on demand.
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Section 2.4(c) Lawful Interest. In no contingency or event whatsoever
shall the interest rate charged pursuant to the terms of this Agreement
exceed the highest rate permissible under any law which a court of
competent jurisdiction shall, in a final determination, deem applicable
hereto. In the event that such a court determines that the Bank has
received interest hereunder in excess of the highest applicable rate, the
Bank shall promptly refund such excess interest to the Borrower as required
by such court.
Section 2.5 Repayment and Mandatory Prepayment. The unpaid principal
balance of the Revolving Notes, together with all accrued and unpaid interest
thereon, shall be due and payable on the Termination Date; provided that if at
any time the unpaid principal balance of the Revolving (A) Note exceeds the
Revolving (A) Commitment Amount or the unpaid principal balance of the Revolving
(B) Note exceeds the Revolving (B) Commitment Amount, the Borrower shall
immediately repay to the Bank the amount of such excess. The principal of the
Term Loan shall be payable (a) in equal monthly installments of $116,667 payable
on the first day of each month commencing on May 1, 1999, and ending on November
30, 2000, and (b) a final installment in an amount equal to the remaining
principal balance of the Term Loan, together with all accrued and unpaid
interest thereon, on the date which is the earlier of (i) December 31, 2000, and
(ii) the date upon which an Initial Public Offering occurs.
Section 2.6 Optional Prepayments. The Borrower may prepay the Revolving
Loan, in whole or in part, at any time, without premium or penalty. Any such
prepayment must be accompanied by accrued and unpaid interest on the amount
prepaid. Each partial prepayment shall be in a minimum amount of $100,000 or, if
more, an integral multiple thereof. Amounts paid (unless following an
acceleration or upon termination of the Revolving (A) Commitment and the
Revolving (B) Commitment in whole) or prepaid on the Revolving Loan under this
Section 2.6 may be reborrowed upon the terms and subject to the conditions and
limitations of this Agreement. Any optional prepayment on the Term Loan shall be
in accordance with Section 2.19(b) and any amounts prepaid on the Term Loan may
not be reborrowed.
Section 2.7 Optional and Mandatory Reduction of the Total Revolving
Commitment Amount or Termination of Revolving Commitments.
2.7 (a) Optional Reduction/Termination of the Revolving Commitments.
The Borrower may, at any time, upon not less than three (3) Business Days
prior written notice to the Bank, reduce either the Revolving (A)
Commitment Amount or the Revolving (B) Commitment Amount, with any such
reduction in a minimum amount of $250,000 or, if more, in an integral
multiple of $50,000; provided, however, that the Borrower may not at any
time reduce the Total Revolving Commitment Amount below the then aggregate
unpaid balance of the Revolving Notes. The Borrower may, at any time, upon
not less than three (3) Business Days prior written notice to the Bank,
terminate either the Revolving (A) Commitment or the Revolving (B)
Commitment in its entirety. Upon termination of the Revolving (A)
Commitment pursuant to this Section, the Borrower shall pay to the Bank the
full amount of all outstanding Advances evidenced by the Revolving (A)
Note, all accrued and unpaid interest thereon, all unpaid Revolving
Commitment Fees accrued to the date of such
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termination under Section 2.8(c) (i) and all other unpaid Obligations of
the Borrower to the Bank hereunder with respect to the Revolving (A)
Commitment. Upon termination of the Revolving (B) Commitment pursuant to
this Section, the Borrower shall pay to the Bank the full amount of all
outstanding Advances evidenced by the Revolving (B) Note, all accrued and
unpaid interest thereon, all unpaid Revolving Commitment Fees accrued to
the date of such termination under Section 2.8(c) (ii) and all other unpaid
Obligations of the Borrower to the Bank hereunder with respect to the
Revolving (B) Commitment. Upon the date on which both the Revolving (A)
Commitment and the Revolving (B) have been terminated, the Borrower shall
have paid to the Bank all unpaid Obligations of the Borrower to the Bank
(other than the Term Loan and any accrued and unpaid interest thereon).
2.7(b) Mandatory Reduction of the Revolving Commitments. Upon the
occurrence of an Initial Public Offering, (i) the Revolving (A) Commitment
shall be reduced to $3,000,000 and the Revolving (B) Commitment shall be
reduced to zero and (ii) the Borrower shall pay to the Bank the full amount
of all outstanding Advances in excess of $3,000,000, all accrued and unpaid
interest thereon, and all unpaid Revolving Commitment Fees accrued thereon
to the date of such mandatory reduction.
Section 2.8 Fees.
2.8(a) Participation Fees. The Borrower shall pay the Participation
Fees in accordance with the terms of Section 8.6 .
2.8(b) Origination Fee. The Borrower shall pay to the Bank on the
Closing Date an origination fee (the "Origination Fee") in an amount equal
to $150,000; provided that the $20,000 non-refundable deposit paid by the
Borrower to the Bank prior to the date of this Agreement shall be credited
against the Origination Fee.
2.8(c) Revolving Commitment Fees. The Borrower shall pay to the Bank
fees (the "Revolving Commitment Fees") in an amount equal to the sum of
(i) the product of (A) the Applicable Fee Percentage times (B)
the average daily Unused Revolving (A) Commitment for the period from
the Closing Date to the Termination Date, plus
(ii) the product of (A) the Applicable Fee Percentage times (B)
the average daily Unused Revolving (B) Commitment for the period from
the Closing Date to the Termination Date, provided that,
notwithstanding the terms of this Agreement to the contrary, the
Applicable Fee Percentage to be used to determine the Revolving
Commitment Fee under this clause (ii) for the period from and after
the Closing Date to and including September 30, 1999, shall be 0.25%.
Such Revolving Commitment Fees are payable in arrears quarterly on the
first day of each April, July, October and January and on the Termination
Date.
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2.8(d) Letter of Credit Fees. For each Letter of Credit issued,
the Borrower shall pay to the Bank, in advance on the date of issuance, a
fee at a per annum rate equal to 200 basis points on the amount available
to be drawn under such Letter of Credit. In addition to the Letter of
Credit Fees, the Borrower shall pay to the Bank, on demand, all issuance,
amendment, drawing and other fees regularly charged by the Bank to its
letter of credit customers as shown as of the Closing Date on Schedule 2.8,
as the same may change from time to time, and all reasonable out-of-pocket
expenses incurred by the Bank in connection with the issuance, amendment,
administration or payment of any Letter of Credit.
Part B -- Terms of the Letter of Credit
Section 2.9 Letters of Credit. Upon the terms and subject to the conditions
of this Agreement, the Bank agrees to issue Letters of Credit for the account of
the Borrower from time to time between the Closing Date and the Termination Date
in such amounts as the Borrower shall request up to an aggregate amount at any
time outstanding not exceeding the Letter of Credit Commitment; provided that no
Letter of Credit will be issued in any amount which, after giving effect to such
issuance, would cause Total Revolving Outstandings to exceed the Total Revolving
Commitment Amount.
Section 2.10 Procedures for Letters of Credit. Each request for a Letter of
Credit shall be made by the Borrower in writing, by telex, telefacsimile
transmission or electronic conveyance received by the Bank by 12:00 noon,
Minneapolis time, on a Business Day which is not less than three Business Days
preceding the requested date of issuance (which shall also be a Business Day).
Each request for a Letter of Credit shall be deemed a representation by the
Borrower that on the date of issuance of such Letter of Credit, and after giving
effect thereto, the applicable conditions specified in Article III have been and
will be satisfied. The Bank may require that such request be made on such letter
of credit application and reimbursement agreement form as the Bank may from time
to time specify, along with satisfactory evidence of the authority and
incumbency of the officials of the Borrower making such request.
Section 2.11 Terms of Letters of Credit. Letters of Credit shall be issued
in support of obligations of the Borrower. All Letters of Credit must expire not
later than Revolving Commitment Ending Date. No Letter of Credit may have a term
longer than 12 months.
Section 2.12 Agreement to Repay Letter of Credit. If the Bank has received
documents purporting to draw under a Letter of Credit that the Bank believes
conform to the requirements of the Letter of Credit, or if the Bank has decided
that it will comply with the Borrower's written or oral request or authorization
to pay a drawing on any Letter of Credit, or that the Bank does not believe that
such documents conform to the requirements of the subject Letter of Credit, it
will notify the Borrower of that fact. The Borrower shall reimburse the Bank by
10:00 a.m. (Minneapolis time) on the day on which such drawing is to be paid in
Immediately Available Funds in an amount equal to the amount of such drawing.
Any amount by which the Borrower has failed to
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reimburse the Bank for the full amount of such drawing by 10:00 a.m. on the date
on which the Bank in its notice indicated that it would pay such drawing, until
reimbursed from the proceeds of an Advance pursuant to Section 2.15, is an
"Unpaid Drawing".
Section 2.13 Obligations Absolute. The obligation of the Borrower under
Section 2.12 to repay the Bank for any amount drawn on any Letter of Credit and
to repay the Bank for any Advances made under Section 2.16 to cover Unpaid
Drawings shall be absolute, unconditional and irrevocable, shall continue for so
long as any Letter of Credit, as the case may be, is outstanding notwithstanding
any termination of this Agreement, and shall be paid strictly in accordance with
the terms of this Agreement, under all circumstances whatsoever, including
without limitation the following circumstances:
(a) Any lack of validity or enforceability of any Letter of Credit;
(b) The existence of any claim, setoff, defense or other right which
the Borrower may have or claim at any time against any beneficiary,
transferee or holder of any Letter of Credit (or any Person for whom any
such beneficiary, transferee or holder may be acting), the Bank or any
other Person, whether in connection with a Letter of Credit, this
Agreement, the transactions contemplated hereby, or any unrelated
transaction; or
(c) Any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
whatsoever.
Neither the Bank nor its officers, directors or employees shall be liable or
responsible for, and the obligations of the Borrower to the Bank shall not be
impaired by:
(i) The use which may be made of any Letter of Credit, or for any
acts or omissions of any beneficiary, transferee or holder
thereof in connection therewith;
(ii) The validity, sufficiency or genuineness of documents, or of any
endorsements thereon, even if such documents or endorsements
should, in fact, prove to be in any or all respects invalid,
insufficient, fraudulent or forged;
(iii) The acceptance by the Bank of documents that appear on their
face to be in order, without responsibility for further
investigation, regardless of any notice or information to the
contrary; or
(iv) Any other action of the Bank in making or failing to make payment
under any Letter of Credit if in good faith and in conformity
with U.S. or foreign laws, regulations or customs applicable
thereto.
Notwithstanding the foregoing, the Borrower shall have a claim against the Bank,
and the Bank shall be liable to the Borrower, to the extent, but only to the
extent, of any direct, as opposed to consequential, damages suffered by the
Borrower which the Borrower proves were caused by the
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Bank's willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit comply with the terms thereof.
Section 2.14 Increased Cost for Letters of Credit. If any Regulatory Change
shall either (a) impose, modify or make applicable any reserve, deposit, capital
adequacy or similar requirement against Letters of Credit issued by the Bank, or
(b) shall impose on the Bank any other conditions affecting this Agreement or
any Letter of Credit; and the result of any of the foregoing is to increase the
cost to the Bank of issuing or maintaining any Letter of Credit, or reduce the
amount of any sum received or receivable by the Bank hereunder, then, within 30
days after written notice and demand from the Bank (which written notice and
demand shall be given by the Bank promptly after it determines such increased
cost or reduction), the Borrower shall pay to the Bank the additional amount or
amounts as will compensate the Bank for such increased cost or reduction. A
certificate submitted to the Borrower by the Bank setting forth the basis for
the determination of such additional amount or amounts necessary to compensate
the Bank as aforesaid shall be conclusive and binding on the Borrower absent
error.
Section 2.15 Loans to Cover Unpaid Drawings. Whenever any Unpaid Drawing
exists for which there are not then funds in the Holding Account to cover the
same, the Bank is authorized (and the Borrower does here so authorize the Bank)
to, and shall, make an Advance to the Borrower in an amount equal to the amount
of the Unpaid Drawing. The Bank shall apply the proceeds of such Advance
directly to reimburse itself for such Unpaid Drawing. If at the time the Bank
makes an Advance pursuant to the provisions of this Section, the applicable
conditions precedent specified in Article III shall not have been satisfied, the
Borrower shall pay to the Bank interest on the funds so advanced at a floating
rate per annum equal to the sum of the Reference Rate plus the Applicable Margin
plus two percent (2.00%).
Part C - General
Section 2.16 Computation. Revolving Commitment Fees and interest on the
Loans shall be computed on the basis of actual days elapsed and a year of 360
days.
Section 2.17 Payments. Payments and prepayments of principal of, and
interest on, the Notes and all fees, expenses and other obligations under this
Agreement payable to the Bank shall be made without setoff or counterclaim in
Immediately Available Funds not later than 12:00 noon (Minneapolis time) on the
dates called for under this Agreement and the Notes to the Bank at its main
office in Minneapolis, Minnesota. Funds received after such time shall be deemed
to have been received on the next Business Day. Whenever any payment to be made
hereunder or on the Notes shall be stated to be due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time, in the case of a payment of principal, shall be included
in the computation of any interest on such principal payment. The Bank will from
time to time provide to the Borrower a statement or statements of amounts due
and owing under the Notes and under this Agreement. The Bank's failure to
provide such statements shall not, however, relieve the Borrower of its
obligations to pay any amounts that are now or hereafter become due under the
Notes and under this Agreement. The Borrower hereby further authorizes the Bank,
if and to the
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extent payment is not made when due under the Notes or this Agreement, to make
an Advance and use the proceeds of such Advance to make such payment, all
without prior notice to the Borrower. The Bank shall, however, provide notice to
the Borrower of any such Advance promptly after it is made.
Section 2.18 Use of Loan Proceeds. The proceeds of the Term Loan shall be
used for repayment of the Borrower's indebtedness under the Existing Credit
Documents and the Borrower's general business purposes in a manner not in
conflict with any of the covenants, provisions or terms of this Agreement. The
proceeds of the Advances shall be used for the development of new Restaurants
and the Borrower's general business purposes in a manner not in conflict with
any of the Borrower's covenants in this Agreement.
Section 2.19 (a) Capital Adequacy; Prepayment Premium. In the event that
any Regulatory Change reduces or shall have the effect of reducing the rate of
return on the Bank's capital or the capital of its parent corporation (by an
amount the Bank deems material) as a consequence of the Commitments and/or its
Loans to a level below that which the Bank or its parent corporation could have
achieved but for such Regulatory Change (taking into account the Bank's policies
and the policies of its parent corporation with respect to capital adequacy),
then the Borrower shall, within 30 days after written notice and demand from the
Bank, pay to the Bank additional amounts sufficient to compensate the Bank or
its parent corporation for such reduction. If the Bank fails to give such notice
within 45 days after it obtains knowledge of such an event, the Bank shall, with
respect to compensation payable pursuant to this Section, only be entitled to
payment under this Section for diminished returns as a result of such reduction
for the period from and after the date 45 days prior to the date that the Bank
does give such notice. Any determination by the Bank under this Section and any
certificate as to the amount of such reduction given to the Borrower by the Bank
shall be final, conclusive and binding for all purposes, absent error.
(b) Term Loan Prepayment Premium. Borrower acknowledges and agrees that (i)
it has no right to prepay the Term Note without the Bank's consent, which the
Bank will grant only on the terms and subject to the conditions hereinafter
provided; (ii) the Bank will be harmed by reason of any prepayment of the Term
Note at a time when interest rates have declined below the levels prevailing at
the time funds were advanced under the Term Note, because any reinvestment of
the prepaid funds at the lower rates prevailing at the time of prepayment will
produce a lower return to the Bank; (iii) there is no readily available index of
rates payable on loans such as that from the Bank to Borrower, nor any assurance
that the Bank could replace the loan with a similar loan; and (iv) changes in
the yields on U.S. government securities provide a reasonable approximation for
changes in interest rates generally.
To induce the Bank to agree to accept voluntary prepayments, the Borrower agrees
to pay the Bank a prepayment indemnity as described in this Section 2.19(b) upon
any optional prepayment or upon acceleration of the Term Note, and agrees to all
of the other terms of prepayment herein.
"Average Maturity Period" means the weighted average time to scheduled
maturity of the amount prepaid. Average Maturity Period shall be computed by
multiplying the dollar amount of
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each installment of principal prepaid by the number of days until the scheduled
maturity of that installment, adding together the resulting products and
dividing the resulting sum by the total dollar amount of principal being
prepaid.
"Government Yield" means, as of any date of determination, the annual yield
(converted as necessary to the equivalent semi-annual compound rate) on a U.S.
Treasury security having a maturity date closest to the date computed by adding
the Average Maturity Period to the date of prepayment, as published in The Wall
Street Journal (or, if not so published, as determined by the Bank based on
quotations by secondary market dealers selected by the Bank). "U.S. Treasury
securities" means actively traded U.S. Treasury bonds, bills and notes. If more
than one issue of U.S. Treasury securities is scheduled to mature at or about
the time of such computed date, then to the extent possible the U.S. Treasury
security trading closest to its par value will be chosen as the basis of the
Government Yield.
"Interest Differential" means, as of any prepayment date, (i) 9.63% minus
(ii) the sum of (A) the Government Yield as of such date, plus (B) the Issuance
Spread.
"Issuance Spread" means forty-four one hundredths percent (0.44%) per
annum.
Any voluntary prepayment under the Term Note shall be either in the full amount
of the outstanding Term Loan under the Term Note or, if a partial prepayment, in
the amount of $100,000 or an integral multiple thereof, and partial prepayments
shall be applied to installments due under the Term Note in inverse order of
their maturities. If, at the time of any prepayment (whether voluntary or upon
acceleration of the Term Note under circumstances where a prepayment indemnity
is due as provided above), the Interest Differential shall exceed zero, such
prepayment shall be accompanied by payment of a prepayment indemnity. The amount
of the prepayment indemnity shall equal the present value (determined by The
Bank using the Government Yield as of the date of prepayment as the discount
factor) on the prepayment date of a stream of equal monthly payments in number
equal to the number of whole months (using a thirty-day month) in the Average
Maturity Period. The amount of each such monthly payment shall equal the
quotient obtained by dividing (a) the product of the amount prepaid, times the
Interest Differential, times a fraction, the numerator of which is the number of
days in the Average Maturity Period and the denominator of which is 360, by (b)
the number of whole months (using a thirty-day month) in the Average Maturity
Period.
Notwithstanding anything to the contrary stated herein, no prepayment indemnity
will be due upon any repayment or mandatory prepayment of the Term Note pursuant
to the second sentence of Section 2.5.
ARTICLE III
CONDITIONS PRECEDENT
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Section 3.1 Conditions of Initial Transaction. The making of the Term Loan
and the initial Advance on the Revolving Loan shall be subject to the prior or
simultaneous fulfillment of the following conditions:
3.1(a) Documents. The Bank shall have received the following:
(i) The Revolving (A) Note, the Revolving (B) Note and the Term
Note executed by a duly authorized officer (or officers) of the
Borrower and dated the Closing Date.
(ii) A certificate of the Secretary or Assistant Secretary of the
Borrower dated as of the Closing Date and certifying as to the
following:
(A) A true and accurate copy of the corporate resolutions of
the Borrower authorizing the execution, delivery and performance
of the Loan Documents to which the Borrower is a party
contemplated hereby and thereby;
(B) The incumbency, names, titles and signatures of the
officers of the Borrower authorized to execute the Loan Documents
to which the Borrower is a party and to request Advances and the
Term Loan;
(C) A true and accurate copy of the Articles of
Incorporation of the Borrower; and
(D) A true and accurate copy of the bylaws for the Borrower.
(iii) A copy of the Articles of Incorporation of the Borrower
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date not
more than 30 days prior to the Closing Date.
(iv) A certificate of good standing for the Borrower in the
jurisdiction of its incorporation and in each State in which the
character of the properties owned or leased by the Borrower or the
business conducted by the Borrower makes such qualification necessary,
certified by the appropriate governmental officials as of a date not
more than 30 days prior to the Closing Date.
(v) A certificate of the Secretary or Assistant Secretary of
each Guarantor dated as of the Closing Date and certifying as to the
following:
(A) A true and accurate copy of the corporate resolutions of
such Guarantor authorizing the execution, delivery and
performance of the Loan Documents to which such Guarantor is a
party contemplated hereby and thereby;
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(B) The incumbency, names, titles and signatures of the
officers of such Guarantor authorized to execute the Loan
Documents to which such Guarantor is a party;
(C) A true and accurate copy of the Articles of
Incorporation or other comparable charter of such Guarantor; and
(D) A true and accurate copy of the bylaws for such
Guarantor.
(vi) A copy of the Articles of Incorporation of each Guarantor
with all amendments thereto, certified by the appropriate governmental
official of the jurisdiction of its incorporation as of a date not
more than 30 days prior to the Closing Date.
(vii) A certificate of good standing for each Guarantor in the
jurisdiction of its incorporation and in each State in which the
character of the properties owned or leased by such Guarantor or the
business conducted by such Guarantor makes such qualification
necessary, certified by the appropriate governmental officials as of a
date not more than 30 days prior to the Closing Date.
(viii) Such corporate and other organizational documents and
certificates as the Bank may reasonably request with respect to the
due organization, good standing, power and authority of the Borrower
or any Guarantor and incumbency of officers or other officials
thereof.
(ix) Such information relating to the Borrower and the
Subsidiaries, financial or otherwise, which the Bank may reasonably
request.
(x) A certificate dated the Closing Date executed by the chief
executive officer or chief financial officer of the Borrower on its
behalf certifying as to the matters set forth in Sections 3.2 (a) and
3.2 (b) below.
(xi) A Certificate of Insurance prepared in accordance with
Acord 27 and Acord 25, showing property, liability, automobile, and
workers compensation insurance coverages carried by the Borrower and
the Subsidiaries with insurance companies licensed to do business in
the State of Minnesota and reasonably acceptable to the Bank, in such
amounts as may be acceptable to the Bank, and otherwise providing
evidence of the Borrower's compliance with Section 5.3 concerning
insurance.
(xii) Payoff letters duly executed by each creditor with respect
to its respective Existing Credit Documents.
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3.1(b) Opinion. The Borrower shall have requested Faegre &
Benson, its counsel, to prepare a written opinion, addressed to the Bank
and dated the Closing Date, covering the matters set forth in Exhibit 3.1 ,
and such opinion shall have been delivered to the Bank.
3.1(c) Compliance. The Borrower shall have performed and
complied with all agreements, terms and conditions contained in this
Agreement required to be performed or complied with by the Borrower prior
to or simultaneously with the Closing Date.
3.1(d) Security Documents. All Security Documents (or financing
statements with respect thereto) shall have been appropriately filed or
recorded to the satisfaction of the Bank; any pledged collateral shall have
been duly delivered to the Bank; and the priority and perfection of the
Liens created by the Security Documents shall have been established to the
satisfaction of the Bank and its counsel.
3.1(e) Other Matters. All corporate and legal proceedings
relating to the Borrower and the Guarantors and all instruments and
agreements in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory in scope, form and substance to
the Bank and its counsel, and the Bank shall have received all information
and copies of all documents, including records of corporate proceedings, as
the Bank or its counsel may reasonably have requested in connection
therewith, such documents where appropriate to be certified by proper
corporate or governmental authorities.
3.1(f) Fees and Expenses. The Bank shall have received all fees
and other amounts due and payable by the Borrower on or prior to the
Closing Date, including the reasonable fees and expenses of counsel to the
Bank payable pursuant to Section 8.2.
Section 3.2 Conditions Precedent to Term Loan and all Advances. The
obligation of the Bank to make the Term Loan, any Advances hereunder (including
the initial Advance on the Revolving Loan) or any Letter of Credit shall be
subject to the fulfillment of the following conditions:
3.2(a) Representations and Warranties. The representations and
warranties contained in Article IV shall be true and correct on and as of
the Closing Date and on the date of each Advance, with the same force and
effect as if made on such date.
3.2(b) No Default. No Default or Event of Default, or Material
Adverse Occurrence first occurring after November 22, 1998 (other than the
fire at the Borrower's corporate headquarters on December 8, 1998), shall
have occurred and be continuing on the Closing Date and on the date of each
Advance or will exist after giving effect to the Loans made on such date.
3.2(c) No Merger/Acquisition. Neither the Borrower nor any of
the Subsidiaries shall have made any commitment to (i) merge or consolidate
with any other
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entity or (ii) acquire all or substantially all of the assets of any other
entity, unless such merger, consolidation or acquisition would not be
prohibited by the terms of this Agreement.
3.2(d) Notices and Requests. The Bank shall have received the
Borrower's request for the Term Loan or such Advance or such Letter of
Credit as required under Section 2.2.
3.2(e) No Adverse Development in Litigation. No development
shall have occurred in any litigation, arbitration or governmental
investigation or proceeding disclosed in writing by the Borrower to the
Bank under this Agreement, which would constitute a Material Adverse
Occurrence.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement and to make the Term Loan
and Advances hereunder, the Borrower represents and warrants to the Bank:
Section 4.1 Organization, Standing, Etc. The Borrower is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted, to enter into this
Agreement and to issue the Notes and to perform its obligations under the Loan
Documents to which it is a party. Each Subsidiary is a corporation duly
incorporated and validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted. Each of the Borrower and
the Subsidiaries (a) holds all certificates of authority, licenses and permits
necessary to carry on its business as presently conducted in each jurisdiction
in which it is carrying on such business, except where the failure to hold such
certificates, licenses or permits would not constitute a Material Adverse
Occurrence, and (b) is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which the character of the properties owned,
leased or operated by it or the business conducted by it makes such
qualification necessary and the failure so to qualify would permanently preclude
the Borrower or such Subsidiary from enforcing its rights with respect to any
material assets or expose the Borrower or any Subsidiary to any Material Adverse
Occurrence.
Section 4.2 Authorization and Validity. The execution, delivery and
performance by the Borrower of the Loan Documents to which it is a party have
been duly authorized by all necessary corporate action by the Borrower, and this
Agreement constitutes, and the Notes and other Loan Documents to which it is a
party when executed will constitute, the legal, valid and binding obligations of
the Borrower, enforceable against the Borrower in accordance with their
respective terms, subject to limitations as to enforceability which might result
from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and subject to general principles of equity.
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Section 4.3 No Conflict; No Default. Except as set forth on Schedule 4.3 ,
the execution, delivery and performance by the Borrower of the Loan Documents to
which it is a party will not (a) violate any provision of any law, statute, rule
or regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Borrower, (b) violate or contravene any provision of the
Articles of Incorporation or bylaws of the Borrower, or (c) result in a breach
of or constitute a default under any indenture, loan or credit agreement or any
other agreement, lease or instrument to which the Borrower is a party or by
which it or any of its properties may be bound or result in the creation of any
Lien on the assets of the Borrower or the Subsidiaries thereunder (except in the
case of clause (a) or (c), above, where the violation, breach or default or the
creation of such Lien could not adversely effect the validity or enforceability
of the Loan Documents or constitute a Material Adverse Occurrence). Except set
forth on Schedule 4.3, neither the Borrower nor any Subsidiary is in default
under or in violation of any such law, statute, rule or regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture, loan
or credit agreement or other agreement, lease or instrument in any case in which
the consequences of such default or violation could constitute a Material
Adverse Occurrence.
Section 4.4 Government Consent. No order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority is required on the
part of the Borrower to authorize, or is required on the part of the Borrower in
connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, the Loan Documents to which the
Borrower is a party, except for any necessary filing or recordation of or with
respect to any of the Security Documents and except as set forth on Schedule
4.3, and except where the failure to obtain such order, consent, approval,
license, authorization, validation or exemption, or to make such filing,
recording or registration, could not adversely effect the validity or
enforceability of the Loan Documents or constitute a Material Adverse
Occurrence.
Section 4.5 Financial Statements and Condition. The Borrower's audited
consolidated financial statements as at, and for the Fiscal Year ended, December
28, 1997 and its unaudited financial statements as at, and for the eleven fiscal
months ended, November 22, 1998, as heretofore furnished to the Bank, have been
prepared in accordance with GAAP on a consistent basis (except for the absence
of footnotes and subject to year-end audit adjustments as to the interim
statements) and fairly present, in all material respects, the financial
condition of the Borrower and the Subsidiaries as at such dates and the results
of their operations and their cash flows for the respective periods then ended.
As of November 22, 1998, neither the Borrower nor any Subsidiary had any
material Indebtedness, Contingent Liability, liability for taxes or long-term
lease obligation, nor other material obligation which is not reflected in the
unaudited financial statements as of November 22, 1998, or in the notes thereto,
and which would be required to be reflected therein in accordance with GAAP.
Since November 22, 1998, there has been no Material Adverse Occurrence other
than the fire at the Borrower's corporate headquarters on December 8, 1998.
Section 4.6 Litigation. Except as set forth on Schedule 4.6 , there are no
actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened against or adversely
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affecting the Borrower or any Subsidiary or any of their properties before any
court or arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Borrower or such
Subsidiary, would constitute a Material Adverse Occurrence.
Section 4.7 Environmental, Health and Safety Laws. Except as set forth on
Schedule 4.7, there does not exist any violation by the Borrower or any
Subsidiary of any applicable federal, state or local law, rule or regulation or
order of any government, governmental department, board, agency or other
instrumentality relating to environmental, pollution, health or safety matters
which will or threatens to impose a material liability on the Borrower or a
Subsidiary or which would require a material expenditure by the Borrower or such
Subsidiary to cure. Except as set forth on Schedule 4.7 , neither the Borrower
nor any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is the subject of any
governmental investigation evaluating whether any remedial action is needed to
respond to any release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action could reasonably be
expected to constitute a Material Adverse Occurrence. Except as set forth in
Schedule 4.7, the Borrower does not have knowledge that it or its property or
any Subsidiary or the property of any Subsidiary will become subject to
environmental laws or regulations during the term of this Agreement, compliance
with which could reasonably be expected to require Capital Expenditures which
would constitute a Material Adverse Occurrence.
Section 4.8 ERISA. Each Plan is in compliance in all material respects with
all applicable requirements of ERISA and the Code and with all material
applicable rulings and regulations issued under the provisions of ERISA and the
Code setting forth those requirements. No Reportable Event has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA. With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Bank) of such Plan's projected benefit obligations did not exceed
the fair market value of such Plan's assets.
Section 4.9 Federal Reserve Regulations. Neither the Borrower nor any
Subsidiary is engaged principally or as one of its important activities in the
business of extending credit for the purpose of purchasing or carrying margin
stock (as defined in Regulation U of the Board). The value of all margin stock
owned by the Borrower does not constitute more than 25% of the value of the
assets of the Borrower.
Section 4.10 Title to Property; Leases; Liens; Subordination. Each of the
Borrower and the Subsidiaries has (a) good and marketable title to its owned
real properties and (b) good and sufficient title to, or valid, subsisting and
enforceable leasehold interest in, its other material properties, including all
real properties and other material properties and assets referred to as owned by
the Borrower and the Subsidiaries in the most recent financial statement
referred to in Section 4.5
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(other than property and assets disposed of since November 22, 1998, in the
ordinary course of business or, after the date of this Agreement, as permitted
under Section 6.2, and other than property and assets destroyed in the fire at
the Borrower's corporate headquarters on December 8, 1998). None of such
properties is subject to a Lien, except as allowed under Section 6.14. The
Borrower has not subordinated any of its rights under any obligation owing to it
to the rights of any other person.
Section 4.11 Taxes. Except as set forth in Schedule 4.11, each of the
Borrower and the Subsidiaries has filed all federal, state and local tax returns
required to be filed and has paid or made provision for the payment of all taxes
due and payable pursuant to such returns and pursuant to any assessments made
against it or any of its property and all other taxes, fees and other charges
imposed on it or any of its property by any governmental authority (other than
taxes, fees or charges the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in accordance with GAAP have been provided on the books of the
Borrower). No tax Liens have been filed and not subsequently released, and no
material claims are being asserted with respect to any such taxes, fees or
charges. Except as set forth in Schedule 4.11, the charges, accruals and
reserves on the books of the Borrower in respect of taxes and other governmental
charges are adequate and the Borrower knows of no proposed material tax
assessment against it or any Subsidiary or any basis therefor.
Section 4.12 Trademarks, Patents. Except as set forth on Schedule 4.12 ,
each of the Borrower and the Subsidiaries possesses or has the right to use all
of the patents, trademarks, trade names, service marks and copyrights, and
applications therefor, and all material technology, know-how, processes, methods
and designs, used in or necessary for the conduct of its business, without known
material conflict with the rights of others.
Section 4.13 Burdensome Restrictions. Neither the Borrower nor any
Subsidiary is a party to or otherwise bound by any indenture, loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter, corporate or partnership restriction which constitutes a Material
Adverse Occurrence.
Section 4.14 Force Majeure. Since November 22, 1998, the business,
properties and other assets of the Borrower and the Subsidiaries have not been
materially and adversely affected in any way as the result of any fire or other
casualty, strike, lockout, or other labor trouble, embargo, sabotage,
confiscation, condemnation, riot, civil disturbance, activity of armed forces or
act of God, other than the fire at the Borrower's corporate headquarters on
December 8, 1998.
Section 4.15 Investment Company Act. Neither the Borrower nor any
Subsidiary is an "investment company" or a company "controlled" by an investment
company within the meaning of the Investment Company Act of 1940, as amended.
Section 4.16 Public Utility Holding Company Act. Neither the Borrower nor
any Subsidiary is a "holding company" or a "subsidiary company" of a holding
company or an "affiliate" of a holding company or of a subsidiary company of a
holding company within the meaning of the Public Utility Holding Company Act of
1935, as amended.
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Section 4.17 Retirement Benefits. Except as required under Section 4980B of
the Code, Section 601 of ERISA or applicable state law, neither the Borrower nor
any Subsidiary is obligated to provide post-retirement medical or insurance
benefits with respect to employees or former employees.
Section 4.18 Full Disclosure. Subject to the following sentence, neither
the financial statements referred to in Section 4.5 nor any other certificates,
written statements, exhibits or reports furnished by or on behalf of the
Borrower in connection with or pursuant to this Agreement, when taken as a
whole, contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements contained therein not
misleading. Certificates or statements furnished by or on behalf of the Borrower
to the Bank consisting of projections or forecasts of future results or events
have been prepared in good faith and based on good faith estimates and
assumptions of the management of the Borrower, and the Borrower has no reason to
believe that such projections or forecasts for any periods or portions of
periods not yet completed (as modified by any updates thereof delivered to the
Bank) are not reasonable.
Section 4.19 Solvency. On the Closing Date, after giving effect to the Term
Loan and all Advances, (a) the present fair saleable value of the assets of the
Borrower and the Subsidiaries is in excess of the total amount of their
liabilities (including for purposes of the definition all liabilities, whether
or not reflected on a balance sheet prepared in accordance with GAAP, and
whether direct or indirect, fixed or contingent, secured of unsecured, disputed
or undisputed); and (b) the Borrower and the Subsidiaries will be able to pay
their obligations as they mature in the ordinary course of business as proposed
to be conducted following the Closing Date; and (c) the Borrower and the
Subsidiaries do not have unreasonably small capital to carry out the business as
proposed to be conducted following the Closing Date. For purposes of this
Section 4.19, "present fair saleable value" means the value which would be
realized from an interested purchaser aware of all relevant information relating
to the assets or group of assets being sold and who is willing to purchase under
ordinary selling conditions in an existing and not theoretical market if the
assets or group of assets are disposed of within a period of six (6) months to
one year.
Section 4.20 Year 2000. The Borrower has reviewed and assessed its and the
Subsidiaries' business operations and computer systems with respect to the "year
2000 problem" (that is, that computer applications and equipment may not be able
properly to perform date-sensitive functions, including without limitation its
credit card processing capabilities, before, during and after January 1, 2000)
and, based on those reviews and inquiries and subject to the matters set forth
on Schedule 4.20 , on or before June 30, 1999, the Borrower will have taken all
necessary steps to ensure that the year 2000 problem will not result in a
Material Adverse Occurrence.
Section 4.21 Capitalization of Borrower and Subsidiaries. Schedule 4.21
sets forth, as of the date of this Agreement:
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(a) for Borrower, the number and percentage of the authorized,
issued and outstanding shares of each class of capital stock owned of
record by its owners, and its jurisdiction of organization,
(b) a list of all Subsidiaries of the Borrower and, as
applicable, the number and percentage of the authorized, issued and
outstanding shares of each class of capital stock owned beneficially
or of record by the Borrower or any such Subsidiary therein, and the
jurisdiction of organization of such Subsidiary.
As of the Closing Date, all of the outstanding capital stock of the Borrower
will be validly issued, fully paid and nonassessable, and will be owned of
record directly as set forth on Schedule 4.21 (other than changes to such
ownership resulting from the exercise of options, warrants and other contractual
rights described in Schedule 4.21), and all of the outstanding capital stock of
the Subsidiaries, will be validly issued, fully paid and nonassessable, as
applicable, and will be owned beneficially and of record directly as set forth
on Schedule 4.21, subject to no Liens other than Liens in favor of the Bank and
the restrictions set forth in Schedule 4.21. Except as reflected on Schedule
4.21, as of the Closing Date, neither the Borrower nor any of the Subsidiaries
has outstanding any capital stock appreciation or phantom capital stock, rights
or plans, and is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its capital stock. Except as
set forth on Schedule 4.21, there are no statutory or contractual shareholder's
preemptive rights or rights of first offer or refusal with respect to the
capital stock of the Borrower or any of the Subsidiaries. Neither the Borrower
nor any of the Subsidiaries has violated any applicable securities laws in
connection with the offer, sale or issuance of any of its respective capital
stock. Except as set forth on Schedule 4.21, there is no agreement, to the
Borrower's knowledge, among or between the shareholders of the Borrower with
respect to the voting or transfer of the capital stock of the Borrower.
Section 4.22 Obligations Senior Debt. The Obligations shall at all times be
considered senior in right of payment to the indebtedness evidenced by the
Subordinated Debt, including without limitation, the Subordinate Debentures.
ARTICLE V
AFFIRMATIVE COVENANTS
Until any obligation of the Bank hereunder to make the Term Loan and
Advances or to issue Letters of Credit shall have expired or been terminated and
all the other Obligations have been paid in full and all outstanding Letters of
Credit shall have expired or shall have been returned to the Bank, or the
liability of the Bank thereon shall have been otherwise discharged, unless the
Bank shall otherwise consent in writing:
Section 5.1 Financial Statements and Reports. The Borrower will furnish to
the Bank:
5.1(a) As soon as available and in any event within 120 days
after the end of each Fiscal Year of the Borrower, the financial statements
of the Borrower and the
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Subsidiaries consisting of consolidated statements of cash flow and changes
in stockholders' equity for such Fiscal Year, statements of income for each
Restaurant for such Fiscal Year, and a consolidated balance sheet as at the
end of such Fiscal Year, setting forth in each case in comparative form
corresponding figures from the previous annual audit, certified, in the
case of the consolidated statements, without qualification by Deloitte
Touche or another firm of independent certified public accountants of
recognized national standing selected by the Borrower and reasonably
acceptable to the Bank, together with all footnotes and any management
letters, management reports or other supplementary comments or reports to
the Borrower or its board of directors furnished by such accountants,
provided that, as long as the Borrower is required to file reports on Form
10-K with the Securities and Exchange Commission pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended, the Borrower
shall be deemed to have fulfilled its obligations to furnish to the Bank,
by the date prescribed in this Section 5.1(a), the financial statements,
management letters , management reports or other supplementary comments or
reports in respect of any Fiscal Year by furnishing to the Bank a copy of
said report for such Fiscal Year.
5.1(b) Together with the audited financial statements required
under Section 5.1(a), a statement by the accounting firm performing such
audit to the effect that it has reviewed this Agreement and that in the
course of performing its examination nothing came to its attention that
caused it to believe that any Default or Event of Default exists, or, if
such Default or Event of Default existed, specifying the nature and period
of existence thereof.
5.1(c) As soon as available and in any event within 30 days
after the end of each fiscal month, unaudited consolidated statements of
cash flow and changes in stockholders' equity for the Borrower and the
Subsidiaries for such month and for the period from the beginning of such
Fiscal Year to the end of such month, unaudited statements of income for
each Restaurant for such month and for the period from the beginning of
such Fiscal Year to the end of such month, and an unaudited consolidated
balance sheet of the Borrower and the Subsidiaries as at the end of such
month, setting forth in comparative form figures for the corresponding
period for the preceding Fiscal Year, accompanied by a certificate signed
by the chief financial officer of the Borrower stating that such financial
statements present fairly, in all material respects, the consolidated
financial condition of the Borrower and the Subsidiaries and that the same
have been prepared in accordance with GAAP (except for the absence of
footnotes and subject to year-end audit adjustments).
5.1(d) As soon as available and in any event within 30 days
after the end of each fiscal quarter (or 45 days after the end of each
fiscal quarter, if the Borrower is required to file reports on Form 10-Q
with the Securities and Exchange Commission pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended, in respect of
such fiscal quarter), unaudited consolidated statements cash flow and
changes in stockholders' equity for the Borrower and the Subsidiaries for
such quarter and for the period from the beginning of such Fiscal Year to
the end of such quarter, an unaudited statement of income for each
Restaurant for such quarter and for the period from the beginning of such
Fiscal Year to the end of such quarter, and an unaudited consolidated
balance sheet of the Borrower and the
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Subsidiaries as at the end of such quarter, setting forth in comparative
form figures for the corresponding period for the preceding Fiscal Year,
accompanied by a certificate signed by the chief financial officer of the
Borrower stating that such financial statements present fairly, in all
material respects, the consolidated financial condition of the Borrower and
the Subsidiaries and that the same have been prepared in accordance with
GAAP (except for the absence of footnotes and subject to year-end audit
adjustments).
5.1(e) As soon as practicable and in any event within 30 days
after the end of each fiscal month, a Compliance Certificate in the form of
Exhibit 5.1(e) signed by the chief financial officer of the Borrower
demonstrating in reasonable detail compliance (or noncompliance, as the
case may be) with these Sections: 6.10, 6.16, 6.17, 6.18, 6.19, 6.20, as at
the end of such month and stating that as at the end of such month there
did not exist any Default or Event of Default or, if such Default or Event
of Default existed, specifying the nature and period of existence thereof
and what action the Borrower proposes to take with respect thereto.
5.1(f) As soon as practicable and in any event at least 30 days
prior to the beginning of each Fiscal Year of the Borrower, a statement of
forecasted income for each Restaurant for each fiscal month in such Fiscal
Year, and a consolidated forecasted balance sheet of the Borrower and the
Subsidiaries, as at the end of each such fiscal month in such Fiscal Year,
together with supporting assumptions, all in reasonable detail and
reasonably satisfactory in scope to the Bank.
5.1(g) Immediately upon any officer of the Borrower becoming
aware of any Default or Event of Default, a notice describing the nature
thereof and what action the Borrower proposes to take with respect thereto.
5.1(h) Immediately upon any officer of the Borrower becoming
aware of the occurrence, with respect to any Plan, of any Reportable Event
or any Prohibited Transaction, a notice specifying the nature thereof and
what action the Borrower proposes to take with respect thereto, and, when
received, copies of any notice from PBGC of intention to terminate or have
a trustee appointed for any Plan.
5.1(i) Promptly, but in any event not later than ten Business
Days after the mailing or filing thereof, copies of all financial
statements, reports and proxy statements mailed to the Borrower's
shareholders generally, and copies of all registration statements, periodic
reports and other documents filed by the Borrower with the Securities and
Exchange Commission (or any successor thereto) or any national securities
exchange.
5.1(j) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
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Section 5.2 Corporate Existence. The Borrower will maintain, and cause each
Subsidiary to maintain, its corporate existence in good standing under the laws
of its jurisdiction of incorporation and its qualification to transact business
in each jurisdiction where failure so to qualify would permanently preclude the
Borrower or such Subsidiary from enforcing its rights with respect to any
material asset or would expose the Borrower or such Subsidiary to any material
liability; provided, however, that nothing herein shall prohibit the merger or
liquidation of any Subsidiary allowed under Section 6.1.
Section 5.3 Insurance. The Borrower shall maintain, and shall cause each
Subsidiary to maintain, with financially sound and reputable insurance companies
such insurance as may be required by law and such other insurance in such
amounts and against such hazards as is customary in the case of reputable firms
engaged in the same or similar business and similarly situated.
Section 5.4 Payment of Taxes and Claims. The Borrower shall file, and cause
each Subsidiary to file, all tax returns and reports which are required by law
to be filed by it and will pay, and cause each Subsidiary to pay, before they
become delinquent all taxes, assessments and governmental charges and levies
imposed upon it or its property and all claims or demands of any kind (including
but not limited to those of suppliers, mechanics, carriers, warehouses,
landlords and other like Persons) which, if unpaid, might result in the creation
of a Lien upon its property; provided that the foregoing items need not be paid
if they are being contested in good faith by appropriate proceedings, and as
long as the Borrower's or such Subsidiary's title to its property is not
materially adversely affected, its use of such property in the ordinary course
of its business is not materially interfered with and adequate reserves with
respect thereto have been set aside on the Borrower's or such Subsidiary's books
in accordance with GAAP.
Section 5.5 Inspection. The Borrower shall permit any Person designated by
the Bank, upon reasonable notice, to visit and inspect any of the properties,
corporate books and financial records of the Borrower and the Subsidiaries, to
examine and to make copies of the books of accounts and other financial records
of the Borrower and the Subsidiaries, and to discuss the affairs, finances and
accounts of the Borrower and the Subsidiaries with, and to be advised as to the
same by, its officers at such reasonable times and intervals as the Bank may
designate (which shall be not less than once during each fiscal quarter of the
Borrower). So long as no Event of Default exists, the Borrower shall reimburse
the Bank for the reasonable out-of-pocket cost of not more than one audit of
collateral in each Fiscal Year and any other visits, inspections and
examinations shall be at the expense of the Bank. Any such visits, inspections
and examinations made while any Event of Default is continuing shall be at the
expense of the Borrower.
Section 5.6 Maintenance of Properties. The Borrower will maintain, and
cause each Subsidiary to maintain, its material properties used or useful in the
conduct of its business in good condition, repair and working order (normal wear
and tear excepted), and supplied with all necessary equipment, and make all
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as may be necessary so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
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Section 5.7 Books and Records. The Borrower will keep, and will cause each
Subsidiary to keep, adequate and proper records and books of account in which
full and correct entries will be made of its dealings, business and affairs.
Section 5.8 Compliance. The Borrower will comply, and will cause each
Subsidiary to comply, in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject; provided, however, that failure so to comply shall not be a
breach of this covenant if such failure does not constitute a Material Adverse
Occurrence and the Borrower or such Subsidiary is acting in good faith and with
reasonable dispatch to cure such noncompliance.
Section 5.9 Notice of Litigation. The Borrower will give prompt written
notice to the Bank of (a) the commencement of any action, suit or proceeding
before any court or arbitrator or any governmental department, board, agency or
other instrumentality adversely affecting the Borrower or any Subsidiary or any
property of the Borrower or a Subsidiary or to which the Borrower or a
Subsidiary is a party in which an adverse determination or result could
constitute a Material Adverse Occurrence, or (other than any litigation where
the insurance insures against the damages claimed and the insurer has assumed
defense of the litigation without reservation) in which the damages claimed
could exceed $200,000 on an individual claim or $500,000 when aggregated with
other such claims, stating the nature and status of such action, (b) any
material arbitration or governmental investigation or proceeding not previously
disclosed by the Borrower to the Bank which has been instituted or, to the
knowledge of the Borrower, is threatened against the Borrower or any of the
Subsidiaries or to which its or any Subsidiaries' property is subject and which,
if determined adversely to the Borrower or such Subsidiary, would constitute a
Material Adverse Occurrence; and (c) any adverse development which occurs in any
litigation, arbitration or governmental investigation or proceeding previously
disclosed by the Borrower to the Bank which, if determined adversely to the
Borrower or such Subsidiary, would constitute a Material Adverse Occurrence,
provided that no such notice by the Borrower shall, per se, excuse the Borrower
from complying with the terms of Section 3.2.
Section 5.10 ERISA. The Borrower will maintain, and cause each Subsidiary
to maintain, each Plan in compliance with all material applicable requirements
of ERISA and of the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and of the Code and will not
and not permit any of the ERISA Affiliates to (a) engage in any transaction in
connection with which the Borrower or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in either case in an amount
exceeding $100,000, (b) fail to make full payment when due of all amounts which,
under the provisions of any Plan, the Borrower or any ERISA Affiliate is
required to pay as contributions thereto, or permit to exist any accumulated
funding deficiency (as such term is defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, with respect to any Plan in an
aggregate amount exceeding $100,000 or (c) fail to make any payments in an
aggregate amount exceeding $100,000 to any Multiemployer Plan that the Borrower
or any of the ERISA Affiliates may be required to make under any agreement
relating to such Multiemployer Plan or any law pertaining thereto.
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Section 5.11 Environmental Matters; Reporting. The Borrower will observe
and comply with, and cause each Subsidiary to observe and comply with, all
applicable laws, rules, regulations and orders of any government or government
agency relating to health, safety, pollution, hazardous materials or other
environmental matters to the extent non-compliance could result in a material
liability for Borrower or any Subsidiary or otherwise constitute a Material
Adverse Occurrence. The Borrower will give the Bank prompt written notice of any
violation of any environmental law, rule, regulation or order by the Borrower or
any Subsidiary of which the Borrower becomes aware and of the commencement of
any judicial or administrative proceeding against the Borrower or any Subsidiary
relating to health, safety or environmental matters (a) in which an adverse
determination or result is reasonably likely to result in the revocation of or
have a material adverse effect on any operating permits, air emission permits,
water discharge permits, hazardous waste permits or other permits held by the
Borrower or any Subsidiary which are material to the operations of the Borrower
and the Subsidiaries taken as whole, or (b) which will or is reasonably likely
to impose a material liability on the Borrower or such Subsidiary to any Person
or which will require a material expenditure by the Borrower or such Subsidiary
to cure any alleged problem or violation.
Section 5.12 Reaffirmation of Guaranties. When so requested by the Bank
from time to time, the Borrower will promptly cause the Guarantors, and any
other Person who may hereafter guaranty the Obligations or any part thereof, to
execute and deliver to the Bank reaffirmations of their respective Guaranties in
such form as the Bank may require.
Section 5.13 Further Assurances. The Borrower shall promptly correct any
non-material or patent defect or error that may be discovered in any Loan
Document or in the execution, acknowledgment or recordation of any Loan
Document. Promptly upon request by the Bank, the Borrower also shall do,
execute, acknowledge, deliver, record, re-record, file, re-file, register and
re-register, any and all conveyances, mortgages, deeds of trust, trust deeds,
assignments, estoppel certificates, financing statements and continuations
thereof, notices of assignment, transfers, certificates, assurances and other
instruments as the Bank may reasonably require from time to time in order: (a)
to carry out more effectively the purposes of the Loan Documents; (b) to perfect
and maintain the validity, effectiveness and priority of any security interests
intended to be created by the Loan Documents; and (c) to better assure, convey,
grant, assign, transfer, preserve, protect and confirm unto the Bank the rights
granted now or hereafter intended to be granted to the Bank under any Loan
Document or under any other instrument executed in connection with any Loan
Document or that the Borrower may be or become bound to convey, mortgage or
assign to the Bank in order to carry out the intention or facilitate the
performance of the provisions of any Loan Document. The Borrower shall furnish
to the Bank evidence satisfactory to the Bank of every such recording, filing or
registration.
Section 5.14 Year 2000 Remediation. The Borrower agrees to take, and to
cause each of the Subsidiaries to take, all actions reasonably necessary to
ensure that the representation set forth in Section 4.20 remains true, and the
Borrower agrees to notify the Bank promptly if, at any time during the term of
this Agreement, the Borrower becomes aware of facts or circumstances such that
the representation set forth in Section 4.20 has become or may become untrue or
this Section has been
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or may be breached. The Borrower will promptly deliver to the Bank such
information relating to the representation in Section 4.20 and the agreement set
forth in this Section as the Bank reasonably requests from time to time,
including, without limitation, any information pertaining to the review and
assessment set forth in Section 4.20.
Section 5.15 Additional Collateral.
(a) Pledge of BUCA (DT Minneapolis) Stock. The Borrower shall use its
best efforts to obtain the approval of the Minneapolis City Council to the
pledge to the Bank of the outstanding shares of capital stock of BUCA (DT
Minneapolis), Inc. promptly after the Closing Date. Upon the receipt of
such approval, the Borrower shall deliver to the Bank a duly executed
amendment to the Pledge Agreement in respect of the capital stock of BUCA
(DT Minneapolis), Inc., in form and substance reasonably satisfactory to
the Bank, together with the stock certificates representing the Borrower's
ownership of 100% of the shares of BUCA (DT Minneapolis), Inc. (together
with stock powers related thereto).
(b) SBA Loan. From and after the date of the repayment of the SBA Loan
described in Section 5.17, the Borrower shall (i) cause all assets of BUCA
(DT) Milwaukee, Inc. subject to any Lien securing the SBA Loan to become
subject to a first priority Lien thereon in favor of the Bank to secure the
Obligations, pursuant to a Security Agreement (Guarantor) and related UCC
financing statements for filing in such jurisdictions as the Bank shall
request, all duly executed by BUCA (DT) Milwaukee, Inc., and (ii) deliver
to the Bank a duly executed amendment to the Pledge Agreement in respect of
the capital stock of BUCA (DT) Milwaukee, Inc., in form and substance
reasonably satisfactory to the Bank, together with the stock certificates
representing the Borrower's ownership of 100% of the shares of BUCA (DT)
Milwaukee, Inc. (together with stock powers related thereto).
(c) Acquisition of Title to Real Property. Within 150 days (210 days
in the case of the real property located at 2728 Gannon Road in Saint Paul,
Minnesota) after the Borrower or any Subsidiary acquires title to any real
property, other than a leasehold interest therein, the Borrower shall, or,
as applicable, shall cause such Subsidiary to, create a first priority Lien
thereon in favor of the Bank to secure the Obligations, pursuant to
agreements and instruments reasonably satisfactory to the Bank, provided
that no such Lien shall be required in the event the Borrower or such
Subsidiary enters into a sale-leaseback agreement relating to such real
property within 120 days (180 days in the case of the real property located
at 2728 Gannon Road in Saint Paul, Minnesota) following the date the
Borrower or such Subsidiary acquires such title, provided further that, to
the extent such real property is acquired with purchase money financing, to
the extent otherwise permitted under this Agreement, the Lien thereon in
favor of the Bank may be a second priority Lien.
Section 5.16 Operating Leases Relating to Real Property and Landlords'
Waivers. Not fewer than five (5) Business Days prior to execution of any new
Operating Lease relating to real property or renewal of any existing Operating
Lease relating to real property, the Borrower agrees to provide a copy thereof
to the Bank in substantially final form. With respect to Operating Leases
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related to real property entered into from and after the Closing Date (whether a
new Operating Lease related to real property or the renewal of an existing
Operating Lease related to real property ), the Borrower shall request the
lessor thereunder to provide a landlord waiver in form and substance reasonably
satisfactory to the Bank, and shall negotiate in good faith to obtain such
landlord waiver from such lessor.
Section 5.17 Repayment of SBA Loan. Within one hundred eighty (180) days
after the date of this Agreement, the Borrower shall repay the SBA Loan in full.
Section 5.18 Century Bank Letters of Credit. On or before April 1, 1999,
the Borrower will allow each of the Century Bank Letters of Credit either (a) to
expire without renewal, (b) to be returned to the issuer thereof and terminated,
or (c) to be replaced by a Letter of Credit. Upon the occurrence of the events
described in the preceding sentence, the Borrower will cause all Liens securing
the Borrower's or any Subsidiary's obligations with respect to the Century Bank
Letters of Credit to be released, terminated or satisfied, and all assets
pledged with respect thereto to be returned to the Borrower or such Subsidiary.
Section 5.19 New Restaurants. The Borrower agrees that each new Restaurant
created or acquired from and after the Closing Date shall be owned or leased and
operated only by a Wholly-Owned Subsidiary the capital stock of which has been
pledged and delivered to the Bank pursuant to the Pledge Agreement.
ARTICLE VI
NEGATIVE COVENANTS
Until any obligation of the Bank hereunder to make the Term Loan and
Advances or to issue Letters of Credit shall have expired or been terminated and
all the other Obligations have been paid in full and all outstanding Letters of
Credit shall have expired or shall have been returned to the Bank, or the
liability of the Bank thereon shall have been otherwise discharged, unless the
Bank shall otherwise consent in writing:
Section 6.1 Merger. The Borrower will not merge or consolidate or enter
into any analogous reorganization or transaction with any Person or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution) or permit
any Subsidiary to do any of the foregoing; provided, however, any Subsidiary may
be merged with or liquidated into the Borrower or any Wholly- Owned Subsidiary
(if the Borrower or such Wholly-Owned Subsidiary is the surviving corporation).
Section 6.2 Disposition of Assets. The Borrower will not, and will not
permit any Subsidiary to, directly or indirectly, sell, assign, lease, convey,
transfer or otherwise dispose of (whether in one transaction or a series of
transactions) any property (including accounts and notes receivable, with or
without recourse) or enter into any agreement to do any of the foregoing,
except:
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6.2(a) dispositions of inventory, or used, worn-out or surplus
equipment, all in the ordinary course of business;
6.2(b) the sale of equipment to the extent that such equipment
is exchanged for credit against the purchase price of similar replacement
equipment, or the proceeds of such sale are applied with reasonable
promptness to the purchase price of such replacement equipment;
6.2(c) the sale, assignment, lease, conveyance, transfer or
other disposition of property (a "Transfer") by a Subsidiary to the
Borrower or any Wholly-Owned Subsidiary; provided that such transferee
Subsidiary shall have executed and delivered to the Bank a Security
Agreement (Guarantor) and related UCC financing statements for filing in
such jurisdictions as the Bank may request and, if the assets subject to a
Transfer are to be located on premises subject to a lease, then prior to
such Transfer, a landlord's waiver in form and substance reasonably
acceptable to the Bank shall have been executed and delivered to the Bank;
6.2(d) the sale of any real property or Restaurant equipment as
part of a sale leaseback transaction in which the Borrower or a Subsidiary
becomes the lessee of such real property or equipment; and
6.2(e) other dispositions of property during the term of this
Agreement whose net book value in the aggregate does not exceed five
percent (5%) of the Borrower's total consolidated assets as shown on its
balance sheet for its most recent prior fiscal quarter.
Section 6.3 Plans. The Borrower will not permit, and will not allow any
Subsidiary to permit, any event to occur or condition to exist which would
permit any Plan to terminate under any circumstances which would cause the Lien
provided for in Section 4068 of ERISA to attach to any assets of the Borrower or
any Subsidiary; and the Borrower will not permit, as of the most recent
valuation date for any Plan subject to Title IV of ERISA, the present value
(determined on the basis of reasonable assumptions employed by the independent
actuary for such Plan and previously furnished in writing to the Bank) of such
Plan's projected benefit obligations to exceed the fair market value of such
Plan's assets.
Section 6.4 Change in Nature of Business. The Borrower will not, and will
not permit any Subsidiary to, make any material change in the nature of the
business of the Borrower or such Subsidiary, as carried on at the date hereof.
Section 6.5 Subsidiaries. After the date of this Agreement, the Borrower
will not, and will not permit any Subsidiary to, form or acquire any corporation
which would thereby become a Subsidiary, except that the Borrower may form a
corporation (that would thereby become a Wholly-Owned Subsidiary) to operate any
Restaurant if the Borrower determines that the operation of such Restaurant
through a Subsidiary is desirable for tax reasons, or in order to facilitate
obtaining a liquor license for such Restaurant, or in order to facilitate
current or future negotiation with the landlord of
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the site for such Restaurant. In the event the Borrower hereafter forms a
corporation that thereby becomes a Wholly-Owned Subsidiary, then upon such
formation such corporation shall deliver to the Bank a Guaranty, a Security
Agreement (Guarantor) and related UCC financing statements for filing in such
jurisdictions as the Bank shall request, all duly executed by such corporation,
and the Borrower shall deliver to the Bank an amendment to the Pledge Agreement
in form and substance reasonably satisfactory to the Bank in respect of such
corporation, duly executed by the Borrower, and the stock certificates
representing the Borrower's ownership of 100% of the shares of such corporation
(together with stock powers related thereto).
Section 6.6 Negative Pledges; Subsidiary Restrictions. The Borrower will
not, and will not permit any Subsidiary to, enter into any agreement, bond, note
or other instrument with or for the benefit of any Person other than the Bank
which would (i) prohibit the Borrower or such Subsidiary from granting, or
otherwise limit the ability of the Borrower or such Subsidiary to grant, to the
Bank any Lien on any assets or properties of the Borrower or such Subsidiary
(other than assets or properties subject to Liens permitted by Section 6.14(i)
or Section 6.14(j)), or (ii) require the Borrower or such Subsidiary to grant a
Lien to any other Person if the Borrower or such Subsidiary grants any Lien to
the Bank. The Borrower will not permit any Subsidiary to place or allow any
restriction, directly or indirectly, on the ability of such Subsidiary to (a)
pay dividends or any distributions on or with respect to such Subsidiary's
capital stock or (b) make loans or other cash payments to the Borrower (other
than restrictions contained in this Agreement).
Section 6.7 Restricted Payments. The Borrower will not, and will not permit
any of the Partially-Owned Subsidiaries to, make any Restricted Payments;
provided that,
(a) the Borrower may (i) repurchase common stock to the extent
required by the Redemption Agreement dated September 30, 1996 between the
Borrower and Parasole Restaurant Holdings, Inc. or by the BUCA, Inc.
Employee Stock Ownership Plan, (ii) distribute common stock or Series C
convertible preferred stock in respect of its outstanding Series C
convertible preferred stock as required by the Contingent Value Right
Agreements between the Borrower and the holders of such Series C
convertible preferred stock, and (iii) make dividends, distributions,
payments, redemptions or purchases payable solely in, or in exchange for,
common stock of the Borrower; and
(b) as long as no Default or Event of Default shall exist or would be
created thereby, the Borrower may (i) repurchase common stock issued
pursuant to options or awards granted to employees or consultants under the
Borrower's 1996 Stock Incentive Plan, as amended, and the Stock Option Plan
for Nonemployee Directors, as amended, (ii) repurchase common stock upon
the exercise by it of its purchase rights under any of the Paisano Partner
Program Stock Purchase Agreements, (iii) repurchase common stock upon the
exercise by it of its rights of first refusal under the Shareholder
Agreement dated as of October 23, 1996, among the Borrower and certain of
its shareholders, as amended, and (iv) make dividends, distributions,
payments, redemptions or purchases out of the net cash proceeds of an
Initial Public Offering if and only if the Borrower has previously made
all payments then due under Sections 2.4(b), 2.5 and 2.7(b).
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Section 6.8 Transactions with Affiliates. Except as set forth on Schedule
6.8 , the Borrower will not, and will not permit any Subsidiary to, enter into
any transaction with any Affiliate of the Borrower, except upon fair and
reasonable terms no less favorable to the Borrower or such Subsidiary than would
obtain in a comparable arm's-length transaction with a Person not an Affiliate.
Section 6.9 Accounting Changes. The Borrower will not, and will not permit
any Subsidiary to, make any significant change in accounting treatment or
reporting practices, except as required by GAAP, or change its Fiscal Year or
the fiscal year of any Subsidiary.
Section 6.10 Capital Expenditures. The Borrower will not, and will not
permit any Subsidiary to, make Capital Expenditures in an amount exceeding, on a
consolidated basis, $18,000,000 during any Fiscal Year; provided that all
Capital Expenditures shall be invested in the development of new Restaurants or
the maintenance of existing Restaurants or in the construction, acquisition,
repair or maintenance of the Borrower's corporate headquarters.
Section 6.11 Subordinated Debt. The Borrower will not, and will not permit
any Subsidiary to (a) make any scheduled payment of the principal of or interest
on any Subordinated Debt which would be prohibited by the terms of such
Subordinated Debt and any related subordination agreement; (b) directly or
indirectly make any prepayment on or purchase, redeem or defease any
Subordinated Debt or offer to do so (whether such prepayment, purchase or
redemption, or offer with respect thereto, is voluntary or mandatory), except
that, subject to the provisions of Section 7.1(p), the Borrower may make any
mandatory prepayment on or mandatory purchase, redemption or defeasance of the
Subordinated Debentures which would not be prohibited by the terms of such
Subordinated Debentures and any related subordination agreement; (c) amend or
cancel the subordination provisions applicable to any Subordinated Debt; (d)
take or omit to take any action if as a result of such action or omission the
subordination of such Subordinated Debt, or any part thereof, to the Obligations
might be terminated, impaired or adversely affected; or (e) omit to give the
Bank prompt notice of any notice received from any holder of Subordinated Debt,
or any trustee therefor, or of any default under any agreement or instrument
relating to any Subordinated Debt by reason whereof such Subordinated Debt might
become or be declared to be due or payable;
Section 6.12 Investments. The Borrower will not, and will not permit any
Subsidiary to, acquire for value, make, have or hold any Investments, except:
6.12(a) Investments existing on the date of this Agreement.
6.12(b) Travel and expense advances to management personnel and
employees in the ordinary course of business.
6.12(c) Investments in readily marketable direct obligations
issued or guaranteed by the United States or any agency thereof and
supported by the full faith and credit of the United States.
6.12(d) A deposit account with Century Bank having funds in an
aggregate amount not to exceed $446,875, plus interest accrued thereon and
deposited therein, and
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certificates of deposit or bankers' acceptances or in any amount by any
commercial bank organized under the laws of the United States or any State
thereof which has (i) combined capital and surplus of at least
$100,000,000, and (ii) a credit rating with respect to its unsecured
indebtedness from a nationally recognized rating service of at least "A".
6.12(e) Commercial paper given the highest rating by two nationally
recognized rating services.
6.12(f) Repurchase agreements relating to securities issued or
guaranteed as to principal and interest by the United States of America.
6.12(g) Other readily marketable Investments in debt securities which
are reasonably acceptable to the Bank.
6.12(h) The stock of any Subsidiary the formation or acquisition of
which is permitted under Section 6.5.
6.12(i) Loans from the Borrower to any Wholly-Owned Subsidiary which
has executed and delivered to the Bank a Guaranty and a Security Agreement
(Guarantor).
6.12(j) Investments in the assets of individual Restaurant locations
for consideration of no more than $2,000,000 per location.
Any Investments under clauses (c), (d), (e) or (f) above must mature within one
year of the acquisition thereof by the Borrower or a Subsidiary.
Section 6.13 Indebtedness. The Borrower will not, and will not permit any
Subsidiary to, incur, create, issue, assume or suffer to exist any Indebtedness,
except:
6.13(a) The Obligations.
6.13(b) Current Liabilities, other than for borrowed money, incurred
in the ordinary course of business.
6.13(c) Indebtedness existing on the date of this Agreement and
disclosed on Schedule 6.13 , but not including any extension or refinancing
thereof.
6.13(d) Indebtedness secured by Liens permitted under Section 6.14(a)
through Section 6.14(h) .
6.13(e) Indebtedness secured by Liens permitted under Section 6.14(i)
in an aggregate principal amount, in the case of any such Indebtedness
secured by Liens on personal property, not to exceed $2,500,000 at any one
time outstanding.
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6.13(f) Subordinated Debt.
6.13(g) Indebtedness owing to the Borrower from any Wholly-Owned
Subsidiary which has executed and delivered to the Bank a Guaranty and a
Security Agreement (Guarantor).
6.13(h) From and after the Closing Date to and including April 1,
1999, Indebtedness with respect to the Century Bank Letters of Credit.
6.13(i) Contingent Obligations permitted under Section 6.15.
Section 6.14 Liens. The Borrower will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any Lien, or enter into,
or make any commitment to enter into, any arrangement for the acquisition of any
property through conditional sale, lease-purchase or other title retention
agreements, with respect to any property now owned or hereafter acquired by the
Borrower or a Subsidiary, except:
6.14(a) Liens granted to the Bank under the Security Documents to
secure the Obligations.
6.14(b) Liens existing on the date of this Agreement and disclosed on
Schedule 6.14 .
6.14(c) Deposits or pledges to secure payment of workers'
compensation, unemployment insurance, old age pensions or other social
security obligations in the ordinary course of business of the Borrower or
a Subsidiary.
6.14(d) Liens for taxes, fees, assessments and governmental charges
not delinquent or to the extent that payment therefor shall not at the time
be required to be made in accordance with the provisions of Section 5.4.
6.14(e) Liens of carriers, warehousemen, landlords, mechanics and
materialmen, and other like Liens arising in the ordinary course of
business, for sums not due or to the extent that payment therefor shall not
at the time be required to be made in accordance with the provisions of
Section 5.4.
6.14(f) Liens incurred or deposits or pledges made or given in
connection with, or to secure payment of, indemnity, performance, appeal,
or other similar bonds.
6.14(g) Liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set-off or similar rights
and remedies as to deposit accounts or other funds maintained with a
creditor depository institution; provided that (i) such deposit account is
not a dedicated cash collateral account and is not subject to restriction
against access by the Borrower or a Subsidiary in excess of those set forth
by
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regulations promulgated by the Board, and (ii) such deposit account is not
intended by the Borrower or any Subsidiary to provide collateral to the
depository institution.
6.14(h) Encumbrances on real property in the nature of zoning
restrictions, easements, rights of way, encroachments, restrictive
covenants and other similar rights or restrictions, whether or not of
record, on the use of real property, which encumbrances do not materially
detract from the value of such property or materially impair the use
thereof in the business of the Borrower or a Subsidiary.
6.14(i) The interest of any lessor under any Capitalized Lease or
purchase money Liens; provided, that, (i) the Indebtedness secured thereby
is permitted by this Agreement and (ii) such Liens are limited to the
property acquired and do not secure Indebtedness other than the related
Capitalized Lease Obligations or the purchase price of such property.
6.14(j) Liens on cash in bank accounts securing rents and other
obligations under real property leases, provided that no obligations under
any single lease shall be secured by cash in an amount in excess of
$200,000.
6.14(k) From and after the Closing Date to and including April 1,
1999, Liens securing Indebtedness incurred with respect to the Century Bank
Letters of Credit on assets of the Borrower having a fair market value not
to exceed $446,875, plus interest accrued thereon.
Section 6.15 Contingent Liabilities. The Borrower will not, and will not
permit any Subsidiary to, be or become liable on any Contingent Obligations,
except Contingent Obligations existing on the date of this Agreement and
described on Schedule 6.15, Contingent Obligations under any Guaranty, and
Contingent Obligations of the Borrower incurred from and after the Closing Date
with respect to obligations of Subsidiaries under leases of real property.
Section 6.16 Average Annual Comparable Restaurant Sales Growth. The
Borrower will not permit the Average Annual Comparable Restaurant Sales Growth
to be less than one percent (1%), as of the last day of any fiscal month.
Section 6.17 Average Restaurant Annual Cash Flow. The Borrower will not
permit the Average Restaurant Annual Cash Flow to be less than $450,000, as of
the last day of any fiscal month.
Section 6.18 Interest/Operating Lease Payment Coverage Ratio. The Borrower
will not permit the Interest/Operating Lease Payment Coverage Ratio, as of the
last day of any fiscal month which ends during any period of measurement
described below, to be less than the ratio set forth below for such period:
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Minimum Interest/
Operating
Lease Payment
Measurement Period Coverage Ratio
------------------ -----------------
Closing Date through March 31, 1999 1.05 to 1.00
April 1, 1999 through June 30, 1999 1.30 to 1.00
July 1, 1999 through September 30, 1999 1.50 to 1.00
October 1, 1999 through December 31, 1999 1.60 to 1.00
January 1, 2000 through March 31, 2000 1.80 to 1.00
April 1, 2000 through June 30, 2000 1.95 to 1.00
Thereafter 2.00 to 1.00
Section 6.19 Fixed Charge Coverage Ratio. The Borrower will not permit the
Fixed Charge Coverage Ratio, as of the last day of any fiscal month which ends
during any period of measurement described below, to be less than the ratio set
forth below for such period:
Minimum Fixed Charge
Measurement Period Coverage Ratio
------------------ --------------------
Closing Date through December 31, 1999 Not Applicable
January 1, 2000 through March 31, 2000 1.10 to 1.00
April 1, 2000 through June 30, 2000 1.15 to 1.00
July 1, 2000 through September 30, 2000 1.25 to 1.00
Thereafter 1.35 to 1.00
Section 6.20 Cash Flow Leverage Ratio. The Borrower will not permit the
Cash Flow Leverage Ratio, as of the last day of any fiscal month which ends
during any period of measurement described below, to be greater than the ratio
set forth below for such period:
Maximum Cash Flow
Measurement Period Leverage Ratio
------------------ -----------------
Closing Date through March 31, 1999 Not Applicable
April 1, 1999 through June 30, 1999 6.10 to 1.00
July 1, 1999 through September 30, 1999 5.50 to 1.00
October 1, 1999 through December 31, 1999 5.30 to 1.00
January 1, 2000 through March 31, 2000 4.35 to 1.00
April 1, 2000 through June 30, 2000 4.00 to 1.00
July 1, 2000 through September 30, 2000 3.75 to 1.00
Thereafter 3.50 to 1.00
Section 6.21 Loan Proceeds. The Borrower will not, and will not permit any
Subsidiary to, use any part of the proceeds of the Loans or Advances directly or
indirectly, and whether immediately, incidentally or ultimately, (a) to purchase
or carry margin stock (as defined in Regulation U of the Board) or to extend
credit to others for the purpose of purchasing or carrying
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margin stock or to refund Indebtedness originally incurred for such purpose or
(b) for any purpose which entails a violation of, or which is inconsistent with,
the provisions of Regulations G, U or X of the Board.
Section 6.22 Modification of Ownership or Equity Structure. The Borrower
will not permit any Subsidiary to issue or authorize the issuance of capital
stock of such Subsidiary (other than directors' qualifying shares) which would
result in any other Person becoming an owner thereof; issue or authorize the
issuance of options to purchase capital stock of such Subsidiary which
immediately, or in the future upon the exercise of rights granted therein, would
result in any other Person becoming an owner thereof; issue or authorize the
issuance or warrants to purchase capital stock of such Subsidiary which
immediately, or in the future upon the exercise of rights granted therein, would
result in any other Person becoming an owner thereof; issue or authorize the
issuance of securities or instruments convertible into capital stock of such
Subsidiary which immediately, or in the future upon the exercise of rights
granted therein, would result in any other Person becoming an owner thereof; or
authorize, issue or grant any capital stock appreciation rights, phantom stock,
profit participations or other similar rights with respect to the capital stock
of such Subsidiary which immediately, or in the future upon the exercise of
rights granted therein, would result in any other Person becoming an owner
thereof.
Section 6.23 Real Property. Except with respect to real property leased for
the Borrower's executive offices, the Borrower shall not, and shall not permit
any Subsidiary to, acquire any interest in real property unless, within one
hundred fifty (150) days after the date of the acquisition of an interest
therein, a Subsidiary commences operation of a Restaurant of similar size and
type to those Restaurants in existence on the date of this Agreement, provided
that, to the extent such interest in real property is obtained through a lease
with respect to such property, the one hundred fifty (150) day period with
respect thereto shall not begin until the date on which such Subsidiary (or in
the case of a lease under negotiation as of the date of this Agreement, the
Borrower) is required to make its first lease payment with respect thereto.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an Event of Default:
7.1(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal of or interest on any
Note or any other Obligation required to be made to the Bank pursuant to
this Agreement, provided that failure to pay interest shall not constitute
an Event of Default if such failure does not continue for more than two
Business Days.
7.1(b) Any representation or warranty made by or on behalf of
the Borrower, any Subsidiary or any Guarantor in this Agreement or any
other Loan Document or by or on
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behalf of the Borrower, any Subsidiary or any Guarantor in any certificate,
written statement, report or document herewith or hereafter furnished to
the Bank pursuant to this Agreement or any other Loan Document shall prove
to have been false or misleading in any material respect on the date as of
which the facts set forth are stated or certified.
7.1(c) The Borrower shall fail to comply with Section 5.2 or 5.3
or any Section of Article VI.
7.1(d) The Borrower shall fail to comply with any other
agreement, covenant or term contained in this Agreement (other than those
hereinabove set forth in this Section 7.1) or under Section 2 (d) or
Section 7 of the Trademark Assignment, and such failure to comply shall
continue for thirty (30) calendar days after whichever of the following
dates is the earliest: (i) the date the Borrower gives notice of such
failure to the Bank, (ii) the date the Borrower should have given notice of
such failure to the Bank pursuant to Section 5.1(g), and (iii) the date the
Bank gives notice of such failure to the Borrower.
7.1(e) Any default (however denominated or defined) shall occur
under any Guaranty or the Trademark Assignment (other than those set forth
in Section 7.1 (d)), or any "Event of Default," as defined in any other
Security Document, shall occur.
7.1(f) The Borrower, any Subsidiary or any Guarantor shall
become insolvent or shall generally not pay its debts as they mature or
shall apply for, shall consent to, or shall acquiesce in the appointment of
a custodian, trustee or receiver of the Borrower, such Subsidiary or such
Guarantor or for a substantial part of the property thereof or, in the
absence of such application, consent or acquiescence, a custodian, trustee
or receiver shall be appointed for the Borrower, a Subsidiary or a
Guarantor or for a substantial part of the property thereof and shall not
be discharged within 60 days, or the Borrower, any Subsidiary or any
Guarantor shall make an assignment for the benefit of creditors.
7.1(g) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower, any Subsidiary or any Guarantor, and, if
instituted against the Borrower, any Subsidiary or any Guarantor, shall
have been consented to or acquiesced in by the Borrower, such Subsidiary or
such Guarantor, or shall remain undismissed for 60 days, or an order for
relief shall have been entered against the Borrower, such Subsidiary or
such Guarantor.
7.1(h) Any dissolution or liquidation proceeding not permitted
by Section 6.1 shall be instituted by or against the Borrower or a
Subsidiary or any Guarantor, and, if instituted against the Borrower, any
Subsidiary or any Guarantor, shall be consented to or acquiesced in by the
Borrower, such Subsidiary or such Guarantor or shall remain for 60 days
undismissed.
7.1(i) Any judgment for the payment of money in excess of the
sum of $100,000, or judgements for the payment of money in excess of the
sum of $500,000 in
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the aggregate at any time, shall be rendered against the Borrower or a
Subsidiary and either (i) the judgment creditor executes on such judgment
or (ii) such judgment remains unpaid or undischarged for more than 60 days
from the date of entry thereof or such longer period during which execution
of such judgment shall be stayed during an appeal from such judgment.
7.1(j) The maturity of any material Indebtedness of the Borrower
(other than Indebtedness under this Agreement) or a Subsidiary shall be
accelerated, or the Borrower or a Subsidiary shall fail to pay any such
material Indebtedness when due (after the lapse of any applicable grace
period) or, in the case of such Indebtedness payable on demand, when
demanded (after the lapse of any applicable grace period), or any event
shall occur or condition shall exist and shall continue for more than the
period of grace, if any, applicable thereto and shall have the effect of
causing, or permitting the holder of any such Indebtedness or any trustee
or other Person acting on behalf of such holder to cause, such material
Indebtedness to become due prior to its stated maturity or any collateral
given as security therefor to be realized upon. For purposes of this
Section, Indebtedness of the Borrower or a Subsidiary shall be deemed
"material" if it exceeds $500,000 as to any item of Indebtedness or in the
aggregate for all items of Indebtedness with respect to which any of the
events described in this Section 7.1(j) has occurred.
7.1(k) Any execution or attachment shall be issued whereby any
substantial part of the property of the Borrower or any Subsidiary shall be
taken or attempted to be taken and the same shall not have been vacated or
stayed within 60 days after the issuance thereof.
7.1(l) Any Guarantor shall repudiate or purport to revoke its,
his or her Guaranty, or any Guaranty for any reason shall cease to be in
full force and effect as to the Guarantor executing and delivering the same
or shall be judicially declared null and void as to such Guarantor.
7.1(m) Any Security Document shall, at any time, cease to be in
full force and effect or shall be judicially declared null and void, or the
validity or enforceability thereof shall be contested by the Borrower, or
the Bank shall cease to have a valid and perfected security interest having
the priority contemplated thereunder in all of the collateral described
therein, other than by action or inaction of the Bank, if (i) the aggregate
value of the collateral affected by any of the foregoing exceeds $25,000
and (ii) any of the foregoing shall remain unremedied for ten days or more
after receipt of notice thereof by the Borrower from the Bank.
7.1(n) Any Change of Control shall occur.
7.1(o) Joseph Micatrotto shall cease to be the President and
Chief Executive Officer of the Borrower, and a successor President and
Chief Executive Officer approved by a majority of the Board of Directors of
the Borrower shall not have been appointed within 60 days.
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7.1(p) Any Indebtedness evidenced by the Subordinated Debentures
in excess of $1,000,000 shall be paid by the Borrower prior to July 30,
2001.
Section 7.2 Remedies. If (a) any Event of Default described in Sections
7.1(f), (g) or (h) shall occur with respect to the Borrower, the Commitments
shall automatically terminate and the Notes and all other Obligations shall
automatically become immediately due and payable and the Borrower shall without
demand pay into the Holding Account an amount equal to the aggregate undrawn
face amount of all outstanding Letters of Credit; or (b) any other Event of
Default shall occur and be continuing, then the Bank may (i) declare the
Commitments terminated, whereupon the Commitments shall terminate, (ii) declare
the outstanding unpaid principal balance of the Notes, the accrued and unpaid
interest thereon and all other Obligations to be forthwith due and payable,
whereupon the Notes, all accrued and unpaid interest thereon and all such
Obligations shall immediately become due and payable, in each case without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding, and (iii) demand that the Borrower pay into the
Holding Account an amount equal to the aggregate undrawn face amount of all
outstanding Letters of Credit. Upon the occurrence of any of the events
described in clauses (a) or (b) of the preceding sentence the Bank may exercise
all rights and remedies under any of the Loan Documents, and enforce all rights
and remedies under any applicable law.
Section 7.3 Offset. In addition to the remedies set forth in Section 7.2,
upon the occurrence of any Event of Default and thereafter while the same be
continuing, the Borrower hereby irrevocably authorizes the Bank to set off any
Obligations against all deposits and credits of the Borrower with, and any and
all claims of the Borrower against, the Bank. Such right shall exist whether or
not the Bank shall have made any demand hereunder or under any other Loan
Document, whether or not the Obligations, or any part thereof, or deposits and
credits held for the account of the Borrower is or are matured or unmatured, and
regardless of the existence or adequacy of any collateral, guaranty or any other
security, right or remedy available to the Bank. The Bank agrees that, as
promptly as is reasonably possible after the exercise of any such setoff right,
it shall notify the Borrower of its exercise of such setoff right; provided,
however, that the failure of the Bank to provide such notice shall not affect
the validity of the exercise of such setoff rights. Nothing in this Agreement
shall be deemed a waiver or prohibition of or restriction on the Bank to all
rights of banker's Lien, setoff and counterclaim available pursuant to law.
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ARTICLE VIII
MISCELLANEOUS
Section 8.1 Modifications. Notwithstanding any provisions to the contrary
herein, any term of this Agreement may be amended with the written consent of
the Borrower; provided that no amendment, modification or waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such amendment, modification, waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
Section 8.2 Expenses. Whether or not the transactions contemplated hereby
are consummated, the Borrower agrees to reimburse the Bank upon demand for all
reasonable out-of-pocket expenses paid or incurred by the Bank (including filing
and recording costs and reasonable fees and expenses of Dorsey & Whitney LLP,
counsel to the Bank) in connection with the negotiation, preparation, approval,
review, execution and delivery of this Agreement and the other Loan Documents
and any commitment letters relating thereto (provided that the Borrower shall
not be obligated to reimburse the Bank for any such expenses in excess of
$50,000 in the aggregate). Subject to the limitations contained in Section 5.5,
the Borrower shall also reimburse the Bank upon demand for all reasonable
out-of-pocket expenses (including reasonable expenses of legal counsel) paid or
incurred by the Bank in connection with the administration, amendment,
modification, interpretation, collection and enforcement of this Agreement and
any other Loan Document. The obligations of the Borrower under this Section
shall survive any termination of this Agreement.
Section 8.3 Waivers, etc. No failure on the part of the Bank or the holder
of a Note to exercise and no delay in exercising any power or right hereunder or
under any other Loan Document shall operate as a waiver thereof; nor shall any
single or partial exercise of any power or right preclude any other or further
exercise thereof or the exercise of any other power or right. The remedies
herein and in the other Loan Documents provided are cumulative and not exclusive
of any remedies provided by law.
Section 8.4 Notices. Except when telephonic notice is expressly authorized
by this Agreement, any notice or other communication to any party in connection
with this Agreement shall be in writing and shall be sent by manual delivery,
telegram, telex, facsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telegram, telex or facsimile transmission, from
the first Business Day after the date of sending if sent by overnight courier,
or from four days after the date of mailing if mailed; provided, however, that
any notice to the Bank under Article II shall be deemed to have been given only
when received by the Bank.
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Section 8.5 Taxes. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of this Agreement or the issuance of the
Notes, which obligation of the Borrower shall survive the termination of this
Agreement.
Section 8.6 Successors and Assigns; Disposition of Loans; Transferees. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign its rights or delegate its obligations hereunder or under any other Loan
Document without the prior written consent of the Bank. The Bank may at any time
sell, assign, transfer, grant participations in, or otherwise dispose of any
portion of the Commitments, the Term Loan and/or Advances (each such interest so
disposed of being herein called a "Transferred Interest") to banks or other
financial institutions ("Transferees"). The Borrower agrees that each Transferee
shall be entitled to the benefits of Section 8.2 with respect to its Transferred
Interest and that each Transferee may exercise any and all rights of banker's
Lien, setoff and counterclaim as if such Transferee were a direct lender to the
Borrower. If the Bank makes any assignment to a Transferee, then upon notice to
the Borrower such Transferee, to the extent of such assignment (unless otherwise
provided therein), shall become a "Bank" hereunder and shall have all the rights
and obligations of the Bank hereunder and the Bank shall be released from its
duties and obligations under this Agreement to the extent of such assignment.
Notwithstanding the sale by the Bank of any participation hereunder, (a) no
participant shall be deemed to be or have the rights and obligations of the Bank
hereunder except that any participant shall have a right of setoff under Section
7.3 as if it were the Bank and the amount of its participation were owing
directly to such participant by the Borrower and (b) the Bank shall not in
connection with selling any such participation condition the Bank's rights in
connection with consenting to amendments or granting waivers concerning any
matter under any Loan Document upon obtaining the consent of such participant
other than on matters relating to (i) any reduction in the amount of any
principal of, or the amount of or rate of interest on, any Note or Advance in
which such participation is sold, (ii) any postponement of the date fixed for
any payment of principal of or interest on any Note or Advance in which such
participation is sold, (iii) the release or subordination of any material
portion of any collateral other than pursuant to the terms of any Security
Document or (iv) the release of any Guaranty. The Borrower shall pay to the Bank
(a) upon the first transfer of a Transferred Interest to a Transferee hereunder,
a fee of $7,500 for such transfer and (b) a fee of $7,500 on each date which is
the anniversary of such transfer (the "Participation Fees").
Section 8.7 Confidentiality of Information. The Bank shall use reasonable
efforts to assure that information about the Borrower and its operations,
affairs and financial condition, not generally disclosed to the public or to
trade and other creditors, which is furnished to the Bank pursuant to the
provisions hereof or of the other Loan Documents is used only for the purposes
of this Agreement and any other relationship between the Bank and the Borrower
and shall not be divulged to any Person other than the Bank, its Affiliates and
their respective officers, directors, employees and agents (who have been
informed of the provisions of this Section 8.7 explicitly or implicitly under
the policies and practices of the Bank), except: (a) to their attorneys and
accountants (who have been informed of the provisions of this Section 8.7
explicitly or implicitly under the policies and practices of the Bank), (b) in
connection with the enforcement of the rights of the Bank hereunder and under
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the Notes, the Guaranties and the Security Documents or otherwise in connection
with related litigation, (c) in connection with assignments and participations
and the solicitation of prospective assignees and participants referred to in
the immediately preceding Section (provided that any such assignee or
participant or prospective assignee or participant has agreed to be bound by the
provisions of this Section 8.7), and (d) as may otherwise be required or
requested by any regulatory authority having jurisdiction over the Bank or by
any applicable law, rule, regulation or judicial process, the opinion of the
Bank's counsel concerning the making of such disclosure to be binding on the
parties hereto. The Bank shall not incur any liability to the Borrower by reason
of any disclosure permitted by this Section 8.7.
Section 8.8 Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS
PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES
APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision of this
Agreement and the other Loan Documents and any other statement, instrument or
transaction contemplated hereby or thereby or relating hereto or thereto shall
be interpreted in such manner as to be effective and valid under such applicable
law, but, if any provision of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto shall be held to be prohibited or invalid under such
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement, the other Loan Documents or any
other statement, instrument or transaction contemplated hereby or thereby or
relating hereto or thereto.
Section 8.9 Consent to Jurisdiction. AT THE OPTION OF THE BANK, THIS
AGREEMENT AND THE OTHER BORROWER LOAN DOCUMENTS MAY BE ENFORCED IN ANY FEDERAL
COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA; AND THE
BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND WAIVES ANY
ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT THE BORROWER
COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT
THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS
AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED
TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER
CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
Section 8.10 Waiver of Jury Trial. EACH OF THE BORROWER AND THE BANK
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
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Section 8.11 Survival of Agreement. All representations, warranties,
covenants and agreement made by the Borrower herein or in the other Borrower
Loan Documents and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be deemed to have been relied upon by the Bank and shall survive
the making of the Loans by the Bank and the execution and delivery to the Bank
by the Borrower of the Notes, regardless of any investigation made by or on
behalf of the Bank, and shall continue in full force and effect as long as any
Obligation is outstanding and unpaid and so long as the Commitments have not
been terminated; provided, however, that the obligations of the Borrower under
Sections 8.2, 8.5 and 8.12 shall survive payment in full of the Obligations and
the termination of the Commitments.
Section 8.12 Indemnification. The Borrower hereby agrees to defend,
protect, indemnify and hold harmless the Bank and its Affiliates and the
directors, officers, employees, attorneys and agents of the Bank and its
Affiliates (each of the foregoing being an "Indemnitee" and all of the foregoing
being collectively the "Indemnitees") from and against any and all claims,
actions, damages, liabilities, judgments, costs and expenses (including all
reasonable fees and disbursements of counsel which may be incurred in the
investigation or defense of any matter) imposed upon, incurred by or asserted
against any Indemnitee, whether direct, indirect or consequential and whether
based on any federal, state, local or foreign laws or regulations (including
securities laws, environmental laws, commercial laws and regulations), under
common law or on equitable cause, or on contract or otherwise:
(a) by reason of, relating to or in connection with the execution,
delivery, performance or enforcement of any Loan Document, any commitments
relating thereto, or any transaction contemplated by any Loan Document; or
(b) by reason of, relating to or in connection with any credit
extended or used under the Loan Documents or any act done or omitted by any
Person, or the exercise of any rights or remedies, thereunder, including
the acquisition of any collateral by the Bank by way of foreclosure of the
Lien thereon, deed or bill of sale in lieu of such foreclosure or
otherwise;
provided, however, that the Borrower shall not be liable to any Indemnitee for
any portion of such claims, actions, damages, liabilities, judgments, costs and
expenses resulting from any Indemnitee's gross negligence or willful misconduct.
In the event this indemnity is unenforceable as a matter of law as to a
particular matter or consequence referred to herein, it shall be enforceable to
the full extent permitted by law and the Borrower agrees to make the maximum
contribution to the payment and satisfaction of each of the indemnified claims,
damages, liabilities and expenses which is permissible under applicable law.
This indemnification applies, without limitation, to any act, omission,
event or circumstance existing or occurring on or prior to the later of the
Termination Date or the date of payment in full of the Obligations, including
specifically Obligations arising under clause (b) of this Section. The
indemnification provisions set forth above shall be in addition to any liability
the
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Borrower may otherwise have. Without prejudice to the survival of any other
obligation of the Borrower hereunder the indemnities and obligations of the
Borrower contained in this Section shall survive the payment in full of the
other Obligations.
Section 8.13 Captions. The captions or headings herein and any table of
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.
Section 8.14 Entire Agreement. This Agreement and the other Borrower Loan
Documents embody the entire agreement and understanding between the Borrower and
the Bank with respect to the subject matter hereof and thereof. This Agreement
supersedes all prior agreements and understandings relating to the subject
matter hereof. Nothing contained in this Agreement or in any other Loan
Document, expressed or implied, is intended to confer upon any Persons other
than the parties hereto any rights, remedies, obligations or liabilities
hereunder or thereunder.
Section 8.15 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 8.16 Borrower Acknowledgments. The Borrower hereby acknowledges
that (a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents, (b) the Bank has no
fiduciary relationship to the Borrower, the relationship being solely that of
debtor and creditor, (c) no joint venture exists between the Borrower and the
Bank, and (d) the Bank undertakes no responsibility to the Borrower to review or
inform the Borrower of any matter in connection with any phase of the business
or operations of the Borrower and the Borrower shall rely entirely upon its own
judgment with respect to its business, and any review, inspection or supervision
of, or information supplied to, the Borrower by the Bank is for the protection
of the Bank and neither the Borrower nor any third party is entitled to rely
thereon.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BUCA, INC.
By /s/ Greg A. Gadel
---------------------------------
Title CFO
------------------------------
Address for the Borrower:
Attention: Greg A. Gadel
1300 Nicollet Avenue
Suite 3043
Minneapolis, MN 55403
Telephone No.: (612) 288-2382
Telecopier No.: (612) 827-6446
U.S. BANK NATIONAL ASSOCIATION
By /s/ Joshua R. Pirozzolo
---------------------------------
Title Commercial Banking Officer
------------------------------
Address for the Bank:
Attention: Joshua R. Pirozzolo MPFP0602
601 Second Avenue South
Minneapolis, MN 55402-4302
Telephone No.: (612) 973-0520
Telecopier No.: (612) 973-0823
S-1
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EXHIBIT 10.8
EXECUTION COPY CREDIT AGREEMENT
SECURITY AGREEMENT (BORROWER)
THIS SECURITY AGREEMENT (BORROWER), dated as of February 5, 1999, is made
and given by BUCA, INC., a Minnesota corporation (the "Grantor"), to U.S. BANK
NATIONAL ASSOCIATION, a national banking association (the "Secured Party").
RECITALS
A. The Grantor and the Secured Party have entered into a Credit Agreement
dated as of the date hereof (as the same may hereafter be amended, supplemented,
extended, restated, or otherwise modified from time to time, the "Credit
Agreement") pursuant to which the Secured Party has agreed to extend to the
Grantor certain credit accommodations.
B. It is a condition precedent to the obligation of the Secured Party to
extend credit accommodations pursuant to the terms of the Credit Agreement that
this Agreement be executed and delivered by the Grantor.
C. The Grantor finds it advantageous, desirable and in its best interests
to comply with the requirement that it execute and deliver this Security
Agreement to the Secured Party.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Party to enter into the Credit Agreement and to extend credit
accommodations to the Grantor thereunder, the Grantor hereby agrees with the
Secured Party for the Secured Party's benefit as follows:
Section 1. Defined Terms.
1(a) As used in this Agreement, the following terms shall have the
meanings indicated:
"Account" shall mean the rights of the Grantor to payment for goods
sold or leased or for services rendered which is not evidenced by an
Instrument or Chattel Paper, whether or not such right has been earned by
performance, all guaranties and security therefor, and all interests in the
goods the sale or lease of which gave rise thereto, including the right to
stop such goods in transit.
"Account Debtor" shall mean a Person who is obligated on or under any
Account, Chattel Paper, Instrument or General Intangible.
"Chattel Paper" shall mean a writing or writings which evidence both a
monetary obligation and a security interest in or lease of specific goods;
when a transaction is
<PAGE>
evidenced by both a security agreement or a lease and by an Instrument or a
series of Instruments, the group of writings taken together constitutes
Chattel Paper.
"Collateral" shall mean all property and rights in property now owned
or hereafter at any time acquired by the Grantor in or upon which a
Security Interest is granted to the Secured Party by the Grantor under this
Agreement.
"Document" shall mean any bill of lading, dock warrant, dock receipt,
warehouse receipt or order for the delivery of goods, together with any
other document or receipt which in the regular course of business or
financing is treated as adequately evidencing that the Person in possession
of it is entitled to receive, hold and dispose of the document and the
goods it covers.
"Equipment" shall mean all machinery, equipment, furniture,
furnishings and fixtures, including all accessions, accessories and
attachments thereto, and any guaranties, warranties, indemnities and other
agreements of manufacturers, vendors and others with respect to such
Equipment.
"Event of Default" shall have the meaning given to such term in
Section 18 hereof.
"Financing Statement" shall have the meaning given to such term in
Section 4 hereof.
"General Intangibles" shall mean any personal property (other than
goods and other Inventory, Accounts, Chattel Paper, Documents, Instruments,
Equipment, shares of capital stock of any Subsidiary (as defined in the
Credit Agreement), and money) including choses in action, causes of
action, contract rights, corporate and other business records, inventions,
designs, patents, patent applications, service marks, trademarks,
tradenames, trade secrets, engineering drawings, good will, registrations,
copyrights, licenses, franchises, customer lists, tax refund claims,
royalties, licensing and product rights, rights to the retrieval from third
parties of electronically processed and recorded data and all rights to
payment resulting from an order of any court.
"Instrument" shall mean a draft, check, certificate of deposit, note,
bill of exchange, security or any other writing which evidences a right to
the payment of money and is not itself a security agreement or lease and is
of a type which is transferred in the ordinary course of business by
delivery with any necessary endorsement or assignment.
"Inventory" shall mean any and all goods owned or held by or for the
account of the Grantor for sale or lease, or for furnishing under a
contract of service, or as raw materials, work in process, materials
incorporated in or consumed in the production of any of the foregoing and
supplies, in each case wherever the same shall be located,
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whether in transit, on consignment, in retail outlets, warehouses,
terminals or otherwise, and all property the sale, lease or other
disposition of which has given rise to an Account and which has been
returned to the Grantor or repossessed by the Grantor or stopped in
transit.
"Lien" shall mean any security interest, mortgage, pledge, lien,
charge, encumbrance, title retention agreement or analogous instrument or
device (including the interest of the lessors under capitalized leases),
in, of or on any assets or properties of the Person referred to.
"Loan Documents" shall have the meaning given to such term in the
Credit Agreement.
"Material Adverse Occurrence" shall mean any occurrence of whatsoever
nature (including, without limitation, any adverse determination in any
litigation, arbitration, or governmental investigation or proceeding) which
(a) has materially adversely affected the present, or which is reasonably
likely to materially adversely affect the prospective, financial condition
or operations of the Grantor and the Subsidiaries, taken as a whole, or (b)
impair the ability of the Grantor or the Subsidiaries, taken as a whole, to
perform their respective obligations under the Loan Documents or any
writing executed pursuant thereto.
"Obligations" shall mean (a) all indebtedness, liabilities and
obligations of the Grantor to the Secured Party of every kind, nature or
description under the Credit Agreement, including the Grantor's obligation
on any promissory note or notes issued under the Credit Agreement and any
note or notes hereafter issued in substitution or replacement thereof and
(b) all liabilities of the Grantor under this Agreement, in all of the
foregoing cases whether due or to become due, and whether now existing or
hereafter arising or incurred.
"Person" shall mean any individual, corporation, partnership, limited
partnership, limited liability company, joint venture, firm, association,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.
"Security Interest" shall have the meaning given such term in Section
2 hereof.
"Subsidiary" shall have the meaning given to such term in the Credit
Agreement.
1(b) All other terms used in this Agreement which are not specifically
defined herein shall have the meaning assigned to such terms in the Uniform
Commercial Code in
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effect in the State of Minnesota as of the date of this Agreement to the
extent such other terms are defined therein.
1(c) Unless the context of this Agreement otherwise clearly requires,
references to the plural include the singular, the singular, the plural and
"or" has the inclusive meaning represented by the phrase "and/or." The
words "include", "includes" and "including" shall be deemed to be followed
by the phrase "without limitation." The words "hereof," "herein,"
"hereunder," and similar terms in this Agreement refer to this Agreement as
a whole and not to any particular provision of this Agreement. References
to Sections are references to Sections in this Security Agreement unless
otherwise provided.
Section 2. Grant of Security Interest. As security for the payment and
performance of all of the Obligations, the Grantor hereby grants to the Secured
Party a security interest (the "Security Interest") in all of the Grantor's
right, title, and interest in and to the following, whether now or hereafter
owned, existing, arising or acquired and wherever located:
2(a) All Accounts.
2(b) All Chattel Paper.
2(c) All Documents.
2(d) All Equipment.
2(e) All General Intangibles.
2(f) All Instruments.
2(g) All Inventory.
2(h) To the extent not otherwise included in the foregoing, (i) all
other rights to the payment of money, including rents and other sums
payable to the Grantor under leases, rental agreements and other Chattel
Paper and insurance proceeds; (ii) all books, correspondence, credit files,
records, invoices, bills of lading, and other documents relating to any of
the foregoing, including, without limitation, all tapes, cards, disks,
computer software, computer runs, and other papers and documents in the
possession or control of the Grantor or any computer bureau from time to
time acting for the Grantor; and (iii) all accessions and additions to,
parts and appurtenances of, substitutions for and replacements of any of
the foregoing.
2(i) To the extent not otherwise included, all proceeds and products
of any and all of the foregoing.
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Notwithstanding the foregoing, no security interest shall be considered to have
been granted hereunder to the Secured Party in any rights of the Grantor in, to
or under
(x) any lease, license or other agreement or instrument which, by its
express terms, prohibits the Grantor from granting a security interest
in Grantor's rights therein, thereto or thereunder without the prior
consent of a third party,
(y) any policies insuring the life of any officer, director,
stockholder or employee of the Grantor or any of the Subsidiaries, or
and such rights shall not be considered for any purposes of this Agreement to be
included in the Collateral or any of the categories of property, assets and
rights listed in Section 2(a) through 2(i), above unless, as to any rights
described in clause (x), above, the necessary consent of third parties with
respect to such rights has been obtained.
Section 3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the Accounts, Chattel
Paper, General Intangibles and other items included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed, (b) the exercise
by the Secured Party of any of the rights hereunder shall not release the
Grantor from any of its duties or obligations under any items included in the
Collateral, and (c) the Secured Party shall have no obligation or liability
under Accounts, Chattel Paper, General Intangibles and other items included in
the Collateral by reason of this Agreement, nor shall the Secured Party be
obligated to perform any of the obligations or duties of the Grantor thereunder
or to take any action to collect or enforce any claim for payment assigned
hereunder.
Section 4. Title to Collateral. The Grantor has (or will have at the time
it acquires rights in Collateral hereafter acquired or arising) and, subject to
the provision of Section 5 hereof, will maintain so long as the Security
Interest may remain outstanding, title to each item of Collateral (including the
proceeds and products thereof), free and clear of all Liens except the Security
Interest and except Liens permitted by the Credit Agreement. The Grantor will
defend the Collateral against all claims or demands of all Persons (other than
the Secured Party and holders of Liens permitted under the Credit Agreement)
claiming the Collateral or any interest therein. As of the date of execution of
this Security Agreement, no effective financing statement or other similar
document used to perfect and preserve a security interest under the laws of any
jurisdiction (a "Financing Statement") covering all or any part of the
Collateral is on file in any recording office, except such as may have been
filed (a) in favor of the Secured Party relating to this Agreement, (b) to
perfect the Liens permitted by the Credit Agreement, or (c) by lenders under the
Existing Credit Documents (as defined in the Credit Agreement) for which
terminations shall have been delivered to the Secured Party on or before the
date of this Agreement.
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Section 5. Disposition of Collateral. The Grantor will not sell, lease or
otherwise dispose of, or discount or factor with or without recourse, any
Collateral, except as permitted by Section 6.2 of the Credit Agreement. Upon any
sale, lease or other disposition of Collateral permitted by Section 6.2 of the
Credit Agreement, such Collateral shall be considered, automatically and without
any further action on the part of the Grantor or the Secured Party, to be
released from the Security Interest, the Secured Party shall thereafter promptly
return to the Grantor such Collateral if then in its possession, and the Secured
Party shall, upon the request and at the expense of the Grantor, thereafter
promptly execute and deliver to the Grantor such documents as the Grantor shall
reasonable request evidencing such release, including complete or partial (as
appropriate) releases of relevant Financing Statements.
Section 6. Names, Offices, Locations. The Grantor does business solely
under its own name and the trade names, if any, set forth on Schedule II hereto.
Except as noted on said Schedule, no such trade name and no trademark or other
similar mark owned by the Grantor is registered with any governmental unit. No
trade style used by the Grantor is registered with any governmental unit. The
chief place of business and chief executive office of the Grantor and the office
where it keeps its books and records concerning the Accounts and General
Intangibles and the originals of all Chattel Paper, Documents and Instruments
are located at its address set forth on the signature page hereof. All items of
Equipment and Inventory existing on the date of this Agreement are located at
the places specified on Schedule I hereto. The Grantor will immediately notify
the Secured Party of any additional state in which any item of Inventory or
Equipment is hereafter located. The Grantor will from time to time at the
request of the Secured Party provide the Secured Party with current lists as to
the locations of the Equipment and Inventory. The Grantor will not permit any
Inventory, Equipment, Chattel Paper or Documents or any records pertaining to
Accounts and General Intangibles to be located in any state or area in which a
financing statement covering such Collateral would be required to be, but has
not in fact been, filed in order to perfect the Security Interest. The Grantor
will not change its name or the location of its chief place of business and
chief executive office unless the Secured Party has been given at least 30 days
prior written notice thereof and the Grantor has executed and delivered to the
Secured Party such Financing Statements and other instruments required or
appropriate to continue the perfection of the Security Interest. The Grantor's
federal tax identification number is set forth on the signature page of this
Agreement.
Section 7. Rights to Payment. Except as the Grantor may otherwise advise
the Secured Party in writing, each Account, Chattel Paper, Document, General
Intangible and Instrument constituting or evidencing Collateral is (or, in the
case of all future Collateral, will be when arising or issued) the valid,
genuine and legally enforceable obligation of the Account Debtor or other
obligor named therein or in the Grantor's records pertaining thereto as being
obligated to pay or perform such obligation. Without the Secured Party's prior
written consent, the Grantor will not agree to any modifications, amendments,
subordinations, cancellations or terminations of the obligations of any such
Account Debtors or other obligors except in the
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<PAGE>
ordinary course of business and in amounts not exceeding $25,000 per Account
Debtor or other obligor in any calendar year. The Grantor will perform and
comply in all material respects with all its obligations under any items
included in the Collateral and, to the extent required by sound business
judgment, exercise promptly and diligently its material rights thereunder.
Section 8. Further Assurances; Attorney-in-Fact.
8(a) The Grantor agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or that the Secured
Party may reasonably request, in order to perfect and protect the Security
Interest granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder with
respect to any Collateral (but any failure to request or assure that the
Grantor execute and deliver such instrument or documents or to take such
action shall not affect or impair the validity, sufficiency or
enforceability of this Agreement and the Security Interest, regardless of
whether any such item was or was not executed and delivered or action taken
in a similar context or on a prior occasion). Without limiting the
generality of the foregoing, the Grantor will, promptly and from time to
time at the request of the Secured Party: (i) mark, or permit the Secured
Party to mark, conspicuously its books, records, and accounts showing or
dealing with the Collateral, and each item of Chattel Paper included in the
Collateral, with a legend, in form and substance satisfactory to the
Secured Party, indicating that each such item of Collateral and each such
item of Chattel Paper is subject to the Security Interest granted hereby;
(ii) deliver to the Secured Party, all Instruments and Documents, duly
indorsed or accompanied by duly executed instruments of transfer or
assignment, with full recourse to the Grantor, all in form and substance
satisfactory to the Secured Party; and (iii) execute and file such
Financing Statements or continuation statements in respect thereof, or
amendments thereto, and such other instruments or notices (including
fixture filings with any necessary legal descriptions as to any goods
included in the Collateral which the Secured Party determines might be
deemed to be fixtures, and instruments and notices with respect to vehicle
titles), as may be necessary or desirable, or as the Secured Party may
request, in order to perfect, preserve, and enhance the Security Interest
granted or purported to be granted hereby.
8(b) The Grantor hereby authorizes the Secured Party to file one or
more Financing Statements or continuation statements in respect thereof,
and amendments thereto, relating to all or any part of the Collateral
without the signature of the Grantor where permitted by law. A photocopy or
other reproduction of this Agreement or any Financing Statement covering
the Collateral or any part thereof shall be sufficient as a Financing
Statement where permitted by law.
8(c) The Grantor will furnish to the Secured Party from time to time
statements and schedules further identifying and describing the Collateral
and such other
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reports in connection with the Collateral as the Secured Party may
reasonably request, all in reasonable detail and in form and substance
reasonably satisfactory to the Secured Party.
8(d) In furtherance, and not in limitation, of the other rights,
powers and remedies granted to the Secured Party in this Agreement, the
Grantor hereby appoints the Secured Party the Grantor's attorney-in-fact,
with full authority in the place and stead of Grantor and in the name of
Grantor or otherwise, from time to time in the Secured Party's good faith
discretion, to take any action (including the right to collect on any
Collateral) and to execute any instrument that the Secured Party may
reasonably believe is necessary or advisable to accomplish the purposes of
this Agreement, in a manner consistent with the terms hereof.
Section 9. Taxes and Claims. The Grantor will promptly pay all taxes and
other governmental charges levied or assessed upon or against any Collateral or
upon or against the creation, perfection or continuance of the Security
Interest, as well as all other claims of any kind (including claims for labor,
material and supplies) against or with respect to the Collateral, except to the
extent (a) such taxes, charges or claims are being contested in good faith by
appropriate proceedings, (b) such proceedings do not involve any material danger
of the sale, forfeiture or loss of any of the Collateral or any interest therein
and (c) such taxes, charges or claims are adequately reserved against on the
Grantor's books in accordance with generally accepted accounting principles.
Section 10. Books and Records. The Grantor will keep and maintain at its
own cost and expense satisfactory and complete records of the Collateral,
including a record of all payments received and credits granted with respect to
all Accounts, Chattel Paper and other items included in the Collateral.
Section 11. Inspection, Reports, Verifications. The Grantor will at all
reasonable times and upon reasonable notice permit the Secured Party or its
representatives to examine or inspect any Collateral, any evidence of Collateral
and the Grantor's books and records concerning the Collateral, wherever located,
provided that at any time an Event of Default has occurred and is continuing, no
such notice shall be required. The Grantor will from time to time when requested
by the Secured Party furnish to the Secured Party a report on its Accounts,
Chattel Paper, General Intangibles and Instruments, naming the Account Debtors
or other obligors thereon, the amount due and the aging thereof. The Secured
Party or its designee is authorized to contact Account Debtors and other Persons
obligated on any such Collateral from time to time to verify the existence,
amount and/or terms of such Collateral.
Section 12. Notice of Loss. The Grantor will promptly notify the Secured
Party of any loss of or material damage to any material item of Collateral or of
any substantial adverse change, known to Grantor, in any material item of
Collateral or the prospect of payment or performance thereof.
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Section 13. Insurance. The Grantor will keep the Equipment and Inventory
insured against "all risks" for the full replacement cost thereof subject to a
deductible not exceeding $10,000 per location, per occurrence, and with a
financially sound and reputable insurance company or companies, the policies to
protect the Secured Party as its interests may appear, with such policies or
certificates with respect thereto to be delivered to the Secured Party at its
request. Each such policy or the certificate with respect thereto shall provide
that such policy shall not be canceled or allowed to lapse unless at least 30
days prior written notice is given to the Secured Party.
Section 14. Lawful Use; Fair Labor Standards Act. The Grantor will use and
keep the Collateral, and will require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or local law,
statute or ordinance. All Inventory of the Grantor as of the date of this
Agreement that was produced by the Grantor or with respect to which the Grantor
performed any manufacturing or assembly process was produced by the Grantor (or
such manufacturing or assembly process was conducted) in compliance in all
material respects with all requirements of the Fair Labor Standards Act, and all
Inventory produced, manufactured or assembled by the Grantor after the date of
this Agreement will be so produced, manufactured or assembled, as the case may
be.
Section 15. Action by the Secured Party. If the Grantor at any time fails
to perform or observe any of the foregoing agreements, the Secured Party shall
have (and the Grantor hereby grants to the Secured Party) the right, power and
authority (but not the duty) to perform or observe such agreement on behalf and
in the name, place and stead of the Grantor (or, at the Secured Party's option,
in the Secured Party's name) and to take any and all other actions which the
Secured Party may reasonably deem necessary to cure or correct such failure
(including, without limitation, the payment of taxes, the satisfaction of Liens,
the procurement and maintenance of insurance, the execution of assignments,
security agreements and Financing Statements, and the indorsement of
instruments); and the Grantor shall thereupon pay to the Secured Party on demand
the amount of all monies reasonably expended and all reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees and legal expenses)
incurred by the Secured Party in connection with or as a result of the
performance or observance of such agreements or the taking of such action by the
Secured Party, together with interest thereon from the date expended or incurred
at the highest lawful rate then applicable to any of the Obligations, and all
such monies expended, costs and expenses and interest thereon shall be part of
the Obligations secured by the Security Interest.
Section 16. Insurance Claims. As additional security for the payment and
performance of the Obligations, the Grantor hereby assigns to the Secured Party
any and all monies (including proceeds of insurance and refunds of unearned
premiums) due or to become due under, and all other rights of the Grantor with
respect to, any and all policies of insurance now or at any time hereafter
covering the Collateral or any evidence thereof or any business records or
valuable papers pertaining thereto. At any time, whether before or after the
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occurrence of any Event of Default, the Secured Party may (but need not), in the
Secured Party's name or in Grantor's name, execute and deliver proofs of claim,
receive all such monies, indorse checks and other instruments representing
payment of such monies, and adjust, litigate, compromise or release any claim
against the issuer of any such policy. Notwithstanding any of the foregoing, so
long as no Event of Default exists the Grantor shall be entitled to all
insurance proceeds with respect to Equipment or Inventory provided that such
proceeds are applied to the cost of replacement Equipment or Inventory.
Section 17. The Secured Party's Duties. The powers conferred on the Secured
Party hereunder are solely to protect its interest in the Collateral and shall
not impose any duty upon it to exercise any such powers. The Secured Party shall
be deemed to have exercised reasonable care in the safekeeping of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to the safekeeping which the Secured Party accords its own property of like
kind. Except for the safekeeping of any Collateral in its possession and the
accounting for monies and for other properties actually received by it
hereunder, the Secured Party shall have no duty, as to any Collateral, as to
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities, tenders or other matters relative to any Collateral, whether or not
the Secured Party has or is deemed to have knowledge of such matters, or as to
the taking of any necessary steps to preserve rights against any Persons or any
other rights pertaining to any Collateral. The Secured Party will take action in
the nature of exchanges, conversions, redemptions, tenders and the like
requested in writing by the Grantor with respect to the Collateral in the
Secured Party's possession if the Secured Party in its reasonable judgment
determines that such action will not impair the Security Interest or the value
of the Collateral, but a failure of the Secured Party to comply with any such
request shall not of itself be deemed a failure to exercise reasonable care.
Section 18. Default. Each of the following occurrences shall constitute an
Event of Default under this Agreement: (a) the Grantor shall fail to comply with
any agreement, covenant or term contained in the last sentence of Section 7, the
second sentence of Section 11, or Section 8(a), 8(c), 9, 10 or 12 of this
Agreement and such failure to comply shall continue for thirty (30) calendar
days after whichever of the following dates is the earliest: (i) the date the
Grantor gives notice of such failure to the Secured Party, (ii) the date the
Grantor should have given notice of such failure to the Secured Party pursuant
to Section 5.1(g) of the Credit Agreement, and (iii) the date the Secured Party
gives notice of such failure to the Grantor; (b) the Grantor shall fail to
observe or perform any covenant or agreement applicable to the Grantor under
this Agreement not specified in clause (a), above; (c) any representation or
warranty made by the Grantor in this Agreement or any schedule, exhibit,
supplement or attachment hereto or in any financial statements, reports or
certificates herewith or at any time hereafter submitted by or on behalf of the
Grantor to the Secured Party pursuant to this Agreement shall prove to have been
false or misleading in any material request when made; or (d) any Event of
Default shall occur under the Credit Agreement.
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Section 19. Remedies on Default. Upon the occurrence of an Event of Default
and at any time thereafter during the continuance thereof:
19(a) The Secured Party may exercise and enforce any and all rights
and remedies available upon default to a secured party under the Uniform
Commercial Code.
19(b) The Secured Party shall have the right to enter upon and into
and take possession of all or such part or parts of the properties of the
Grantor, including lands, plants, buildings, Equipment, Inventory and other
property as may be necessary or appropriate in the judgment of the Secured
Party to permit or enable the Secured Party to manufacture, produce,
process, store or sell or complete the manufacture, production, processing,
storing or sale of all or any part of the Collateral, as the Secured Party
may elect, and to use and operate said properties for said purposes and for
such length of time as the Secured Party may deem necessary or appropriate
for said purposes without the payment of any compensation to Grantor
therefor. The Secured Party may require the Grantor to, and the Grantor
hereby agrees that it will, at its expense and upon request of the Secured
Party forthwith, assemble all or part of the Collateral as directed by the
Secured Party and make it available to the Secured Party at a place or
places to be designated by the Secured Party.
19(c) Any sale of Collateral may be in one or more parcels at public
or private sale, at any of the Secured Party's offices or elsewhere, for
cash, on credit, or for future delivery, and upon such other terms as are
commercially reasonable. The Secured Party shall not be obligated to make
any sale of Collateral regardless of notice of sale having been given, and
the Secured Party may adjourn any public or private sale from time to time
by announcement made at the time and place fixed therefor, and such sale
may, without further notice, be made at the time and place to which it was
so adjourned to the extent commercially reasonable.
19(d) The Secured Party is hereby granted a non-exclusive license or
other right to use, without charge, all of the Grantor's property,
including, without limitation, all of the Grantor's labels, trademarks,
copyrights, patents and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale and selling any Collateral, and the Grantor's rights
under all licenses and all franchise agreements shall, subject to the
rights of third parties, inure to the Secured Party's benefit until the
Obligations are paid in full.
19(e) If notice to the Grantor of any intended disposition of
Collateral or any other intended action is required by law in a particular
instance, such notice shall be deemed commercially reasonable if given in
the manner specified for the giving of notice in Section 24 hereof at least
ten calendar days prior to the date of intended disposition or other
action, and the Secured Party may exercise or enforce any and all other
rights or remedies available by law or agreement against the Collateral,
against the Grantor, or against any other Person or property.
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Section 20. Remedies as to Certain Rights to Payment. Upon the occurrence
of an Event of Default and at any time thereafter during the continuance
thereof, the Secured Party may notify any Account Debtor or other Person
obligated on any Accounts or other Collateral that the same have been assigned
or transferred to the Secured Party and that the same should be performed as
requested by, or paid directly to, the Secured Party, as the case may be. The
Grantor shall join in giving such notice, if the Secured Party so requests. Upon
the occurrence of an Event of Default and at any time thereafter during the
continuance thereof, the Secured Party may, in the Secured Party's name or in
the Grantor's name, demand, sue for, collect or receive any money or property at
any time payable or receivable on account of, or securing, any such Collateral
or grant any extension to, make any compromise or settlement with or otherwise
agree to waive, modify, amend or change the obligation of any such Account
Debtor or other Person. Upon the occurrence and during the continuance of any
Event of Default described in Sections 7.1(f), (g) or (h) of the Credit
Agreement, without notice from the Secured Party, and upon the occurrence and
during the continuance any other Event of Default, upon written notice from the
Secured Party, all payments made with respect to any Collateral and received by
the Grantor shall be held in trust by the Grantor as the property of the Secured
Party and shall not be commingled with any funds or property of the Grantor and
shall be forthwith remitted to the Secured Party for application on the
Obligations.
Section 21. Application of Proceeds. All cash proceeds received by the
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral may, in the discretion of the Secured
Party, be held by the Secured Party as collateral for, or then or at any time
thereafter be applied in whole or in part by the Secured Party against, all or
any part of the Obligations (including, without limitation, any expenses of the
Secured Party payable pursuant to Section 22 hereof).
Section 22. Costs and Expenses; Indemnity. Subject to the limitations set
forth in Section 8.2 of the Credit Agreement, the Grantor will pay or reimburse
the Secured Party on demand for all reasonable out-of-pocket expenses (including
in each case all filing and recording fees and taxes and all reasonable fees and
expenses of counsel and of any experts and agents) incurred by the Secured Party
in connection with the creation, perfection, protection, satisfaction,
foreclosure or enforcement of the Security Interest and the preparation,
administration, continuance, amendment or enforcement of this Agreement, and all
such costs and expenses shall be part of the Obligations secured by the Security
Interest. The Grantor shall indemnify and hold the Secured Party harmless from
and against any and all claims, losses and liabilities (including reasonable
attorneys' fees) growing out of or resulting from this Agreement and the
Security Interest hereby created (including enforcement of this Agreement) or
the Secured Party's actions pursuant hereto, except claims, losses or
liabilities resulting from the Secured Party's gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Any liability of the Grantor to indemnify and hold the Secured
Party harmless pursuant to the preceding sentence shall be part of the
Obligations secured by the Security
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Interest. The obligations of the Grantor under this Section shall survive any
termination of this Agreement.
Section 23. Waivers; Remedies; Marshalling. This Agreement can be waived,
modified, amended, terminated or discharged, and the Security Interest can be
released, only explicitly in a writing signed by the Secured Party (and, in the
case of a modification or amendment, by the Grantor). A waiver so signed shall
be effective only in the specific instance and for the specific purpose given.
Mere delay or failure to act shall not preclude the exercise or enforcement of
any rights and remedies available to the Secured Party. All rights and remedies
of the Secured Party shall be cumulative and may be exercised singly in any
order or sequence, or concurrently, at the Secured Party's option, and the
exercise or enforcement of any such right or remedy shall neither be a condition
to nor bar the exercise or enforcement of any other. The Grantor hereby waives
all requirements of law, if any, relating to the marshalling of assets which
would be applicable in connection with the enforcement by the Secured Party of
its remedies hereunder, absent this waiver.
Section 24. Notices. Any notice or other communication to any party in
connection with this Agreement shall be in writing and shall be sent by manual
delivery, telefacsimile transmission, overnight courier or United States mail
(postage prepaid) addressed to such party at the address specified on the
signature page hereof, or at such other address as such party shall have
specified to the other party hereto in writing. All periods of notice shall be
measured from the date of delivery thereof if manually delivered, from the date
of sending thereof if sent by telefacsimile transmission, from the first
business day after the date of sending if sent by overnight courier, or from
four days after the date of mailing if mailed.
Section 25. Grantor Acknowledgments. The Grantor hereby acknowledges that
(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement, (b) the Secured Party has no fiduciary relationship to the
Grantor, the relationship being solely that of debtor and creditor, and (c) no
joint venture exists between the Grantor and the Secured Party.
Section 26. Continuing Security Interest; Assignments under Credit
Agreement. This Agreement shall (a) create a continuing security interest in the
Collateral and shall remain in full force and effect until payment in full of
the Obligations and the expiration of the obligations, if any, of the Secured
Party to extend credit accommodations to the Grantor under the Credit Agreement,
(b) be binding upon the Grantor, its successors and assigns, and (c) inure to
the benefit of, and be enforceable by, the Secured Party and its successors,
transferees, and assigns. Without limiting the generality of the foregoing
clause (c), the Secured Party may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement to any other
Persons to the extent and in the manner provided in the Credit Agreement and may
similarly transfer all or any portion of its rights under this Security
Agreement to such Persons.
Section 27. Termination of Security Interest. Upon payment in full of the
Obligations and the expiration of any obligation of the Secured Party to extend
credit
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accommodations to the Grantor under the Credit Agreement, the Security Interest
granted hereby shall terminate. Upon any such termination, the Secured Party
will return to the Grantor such of the Collateral then in the possession of the
Secured Party as shall not have been sold or otherwise applied pursuant to the
terms hereof and execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination. Any reversion or
return of Collateral upon termination of this Agreement and any instruments of
transfer or termination shall be at the expense of the Grantor and shall be
without warranty by, or recourse on, the Secured Party. As used in this Section,
"Grantor" includes any assigns of Grantor, any Person holding a subordinate
security interest in any of the Collateral or whoever else may be lawfully
entitled to any part of the Collateral.
Section 28. Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
ENFORCEABILITY OF THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, EXCEPT
TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE
MANDATORILY GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
MINNESOTA. Whenever possible, each provision of this Agreement and any other
statement, instrument or transaction contemplated hereby or relating hereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Agreement or any other statement,
instrument or transaction contemplated hereby or relating hereto shall be held
to be prohibited or invalid under such applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement or any other statement, instrument or transaction contemplated hereby
or relating hereto.
Section 29. Consent to Jurisdiction. AT THE OPTION OF THE SECURED PARTY,
THIS AGREEMENT MAY BE ENFORCED IN ANY FEDERAL COURT OR MINNESOTA STATE COURT
SITTING IN HENNEPIN COUNTY; AND THE GRANTOR CONSENTS TO THE JURISDICTION AND
VENUE OF ANY SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT
CONVENIENT. IN THE EVENT THE GRANTOR COMMENCES ANY ACTION IN ANOTHER
JURISDICTION OR VENUE UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR
INDIRECTLY FROM THE RELATIONSHIP CREATED BY THIS AGREEMENT, THE SECURED PARTY AT
ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE TRANSFERRED TO ONE OF THE
JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE
ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE DISMISSED WITHOUT
PREJUDICE.
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Section 30. Waiver of Notice and Hearing. THE GRANTOR HEREBY WAIVES ALL
RIGHTS TO A JUDICIAL HEARING OF ANY KIND PRIOR TO THE EXERCISE BY THE SECURED
PARTY OF ITS RIGHTS TO POSSESSION OF THE COLLATERAL WITHOUT JUDICIAL PROCESS OR
OF ITS RIGHTS TO REPLEVY, ATTACH, OR LEVY UPON THE COLLATERAL WITHOUT PRIOR
NOTICE OR HEARING. THE GRANTOR ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL
OF ITS CHOICE WITH RESPECT TO THIS PROVISION AND THIS AGREEMENT.
Section 31. Waiver of Jury Trial. EACH OF THE GRANTOR AND THE SECURED
PARTY, BY ITS ACCEPTANCE OF THIS AGREEMENT, IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 32. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument.
Section 33. General. All representations and warranties contained in this
Agreement or in any other agreement between the Grantor and the Secured Party
shall survive the execution, delivery and performance of this Agreement and the
creation and payment of the Obligations. The Grantor waives notice of the
acceptance of this Agreement by the Secured Party. Captions in this Agreement
are for reference and convenience only and shall not affect the interpretation
or meaning of any provision of this Agreement.
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IN WITNESS WHEREOF, the Grantor has caused this Security Agreement to be
duly executed and delivered by its officer thereunto duly authorized as of the
date first above written.
BUCA, INC.
By /s/ Greg A. Gadel
----------------------------------
Title CFO
-------------------------------
Federal tax identification number: 41-1802364
Address for Grantor:
Attention: Greg A. Gadel
1300 Nicollet Avenue
Suite 3043
Minneapolis, MN 55403
Telephone No.: (612) 288-2382
Telecopier No.: (612) 827-6446
Address for the Secured Party:
Attention: Joshua R. Pirozzolo MPFP0602
601 Second Avenue South
Minneapolis, MN 55402-4302
Telephone No.: (612) 973-0520
Telecopier No.: (612) 973-0823
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EXHIBIT 10.9
BUCA VENTURES, INC.
PURCHASE AGREEMENT FOR SERIES A CONVERTIBLE
SUBORDINATED DEBENTURES
DATED AS OF AUGUST 1, 1994
BUCA Ventures, Inc., a Minnesota corporation (the "Company") hereby agrees
with each and all of the Purchasers executing this agreement (the "Agreement")
as follows:
SECTION I.
ISSUANCE AND PURCHASE OF SUBORDINATED DEBENTURES
1.1 Issuance of Debentures. Subject to the terms and conditions of this
-----------------------
Agreement, the Company agrees to issue and sell, and each Purchaser who executes
a counterpart of this Agreement who thereby agrees to purchase, the dollar
amount of Series A Convertible Subordinated Debentures (the "Series A
Debentures") set forth opposite the Purchaser's signature at the foot of this
Agreement. Series A Debentures shall be sold in the minimum quantity of $50,000
and multiples thereof. No Purchaser's right and obligation to purchase the
Series A Debentures upon execution of this Agreement shall be contingent on any
other person becoming a Purchaser of Series A Debentures hereunder. The maximum
total face amount of Series A Debentures which may be issued by the Company
hereunder to all Purchasers is One Million Eight Hundred Thousand Dollars
($1,800,000). There is no minimum sale amount which must be achieved.
1.2 Closing and Delivery. The Debentures shall be delivered and purchased as
---------------------
provided in this Agreement on a date (the "Closing Date") designated by the
Company, which need not be the same for each Purchaser and which will not be
later than October 1, 1994. Such delivery shall be against payment of the
purchase price set forth opposite each Purchaser's signature at the foot of this
Agreement. Payment shall be by check payable to the order of the Company. The
Series A Debentures shall be in the form of Exhibit A attached hereto and hereby
made a part hereof.
1.3 Payments and Computations. The Company shall make each payment under the
--------------------------
Series A Debentures by check mailed not later than the day when due to the
holder of the Series A Debentures, and if the holder of the Series A Debentures
is the Purchaser, at his address stated at the foot of this Agreement. All
computations of interest under the Series A Debentures shall be made on the
basis of a year of 365 or 366 days, as the case may be, for the actual number of
days (including the first day but excluding the last day) elapsed.
1.4 Payment on Non-Business Days. Whenever any payment to be made under the
-----------------------------
Series
<PAGE>
A Debentures shall be stated to be due on a Saturday, Sunday or public holiday
or the equivalent for banks generally under the laws of the State of Minnesota
(any other day being a "Business Day"), such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of interest.
SECTION 2
COMPANY'S REPRESENTATIONS AND WARRANTIES
For the purpose of inducing the Purchasers to purchase the Series A Debentures
hereunder, the Company makes the following representations and warranties to
each Purchaser, which representations and warranties shall survive the delivery
of the Series A Debentures hereunder:
2.1 Good Standing. The Company is a duly organized corporation in good
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standing under the laws of the state of Minnesota, with perpetual corporate
existence, and has the corporate power and authority to own or lease its
properties and to transact the business in which it is engaged or presently
proposes to engage.
2.2 Capital Stock. The authorized capitalization of the Company consists of
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1,000,000 shares of $0.01 par value common capital stock ("Common Stock"), of
which on the date hereof there are 600 shares issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable. The
Company has no treasury shares, and the Company has no obligation for the
repurchase of any of its outstanding shares of Common Stock. There are no
outstanding rights, warrants, options or securities convertible into Common
Stock of the Company or other rights to subscribe for or to purchase any Common
Stock of the Company. Other than as contemplated hereby, there are no
agreements with respect to the registration of shares of Common Stock of the
Company under the Securities Act of 1933, as amended.
2.3 Corporate Status of Subsidiaries. The Company does not own or control,
---------------------------------
directly or indirectly, any other corporation, association or business
organization except BUCA, Inc., a Minnesota corporation, BUCA (Eden Prairie),
Inc., a Minnesota corporation and BUCA (Gannon Road), Inc., a Minnesota
corporation, which are wholly owned subsidiaries (BUCA, Inc., BUCA (Eden
Prairie), Inc., BUCA (Gannon Road), Inc. and any corporation, association or
business organization which the Company controls directly or indirectly, other
than Parasole Restaurant Holdings, Inc., is herein referred to as "Subsidiary"
or "Subsidiaries"). The Subsidiaries are duly organized and validly existing
corporations in good standing under the laws of Minnesota.
2.4 Corporate Power and Authority. The Company has the corporate power to
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borrow and
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to execute, deliver, and carry out the terms and provisions of this Agreement,
the Series A Debentures and all instruments and documents delivered by it
pursuant to this Agreement, and the Company has taken or caused to be taken all
necessary corporate action (including but not limited to, the obtaining of any
consent of stockholders required by law or by the Articles or Certificate of
Incorporation or Bylaws of the Company and any Subsidiary) to authorize the
execution, delivery, and performance of this Agreement, the borrowing hereunder,
the making and delivery of the Series A Debentures, and the execution, delivery,
and performance of the instruments and documents delivered by it pursuant to
this Agreement.
2.5 No Violation of Agreements. Neither the Company nor any Subsidiary is in
---------------------------
default of any material obligation under any indenture, mortgage, deed of trust,
agreement, or other instrument to which it is a party or by which it may be
bound. Neither the execution and delivery of this Agreement, the Series A
Debentures or any of the instruments and documents to be delivered pursuant to
this Agreement, nor the consummation of the transactions herein and therein
contemplated, nor compliance with the provisions hereof or thereof, will violate
any material law or regulation, or any potential order or decree of any court or
governmental instrumentality, or will conflict with, or result in the material
breach of, or constitute a material default under, any indenture, mortgage, deed
of trust, agreement, or other instrument to which the Company or any Subsidiary
is a party or by which any of them may be bound, or result in the creation or
imposition of any material lien, charge, or encumbrance upon any of the property
of the Company or any Subsidiary thereunder, or violate any material provision
of the Articles of Incorporation or Bylaws of the Company or any Subsidiary.
2.6 No Litigation. There are no actions, suits, or proceedings pending, or
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to the knowledge of the Company threatened, against or affecting the Company or
any Subsidiary before any court, arbitrator, or governmental or administrative
body or agency which might result in any material adverse change in the
business, operations, properties, or assets or in the condition, financial or
otherwise, of the Company or any Subsidiary.
2.7 Financial Statements. The balance sheet of BUCA, Inc. as at December 31,
---------------------
1993, and the related statement of income and surplus for the fiscal year ended
on said date, heretofore or herewith delivered to each Purchaser, all present
fairly (i) the financial position of BUCA, Inc. as at the date of such balance
sheet, and (ii) the results of the operations of BUCA, Inc. for said fiscal
year. All such financial statements have been prepared in accordance with
generally accepted
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accounting principles applied on a basis consistently maintained throughout the
period involved. Also herewith delivered to each Purchaser is the unaudited
consolidated balance sheet and related statement of income of the Company for
the interim period ended June 30, 1994. There has been no material adverse
change in the assets, liabilities, properties, business and condition, financial
or otherwise, of BUCA, Inc. since December 31, 1993 and the Company since June
30, 1994. The Company has incurred significant start-up costs associated with
the opening of the restaurant owned by BUCA (Gannon Road), Inc. in late May,
1994 and expects to incur significant start-up costs in connection with the
anticipated opening of the restaurant to be owned by BUCA (Eden Prairie), Inc.
scheduled to be opened in February, 1995.
2.8 Tax Liability. The Company and its Subsidiaries have filed all tax
--------------
returns which are required to be filed, and have paid all taxes which have
become due pursuant to such returns or pursuant to any assessment received by
them.
2.9 Merger Discussions. The Company has had preliminary discussions with the
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management of Parasole Restaurant Holdings, Inc. ("Parasole"), a brother-sister
corporation, relating to the merger of the Company into Parasole, after which
the Company would be a wholly owned subsidiary of Parasole.
SECTION 3
USE OF PROCEEDS
The Company agrees that the proceeds of the sale of the Series A Debentures
shall be used by the Company for the purposes of opening new restaurants to be
owned by the Company and its Subsidiaries and the payment of debts of the
Company and its Subsidiaries principally incurred in connection with
improvements to real property occupied by BUCA (Gannon Road), Inc.
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SECTION 4
SUBORDINATION
4.1 Subordination to Senior Debt. The indebtedness, including principal,
-----------------------------
interest and premium, if any, evidenced by any Series A Debentures shall be
subordinate and junior in right of payment, to the extent and in the manner
herein set forth, to all indebtedness of the Company herein defined as Senior
Debt. Senior Debt is defined as any indebtedness of the Company of any kind or
nature which according to the terms of such indebtedness provides that it is
senior in the right of payment to the Series A Debentures. Upon default in the
payment of or in the performance of any other terms or obligations of any or all
such Senior Debt, upon notice from the holder of such Senior Debt or the Company
the Purchaser will not receive any payments of principal or interest or premium
on the Series A Debentures will not take any action to assert, collect or
enforce any right or obligation under the Series A Debentures until the holders
of all Senior Debt have been paid in full. Upon maturity of any Senior Debt by
lapse of time, acceleration or otherwise, all principal, premium (if any), and
interest on all such matured Senior Debt shall first be paid in full before any
payment on account of principal or interest or premium, if any, is made upon any
Series A Debentures.
4.2 Liquidation, etc. In the event of any insolvency, bankruptcy,
-----------------
liquidation, reorganization or other similar proceedings, or any receivership
proceedings in connection therewith, relative to the Company or its property,
and in the event of any proceedings for voluntary liquidation, dissolution, or
other winding up of the Company, whether or not involving insolvency or
bankruptcy proceedings, then all principal, premium (if any) and interest due on
Senior Debt shall first be paid in full, or such payment shall have been
provided for, before any payment on account of principal or interest or premium
is made upon any Series A Debentures. Any payment or distribution of any kind
or character, whether in cash, property, stock, or obligations, which may be
payable or deliverable in respect of the Series A Debentures in any of the
proceedings referred to in the first sentence of this Section 4.02 shall be paid
or delivered directly to the holders of Senior Debt (or to a banking institution
selected by the court or person making the payment or delivery or designated by
any holder of Senior Debt) for application in payment thereof, unless and until
all principal and interest and premium (if any) on all Senior Debt shall have
been paid in full, or such payment shall have been provided for; provided
--------
however, that:
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(i) In the event that payment or delivery of such cash, property, stock
or
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obligations to the holders of the Series A Debentures is authorized by an
order or decree giving effect, and stating in such order or decree that effect
is given, to the subordination of the Series A Debentures to Senior Debt, and
made by a court of competent jurisdiction in a reorganization proceeding under
any applicable bankruptcy or reorganization law, no payment or delivery of
such cash, property, stock or obligations payable or deliverable with respect
to the Series A Debentures shall be made to the holders of Senior Debt; and
(ii) No such delivery shall be made to holders of Senior Debt of stock or
obligations which are issued pursuant to reorganization proceedings or
dissolution or liquidation proceedings, or upon any merger, consolidation,
sale, lease, transfer or other disposal not prohibited by the provisions of
this Agreement, by the Company, as reorganized, or by the corporation
succeeding to the Company or acquiring its property and assets, if such stock
or obligations are subordinate and junior at least to the extent provided in
this Section 4 to the payment of all Senior Debt then outstanding and to the
payment of any stock or obligations which are issued in exchange or
substitution for any Senior Debt then outstanding.
4.3 Senior Debt Default. The Company shall not make any payment of principal
--------------------
or interest or premium on, or purchase or acquire for value, any of the Series A
Debentures during the continuance of any default in the payment of principal of
or interest or premium or any other obligation on or under any Senior Debt.
4.4 Company's Obligations Unimpaired. The provisions of this Section 4 are
---------------------------------
for the purpose of defining the relative rights of the holders of Senior Debt on
the one hand, and the holders of the Series A Debentures on the other hand, and
as between the Company and the holders of the Series A Debentures nothing herein
shall impair the obligation of the Company, which is unconditional and absolute,
to pay the holders thereof the principal thereof and interest and premium, if
any, thereon in accordance with their terms and the terms of the related
agreements, nor shall anything herein prevent the holder of any Series A
Debentures from exercising all remedies otherwise permitted by applicable law
upon default thereunder, subject to the rights, under this Section 4, of holders
of Senior Debt in respect of cash, property, stock or other securities received
upon the exercise of such remedies.
4.5 Subordination Unimpaired. No right of any present or future holder of
-------------------------
Senior Debt to enforce subordination as herein provided shall at any time in any
way be prejudiced or impaired by any act or failure to act on the part of the
Company or by any act or failure to act in good faith by
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any such holder, or by any noncompliance by the Company with the terms,
provisions, and covenants of any agreement relating to Senior Debt, regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
SECTION 5
CONDITIONS PRECEDENT
The obligation of each Purchaser to purchase Series A Debentures in the amount
set forth opposite his signature below shall be subject to satisfaction of the
following conditions precedent on or prior to the Closing Date:
5.1 Debentures. The Company shall have executed and delivered the Series A
-----------
Debentures.
5.2 Correctness of Warranties. All representations and warranties herein or
--------------------------
otherwise made to the Purchaser in connection herewith shall be true and
correct.
5.3 No Event of Default. There shall exist no Event of Default as defined
--------------------
herein and no condition, event, or act which, with notice or lapse of time or
both, would constitute an Event of Default.
SECTION 6
BORROWER'S COVENANTS
Until the Series A Debentures and any other indebtedness to the Purchasers
pursuant to this Agreement are paid in full, unless specifically waived as
provided in Section 11.3:
6.1 Financial Statements and Other Information. The Company shall furnish to
-------------------------------------------
each Purchaser:
(A) As soon as practicable and in any event within 45 days after the
close of each of the first three quarters of each fiscal year of the Company, an
unaudited consolidated balance sheet of the Company and its Subsidiaries, a
consolidated statement of income of the Company and its Subsidiaries and a
consolidated statement of changes in financial position of the Company and its
Subsidiaries, as at the end of and for the period commencing at the end of the
previous fiscal year and ending with such quarter, and for the period commencing
at the end of the previous quarter and ending with such quarter, setting forth
in comparative form the corresponding figures for the same periods of the
preceding fiscal year, all in reasonable detail;
(B) As soon as practicable and in any event within 120 days after the
close of each fiscal year of the Company, a consolidated balance sheet of the
Company and its subsidiaries, a consolidated statement of income of the Company
and its Subsidiaries and a consolidated
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<PAGE>
statement of changes in financial position of the Company and its Subsidiaries,
as at the end of and for the fiscal year just closed, setting forth the
corresponding figures of the previous fiscal year in comparative form, all in
reasonable detail; and it is understood and agreed that none of the foregoing
financial statements need be audited;
(C) As soon as practicable and in any event within 120 days after the
close of each fiscal year of the Company, a certificate signed by the chief
financial officer of the Company, stating (i) that a review of the activities of
the Company and its Subsidiaries during such period has been made under their
immediate supervision with a view to determining whether the Company has
observed, performed and fulfilled all of its obligations under this Agreement,
and (ii) that there existed during such period no Event of Default and no act,
condition, or event which, with the giving of notice or lapse of time, or both,
as specified in Section 10 hereof, would constitute an Event of Default, or if
any such Event of Default, act, condition, or event existed, specifying the
nature thereof, the period of existence thereof and what action the Company
proposes to take, or has taken, with respect thereto;
(D) Promptly upon the issuance thereof, copies of all periodic
reports to or from the Securities and Exchange Commission or any securities
exchange, and all reports, notices, or statements sent to its stockholders;
(E) Promptly upon the commencement thereof, written notice of any
litigation, including arbitrations, and of any proceedings before any
governmental agency which would, if successful, materially affect the Borrower
or the Subsidiary, or where the amount involved exceeds $100,000 and is not
acknowledged by an insurance carrier to be covered in full (subject to any
applicable deductible) by insurance maintained by the Company.
6.2 Taxes and Claims. The Company shall duly pay and discharge, and shall
-----------------
cause each of its Subsidiaries to pay and discharge, (a) all taxes, assessments,
and governmental charges upon or against the Company or its Subsidiaries or
their respective properties or assets prior to the date on which penalties
attach thereto, unless and to the extent that such taxes are being diligently
contested in good faith and by appropriate proceedings, and (b) all lawful
claims, whether for tort damages, labor, materials, supplies, services, repairs,
wages or otherwise, which might or could, if unpaid, become a lien or charge
upon the properties or assets of the Company or its Subsidiaries, unless and to
the extent only that the same are being diligently contested in good faith and
by appropriate proceedings.
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<PAGE>
6.3 Insurance. The Company shall and shall cause its Subsidiaries to keep
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all of its properties adequately insured at all times with responsible insurance
carriers against loss or damage by fire and other hazards, and maintain adequate
insurance at all times with responsible insurance carriers against liability on
account of damage to persons and property and under all applicable worker's
compensation laws.
6.4 Books and Records. The Company shall and shall cause its Subsidiaries to
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maintain, at all times, books, records, and accounts of its transactions in
accordance with generally accepted accounting principles.
6.5 Properties in Good Condition. The Company shall keep, and shall cause
-----------------------------
its Subsidiaries to keep its properties in reasonable repair, working order and
condition and, from time to time, make all economic repairs, renewals,
replacements, and improvements thereto, so that the business carried on may be
properly and advantageously conducted at all times in accordance with prudent
business management.
6.6 Pay Indebtedness of Company and Perform Other Covenants. The Company
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shall (a) make full and timely payment of the principal of and interest on each
Series A Debenture, and (b) duly comply with all the terms and covenants
contained in each of the instruments and documents given to the Purchaser in
connection with or pursuant to this Agreement, all at the times and places and
in the manner set forth therein.
SECTION 7
CONVERSION TO COMMON STOCK
7.1 Right to Convert. The holder of any Series A Debentures shall have the
----------------
right to convert all and not less than all of any Series A Debentures into that
number of shares of common capital stock of the Company or in the case of merger
of the Company into or with any other entity so that the Company becomes a
wholly owned subsidiary of such other entity (such other entity hereinafter is
referred to as "Parent"), that number of shares of common capital stock of the
Parent, whichever first has an initial public offering of its common stock
("IPO"), into that number of shares that the face amount of the Series A
Debenture will purchase at a discount from the public offering price in the IPO
of (a) 30% if the IPO's effective date occurs on or prior to August 1, 1997; (b)
40% if the IPO's effective date occurs after August 1, 1997 but on or prior to
August 1, 1999; and (c) 50% if the IPO's effective date occurs after August 1,
1999 but before July 30, 2001. Such a conversion may be elected by the holder
at the time of the effective date of any such public offering
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and for one year thereafter (but no later than July 30, 2001), time being of the
essence.
7.2 Procedure for Conversion. In order to convert any Series A Debentures,
-------------------------
the holder thereof shall surrender such Series A Debentures to the Company at
its office at the address stated herein (or such other office as the Company may
designate by notice in writing to the holders of the Series A Debentures),
accompanied by a written statement designating the principal amount of such
Series A Debentures, and the notice and opinion of legal counsel which may be
required by Section 7.7 hereof. Within a reasonable time, not exceeding ten
days after the receipt of the written statement and surrender of such Series A
Debentures as aforesaid, the Company shall issue and deliver to the holder
thereof (hereinafter in this subsection, the term "holder" shall include the
nominee of any such holder), registered in the name of such holder, a
certificate or certificates for the number of full shares of common stock
issuable upon the conversion of such Series A Debentures, bearing any
restrictive legend which may be required by Section 7.6. Such Series A
Debentures shall have been surrendered as of the date received by the Company,
and at such time the rights of the holder of such Series A Debentures as such
holder shall cease, and the person or persons in whose name or names any
certificate or certificates for shares of common stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.
7.3 No Fractional Shares. Anything contained herein or any Series A
---------------------
Debentures to the contrary notwithstanding, the Company or the Parent shall not
be required to issue any fraction of a share in connection with the conversion
of a Series A Debentures, but in any case where any holder of a Series A
Debentures would, except for the provisions of this Section 7.3, be entitled
under the terms of this Agreement to receive a fraction of a share upon the
conversion of Series A Debentures, the Company may elect to pay a sum in cash
equal to the value of such fraction.
7.4 Shares Fully Paid. The Company covenants and agrees that all shares of
------------------
common stock which may be issued upon the conversion of any Series A Debentures
will, upon issuance, be duly and validly issued and fully paid and nonassessable
and free from all issuance or stock transfer taxes, liens, and charges with
respect to the issue thereof. The Company further covenants and agrees that it
will at all times have authorized, and reserved and kept available solely for
the purpose of issuance upon the conversion of the Series A Debentures as herein
provided, a sufficient number of shares of its common stock as shall then be
issuable upon the conversion of all outstanding Series A Debentures.
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7.5 Issuance Tax and Expenses. The Company or the Parent shall pay all
--------------------------
expenses, issuance taxes and other charges payable in connection with the
preparation, execution and delivery of certificates for common stock issuable
upon each conversion of any Series A Debentures, except that, in case any such
certificate shall be registered in a name or names other than the name of the
holder of such Series A Debentures, funds sufficient to pay all stock transfer
taxes which shall be payable upon the execution and delivery of such certificate
shall be paid by such holder to the Company or the Parent at the time of the
surrender of such Series A Debentures for conversion.
7.6 Legends. Each stock certificate issued upon the conversion of any Series
-------
A Debenture shall be stamped or imprinted with a legend in substantially the
following form:
"The transfer of these securities is subject to the terms and conditions
specified in the BUCA Ventures, Inc. Purchase Agreement for Series A
Convertible Subordinated Debentures dated as of August 1, 1994, a
complete and correct conformed copy of which will be furnished to the
holder of such securities upon written request and without charge. These
securities have not been registered under the Securities Act of 1933 or
any applicable state securities statutes and may be offered and sold only
if registered pursuant to the provisions of such Act or statutes or if an
exemption from registration is available."
The outstanding stock of the Company or the Parent evidenced by a certificate
or certificates bearing such legend is herein sometimes called "Legend Stock."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless in the opinion
(addressed to such holder and the Company) of such holder's counsel acceptable
to the Company, the securities represented thereby need no longer be subject to
the restrictions contained in this Section 7.
7.7 Notice and Opinion of Counsel. The Series A Debentures and the Legend
------------------------------
Stock to be issued upon such conversion thereof shall not be transferable except
upon the conditions specified in this Section 7.7. Each holder of any Series A
Debentures or Legend Stock, by acceptance thereof, agrees, prior to any transfer
of such Series A Debentures or Legend Stock or concurrently with any conversion
of such Series A Debentures, to give written notice to the Company expressing
such holder's intention to effect such transfer or conversion and describing
briefly the manner of the proposed transfer or, in the case of such conversion,
such holder's intention as to the disposition (and the intended method thereof)
or retention to be made of common stock issuable upon the proposed conversion,
together, if registration of such Series A Debentures or Legend Stock, with a
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copy of the opinion of counsel selected by such holder and reasonably
satisfactory to the Company or the Parent (addressed to such holder and the
Company or Parent) as to the exemption from registration under the Securities
Act of such proposed transfer or disposition or retention upon such proposed
conversion. If in the opinion of such counsel, the proposed transfer of such
Series A Debentures or Legend Stock, or the proposed disposition or retention of
common stock to be issued upon such conversion, may be effected without such
registration of such Series A Debentures or of such Legend Stock or of such
common stock under the Securities Act, such holder shall be entitled to transfer
such Series A Debentures or Legend Stock or to dispose of or retain such common
stock to be issued upon conversion, all in accordance with the terms of the
notice delivered by such holder to the Company or the Parent. Unless in the
opinion of such counsel subsequent disposition by such holder or by others of
the common stock to be issued upon conversion or of the Legend Stock to be so
transferred may require such registration, the Company or the Parent will
promptly upon such conversion or transfer deliver certificates for common stock
not bearing a legend of the character set forth above. If the proposed transfer
of such Series A Debentures or Legend Stock, or the proposed disposition
(including retention) of the common stock to be issued upon such conversion, may
not be effected without such registration of such Series A Debentures, Legend
Stock, or such common stock, the holder thereof shall not be entitled to
transfer such Series A Debentures or such Legend Stock until such registration
is in effect.
SECTION 8
REGISTRATION RIGHTS
If the Company or the Parent proposes (whether or not for its own account) to
register any of its securities under the Securities Act in an S-1 or equivalent
form registration holders of Legend Stock and holders of Series A Debentures
shall have the opportunity to include in such registration statement and
offering any shares of the Legend Stock then outstanding or into which a Series
A Debentures is convertible. The Company's obligation under this Section 8
shall be limited to registrations as to which a registration statement is to be
filed on or before two years and six months after the purchase of any Debenture.
Subject to the provisions of this Agreement, the Company will use its reasonable
efforts to cause all of the shares of common stock of the Company or the Parent
for which any Series A Debenture holder or holder of Legend Stock has requested
the registration to be registered under the Securities Act to the extent
required to permit the disposition by any such shareholder or Series A Debenture
holder; provided, that if such registration shall be in
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connection with an underwritten public offering and the managing underwriter or
underwriters shall advise the Company or the Parent that in their opinion the
securities requested to be included by such shareholders or Series A Debenture
holders or the number of shares of such securities requested to be included by
such shareholders or Series A Debenture holders, in any way adversely affects
the proposed offering by the Company or the Parent, then based upon such advice,
such shares will either be excluded from the registration and offering or the
number of shares of shareholders and Series A Debenture holders requested to be
registered in the offering will be reduced pro rata to their total holdings of
shares of Legend Stock issued and into which Series A Debentures are
convertible. The Company shall not be required to maintain the effectiveness of
any registration statement for a period in excess of the completion of the
distribution for which notice is given. In connection with any registration
hereunder, any selling shareholders will furnish promptly to the Company or the
Parent in writing such information with respect to themselves and the proposed
distribution as will be reasonably necessary in order to insure compliance with
Federal and applicable state securities laws. Any selling shareholders and
Series A Debenture holders shall pay all of their expenses, the underwriting
discount, selling commissions and the expenses of the underwriters incurred in
connection with inclusion of their shares in any such registration. They shall
also reimburse the Company for the incremental cost, on a per share basis, of
all registration and filing fees, Blue Sky fees and expenses, printing expenses,
listing fees, fees and disbursements of counsel and independent public
accountants for the Company or the Parent, fees of transfer agents and
registrars and other expenses incurred by the Company or the Parent allocable to
the offer or sale of shares of common stock to be registered on behalf of the
shareholders and Series A Debentures holders. In the event that such stock is
not registered and sold in such an offering, the holder thereof agrees to abide
by any restrictions required by the underwriter of such stock in order to sell
any such shares of Legend Stock for a period of up to 180 days after the
effective date of any such public offering.
If at any time after the date hereof there continues to exist any outstanding
Debenture or Legend Stock and an event occurs under Section 8 hereof pursuant to
which a holder of a Debenture or Legend Stock shall have registration rights
under said Section 8, the Company shall cause to be mailed (by first class mail,
postage prepaid) to each holder of an outstanding Debenture at such holder's
last address as shown on the register of the Company and to each holder of
outstanding Legend Stock at such holder's last address as shown on the register
of the Company, at
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the earliest practicable time and in any event, not less than 45 days before the
anticipated effective date of any registration statement filed or to be filed
with the Securities and Exchange Commission ("SEC") which notice shall offer
holders of such Legend Stock or any Debenture the opportunity to include in the
registration statement any shares of Legend Stock held by a stockholder or any
shares of Legend Stock into which any Debenture is convertible held by any
Debenture holder (a "Piggyback Registration"). Upon such event, any holder of
Legend Stock and any Debenture holder shall have 30 days to elect to take
advantage of the Piggyback Registration rights provided in Section 8 hereof by
notice to the Company.
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SECTION 9
REPRESENTATIONS OF PURCHASER
You represent to the Company that: (a) you are purchasing the Series A
Debentures for your own account, for investment and with no present intention of
distributing the Series A Debentures or any part thereof; (b) you are an
"accredited investor" as that expression is used in the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder; (c) you are a
resident of the State of Minnesota; (d) you acknowledge that the Company is in
the development stage with two operating restaurants, one opened on July 7,
1993, and the other on May 24, 1994, that other than the operations of these two
restaurants, it has no operating history and that the restaurant business is a
risky business with a high failure rate; (e) you or your financial advisor have
received such information with respect to the Company and its projected
performance as you deem necessary for the purpose of purchasing the Series A
Debentures and you or your financial advisor desire no further information and
desire to ask no further questions of the management of the Company; and (f) you
acknowledge that you are not relying on any representations or warranties with
respect to the transactions contemplated by this Agreement except as expressly
set forth in this Agreement. Purchaser understands that he has no voting rights
as a holder of the Series A Debentures; that the Company may issue or incur
additional debt in unlimited amounts which may be senior to or on a par with the
Series A Debentures; that the Company may be merged into a subsidiary of
Parasole and if so, only the surviving entity and not Parasole would be liable
for payment of the Series A Debentures; and that there is no assurance the
Company or the Parent will have an initial public offering of their common
stock.
SECTION 10
EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. If any one or more of the following events (herein
------------------
called "Events of Default") shall occur for any reason whatsoever:
(A) The Company fails to pay any installment of principal of, or
interest on, any Series A Debentures within 30 days of the date when due;
(B) Any representation or warranty made by the Company herein shall
prove to have been incorrect in any material respect when made; or
(C) The Company shall fail to perform or observe any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed and any such failure
-15-
<PAGE>
shall remain unremedied for 30 days after written notice thereof shall have been
given to the Company by the holders of 50% or more in aggregate principal amount
of the Series A Debentures; or
(D) The Company or any Subsidiary shall fail to pay any indebtedness
of the Company or any Subsidiary for borrowed money when due at scheduled
maturity or by acceleration and such failure shall continue after the applicable
grace period, if any, specified in the agreement or instrument relating to such
debt after giving effect to any amendment, modification or waiver; or
(E) The Company or any Subsidiary shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Company or
any Subsidiary seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking appointment or a receiver, trustee, or other similar
official for it or for any substantial part of its property that has not been
dismissed within ninety (90) days; or the Company or any Subsidiary shall take
any corporate action to authorize any of the actions set forth above in this
paragraph E.
Then, and in any such event, and at any time thereafter, if such or any other
Event of Default shall then be continuing, each Purchaser or holder of a Series
A Debenture may, at his option, declare each Series A Debenture held by him to
be due and payable, whereupon the maturity of the then unpaid balance of the
Series A Debentures covered by such declaration shall be accelerated and the
same, and all interest accrued thereon, shall forthwith become due and payable
without presentment, demand, protest, or notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the Series A Debentures
to the contrary notwithstanding.
10.2 Suits for Enforcement. In case any one or more Events of Default shall
----------------------
occur and be continuing, a Purchaser may proceed to protect and enforce its
rights or remedies either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant, agreement, or other
provision contained herein, in the Series A Debentures, or in any document or
instrument delivered in connection with or pursuant to this Agreement, or to
enforce the payment of the Series A Debentures or any other legal or equitable
right or remedy.
10.3 Rights and Remedies Cumulative. No right or remedy herein conferred
-------------------------------
upon a Purchaser is intended to be exclusive of any other right or remedy
contained herein, in any of the
-16-
<PAGE>
Series A Debentures or in any instrument or document delivered in connection
with or pursuant to this Agreement, and every such right or remedy shall be
cumulative and shall be in addition to every other such right or remedy
contained herein and therein or now or hereafter existing at law or in equity or
by statute, or otherwise.
10.4 Rights and Remedies not Waived. No course of dealing between the
-------------------------------
Company and a Purchaser or any failure or delay on the part of a Purchaser in
exercising any rights or remedies hereunder shall operate as a waiver of any
rights or remedies of the Purchaser or the holder of any of the Series A
Debentures and no single or partial exercise of any rights or remedies hereunder
shall operate as a waiver or preclude the exercise of any other rights or
remedies hereunder.
SECTION 11
MISCELLANEOUS PROVISIONS
11.1 Costs, Expenses and Taxes. The Company shall pay on demand the
--------------------------
reasonable costs and expenses, if any, of the Purchasers in connection with the
reasonable enforcement action of this Agreement or any of the Series A
Debentures; provided, such purchasers are successful in such action and that the
---------
Company shall in no case be obligated to pay the attorney's fees of more than
one attorney or law firm acting on behalf of Purchasers, it being understood
that any separate counsel retained by a Purchaser shall be at their own expense.
11.2 Notices, Etc. All notices and other communications provided for
-------------
hereunder shall be in writing and mailed or delivered, if to the Company, at its
address at 3001 Hennepin Avenue South, Suite 301A, Minneapolis, Minnesota 55408,
Attention: Peter J. Mihajlov; and if to a Purchaser, at the address set forth
beneath their signature on this Agreement; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
party. All such notices and communications shall, when mailed, be effective
when deposited in the mails, addressed as aforesaid.
11.3 Amendments, Waivers, Consents. No amendment or waiver of any provision
------------------------------
of this Agreement or any Series A Debenture, or consent to any departure by the
Company therefrom, shall in any event be effective unless the same shall be in
writing and signed by the holders of two-thirds of the voting power of the
Series A Debentures, such voting power being one vote for each dollar of
principal amount of indebtedness evidenced by the outstanding Series A Debenture
being affected then held. Each waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
-17-
<PAGE>
11.4 Binding Effect; Governing Law. This Agreement shall be binding upon and
------------------------------
inure to the benefit of the Company and each Purchaser and their respective
successors and assigns, except that the Company and any Purchaser shall not have
the right to assign its rights hereunder or any interest herein without the
prior written consent of the other party. This Agreement and the Series A
Debentures shall be governed by, and construed in accordance with, the laws of
the State of Minnesota. Different counterparts of this Agreement may be
executed at different times by the Company and various Purchasers, but all
counterparts together shall constitute one and the same instrument and
Agreement.
11.5 Captions. The captions of the various Sections and paragraphs of this
---------
Agreement have been inserted only for convenience; such captions are not a part
of this Agreement and shall not be deemed in any manner to modify, explain,
enlarge, or restrict any of the provisions of this Agreement.
11.6 Restrictions on Transfer. Each Series A Debenture and certificate for
-------------------------
common stock issued upon conversion of any Series A Debenture shall be stamped
or otherwise imprinted with a legend in substantially the following form:
The securities represented hereby have not been registered under the
Securities Act of 1933 or any state securities statute and may be offered
or sold only if registered pursuant to the provisions of such Act and
statutes or if an exemption from registration is available.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BUCA VENTURES, INC.
Dated September 30, 1994 By: /s/ Don W. Hays
------------ ------------------------------
Don W. Hays, Chief Executive
Officer
Dated September 30, 1994 By: /s/ Peter J. Mihajlov
------------ ------------------------------
Peter J. Mihajlov, Chief
Financial Officer
Face Amount of Series A
Debentures Being Purchased: Purchaser:
$50,000 ACKY-BUCA PARTNERSHIP
------ ----------------------------------
Name: c/o The Ackerberg Group
Address: 1422 West Lake Street, Suite 300
Dated: September 30, 1994
------------
-18-
<PAGE>
EXHIBIT A
BUCA VENTURES, INC.
SERIES A CONVERTIBLE SUBORDINATED DEBENTURE
8% - Due July 30, 2001
THE SECURITIES EVIDENCED BY THIS DEBENTURE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES STATUTE AND MAY BE OFFERED OR SOLD ONLY IF
REGISTERED PURSUANT TO THE PROVISIONS OF SUCH ACT AND
STATUTES OF IF AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS AND
CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT FOR SERIES A
CONVERTIBLE SUBORDINATED DEBENTURES DATED AUGUST 1, 1994, A
COMPLETE AND CORRECT CONFORMED COPY OF WHICH WILL BE
FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
BUCA Ventures, Inc., a Minnesota corporation (the "Company"), for value
received, hereby promises to pay to the order of Acky-Buca Partnership the
---------------------
principal sum of Fifty thousand & no/100 Dollars ($50,000.00) in lawful money of
----------------------- ---------
the United States on July 30, 2001 at the principal office of the Company; and
the Company further hereby promises to pay interest thereon from the date hereof
to and including December 31, 1996 at a fixed annual rate of eight percent (8%)
and thereafter until this Debenture is paid in full the fixed annual rate at
which interest shall accrue shall be adjusted on January 1 and July 1 of each
year (the "Adjustment Date") commencing January 1, 1997 to equal one percent
(1) in excess of the rate announced or published by First Bank National
Association as being its reference or prime rate in effect on the banking day
immediately prior to the Adjustment Date, provided, however, under no
circumstances shall the fixed annual rate of interest ever be less than eight
percent (8%) or greater than twelve percent (12%). The first interest payment
due on this Debenture shall be paid on December 31, 1994, thereafter interest
shall be payable quarterly on April 1, July 1, October 1, and January 1 of each
year until July 30, 2001 at which time the unpaid principal hereunder plus all
accrued and unpaid interest and premium shall be due and payable.
The holder of this Debenture may elect to have this Debenture paid in full on
July 30, 1999 by delivering this Debenture to the Company for payment. In such
event, the holder shall be entitled to a premium payment from the Company equal
to ten percent (10%) of the original principal sum of this Debenture. In the
event that the holder hereof holds this Debenture until maturity, the holder
shall be entitled in addition to all unpaid principal and interest, a premium
-19-
<PAGE>
payment from the Company equal to twenty percent (20%) of the original principal
sum of this Debenture.
This Debenture arises out of and is entitled to and subject to all of the
terms and conditions of the BUCA Ventures, Inc. Purchase Agreement for Series A
Convertible Subordinated Debentures dated as of August 1, 1994 (the
"Agreement"), a copy of which is available from the Company to any holder
hereof, and which contains, among other things, provision for acceleration by
the holder of the maturity hereof and the subordination of the indebtedness
evidenced by this Debenture.
Subject to the terms of the Agreement, the holder of this Debenture is
entitled at his option to convert the principal amount due under this Debenture
into fully paid and nonassessable shares of common stock of the Company or the
Parent as provided in the Agreement. No payment or adjustment shall be made on
conversion for interest accrued or for dividends on securities issued upon
conversion.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by
its duly authorized officers this 30th day of September, 1994.
---- ---------
BUCA VENTURES, INC.
By: /s/ Don W. Hays
-----------------------------
Don W. Hays, Chief Executive
Officer
By: /s/ Peter J. Mihajlov
-----------------------------
Peter J. Mihajlov, Chief
Financial Officer
-20-
<PAGE>
EXHIBIT 10.10
STOCK PURCHASE WARRANT
----------------------
As of October 23, 1996, BUCA, Inc. issued the attached Stock Purchase
Warrant to Piper Jaffray Inc. The following Schedule sets forth the material
details in which another substantially identical Stock Purchase Warrant, issued
to the Purchaser named in the following Schedule, differs from the attached
copy.
SCHEDULE OF DIFFERENCES BETWEEN ATTACHED COPY AND A SUBSTANTIALLY IDENTICAL COPY
<TABLE>
<CAPTION>
DESCRIPTION DETAILS OF ATTACHED DETAILS OF
----------- COPY SUBSTANTIALLY
---- IDENTICAL COPY
--------------
<S> <C> <C>
NAME OF PURCHASER: Piper Jaffray Inc. Michael Bochert
NUMBER OF SHARES: one hundred twelve thousand Forty Four Thousand Eight
(112,000) Hundred (44,800)
DATED AS OF: October 23, 1996 October 24, 1996
</TABLE>
<PAGE>
STOCK PURCHASE WARRANT
TO SUBSCRIBE FOR AND PURCHASE
SERIES A CONVERTIBLE PREFERRED STOCK OF
BUCA, INC.
THIS CERTIFIES THAT, for value received, Piper Jaffray Inc. (herein
called "Purchaser"), or registered assigns, is entitled to subscribe for and
purchase from BUCA, Inc. (herein called the "Company"), a corporation organized
and existing under the laws of the State of Minnesota, at the price specified
below (subject to adjustment as noted below) at any time after the date hereof
to and including October 23, 2003 (the "Expiration Date") one hundred twelve
thousand (112,000) fully paid and nonassessable shares of Series A Convertible
Preferred Stock (herein the "Preferred Stock") (subject to adjustment as noted
below).
The warrant purchase price (subject to adjustment as noted below)
shall be $3.75 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part, by written notice of exercise delivered to
the Company 20 days prior to the intended date of exercise and by the surrender
of this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the next
succeeding paragraph, certificates for the shares of stock so purchased shall be
delivered to the holder hereof within a reasonable time, not exceeding 10 days,
after the rights represented by this Warrant shall have been so exercised, and,
unless this Warrant has expired, a new Warrant representing the number of
shares, if any, with respect to which this Warrant shall not then have been
exercised shall also be delivered to the holder hereof within such time.
2. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof.
3. The Company represents and warrants that: (a) the Company has all
requisite power and authority to execute, issue and perform this Warrant and to
issue the Preferred Stock and the shares of Common Stock of the Company (the
"Common Stock") issuable upon conversion of the Preferred Stock (the "Warrant
Conversion Stock"); (b) this
<PAGE>
Warrant has been duly authorized by all necessary corporate action, has been
duly executed and delivered and is a legal and binding obligation of the
Company; (c) that all shares which may be issued upon the exercise of the rights
represented by this Warrant according to the terms hereof or represented by the
Preferred Stock will, upon issuance, be duly authorized and issued, fully paid
and nonassessable; (d) during the period within which the rights represented by
this Warrant may be exercised or the Preferred Stock may be converted into
Common Stock, the Company will at all times have authorized, and reserved for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant or conversion of the Preferred Stock, a sufficient
number of shares of its Preferred Stock or Common Stock to provide for the
exercise of the rights represented by this Warrant or the Preferred Stock; (e)
the execution, issuance and performance of this Warrant by the Company and the
issuance of the Preferred Stock and Warrant Conversion Stock will not violate
any provision of the articles of incorporation or bylaws of the Company or any
agreement or other instrument to which the Company is a party or by which it is
bound, or any statute, rule or regulation; and (f) any necessary approvals,
government and private, to the execution, issuance and performance of this
Warrant by the Company and the issuance of the Preferred Stock and Warrant
Conversion Stock have been obtained by the Company.
4. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) In case the Company shall (i) declare a dividend upon the
Preferred Stock payable in Preferred Stock (other than a dividend declared to
effect a subdivision of the outstanding shares of Preferred Stock, as described
in subparagraph (b) below) or any obligations or any shares of stock of the
Company which are convertible into or exchangeable for Preferred Stock (such
obligations or shares of stock being hereinafter referred to as "Convertible
Securities"), or in any rights or options to purchase any Preferred Stock or
Convertible Securities, or (ii) declare any other dividend or make any other
distribution upon the Preferred Stock payable otherwise than out of earnings or
earned surplus, then thereafter the holder of this Warrant upon the exercise
hereof will be entitled to receive the number of shares of Preferred Stock to
which such holder shall be entitled upon such exercise, and, in addition and
without further payment therefor, such number of shares of Preferred Stock, such
that upon exercise hereof, such holder would receive such number of shares of
Preferred Stock as a result
-2-
<PAGE>
of each dividend described in clause (i) above and each dividend or distribution
described in clause (ii) above which such holder would have received by way of
any such dividend or distribution if continuously since the record date for any
such dividend or distribution such holder (i) had been the record holder of the
number of shares of Preferred Stock then received, and (ii) had retained all
dividends or distributions in stock or securities (including Preferred Stock or
Convertible Securities, or in any rights or options to purchase any Preferred
Stock or Convertible Securities) payable in respect of such Preferred Stock or
in respect of any stock or securities paid as dividends or distributions and
originating directly or indirectly from such Preferred Stock. For the purposes
of the foregoing, a dividend or distribution other than in cash shall be
considered payable out of earnings or surplus only to the extent that such
earnings or surplus are charged an amount equal to the fair value of such
dividend as determined by the Board of Directors of the Company.
(c) In case the Company shall at any time subdivide its outstanding
shares of Preferred Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Preferred Stock of
the Company shall be combined into a smaller number of shares, the warrant
purchase price in effect immediately prior to such combination shall be
proportionately increased.
(d) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Preferred Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Preferred Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Preferred Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the
-3-
<PAGE>
corporation purchasing such assets shall assume, by written instrument executed
and mailed to the registered holder hereof at the last address of such holder
appearing on the books of the Company, the obligation to deliver to such holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such holder may be entitled to purchase.
(e) If by reason of the terms of the Company's Articles of
Incorporation, all of the Company's outstanding Preferred Stock shall have been
mandatorily redeemed for cash or mandatorily converted into shares of Common
Stock (either such event being herein referred to as an "Event"), then from and
after such Event, the holder of this Warrant shall have the right to purchase
and receive in lieu of the shares of Preferred Stock immediately theretofore
purchasable and receivable hereunder that number of shares of Common Stock equal
to the number of shares of Common Stock, subject to adjustment as herein
provided, that would have been received if this Warrant had been exercised in
full and the Preferred Stock received thereupon had been simultaneously
converted into shares of Common Stock immediately prior to such Event. The
warrant purchase price shall be immediately adjusted to equal (subject to
further adjustment as herein provided) the quotient obtained by dividing (x) the
aggregate warrant purchase price of the maximum number of shares of Preferred
Stock for which this Warrant was exercisable immediately prior to such Event, by
(y) the number of shares of Common Stock for which this Warrant is exercisable
immediately after such Event. From and after such Event, references in this
Warrant to Preferred Stock shall be deemed amended to be references to Common
Stock, and any other appropriate provision shall be made, to the extent
necessary or appropriate to accord the holder of this Warrant the same rights
and privileges relative to the purchase of Common Stock as this Warrant accorded
the holder relative to the purchase of Preferred Stock prior to the Event
(including without limitation the provisions for adjustments of the warrant
purchase price and of the number of shares purchasable upon exercise of this
Warrant).
(f) Upon any adjustment of the warrant purchase price, then and in
each such case the Company shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(g) In case any time:
(1) the Company shall declare any cash dividend on its capital
stock at a rate in excess of the rate of the last cash dividend theretofore
paid;
-4-
<PAGE>
(2) the Company shall pay any dividend payable in stock upon its
capital stock or make any distribution (other than regular cash dividends)
to the holders of its capital stock;
(3) the Company shall offer for subscription pro rata to the
holders of its capital stock any additional shares of stock of any class or
other rights;
(4) there shall be any capital reorganization, or reclassification
of the capital stock of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(6) there shall be any redemption or mandatory conversion of
Preferred Stock;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, or conversion or redemption shall take place, as the
case may be. Such notice shall also specify the date as of which the holders of
capital stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their capital stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, or conversion or redemption, as the case may be. Such written
notice shall be given at least 20 days prior to the action in question and not
less than 20 days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
(h) No fractional shares of Preferred Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the Market Price per share of Preferred Stock as of the close of business on the
date of the notice required by paragraph 1 above. "Market Price" shall mean, if
the Preferred Stock is traded on a securities exchange or on the NASDAQ National
Market System, the average of the closing prices of the Preferred Stock on such
exchange or the NASDAQ National Market System on the 20 trading days ending on
the trading day prior to
-5-
<PAGE>
the date of determination, or, if the Preferred Stock is otherwise traded in the
over-the-counter market, the average of the closing bid prices on the 20 trading
days ending on the trading day prior to the date of determination. If at any
time the Preferred Stock is not traded on an exchange or the NASDAQ National
Market System, or otherwise traded in the over-the-counter market, but the
Common Stock of the Company is, then the Market Price shall be deemed to be the
average closing prices or average closing bid prices of the Common Stock, as the
case may be, or, if such exercise occurs in connection with a public offering of
the Common Stock, the public offering price of the Common Stock, in each case,
multiplied by the number of shares or fraction thereof into which a share of
Preferred Stock is then convertible. If at any time neither the Preferred Stock
nor the Common Stock is traded on an exchange or the NASDAQ National Market
System, or otherwise traded in the over-the-counter market, the Market Price
shall be deemed to be the higher of (i) the book value thereof as determined by
any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made,
or (ii) the fair value thereof determined in good faith by the Board of
Directors of the Company as of a date which is within 15 days of the date as of
which the determination is to be made.
5. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
6. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Preferred Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Preferred Stock issuable or issued upon the exercise hereof. Such
holder shall also provide the Company with an opinion of counsel satisfactory to
the Company to the effect that the proposed transfer of this Warrant or
disposition of shares may be effected without registration or qualification
(under any Federal or State law) of this Warrant or the shares of Preferred
Stock issuable or issued upon the exercise hereof. Upon receipt of such written
notice and opinion by the Company, such holder shall be entitled to transfer
this Warrant, or to exercise this Warrant in accordance with its terms and
dispose of the shares received upon such exercise or to dispose of shares of
Preferred Stock received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by such holder to the Company,
provided that an appropriate legend respecting the aforesaid restrictions on
transfer and disposition may be endorsed on this Warrant or the certificates for
such shares.
7. Subject to the provisions of paragraph 6 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant
-6-
<PAGE>
properly endorsed. Each taker and holder of this Warrant, by taking or holding
the same, consents and agrees that the bearer of this Warrant, when endorsed,
may be treated by the Company and all other persons dealing with this Warrant as
the absolute owner hereof for any purpose and as the person entitled to exercise
the rights represented by this Warrant, or to the transfer hereof on the books
of the Company, any notice to the contrary notwithstanding; but until such
transfer on such books, the Company may treat the registered holder hereof as
the owner for all purposes.
8. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
9. The warrants shall have the registration rights set forth in
Section 12 of that certain Stock Purchase Agreement dated October 23, 1996 by
and among the Purchasers and BUCA, Inc.
10. (a) In addition to and without limiting the rights of the holder
of this Warrant under the terms of this Warrant, the holder of this Warrant
shall have the right (the "Conversion Right") to convert this Warrant or any
portion thereof into shares of Preferred Stock as provided in this paragraph 10
at any time or from time to time prior to its expiration. Upon exercise of the
Conversion Right with respect to a particular number of shares subject to this
Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder of this Warrant, without payment by the holder of any exercise price or
any cash or other consideration, that number of shares of Preferred Stock equal
to the quotient obtained by dividing the Net Value (as hereinafter defined) of
the Converted Warrant Shares by the fair market value (as defined in paragraph
(c) below) of a single share of Preferred Stock, determined in each case as of
the close of business on the Conversion Date (as hereinafter defined). The "Net
Value" of the Converted Warrant Shares shall be determined by subtracting the
aggregate warrant purchase price of the Converted Warrant Shares from the
aggregate fair market value of the Converted Warrant Shares. Notwithstanding
anything in this paragraph 10 to the contrary, the Conversion Right cannot be
exercised with respect to a number of Converted Warrant Shares having a Net
Value below $100. No fractional shares shall be issuable upon exercise of the
Conversion Right, and if the number of shares to be issued in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder of this Warrant an amount in cash equal to the fair market value of the
resulting fractional share.
-7-
<PAGE>
(b) The Conversion Right may be exercised by the holder of this
Warrant by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in paragraph (a) above as
the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), but not later than the expiration
date of this Warrant. Certificates for the shares of Preferred Stock issuable
upon exercise of the Conversion Right, together with a check in payment of any
fractional share and, in the case of a partial exercise, a new warrant
evidencing the shares remaining subject to this Warrant, shall be issued as of
the Conversion Date and shall be delivered to the holder of this Warrant within
15 days following the Conversion Date.
(c) For purposes of this paragraph 10, the "fair market value" of a
share of Preferred Stock as of a particular date shall be its Market Price,
calculated as described in paragraph 4(i) hereof.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law, not the law of
conflicts, of the State of Minnesota.
-8-
<PAGE>
IN WITNESS WHEREOF, BUCA, Inc. has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of October 23, 1996.
BUCA, Inc.
By /s/ Philip A. Roberts
-----------------------
Its CEO
---------------------
RESTRICTION ON TRANSFER
"The securities evidenced hereby may not be transferred without (i)
the opinion of counsel satisfactory to this corporation that such transfer may
be lawfully made without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such registration."
-9-
<PAGE>
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: BUCA, Inc. (the "Company")
The undersigned ___________________________________
Please insert Social Security or other
identifying number of Subscriber:
_______________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Preferred
Stock (the "Preferred Stock") provided for therein and tenders payment herewith
to the order of the Company in the amount of $___________, such payment being
made as provided on the face of this Warrant.
The undersigned requests that certificates for such shares of
Preferred Stock be issued as follows:
Name:_________________________________________________________________________
Address:______________________________________________________________________
Deliver to:___________________________________________________________________
Address:______________________________________________________________________
and, if such number of shares of Preferred Stock shall not be all the shares of
Preferred Stock purchasable hereunder, that a new Warrant for the balance
remaining of the shares of Preferred Stock purchasable under this Warrant be
registered in the name of, and delivered to, the undersigned at the address
stated above.
Dated:
Signature _______________________________________
Note: The signature on this Subscription
Form must correspond with the name as
written upon the face of this Warrant in
every particular, without alteration or
enlargement or any change whatever.
-10-
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto this Warrant, and appoints to transfer this Warrant on the books
of the Company with the full power of substitution in the premises.
Dated:
In the presence of:
________________________________________
(Signature must conform in all respects
to the name of the holder as specified
on the face of this Warrant without
alteration, enlargement or any change
whatsoever, and the signature must be
guaranteed in the usual manner)
-11-
<PAGE>
EXHIBIT 10.11
STOCK PURCHASE WARRANT
To Subscribe for and Purchase
SERIES B CONVERTIBLE PREFERRED STOCK OF
BUCA, INC.
THIS CERTIFIES THAT, for value received, Piper Jaffray Inc. (herein called
"Purchaser"), or registered assigns, is entitled to subscribe for and purchase
from BUCA, Inc. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Minnesota, at the price specified below
(subject to adjustment as noted below) at any time after the date hereof to and
including September 2, 2004 (the "Expiration Date") up to fifty thousand
(50,000) fully paid and nonassessable shares of Series B Convertible Preferred
Stock (herein the "Preferred Stock") (subject to the vesting provided in
paragraph 2 below and subject to adjustment as noted below).
The warrant purchase price (subject to adjustment as noted below) shall be
$4.50 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, by written notice of exercise delivered to the
Company 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the shares of stock so purchased
shall be delivered to the holder hereof within a reasonable time, not exceeding
10 days, after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be delivered to the holder hereof within such time.
2. This Warrant shall become vested and exercisable as to that number of
shares of Preferred Stock equal to the percentage of Financing (as hereinafter
defined) obtained by the Company prior to January 31, 1998, times 50,000.
Vesting shall occur at the time of the closing or closings of the Financing;
provided, however, that if any such closing fails to occur prior to February 1,
1998, this Warrant shall be void as to any shares of Preferred Stock as to which
it is not then vested, except as otherwise set forth in this paragraph 2. For
purposes of this Warrant, "Financing" shall mean the receipt by the
-1-
<PAGE>
Company of gross proceeds of up to $3,000,000 from the placement of subordinated
debt of the Company with Sirrom Capital Corporation and other institutional
lenders. For example, if the Company obtains $3,000,000, or 100% of the
Financing, this Warrant will become vested and exercisable as to 100% of 50,000,
or 50,000 shares of Preferred Stock. If the Company obtains $1,500,000, or 50%
of the Financing, this Warrant will become vested and exercisable as to 50% of
50,000, or 25,000 shares of Preferred Stock. Such vesting shall be cumulative,
based on the percentage of Financing obtained at each closing, but shall in no
event exceed 50,000 shares in the aggregate. Notwithstanding the foregoing,
however, this Warrant shall be deemed vested and exercisable as of September 2,
1997 with respect to all 50,000 shares if the failure to close any or all of the
Financing is the result of the Company's determination not to proceed with such
Financing on substantially the terms proposed by Sirrom Capital Corporation in
the term sheet dated July 16, 1997.
3. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof.
4. The Company represents and warrants that: (a) the Company has all
requisite power and authority to execute, issue and perform this Warrant and to
issue the Preferred Stock and the shares of Common Stock of the Company (the
"Common Stock") issuable upon conversion of the Preferred Stock (the "Warrant
Conversion Stock"); (b) this Warrant has been duly authorized by all necessary
corporate action, has been duly executed and delivered and is a legal and
binding obligation of the Company; (c) that all shares which may be issued upon
the exercise of the rights represented by this Warrant according to the terms
hereof or represented by the Preferred Stock will, upon issuance, be duly
authorized and issued, fully paid and nonassessable; (d) during the period
within which the rights represented by this Warrant may be exercised or the
Preferred Stock may be converted into Common Stock, the Company will at all
times have authorized, and reserved for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant or conversion of
the Preferred Stock, a sufficient number of shares of its Preferred Stock or
Common Stock to provide for the exercise of the rights represented by this
Warrant or the Preferred Stock; (e) the execution, issuance and performance of
this Warrant by the Company and the issuance of the Preferred Stock and Warrant
Conversion Stock will not violate any provision of the articles of incorporation
or bylaws of the Company or any agreement or other instrument to which the
Company is a party or by which it is bound, or any statute, rule or regulation;
and (f) any necessary approvals, government and private, to the execution,
issuance and performance of this Warrant by the Company and the issuance of the
Preferred Stock and Warrant Conversion Stock have been obtained by the Company.
5. The above provisions are, however, subject to the following:
-2-
<PAGE>
(a) The warrant purchase price shall, from and after the date of issuance
of this Warrant, be subject to adjustment from time to time as hereinafter
provided. Upon each adjustment of the warrant purchase price, the holder of
this Warrant shall thereafter be entitled to purchase, at the warrant purchase
price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) In case the Company shall (i) declare a dividend upon the Preferred
Stock payable in Preferred Stock (other than a dividend declared to effect a
subdivision of the outstanding shares of Preferred Stock, as described in
subparagraph (b) below) or any obligations or any shares of stock of the Company
which are convertible into or exchangeable for Preferred Stock (such obligations
or shares of stock being hereinafter referred to as "Convertible Securities"),
or in any rights or options to purchase any Preferred Stock or Convertible
Securities, or (ii) declare any other dividend or make any other distribution
upon the Preferred Stock payable otherwise than out of earnings or earned
surplus, then thereafter the holder of this Warrant upon the exercise hereof
will be entitled to receive the number of shares of Preferred Stock to which
such holder shall be entitled upon such exercise, and, in addition and without
further payment therefor, such number of shares of Preferred Stock, such that
upon exercise hereof, such holder would receive such number of shares of
Preferred Stock as a result of each dividend described in clause (i) above and
each dividend or distribution described in clause (ii) above which such holder
would have received by way of any such dividend or distribution if continuously
since the record date for any such dividend or distribution such holder (i) had
been the record holder of the number of shares of Preferred Stock then received,
and (ii) had retained all dividends or distributions in stock or securities
(including Preferred Stock or Convertible Securities, or in any rights or
options to purchase any Preferred Stock or Convertible Securities) payable in
respect of such Preferred Stock or in respect of any stock or securities paid as
dividends or distributions and originating directly or indirectly from such
Preferred Stock. For the purposes of the foregoing, a dividend or distribution
other than in cash shall be considered payable out of earnings or surplus only
to the extent that such earnings or surplus are charged an amount equal to the
fair value of such dividend as determined by the Board of Directors of the
Company.
(c) In case the Company shall at any time subdivide its outstanding shares
of Preferred Stock into a greater number of shares, the warrant purchase price
in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Preferred Stock of
the Company shall be combined into a smaller number of shares, the warrant
purchase price in effect immediately prior to such combination shall be
proportionately increased.
-3-
<PAGE>
(d) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Preferred Stock
shall be entitled to receive stock, securities or assets with respect to or in
exchange for Preferred Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the holder hereof shall thereafter have the right to
purchase and receive, upon the basis and upon the terms and conditions specified
in this Warrant and in lieu of the shares of the Preferred Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for a number of outstanding
shares of such Preferred Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented hereby had such reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provision shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including without
limitation provisions for adjustments of the warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume, by written instrument executed and mailed to the registered
holder hereof at the last address of such holder appearing on the books of the
Company, the obligation to deliver to such holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
holder may be entitled to purchase.
(e) If by reason of the terms of the Company's Articles of Incorporation,
all of the Company's outstanding Preferred Stock shall have been mandatorily
redeemed for cash or mandatorily converted into shares of Common Stock (either
such event being herein referred to as an "Event"), then from and after such
Event, the holder of this Warrant shall have the right to purchase and receive
in lieu of the shares of Preferred Stock immediately theretofore purchasable and
receivable hereunder that number of shares of Common Stock equal to the number
of shares of Common Stock, subject to adjustment as herein provided, that would
have been received if this Warrant had been exercised in full and the Preferred
Stock received thereupon had been simultaneously converted into shares of Common
Stock immediately prior to such Event. The warrant purchase price shall be
immediately adjusted to equal (subject to further adjustment as herein provided)
the quotient obtained by dividing (x) the aggregate warrant purchase price of
the maximum number of shares of Preferred Stock for which this Warrant was
exercisable immediately prior to such Event, by (y) the number of shares of
Common Stock for which this Warrant is exercisable immediately after such Event.
From and after such Event, references in this Warrant to Preferred Stock shall
be deemed amended to be
-4-
<PAGE>
references to Common Stock, and any other appropriate provision shall be made,
to the extent necessary or appropriate to accord the holder of this Warrant the
same rights and privileges relative to the purchase of Common Stock as this
Warrant accorded the holder relative to the purchase of Preferred Stock prior to
the Event (including without limitation the provisions for adjustments of the
warrant purchase price and of the number of shares purchasable upon exercise of
this Warrant).
(f) Upon any adjustment of the warrant purchase price, then and in
each such case the Company shall give written notice thereof, by first-class
mail, postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(g) In case any time:
(1) the Company shall declare any cash dividend on its capital
stock at a rate in excess of the rate of the last cash dividend theretofore
paid;
(2) the Company shall pay any dividend payable in stock upon its
capital stock or make any distribution (other than regular cash dividends)
to the holders of its capital stock;
(3) the Company shall offer for subscription pro rata to the
holders of its capital stock any additional shares of stock of any class or
other rights;
(4) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with, or sale of all or substantially all of its
assets to, another corporation;
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(6) there shall be any redemption or mandatory conversion of
Preferred Stock;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the
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<PAGE>
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights, or (bb) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, or
conversion or redemption shall take place, as the case may be. Such notice shall
also specify the date as of which the holders of capital stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their capital stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, or conversion or redemption, as
the case may be. Such written notice shall be given at least 20 days prior to
the action in question and not less than 20 days prior to the record date or the
date on which the Company's transfer books are closed in respect thereto.
(h) No fractional shares of Preferred Stock shall be issued upon the
exercise of this Warrant, but, instead of any fraction of a share which would
otherwise be issuable, the Company shall pay a cash adjustment (which may be
effected as a reduction of the amount to be paid by the holder hereof upon such
exercise) in respect of such fraction in an amount equal to the same fraction of
the Market Price per share of Preferred Stock as of the close of business on the
date of the notice required by paragraph l above. "Market Price" shall mean, if
the Preferred Stock is traded on a securities exchange or on the NASDAQ National
Market System, the average of the closing prices of the Preferred Stock on such
exchange or the NASDAQ National Market System on the 20 trading days ending on
the trading day prior to the date of determination, or, if the Preferred Stock
is otherwise traded in the over-the-counter market, the average of the closing
bid prices on the 20 trading days ending on the trading day prior to the date of
determination. If at any time the Preferred Stock is not traded on an exchange
or the NASDAQ National Market System, or otherwise traded in the over-the-
counter market, but the Common Stock of the Company is, then the Market Price
shall be deemed to be the average closing prices or average closing bid prices
of the Common Stock, as the case may be, or, if such exercise occurs in
connection with a public offering of the Common Stock, the public offering price
of the Common Stock, in each case, multiplied by the number of shares or
fraction thereof into which a share of Preferred Stock is then convertible. If
at any time neither the Preferred Stock nor the Common Stock is traded on an
exchange or the NASDAQ National Market System, or otherwise traded in the over-
the-counter market, the Market Price shall be deemed to be the higher of (i) the
book value thereof as determined by any firm of independent public accountants
of recognized standing selected by the Board of Directors of the Company as of
the last day of any month ending within 60 days preceding the date as of which
the determination is to be made, or (ii) the fair value thereof determined in
good faith by the Board of Directors of the Company as of a date which is within
15 days of the date as of which the determination is to be made.
6. This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company.
-6-
<PAGE>
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Preferred Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Preferred Stock issuable or issued upon the exercise hereof. Such
holder shall also provide the Company with an opinion of counsel satisfactory to
the Company to the effect that the proposed transfer of this Warrant or
disposition of shares may be effected without registration or qualification
(under any Federal or State law) of this Warrant or the shares of Preferred
Stock issuable or issued upon the exercise hereof. Upon receipt of such written
notice and opinion by the Company, such holder shall be entitled to transfer
this Warrant, or to exercise this Warrant in accordance with its terms and
dispose of the shares received upon such exercise or to dispose of shares of
Preferred Stock received upon the previous exercise of this Warrant, all in
accordance with the terms of the notice delivered by such holder to the Company,
provided that an appropriate legend respecting the aforesaid restrictions on
transfer and disposition may be endorsed on this Warrant or the certificates for
such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, at the principal office
of the Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that the bearer of
this Warrant, when endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder hereof at the time of such
surrender.
10. The warrants shall have the registration rights set forth in Section
12 of that certain Stock Purchase Agreement dated as of September 2, 1997, by
and among the Purchasers and BUCA, Inc.
11. (a) In addition to and without limiting the rights of the holder of
this Warrant under the terms of this Warrant, the holder of this Warrant shall
have the right (the
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<PAGE>
"Conversion Right") to convert this Warrant or any portion thereof into shares
of Preferred Stock as provided in this paragraph 11 at any time or from time to
time prior to its expiration. Upon exercise of the Conversion Right with respect
to a particular number of shares subject to this Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the holder of this Warrant, without
payment by the holder of any exercise price or any cash or other consideration,
that number of shares of Preferred Stock equal to the quotient obtained by
dividing the Net Value (as hereinafter defined) of the Converted Warrant Shares
by the fair market value (as defined in paragraph (c) below) of a single share
of Preferred Stock, determined in each case as of the close of business on the
Conversion Date (as hereinafter defined). The "Net Value" of the Converted
Warrant Shares shall be determined by subtracting the aggregate warrant purchase
price of the Converted Warrant Shares from the aggregate fair market value of
the Converted Warrant Shares. Notwithstanding anything in this paragraph 11 to
the contrary, the Conversion Right cannot be exercised with respect to a number
of Converted Warrant Shares having a Net Value below $100. No fractional shares
shall be issuable upon exercise of the Conversion Right, and if the number of
shares to be issued in accordance with the foregoing formula is other than a
whole number, the Company shall pay to the holder of this Warrant an amount in
cash equal to the fair market value of the resulting fractional share.
(b) The Conversion Right may be exercised by the holder of this Warrant by
the surrender of this Warrant at the principal office of the Company together
with a written statement specifying that the holder thereby intends to exercise
the Conversion Right and indicating the number of shares subject to this Warrant
which are being surrendered (referred to in paragraph (a) above as the Converted
Warrant Shares) in exercise of the Conversion Right. Such conversion shall be
effective upon receipt by the Company of this Warrant together with the
aforesaid written statement, or on such later date as is specified therein (the
"Conversion Date"), but not later than the expiration date of this Warrant.
Certificates for the shares of Preferred Stock issuable upon exercise of the
Conversion Right, together with a check in payment of any fractional share and,
in the case of a partial exercise, a new warrant evidencing the shares remaining
subject to this Warrant, shall be issued as of the Conversion Date and shall be
delivered to the holder of this Warrant within 15 days following the Conversion
Date.
(c) For purposes of this paragraph 11, the "fair market value" of a share
of Preferred Stock as of a particular date shall be its Market Price, calculated
as described in paragraph 4(i) hereof.
12. All questions concerning this Warrant will be governed and interpreted
and enforced in accordance with the internal law, not the law of conflicts, of
the State of Minnesota.
-8-
<PAGE>
IN WITNESS WHEREOF, BUCA, Inc. has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of September 3, 1997.
BUCA, Inc.
By /s/ Greg A. Gadel
----------------------------------
Its CFO
---------------------------------
RESTRICTION ON TRANSFER
"The securities evidenced hereby may not be transferred without (i)
the opinion of counsel satisfactory to this corporation that such transfer may
be lawfully made without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such registration."
-9-
<PAGE>
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: BUCA, Inc. (the "Company")
The undersigned ____________________________________
Please insert Social Security or other
identifying number of Subscriber:
_______________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Preferred
Stock (the "Preferred Stock") provided for therein and tenders payment herewith
to the order of the Company in the amount of $___________, such payment being
made as provided on the face of this Warrant.
The undersigned requests that certificates for such shares of Preferred Stock be
issued as follows:
Name:___________________________________________________________________________
Address:________________________________________________________________________
Deliver to:_____________________________________________________________________
Address:________________________________________________________________________
and, if such number of shares of Preferred Stock purchasable hereunder, that a
new Warrant for the balance remaining of the shares of Preferred Stock
purchasable under this Warrant be registered in the name of, and delivered to,
the undersigned at the address stated above.
Dated:
Signature _______________________________________
Note: The signature on this
Subscription Form must correspond with
the name as written upon the face of
this Warrant in every particular,
without alteration or enlargement or any
change whatever.
-10-
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto this Warrant, and appoints to transfer this Warrant on the books
of the Company with the full power of substitution in the premises.
Dated:
In the presence of:
______________________________________________
(Signature must conform in all respects to the
name of the holder as specified on the face of
this Warrant without alteration, enlargement
or any change whatsoever, and the signature
must be guaranteed in the usual manner)
-11-
<PAGE>
EXHIBIT 10.12
STOCK PURCHASE WARRANT
----------------------
As of October 31, 1997, BUCA, Inc. issued the attached Stock Purchase
Warrant to Norwest Equity Partners V. The following Schedule sets forth the
material details in which other substantially identical Stock Purchase Warrants,
issued to the Purchasers named in the following Schedule, differ from the
attached copy.
SCHEDULE OF DIFFERENCES BETWEEN ATTACHED COPY AND SUBSTANTIALLY IDENTICAL COPIES
<TABLE>
<CAPTION>
PURCHASER NUMBER OF SHARES
--------- ----------------
<S> <C> <C>
Attached Norwest Equity Twenty-Eight Thousand Nine Hundred Two (28,902)
Copy: Partners V
Substantially Consumer Venture Eleven Thousand Five Hundred Sixty-One (11,561)
Identical Copy: Partners II, L.P.
Substantially Regent Capital Five Hundred Seventy-Eight (578)
Identical Copy: Partners, L.P.
Substantially Standby Fund 1997 Two Thousand Eight Hundred Ninety (2,890)
Identical Copy:
Substantially WA&H Investment, L.L.C. Two Thousand Eight Hundred Ninety (2,890)
Identical Copy:
Substantially Northwood Ventures Nine Thousand Two Hundred Forty-Nine (9,249)
Identical Copy:
Substantially Northwood Capital Two Thousand Three Hundred Twelve (2,312)
Identical Copy: Partners LLC
Substantially National Dining Twenty-Three Thousand One Hundred Twenty-One (23,121)
Identical Copy: Concepts, Inc.
Substantially Walden Investors Four Thousand Forty-Six (4,046)
Identical Copy:
Substantially Walden Ventures One Thousand Seven Hundred Thirty-Four (1,734)
Identical Copy:
Substantially Walden Capital Partners Five Hundred Seventy-Eight (578)
Identical Copy:
Substantially Walden - SBIC, L.P. Ten Thousand Four Hundred Five (10,405)
Identical Copy:
Substantially Walden Technology One Thousand Seven Hundred Thirty-Four (1,734)
Identical Copy: Ventures II, L.P.
</TABLE>
<PAGE>
STOCK PURCHASE WARRANT
To Subscribe for and Purchase
COMMON STOCK OF
BUCA, INC.
THIS CERTIFIES THAT, for value received, Norwest Equity Partners V (herein
called "Purchaser"), or registered assigns, is entitled to subscribe for and
purchase from BUCA, Inc. (herein called the "Company"), a corporation organized
and existing under the laws of the State of Minnesota, at the price specified
below (subject to adjustment as noted below) during the exercise period
specified below to and including September 30, 2002 (the "Expiration Date") up
to Twenty-Eight Thousand Nine Hundred Two (28,902) fully paid and nonassessable
shares of Common Stock, par value $.01 per share, of the Company (herein the
"Common Stock") (subject to adjustment as noted below).
The warrant purchase price (subject to adjustment as noted below) shall be
$.01 per share.
This Warrant is subject to the following provisions, terms and conditions:
1. The rights represented by this Warrant may be exercised by the holder
hereof, in whole or in part, by written notice of exercise delivered to the
Company 20 days prior to the intended date of exercise and by the surrender of
this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to it by check of the purchase price for such shares.
The Company agrees that the shares so purchased shall be and are deemed to be
issued to the holder hereof as the record owner of such shares as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the shares of stock so purchased
shall be delivered to the holder hereof within a reasonable time, not exceeding
10 days, after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be delivered to the holder hereof within such time.
2. This Warrant shall become vested and exercisable commencing on such
date as the Company completes an Initial Public Offering (as defined below) of
its Common Stock, but if and only if the public offering price per share of
Common Stock in such Initial Public Offering is less than $9.00 (as adjusted
from time to time to reflect stock splits, dividends, recapitalizations or the
like). If the Company completes an Initial Public Offering at a price per share
of Common Stock of $9.00 or greater (as adjusted from time to time to reflect
stock splits, dividends, recapitalizations or the like), then this Warrant will
<PAGE>
immediately terminate and be null and void. In addition, if, during the term of
this Warrant and prior to the completion of an Initial Public Offering, the
Company merges or consolidates with another corporation or completes a share
exchange with another corporation (in which such merger, consolidation or
exchange any stockholders of the Company receive distributions of cash or
securities or other property), or the Company sells, transfers or disposes of
all or substantially all of the assets of the Company, then this Warrant will
terminate immediately prior to the closing of such merger, consolidation,
exchange, sale, transfer or disposition, and be null and void (notwithstanding
the provisions of paragraph 5(c) hereof). For purposes of this Warrant,
"Initial Public Offering" shall mean the first public offering by the Company of
shares of Common Stock registered under the Securities Act of 1933, as amended,
in which the offering is underwritten on a firm commitment basis by an
underwriter, or a group of underwriters represented by an underwriter or
underwriters, which is a member of the New York Stock Exchange.
3. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof.
4. The Company represents and warrants that: (a) the Company has all
requisite power and authority to execute, issue and perform this Warrant and to
issue the Common Stock (b) this Warrant has been duly authorized by all
necessary corporate action, has been duly executed and delivered and is a legal
and binding obligation of the Company; (c) that all shares which may be issued
upon the exercise of the rights represented by this Warrant according to the
terms hereof or represented by the Common Stock will, upon issuance, be duly
authorized and issued, fully paid and nonassessable; (d) during the period
within which the rights represented by this Warrant may be exercised, the
Company will at all times have authorized, and reserved for the purpose of issue
or transfer upon exercise of the subscription rights evidenced by this Warrant,
a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant; (e) the execution, issuance and
performance of this Warrant by the Company and the issuance of the Common Stock
will not violate any provision of the articles of incorporation or bylaws of the
Company or any agreement or other instrument to which the Company is a party or
by which it is bound, or any statute, rule or regulation; and (f) any necessary
approvals, government and private, to the execution, issuance and performance of
this Warrant by the Company and the issuance of the Common Stock have been
obtained by the Company.
5. The above provisions are, however, subject to the following:
(a) In case the Company shall (i) declare a dividend upon the Common Stock
payable in Common Stock (other than a dividend declared to effect a subdivision
of the
-2-
<PAGE>
outstanding shares of Common Stock, as described in subparagraph (b) below) or
any obligations or any shares of stock of the Company which are convertible into
or exchangeable for Common Stock (such obligations or shares of stock being
hereinafter referred to as "Convertible Securities"), or in any rights or
options to purchase any Common Stock or Convertible Securities, or (ii) declare
any other dividend or make any other distribution upon the Common Stock payable
otherwise than out of earnings or earned surplus, then thereafter the holder of
this Warrant upon the exercise hereof will be entitled to receive the number of
shares of Common Stock to which such holder shall be entitled upon such
exercise, and, in addition and without further payment therefor, such number of
shares of Common Stock, such that upon exercise hereof, such holder would
receive such number of shares of Common Stock as a result of each dividend
described in clause (i) above and each dividend or distribution described in
clause (ii) above which such holder would have received by way of any such
dividend or distribution if continuously since the record date for any such
dividend or distribution such holder (i) had been the record holder of the
number of shares of Common Stock then received, and (ii) had retained all
dividends or distributions in stock or securities (including Common Stock or
Convertible Securities, or in any rights or options to purchase any Common Stock
or Convertible Securities) payable in respect of such Common Stock or in respect
of any stock or securities paid as dividends or distributions and originating
directly or indirectly from such Common Stock. For the purposes of the
foregoing, a dividend or distribution other than in cash shall be considered
payable out of earnings or surplus only to the extent that such earnings or
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company.
(b) In case the Company shall at any time subdivide its outstanding shares
of Common Stock into a greater number of shares, the number of shares subject to
this Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the number of shares
subject to this Warrant immediately prior to such combination shall be
proportionately reduced.
(c) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, except as otherwise provided in paragraph 2
hereof, as a condition of such reorganization, reclassification, consolidation,
merger or sale, lawful and adequate provision shall be made whereby the holder
hereof shall thereafter have the right to purchase and receive, upon the basis
and upon the terms and conditions specified in this Warrant and in lieu of the
shares of the Common Stock of the Company immediately theretofore purchasable
and receivable upon the exercise of the rights represented hereby, such shares
of stock, securities or assets as may be issued or payable with respect to or in
exchange
-3-
<PAGE>
for a number of outstanding shares of such Common Stock equal to the number of
shares of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provision shall be made with respect to the rights and
interests of the holder of this Warrant to the end that the provisions hereof
(including without limitation provisions for adjustments of the warrant purchase
price and of the number of shares purchasable upon the exercise of this Warrant)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger or sale, unless
prior to the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing such assets shall assume, by written instrument executed and mailed
to the registered holder hereof at the last address of such holder appearing on
the books of the Company, the obligation to deliver to such holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such holder may be entitled to purchase.
(d) Upon each adjustment in the number of shares the holder is entitled to
purchase upon exercise of this Warrant, the Warrant purchase price hereunder
shall be appropriately adjusted, provided, however, that in no event shall such
purchase price per share be less than the par value of the Company's Common
Stock. Upon any adjustment of the shares purchasable upon exercise of this
Warrant, then and in each such case the Company shall give written notice
thereof, by first-class mail, postage prepaid, addressed to the registered
holder of this Warrant at the address of such holder as shown on the books of
the Company, which notice shall state the warrant purchase price resulting from
such adjustment and the increase or decrease, if any, in the number of shares
purchasable at such price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based.
(e) In case any time:
(1) the Company shall declare any cash dividend on its capital stock
at a rate in excess of the rate of the last cash dividend theretofore paid;
(2) the Company shall pay any dividend payable in stock upon its
capital stock or make any distribution (other than regular cash dividends)
to the holders of its capital stock;
(3) the Company shall offer for subscription pro rata to the holders
of its capital stock any additional shares of stock of any class or other
rights;
-4-
<PAGE>
(4) there shall be any capital reorganization, or reclassification of
the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation; or
(5) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of said cases, the Company shall give written notice,
by first-class mail, postage prepaid, addressed to the registered holder of this
Warrant at the address of such holder as shown on the books of the Company, of
the date on which (aa) the books of the Company shall close or a record shall be
taken for such dividend, distribution or subscription rights, or (bb) such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, or conversion or redemption shall take place, as the
case may be. Such notice shall also specify the date as of which the holders of
capital stock of record shall participate in such dividend, distribution or
subscription rights, or shall be entitled to exchange their capital stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, or conversion or redemption, as the case may be. Such written
notice shall be given at least 20 days prior to the action in question and not
less than 20 days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
(f) No fractional shares of Common Stock shall be issued upon the exercise
of this Warrant, but, instead of any fraction of a share which would otherwise
be issuable, the Company shall pay a cash adjustment (which may be effected as a
reduction of the amount to be paid by the holder hereof upon such exercise) in
respect of such fraction in an amount equal to the same fraction of the Market
Price per share of Common Stock as of the close of business on the date of the
notice required by paragraph l above. "Market Price" shall mean, if the Common
Stock is traded on a securities exchange or on the NASDAQ National Market
System, the average of the closing prices of the Common Stock on such exchange
or the NASDAQ National Market System on the 20 trading days ending on the
trading day prior to the date of determination, or, if the Common Stock is
otherwise traded in the over-the-counter market, the average of the closing bid
prices on the 20 trading days ending on the trading day prior to the date of
determination. If at any time the Common Stock is not traded on an exchange or
the NASDAQ National Market System, or otherwise traded in the over-the-counter
market, the Market Price shall be deemed to be the higher of (i) the book value
thereof as determined by any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company as of the
last day of any month ending within 60 days preceding the date as of which the
determination is to be made, or (ii) the fair value thereof determined in good
faith by the Board of Directors of the Company as of a date which is within 15
days of the date as of which the determination is to be made.
-5-
<PAGE>
6. This Warrant shall not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and
opinion by the Company, such holder shall be entitled to transfer this Warrant,
or to exercise this Warrant in accordance with its terms and dispose of the
shares received upon such exercise or to dispose of shares of Common Stock
received upon the previous exercise of this Warrant, all in accordance with the
terms of the notice delivered by such holder to the Company, provided that an
appropriate legend respecting the aforesaid restrictions on transfer and
disposition may be endorsed on this Warrant or the certificates for such shares.
8. Subject to the provisions of paragraph 7 hereof, this Warrant and all
rights hereunder are transferable, in whole or in part, at the principal office
of the Company by the holder hereof in person or by duly authorized attorney,
upon surrender of this Warrant properly endorsed. Each taker and holder of this
Warrant, by taking or holding the same, consents and agrees that the bearer of
this Warrant, when endorsed, may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented by this Warrant, or to
the transfer hereof on the books of the Company, any notice to the contrary
notwithstanding; but until such transfer on such books, the Company may treat
the registered holder hereof as the owner for all purposes.
9. This Warrant is exchangeable, upon the surrender hereof by the holder
hereof at the principal office of the Company, for new Warrants of like tenor
representing in the aggregate the right to subscribe for and purchase the number
of shares which may be subscribed for and purchased hereunder, each of such new
Warrants to represent the right to subscribe for and purchase such number of
shares as shall be designated by said holder hereof at the time of such
surrender.
10. The holder of the Warrant shall have the registration rights set forth
in Section 12 of that certain Stock Purchase Agreement dated as of September 2,
1997, by and among the Purchasers and BUCA, Inc.
-6-
<PAGE>
11. All questions concerning this Warrant will be governed and interpreted
and enforced in accordance with the internal law, not the law of conflicts, of
the State of Minnesota.
IN WITNESS WHEREOF, BUCA, Inc. has caused this Warrant to be signed by its
duly authorized officer and this Warrant to be dated as of October 31, 1997.
BUCA, Inc.
By /s/ Greg A. Gadel
---------------------------------------------
Its CFO
----------------------------------------------
RESTRICTION ON TRANSFER
"The securities evidenced hereby may not be transferred without (i)
the opinion of counsel satisfactory to this corporation that such transfer may
be lawfully made without registration under the Federal Securities Act of 1933
and all applicable state securities laws or (ii) such registration."
-7-
<PAGE>
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: BUCA, Inc. (the "Company")
The undersigned ___________________________________
Please insert Social Security or other
identifying number of Subscriber:
___________________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ___________ shares of the Preferred
Stock (the "Preferred Stock") provided for therein and tenders payment herewith
to the order of the Company in the amount of $___________, such payment being
made as provided on the face of this Warrant.
The undersigned
requests that certificates for such shares of Preferred Stock be issued as
follows:
Name:___________________________________________________________________________
Address:________________________________________________________________________
Deliver to:_____________________________________________________________________
Address:________________________________________________________________________
and, if such number of shares of Preferred Stock shall not be all the shares of
Preferred Stock purchasable hereunder, that a new Warrant for the balance
remaining of the shares of Preferred Stock purchasable under this Warrant be
registered in the name of, and delivered to, the undersigned at the address
stated above.
Dated:
Signature ________________________________________
Note: The signature on this Subscription
Form must correspond with the name as
written upon the face of this Warrant in
every particular, without alteration or
enlargement or any change whatever.
-8-
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto this Warrant, and appoints to transfer this Warrant on the books of the
Company with the full power of substitution in the premises.
Dated:
In the presence of:
__________________________________________________
(Signature must conform in all respects to the
name of the holder as specified on the face of
this Warrant without alteration, enlargement or
any change whatsoever, and the signature must be
guaranteed in the usual manner)
-9-
<PAGE>
EXHIBIT 10.13
STOCK PURCHASE WARRANT
----------------------
On October 31, 1997, BUCA, Inc. issued the attached Stock Purchase
Warrant to SIRROM CAPITAL CORPORATION. The following Schedule sets forth the
material details in which another substantially identical Stock Purchase
Warrant, issued to the Holder named in the following Schedule, differs from the
attached copy.
SCHEDULE OF DIFFERENCES BETWEEN ATTACHED COPY AND SUBSTANTIALLY IDENTICAL COPIES
DETAILS OF SUBSTANTIALLY
DESCRIPTION DETAILS OF ATTACHED COPY IDENTICAL COPY
- ----------- ------------------------ --------------------------
NAME OF HOLDER: SIRROM CAPITAL CORPORATION REGENT CAPITAL PARTNERS,
L.P.
TYPE OF ENTITY: a Tennessee corporation a Delaware limited
partnership
LOAN AMOUNT : Two Million and no/100ths Five Hundred Thousand and
Dollars ($2,000,000) no/100ths Dollars ($500,000)
AMOUNT OF STOCK: 96,666 24,167
AMOUNT OF STOCK 1.27% 0.32%
PERCENTAGE:
ADDRESS OF HOLDER: Sirrom Capital Corporation Regent Capital Partners, L.P.
Suite 200 505 Park Avenue, Suite 1700
500 Church Street New York, New York 10022
Nashville, TN 37219 Attention: J. Oliver Maggard
Attention: John Dyslin Telecopy No. 212/735-9908
Telecopy No. 615/726-1208
SIGNATURE: /s/ John Dyslin Regent Capital Holdings II,
L.P. its General Partner
By: Regent Capital Holdings,
Inc. its General Partner
By: /s/ J. Oliver Maggard
By: J. Oliver Maggard
TITLE: VP Managing Director
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES
ACTS AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
STOCK PURCHASE WARRANT
----------------------
This Warrant is issued this 31st day of October, 1997, by BUCA, INC., a
Minnesota corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a
Tennessee corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM CAPITAL
-------------------------
CORPORATION making a loan to the Company in an amount of Two Million and
no/100ths Dollars ($2,000,000) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related loan agreement of even date
herewith (the "Loan Agreement"), and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 96,666 shares of the Company's common
stock (the "Common Stock"), which the Company represents to equal 1.27% of the
shares of capital stock outstanding on the date hereof, calculated on a fully
diluted basis and assuming exercise of this Warrant and the other warrants
granted the date hereof under the Loan Agreement (all such warrants, including
this Warrant, are sometimes hereinafter referred to as the "Aggregate
Warrants.") The shares of Common Stock issuable upon exercise of this Warrant
are hereinafter referred to as the "Shares." This Warrant shall be exercisable
at any time and from time to time from the date hereof until September 30, 2002.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share for
--------------
which all or any of the Shares may be purchased pursuant to the terms of this
Warrant shall be One Cent ($.01).
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but only
--------
on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 1422 W. Lake Street, Suite 220, Minneapolis,
MN 55408 or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The Exercise
Price shall be payable, at the option of the Holder, (i) by certified or bank
check, (ii) by the surrender of the Note or portion thereof
<PAGE>
having an outstanding principal balance equal to the aggregate Exercise Price or
(iii) by the surrender of a portion of this Warrant where the Shares subject to
the portion of this Warrant that is surrendered have a fair market value equal
to the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, but
subject to the provisions of Section 4 hereof, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares and provided that this
Warrant has not expired, the Holder shall be entitled to receive a new Warrant
covering the number of Shares in respect of which this Warrant shall not have
been exercised, which new Warrant shall in all other respects be identical to
this Warrant. The Company covenants and agrees that it will pay when due any and
all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under the
Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). The Holder represents and warrants that
this Warrant has been acquired for investment purposes and not with a view
to distribution or resale and the Holder understands that it may not be
sold or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Caldwell &
Caldwell, P.C. is acceptable counsel). Furthermore, the Holder represents
and warrants that it is an "accredited investor," as defined in Regulation
D of the Securities Act. Transfer of the Shares issued upon the exercise
of this Warrant shall be restricted in the same manner and to the same
extent as the Warrant and the certificates representing such Shares shall
bear substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW
AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION STATEMENT
UNDER THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL
HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION
UNDER SUCH SECURITIES ACTS AND SUCH APPLICABLE STATE
SECURITIES LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH
PROPOSED TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of
-2-
<PAGE>
this Warrant and any shares of Common Stock issued upon exercise hereof with
applicable federal and state securities laws; provided, however, that in no
event shall the Company be required to register any securities related to this
Warrant under the federal or any state securities laws, except as provided in
Section 10 hereof.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment therefor,
be legally and validly issued and outstanding, fully paid and nonassessable,
free from all taxes, liens, charges and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
(c) If the Company sells any shares of the Company's Common Stock at a
price per share below the fair market value of such shares, without the prior
written consent of the Holder hereof, then the number of Shares issuable upon
exercise of this Warrant shall be equal to the product obtained by multiplying
the number of Shares issuable pursuant to this Warrant prior to such sale by the
quotient obtained by dividing (i) the fair market value of the shares issued by
(ii) the price at which such shares were sold. In the absence of an established
public market for the shares of stock sold by the Company, fair market value
shall be established by the Company's board of directors in a commercially
reasonable manner. The basis for determination shall be provided in writing to
the Holder hereof. Notwithstanding the foregoing, there shall be no adjustment
to the number of shares issuable upon exercise of this Warrant with respect to
issuances of Shares of Common Stock to (i) restaurant managers (provided that
the amount of Common Stock issued with respect to any single restaurant shall
not exceed in value $20,000), (ii) the issuance of Shares of Common Stock upon
exercise of options or warrants heretofore granted by the Company in accordance
with their terms or the conversion of any preferred stock of the Company (the
Preferred Stock") outstanding on the date hereof in accordance with the terms
thereof, (iii) any future grants of options, rights or warrants to purchase
Common Stock or any securities convertible into or exchangeable for such Common
Stock provided that the exercise or conversion price established on the date of
issuance is equal to or greater than the fair market value of the Common Stock
of the Company as of such date and (iv) the issuance of options required in
accordance with the terms of the employment agreement between the Company and
Joseph P. Micatrotto, as in effect on the date hereof.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the Warrant to the Company with written instructions
for such transfer. Upon such presentation for transfer, the Company shall
promptly execute and deliver a new Warrant or Warrants in the form hereof in the
name of the assignee or assignees and in the denominations specified in such
instructions. The Company shall pay all expenses incurred by it in connection
with the preparation, issuance and delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
------------------------------------------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the
-3-
<PAGE>
Company should offer to all of the Company's shareholders the right to purchase
any securities of the Company, then all shares of Common Stock that are subject
to this Warrant shall be deemed to be outstanding and owned by the Holder and
the Holder shall be entitled to participate in such rights offering. Except for
contractual preemptive rights granted from time to time to additional holders of
any shares of Preferred Stock of the Company (and provided such rights are
substantially similar to the rights granted to the existing holders of the
Company's existing Preferred Stock as set forth in the Stock Purchase Agreement
dated as of September 2, 1997 among the Company and such holders (the "Stock
Purchase Agreement")), the Company shall not grant any preemptive rights with
respect to any of its capital stock without the prior written consent of the
Holder.
7. OBSERVATION RIGHTS. So long as Sirrom Capital Corporation, or any of its
------------------
affiliates, holds Shares and/or Warrants exercisable for Shares that in the
aggregate equal or exceed in amount to at least 75% of the Shares issuable under
this Warrant as of the original issuance date of this Warrant, Sirrom Capital
Corporation shall receive notice of and be entitled to attend or may send a
representative to attend all meetings of the Company's Board of Directors in a
non-voting observation capacity and shall receive a copy of all correspondence
and information delivered to the Company's Board of Directors, from the date
hereof until such time as the indebtedness evidenced by the Note has been paid
in full.
8. ADJUSTMENT UPON CHANGES IN STOCK.
---------------------------------
(a) If all or any portion of this Warrant shall be exercised subsequent to
any stock split, stock dividend, recapitalization, combination of shares of the
Company, or other similar event affecting the Common Stock, including any
securities convertible into or exchangeable for Common Stock, occurring after
the date hereof, then the Holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such Holder would have received if this Warrant had been exercised
immediately prior to such stock split, stock dividend, recapitalization,
combination of shares, or other similar event. If any adjustment under this
Section 8(a), would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares subject to this Warrant shall be the next
higher number of shares, rounding all fractions upward. Whenever there shall be
an adjustment pursuant to this Section 8(a), the Company shall forthwith notify
the Holder or Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated.
(b) If all or any portion of this Warrant shall be exercised subsequent to
any merger, consolidation, exchange of shares, separation, reorganization or
liquidation of the Company, or other similar event, occurring after the date
hereof, as a result of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class or classes of
securities of the Company or another entity, or the holders of Common Stock are
entitled to receive cash or other property, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise, the
aggregate number and class of shares, cash or other property which such Holder
would have received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization
-4-
<PAGE>
or liquidation, or other similar event. If any adjustment under this Section
8(b) would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an adjustment
pursuant to this Section 8(b), the Company shall forthwith notify the Holder or
Holders of this Warrant of such adjustment, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated.
9. PUT AGREEMENT.
--------------
(a) The Company hereby irrevocably grants and issues to Holder the right and
option to sell to the Company (the "Put") this Warrant for a period of 30 days
immediately prior to the expiration thereof, at a purchase price (the "Purchase
Price") equal to the Fair Market Value (as hereinafter defined) of the shares of
Common Stock issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified or cashier's
check, the Purchase Price in exchange for the delivery to the Company of this
Warrant within fifteen (15) days after Fair Market Value has been determined in
accordance with Section 9(c) below.
(c) The Fair Market Value of the shares of Common Stock of the Company
issuable pursuant to this Warrant shall be determined as follows:
(i) After receipt of written notice from the Holder of its intent
to exercise the Put, which notice must be received by the Company prior to
the expiration of the thirty (30) day Put period set forth in Section 9(a)
above (the "Put Notice"), the board of directors of the Company will
initially determine the Fair Market Value in good faith (the "Preliminary
Board Determination") and deliver to the Holder within fifteen (15) days
after the expiration of the Put period, a written notice stating such value
and, in reasonable detail, its basis for the determination thereof (the
"Board Notice"). The Company will give the Holder access to the Company's
records, employees, officers and directors to enable such Holder to
understand and assess the Preliminary Board Determination. If, within
fifteen (15) days after delivery of the Board Notice, those holders
representing a majority of the Shares issuable under the Aggregate Warrants
(the "Majority Holders") who have exercised their Put rights deliver a
notice to the Company stating a disagreement with such Preliminary Board
Determination, then the Majority Holders and the Company's directors will
use reasonable efforts to determine the Fair Market Value, including by
meeting at a mutually agreeable time and location to discuss the
determination thereof, within thirty (30) days of delivery of the Board
Notice. If such parties are unable to agree on the Fair Market Value within
ten (10) days after the first of any such meetings, the Company and the
Majority Holders will jointly select a nationally-recognized investment
banking firm (the "Selected Firm") within ten (10) days thereafter. The
Selected Firm will then independently determine the Fair Market Value
within thirty (30) days from the date of selection, which determination
will be binding upon the Company and all Holders exercising their Put
rights. The expenses of determining the Fair Market Value pursuant to this
Section 9 will be borne one-half by
-5-
<PAGE>
the Company and one-half by the Holders. The Selected Firm shall determine
the value of the shares of Common Stock which would be issued upon the
exercise of the Warrant, assuming that the sale would be between a willing
buyer and a willing seller, both of whom have full knowledge of the
financial and other affairs of the Company, and neither of whom is under
any compulsion to sell or to b uy.
(d) Notwithstanding the foregoing, the put rights of the Holder under this
Section 9 shall terminate prior to expiration of the Warrant at the time the
Company completes a Qualified Public Offering. "Qualified Public Offering"
shall mean public offering by the Company of shares of Common Stock of the
Company registered under the Securities Act of 1933, as amended, in which the
aggregate public offering price of the securities sold for cash by the Company
in the offering is at least $15,000,000 and the offering is underwritten on a
firm commitment basis by an underwriter, or a group of underwriters represented
by an underwriter or underwriters, which is a member of the New York Stock
Exchange.
10. REGISTRATION.
-------------
(a) The Company agrees that if at any time after the date hereof the
Company shall determine to proceed with the preparation and filing of a
registration statement under the Securities Act with respect to any of its
Common Stock on a form suitable for a secondary offering, it will give notice in
writing to such effect to the registered holder(s) of any Shares at least thirty
(30) days prior to such filing, and, at the written request of any such
registered holder, made within ten (10) days after the receipt of such notice,
will, except as herein provided, include therein such of the Shares as such
holder(s) shall request; provided, however, that nothing herein shall prevent
the Company from, at any time, abandoning or delaying any given registration
initiated by it. If the offering being registered by the Company is
underwritten and if the representative of the underwriters certifies in writing
that the inclusion therein of the Shares would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
of Common Stock offered by the Company, then the Company shall be required to
include in the offering only that number of securities, including the Shares,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering with Holder's Shares being cut back first.
(b) Whenever the Company undertakes to effect the registration of any of
the Shares, the Company shall, as expeditiously as reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement covering such Shares and use its
best efforts to cause such registration statement to be declared effective
by the Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when all Shares
covered by the registration statement have been sold or (B) two hundred
seventy (270) days from the effective date of the registration statement;
provided, that before filing a registration statement or prospectus or any
amendment or supplements thereto, the Company will furnish to each Holder
of Shares covered by such registration statement and the underwriters, if
any, copies of all such documents proposed
-6-
<PAGE>
to be filed (excluding exhibits, unless any such person shall specifically
request exhibits), which documents will be subject to the review of such
Holders and underwriters, and the Company will not file such registration
statement or any amendment thereto or any prospectus or any supplement
thereto (including any documents incorporated by reference therein) with
the Commission if (A) the underwriters, if any, shall reasonably object to
such filing or (B) if information in such registration statement or
prospectus concerning a particular selling Holder has changed and such
Holder or the underwriters, if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and post-
effective amendments to such registration statement as may be necessary to
keep such registration statement effective during the period referred to in
Section 10(b)(i) and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement, and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed with the
Commission pursuant to Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of such
registration statement, each amendment thereto, the prospectus included in
such registration statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may reasonably request
in order to facilitate the disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such other
securities laws of such jurisdictions as shall be reasonably requested by
any selling Holder in writing within twenty (20) days following the
original filing of the registration statement and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by such
Holder, in such jurisdictions; provided, however, that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to transact business or to file a general consent to service of
process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of such
Shares, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact necessary to make the statements therein not
misleading.
(vi) Provide a transfer agent and registrar for all such Shares not
later than the effective date of such registration statement.
(vii) Make available for inspection by any selling Holder or any
underwriter participating in any disposition pursuant to such registration
statement and any attorney,
-7-
<PAGE>
accountant or other agent retained by any such selling Holder or
underwriter, all financial and other records, pertinent corporate documents
and properties of the Company, and cause the officers, directors, employees
and independent accountants of the Company to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant
or agent in connection with such registration statement.
(viii) Promptly notify the selling Holder(s) and the underwriters, if
any, of the following events and (if requested by any such person) confirm
such notification in writing: (A) the filing of the prospectus or any
prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration
statement or any post-effective amendment thereto, the declaration of the
effectiveness of such documents, (B) any requests by the Commission for
amendments or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of issuance by
the Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) the receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any proceeding
for such purposes.
(ix) Make every reasonable effort to prevent the entry of any order
suspending the effectiveness of the registration statement and to obtain
the withdrawal of any such order, if entered.
(x) Provide a CUSIP number for all the Shares not later than the
effective date of the registration statement.
(xi) At each closing of an underwritten offering: (A) use its best
efforts to obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders and the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters by underwriters in connection with primary underwritten offerings;
(B) deliver such documents and certificates as may be reasonably requested
(1) by the holders of a majority of the Shares being sold, and (2) by the
underwriters, if any, to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by
the Company; and (C) obtain opinions of counsel to the Company and updates
thereof (which counsel and which opinions shall be reasonably satisfactory
to the underwriters, if any), covering the matters customarily covered in
opinions requested in underwritten offerings and such other matters as may
be reasonably requested by the selling Holders and underwriters or their
counsel. Such counsel shall also state that no facts have come to the
attention of such counsel which cause them to believe that such
registration statement, the prospectus contained therein, or any amendment
or supplement thereto, as of their respective effective or issue dates,
contains any untrue statement of any material fact or omits to state any
material fact necessary to make the statements therein not misleading
(except that no statement need be made with respect to any financial
statements, notes thereto or other financial data or other expertized
material contained therein). If for any reason the Company's counsel is
-8-
<PAGE>
unable to give such opinion, the Company shall so notify the Holders of the
Shares and shall use its best efforts to remove expeditiously all
impediments to the rendering of such opinion.
(xii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days
after the end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any fiscal quarter in
which the Shares are sold to underwriters in a firm or best efforts
underwritten offering, or (B) if not sold to underwriters in such an
offering, beginning with the first month of the first fiscal quarter of the
Company commencing after the effective date of the registration statement,
which statements shall cover such twelve-month periods.
(c) Except for registration rights granted from time to time to additional
holders of any shares of Preferred Stock of the Company (and provided such
rights are substantially similar to the rights granted to the existing holders
of the Company's Preferred Stock as set forth in the Stock Purchase Agreement),
after the date hereof, the Company shall not grant to any holder of securities
of the Company any registration rights which have a priority greater than or
equal to those granted to Holders pursuant to this Warrant without the prior
written consent of the Holder(s) unless such registration rights are granted to
Holder.
(d) The Company's obligations under Section 10(a) above with respect to
each holder of Shares are expressly conditioned upon such holder's furnishing to
the Company in writing such information concerning such holder and the terms of
such holder's proposed offering as the Company shall reasonably request for
inclusion in the registration statement. If any registration statement
including any of the Shares is filed, then the Company shall indemnify each
holder thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act) from any
loss, claim, damage or liability arising out of, based upon or in any way
relating to any untrue statement of a material fact contained in such
registration statement or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except for any such statement or omission based on information furnished in
writing by such holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company (and each of
its officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning of
the Securities Act, each underwriter for the Company and each person, if any,
who controls such underwriter within the meaning of the Securities Act) and each
other such holder against any loss, claim, damage or liability arising from any
such statement or omission which was made in reliance upon information furnished
in writing to the Company by such holder of the Shares expressly for use in
connection with such registration statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed to
be issued and outstanding.
-9-
<PAGE>
(f) With respect to each inclusion of Shares in a registration statement
pursuant to this Section 10, the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
Company expenses, all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, and the premiums
and other costs of policies and insurance against liability (if any) arising out
of such public offering. Fees and disbursements of counsel and accountants for
the selling holders, underwriting discounts and commissions and transfer taxes
relating to the Shares included in the offering by the selling holders, and any
other expenses incurred by the selling holders not expressly included above,
shall be borne by the selling holders.
(g) Each Holder hereby agrees that it will not, to the extent required by
the Company or any underwriter of securities of the Company, sell or otherwise
transfer or dispose of any Shares, except Shares included in such registration,
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act.
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
---------------
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or make
any special dividend or other distribution to the holders of its Common Stock;
(c) offer for subscription to the holders of any of its Common Stock any
additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or substantially
all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
then, in any one or more of said cases, the Company shall give to the Holder of
the Warrant, by certified or registered mail, (i) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend,
-10-
<PAGE>
distribution or subscription rights, the date on which the holders of Common
Stock shall be entitled thereto, and any notice required by clause (ii) shall
specify the date on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be.
12. RIGHTS OF CO-SALE.
------------------
(a) Co-Sale Right. Except for sales made to the Company or to the Founders
-------------
or Purchasers (as each term is defined in the Shareholder's Agreement dated as
of October 23, 1996, as amended, among the Company and certain shareholder
thereof (the "Shareholder Agreement")), none of Philip A. Roberts, Peter J.
Mihajlov, Don W. Hays, Joseph P. Micatrotto, or Barbara Marshall (each a
"Management Shareholder") shall enter into any transaction that would result in
the sale by him or her of any Common Stock now or hereafter owned by him or her,
unless prior to such sale such Management Shareholder shall give notice to
Holder of his or her intention to effect such sale in order that Holder may
exercise its rights under this Section 12 as hereinafter described. Such notice
shall set forth (i) the number of shares to be sold by such Management
Shareholder, (ii) the principal terms of the sale, including the price at which
the shares are intended to be sold, and (iii) an offer by such Management
Shareholder to use his or her best efforts to cause to be included with the
shares to be sold by it in the sale, on the pro rata basis set forth below, and
on the same terms and conditions, the Shares issuable or issued to Holder
pursuant to this Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such offer in
--------------------------
writing within a period of ten (10) days from the date of receipt of the notice,
then such Management Shareholder shall thereafter be free for a period of ninety
(90) days to sell the number of shares specified in such notice, at a price no
greater than the price set forth in such notice and on otherwise no more
favorable terms, to such Management Shareholder than as set forth in such
notice, without any further obligation to Holder in connection with such sale.
In the event that such Management Shareholder fails to consummate such sale
within such ninety-day period, the shares specified in such notice shall
continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in writing
---------------------------
within ten (10) day period, such acceptance shall be irrevocable unless such
Management Shareholder shall be unable to cause to be included in his sale the
number of Shares of stock held by Holder and set forth in the written
acceptance. In that event, such Holder shall be entitled to sell an amount of
shares in connection with such sale equal to the product of (A) a fraction, the
numerator of which is the number of shares issuable or issued to Holder pursuant
to this Warrant and the denominator of which is the total number of outstanding
shares of all classes of capital stock of the Company then held by the Holder
and the Management Shareholder (assuming for purposes hereof full conversion of
any convertible securities and full exercise of any options, warrants or rights
to acquire shares of any class of capital stock of the Company held by the
Holder and the Management Shareholder), times (B) the number of shares to be
sold by the Management Shareholder less that number of shares to be sold by the
Purchasers in connection therewith under Section 2 of the Shareholders
Agreement.
-11-
<PAGE>
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and section
----------------------------
headings are for convenience only and shall not be construed as amplifying or
limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
------
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: John Dyslin
Telecopy No. 615/726-1208
with a copy to: Caldwell & Caldwell
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Maria-Lisa Caldwell, Esq.
Telecopy No. 615/256-9958
The Address of Company is: Buca, Inc.
1422 W. Lake Street, Suite 220
Minneapolis, MN 55408
Attention: Greg Gadel
with a copy to: Faegre & Benson
2200 Norwest Center
90 South 7th Street
Minneapolis, MN 55402
Attention: Rich Ersted
15. SEVERABILITY. If any provisions(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
-12-
<PAGE>
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
----------------
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. JURISDICTION AND VENUE. The Company hereby consents to the
----------------------
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
20. EQUITY PARTICIPATION. This Warrant is issued in connection with the
--------------------
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. (S)47-24-101, et seq. and that equity
------
participation be permitted under said statutes and not constitute interest on
the Note. If under any circumstances whatsoever, fulfillment of any obligation
of this Warrant, the Loan Agreement, or any other agreement or document executed
in connection with the Loan Agreement, shall violate the lawful limit of any
applicable usury statue or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled shall be
reduced to such lawful limit, such that in no event shall there occur, under
this Warrant, the Loan Agreement, or any other document or instrument executed
in connection with the Loan Agreement, any violation of such lawful limit, but
such obligation shall be fulfilled to the lawful limit. If any sum is collected
in excess of the lawful limit, such excess shall be applied to reduce the
principal amount of the Note.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
COMPANY: BUCA, INC.,
-------
a Minnesota corporation
By: /s/ Greg A. Gadel
-----------------------------
Title: CFO
----------------------
HOLDER: SIRROM CAPITAL CORPORATION,
------
a Tennessee corporation
By: /s/ John Dyslin
-----------------------------
Title: VP
---------------------
IN WITNESS WHEREOF, the parties hereto have executed or caused this Warrant
to be executed as of the date first above written for the purpose of agreeing to
the terms and conditions of Section 12 hereof.
MANAGEMENT
----------
SHAREHOLDERS:
------------
/s/ Don W. Hays
--------------------------------
Don W. Hays
/s/ Barbara Marshall
--------------------------------
Barbara Marshall
/s/ Joseph P. Micatrotto
--------------------------------
Joseph P. Micatrotto
/s/ Peter J. Mihajlov
--------------------------------
Peter J. Mihajlov
/s/ Philip A. Roberts
--------------------------------
Philip A. Roberts
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<PAGE>
EXHIBIT 10.14
STOCK PURCHASE WARRANT
----------------------
On May 19, 1998, BUCA, Inc. issued the attached Stock Purchase Warrant to
SIRROM CAPITAL CORPORATION. The following Schedule sets forth the material
details in which another substantially identical Stock Purchase Warrant, issued
to the Holder named in the following Schedule, differs from the attached copy.
SCHEDULE OF DIFFERENCES BETWEEN ATTACHED COPY AND SUBSTANTIALLY IDENTICAL COPIES
<TABLE>
<CAPTION>
DETAILS OF SUBSTANTIALLY
DESCRIPTION DETAILS OF ATTACHED COPY IDENTICAL COPY
- ----------- ------------------------ ------------------------
<S> <C> <C>
NAME OF HOLDER: SIRROM CAPITAL REGENT CAPITAL
CORPORATION PARTNERS, L.P.
TYPE OF ENTITY: a Tennessee corporation a Delaware limited partnership
LOAN AMOUNT : Two Million and no/100ths One Million Five Hundred
Dollars ($2,000,000) Thousand and no/100ths
Dollars ($1,500,000)
BASE AMOUNT: 96,666 72,501
BASE AMOUNT PERCENTAGE: 1.7% 1.3%
INCREASED BASE AMOUNT: 145,000 108,750
INCREASED BASE AMOUNT 2.6% 1.9%
PERCENTAGE:
ADDRESS OF HOLDER: Sirrom Capital Corporation Regent Capital Partners, L.P.
Suite 200 505 Park Avenue, Suite 1700
500 Church Street New York, New York 10022
Nashville, TN 37219 Attention: J. Oliver Maggard
Attention: John Dyslin Telecopy No. 212/735-9908
Telecopy No. 615/726-1208
SIGNATURE: /s/ John Dyslin Regent Capital Holdings II,
L.P. its General Partner
By: Regent Capital Holdings,
Inc. its General Partner
By: /s/ J. Oliver Maggard
By: J. Oliver Maggard
TITLE: VP Managing Director
</TABLE>
<PAGE>
THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR ANY APPLICABLE STATE SECURITIES LAW AND MAY NOT BE TRANSFERRED
UNTIL (I) A REGISTRATION STATEMENT UNDER THE ACT AND SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER SUCH SECURITIES
ACTS AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
STOCK PURCHASE WARRANT
----------------------
This Warrant is issued this 19th day of May, 1998, by BUCA, INC., a
Minnesota corporation (the "Company"), to SIRROM CAPITAL CORPORATION, a
Tennessee corporation (SIRROM CAPITAL CORPORATION and any subsequent assignee or
transferee hereof are hereinafter referred to collectively as "Holder" or
"Holders").
AGREEMENT:
1. ISSUANCE OF WARRANT; TERM. For and in consideration of SIRROM CAPITAL
-------------------------
CORPORATION making a loan to the Company in an amount of Two Million and
no/100ths Dollars ($2,000,000) pursuant to the terms of a secured promissory
note of even date herewith (the "Note") and related First Amendment to Loan
Agreement and Loan Documents of even date herewith (the "First Amendment", which
together with that Loan and Security Agreement dated October 31, 1997 is herein
referred to as the "Loan Agreement"), and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Company hereby
grants to Holder the right to purchase 96,666 shares (the "Base Amount") of the
Company's common stock (the "Common Stock"), which the Company represents to
equal 1.7% of the shares of capital stock outstanding on the date hereof,
calculated on a fully diluted basis and assuming exercise of this Warrant and
the other warrants granted the date hereof and on October 31, 1997 under the
Loan Agreement (all such warrants, including this Warrant, are sometimes
hereinafter referred to as the "Aggregate Warrants.") The shares of Common
Stock issuable upon exercise of this Warrant are hereinafter referred to as the
"Shares." This Warrant shall be exercisable at any time and from time to time
from the date hereof until June 30, 2003. In the event that the Company does
not either (i) achieve Operating Income (as defined below) of at least $1.00 for
the nine month period ended December 31, 1998, or (ii) raise equity capital in
an amount not less than $2.5 million by December 31, 1998, then the Base Amount
shall be increased to 145,000 shares, which the Company represents to equal 2.6%
of the shares of capital stock outstanding on the date hereof calculated on a
fully diluted basis and assuming exercise of the Aggregate Warrants. For the
purposes of this Warrant, Operating Income shall be defined as the operating
income of the Company and its subsidiaries, determined on a consolidated basis
and in accordance with generally accepted accounting principles.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") per share
--------------
for which all or any of the Shares may be purchased pursuant to the terms of
this Warrant shall be One Cent ($.01).
<PAGE>
3. EXERCISE. This Warrant may be exercised by the Holder hereof (but
--------
only on the conditions hereinafter set forth) as to all or any increment or
increments of One Hundred (100) Shares (or the balance of the Shares if less
than such number), upon delivery of written notice of intent to exercise to the
Company at the following address: 1422 W. Lake Street, Suite 220, Minneapolis,
MN 55408 or such other address as the Company shall designate in a written
notice to the Holder hereof, together with this Warrant and payment to the
Company of the aggregate Exercise Price of the Shares so purchased. The Exercise
Price shall be payable, at the option of the Holder, (i) by certified or bank
check, (ii) by the surrender of the Note or portion thereof having an
outstanding principal balance equal to the aggregate Exercise Price or (iii) by
the surrender of a portion of this Warrant where the Shares subject to the
portion of this Warrant that is surrendered have a fair market value equal to
the aggregate Exercise Price. Upon exercise of this Warrant as aforesaid, but
subject to the provisions of Section 4 hereof, the Company shall as promptly as
practicable, and in any event within fifteen (15) days thereafter, execute and
deliver to the Holder of this Warrant a certificate or certificates for the
total number of whole Shares for which this Warrant is being exercised in such
names and denominations as are requested by such Holder. If this Warrant shall
be exercised with respect to less than all of the Shares and provided that this
Warrant has not expired, the Holder shall be entitled to receive a new Warrant
covering the number of Shares in respect of which this Warrant shall not have
been exercised, which new Warrant shall in all other respects be identical to
this Warrant. The Company covenants and agrees that it will pay when due any and
all state and federal issue taxes which may be payable in respect of the
issuance of this Warrant or the issuance of any Shares upon exercise of this
Warrant.
4. COVENANTS AND CONDITIONS. The above provisions are subject to the
------------------------
following:
(a) Neither this Warrant nor the Shares have been registered under
the Securities Act of 1933, as amended ("Securities Act") or any state
securities laws ("Blue Sky Laws"). The Holder represents and warrants that
this Warrant has been acquired for investment purposes and not with a view
to distribution or resale and the Holder understands that it may not be
sold or otherwise transferred without (i) an effective registration
statement for such Warrant under the Securities Act and such applicable
Blue Sky Laws, or (ii) an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to the Company and its counsel, that
registration is not required under the Securities Act or under any
applicable Blue Sky Laws (the Company hereby acknowledges that Caldwell &
Caldwell, P.C. is acceptable counsel). Furthermore, the Holder represents
and warrants that it is an "accredited investor," as defined in Regulation
D of the Securities Act. Transfer of the Shares issued upon the exercise of
this Warrant shall be restricted in the same manner and to the same extent
as the Warrant and the certificates representing such Shares shall bear
substantially the following legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE SECURITIES
LAW AND MAY NOT BE TRANSFERRED UNTIL (I) A REGISTRATION
STATEMENT UNDER
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<PAGE>
THE ACT AND SUCH APPLICABLE STATE SECURITIES LAWS SHALL HAVE
BECOME EFFECTIVE WITH REGARD THERETO, OR (II) IN THE OPINION
OF COUNSEL ACCEPTABLE TO THE COMPANY, REGISTRATION UNDER
SUCH SECURITIES ACTS AND SUCH APPLICABLE STATE SECURITIES
LAWS IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED
TRANSFER.
The Holder hereof and the Company agree to execute such other documents and
instruments as counsel for the Company reasonably deems necessary to effect the
compliance of the issuance of this Warrant and any shares of Common Stock issued
upon exercise hereof with applicable federal and state securities laws;
provided, however, that in no event shall the Company be required to register
any securities related to this Warrant under the federal or any state securities
laws, except as provided in Section 10 hereof.
(b) The Company covenants and agrees that all Shares which may be
issued upon exercise of this Warrant will, upon issuance and payment therefor,
be legally and validly issued and outstanding, fully paid and nonassessable,
free from all taxes, liens, charges and preemptive rights, if any, with respect
thereto or to the issuance thereof. The Company shall at all times reserve and
keep available for issuance upon the exercise of this Warrant such number of
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of this Warrant.
(c) If the Company sells any shares of the Company's Common Stock at a
price per share below the fair market value of such shares, without the prior
written consent of the Holder hereof, then the number of Shares issuable upon
exercise of this Warrant shall be equal to the product obtained by multiplying
the number of Shares issuable pursuant to this Warrant prior to such sale by the
quotient obtained by dividing (i) the fair market value of the shares issued by
(ii) the price at which such shares were sold. In the absence of an established
public market for the shares of stock sold by the Company, fair market value
shall be established by the Company's board of directors in a commercially
reasonable manner. The basis for determination shall be provided in writing to
the Holder hereof. Notwithstanding the foregoing, there shall be no adjustment
to the number of shares issuable upon exercise of this Warrant with respect to
issuances of Shares of Common Stock to (i) restaurant managers (provided that
the amount of Common Stock issued with respect to any single restaurant shall
not exceed in value $20,000), (ii) the issuance of Shares of Common Stock upon
exercise of options or warrants heretofore granted by the Company in accordance
with their terms or the conversion of any preferred stock of the Company (the
Preferred Stock") outstanding on the date hereof in accordance with the terms
thereof, (iii) any future grants of options, rights or warrants to purchase
Common Stock or any securities convertible into or exchangeable for such Common
Stock provided that the exercise or conversion price established on the date of
issuance is equal to or greater than the fair market value of the Common Stock
of the Company as of such date and (iv) the issuance of options required in
accordance with the terms of the employment agreement between the Company and
Joseph P. Micatrotto, as in effect on the date hereof.
5. TRANSFER OF WARRANT. Subject to the provisions of Section 4 hereof,
-------------------
this Warrant may be transferred, in whole or in part, to any person or business
entity, by presentation of the
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<PAGE>
Warrant to the Company with written instructions for such transfer. Upon such
presentation for transfer, the Company shall promptly execute and deliver a new
Warrant or Warrants in the form hereof in the name of the assignee or assignees
and in the denominations specified in such instructions. The Company shall pay
all expenses incurred by it in connection with the preparation, issuance and
delivery of Warrants under this Section.
6. WARRANT HOLDER NOT SHAREHOLDER; RIGHTS OFFERING; PREEMPTIVE RIGHTS.
------------------------------------------------------------------
Except as otherwise provided herein, this Warrant does not confer upon the
Holder, as such, any right whatsoever as a shareholder of the Company.
Notwithstanding the foregoing, if the Company should offer to all of the
Company's shareholders the right to purchase any securities of the Company, then
all shares of Common Stock that are subject to this Warrant shall be deemed to
be outstanding and owned by the Holder and the Holder shall be entitled to
participate in such rights offering. Except for contractual preemptive rights
granted from time to time to additional holders of any shares of Preferred Stock
of the Company (and provided such rights are substantially similar to the rights
granted to the existing holders of the Company's existing Preferred Stock as set
forth in the Stock Purchase Agreement dated as of September 2, 1997 among the
Company and such holders (the "Stock Purchase Agreement")), the Company shall
not grant any preemptive rights with respect to any of its capital stock without
the prior written consent of the Holder.
7. OBSERVATION RIGHTS. So long as Sirrom Capital Corporation, or any of
------------------
its affiliates, holds Shares and/or Warrants exercisable for Shares that in the
aggregate equal or exceed in amount to at least 75% of the aggregate Shares
issuable under this Warrant and other Aggregate Warrants held by the Holder as
of the original issuance dates of such Warrants, Sirrom Capital Corporation
shall receive notice of and be entitled to attend or may send a representative
to attend all meetings of the Company's Board of Directors in a non-voting
observation capacity and shall receive a copy of all correspondence and
information delivered to the Company's Board of Directors, from the date hereof
until such time as the indebtedness evidenced by the Note has been paid in full.
8. ADJUSTMENT UPON CHANGES IN STOCK.
---------------------------------
(a) If all or any portion of this Warrant shall be exercised subsequent to
any stock split, stock dividend, recapitalization, combination of shares of the
Company, or other similar event affecting the Common Stock, including any
securities convertible into or exchangeable for Common Stock, occurring after
the date hereof, then the Holder exercising this Warrant shall receive, for the
aggregate price paid upon such exercise, the aggregate number and class of
shares which such Holder would have received if this Warrant had been exercised
immediately prior to such stock split, stock dividend, recapitalization,
combination of shares, or other similar event. If any adjustment under this
Section 8(a), would create a fractional share of Common Stock or a right to
acquire a fractional share of Common Stock, such fractional share shall be
disregarded and the number of shares subject to this Warrant shall be the next
higher number of shares, rounding all fractions upward. Whenever there shall be
an adjustment pursuant to this Section 8(a), the Company shall forthwith notify
the Holder or Holders of this Warrant of such adjustment, setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated.
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<PAGE>
(b) If all or any portion of this Warrant shall be exercised subsequent to
any merger, consolidation, exchange of shares, separation, reorganization or
liquidation of the Company, or other similar event, occurring after the date
hereof, as a result of which shares of Common Stock shall be changed into the
same or a different number of shares of the same or another class or classes of
securities of the Company or another entity, or the holders of Common Stock are
entitled to receive cash or other property, then the Holder exercising this
Warrant shall receive, for the aggregate price paid upon such exercise, the
aggregate number and class of shares, cash or other property which such Holder
would have received if this Warrant had been exercised immediately prior to such
merger, consolidation, exchange of shares, separation, reorganization or
liquidation, or other similar event. If any adjustment under this Section 8(b)
would create a fractional share of Common Stock or a right to acquire a
fractional share of Common Stock, such fractional share shall be disregarded and
the number of shares subject to this Warrant shall be the next higher number of
shares, rounding all fractions upward. Whenever there shall be an adjustment
pursuant to this Section 8(b), the Company shall forthwith notify the Holder or
Holders of this Warrant of such adjustment, setting forth in reasonable detail
the event requiring the adjustment and the method by which such adjustment was
calculated.
9. PUT AGREEMENT.
--------------
(a) The Company hereby irrevocably grants and issues to Holder the right
and option to sell to the Company (the "Put") this Warrant for a period of 30
days immediately prior to the expiration thereof, at a purchase price (the
"Purchase Price") equal to the Fair Market Value (as hereinafter defined) of the
shares of Common Stock issuable to Holder upon exercise of this Warrant.
(b) The Company shall pay to the Holder, in cash or certified or cashier's
check, the Purchase Price in exchange for the delivery to the Company of this
Warrant within fifteen (15) days after Fair Market Value has been determined in
accordance with Section 9(c) below.
(c) The Fair Market Value of the shares of Common Stock of the Company
issuable pursuant to this Warrant shall be determined as follows:
(i) After receipt of written notice from the Holder of its intent to
exercise the Put, which notice must be received by the Company prior to the
expiration of the thirty (30) day Put period set forth in Section 9(a)
above (the "Put Notice"), the board of directors of the Company will
initially determine the Fair Market Value in good faith (the "Preliminary
Board Determination") and deliver to the Holder within fifteen (15) days
after the expiration of the Put period, a written notice stating such value
and, in reasonable detail, its basis for the determination thereof (the
"Board Notice"). The Company will give the Holder access to the Company's
records, employees, officers and directors to enable such Holder to
understand and assess the Preliminary Board Determination. If, within
fifteen (15) days after delivery of the Board Notice, those holders
representing a majority of the Shares issuable under the Aggregate Warrants
(the "Majority Holders") who have exercised their Put rights deliver a
notice to the Company stating a disagreement with such Preliminary Board
Determination, then the Majority
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<PAGE>
Holders and the Company's directors will use reasonable efforts to
determine the Fair Market Value, including by meeting at a mutually
agreeable time and location to discuss the determination thereof, within
thirty (30) days of delivery of the Board Notice. If such parties are
unable to agree on the Fair Market Value within ten (10) days after the
first of any such meetings, the Company and the Majority Holders will
jointly select a nationally-recognized investment banking firm (the
"Selected Firm") within ten (10) days thereafter. The Selected Firm will
then independently determine the Fair Market Value within thirty (30) days
from the date of selection, which determination will be binding upon the
Company and all Holders exercising their Put rights. The expenses of
determining the Fair Market Value pursuant to this Section 9 will be borne
one-half by the Company and one-half by the Holders. The Selected Firm
shall determine the value of the shares of Common Stock which would be
issued upon the exercise of the Warrant, assuming that the sale would be
between a willing buyer and a willing seller, both of whom have full
knowledge of the financial and other affairs of the Company, and neither of
whom is under any compulsion to sell or to buy.
(d) Notwithstanding the foregoing, the put rights of the Holder under this
Section 9 shall terminate prior to expiration of the Warrant at the time
the Company completes a Qualified Public Offering. "Qualified Public
Offering" shall mean public offering by the Company of shares of Common
Stock of the Company registered under the Securities Act of 1933, as
amended, in which the aggregate public offering price of the securities
sold for cash by the Company in the offering is at least $15,000,000 and
the offering is underwritten on a firm commitment basis by an underwriter,
or a group of underwriters represented by an underwriter or underwriters,
which is a member of the New York Stock Exchange.
10. REGISTRATION.
-------------
(a) The Company agrees that if at any time after the date hereof the
Company shall determine to proceed with the preparation and filing of a
registration statement under the Securities Act with respect to any of its
Common Stock on a form suitable for a secondary offering, it will give notice in
writing to such effect to the registered holder(s) of any Shares at least thirty
(30) days prior to such filing, and, at the written request of any such
registered holder, made within ten (10) days after the receipt of such notice,
will, except as herein provided, include therein such of the Shares as such
holder(s) shall request; provided, however, that nothing herein shall prevent
the Company from, at any time, abandoning or delaying any given registration
initiated by it. If the offering being registered by the Company is
underwritten and if the representative of the underwriters certifies in writing
that the inclusion therein of the Shares would reduce the number of shares to be
offered by the Company or interfere with the successful marketing of the shares
of Common Stock offered by the Company, then the Company shall be required to
include in the offering only that number of securities, including the Shares,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering with Holder's Shares being cut back first.
(b) Whenever the Company undertakes to effect the registration of any of
the Shares, the Company shall, as expeditiously as reasonably possible:
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<PAGE>
(i) Prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement covering such Shares and use
its best efforts to cause such registration statement to be declared
effective by the Commission as expeditiously as possible and to keep such
registration effective until the earlier of (A) the date when all Shares
covered by the registration statement have been sold or (B) two hundred
seventy (270) days from the effective date of the registration statement;
provided, that before filing a registration statement or prospectus or any
amendment or supplements thereto, the Company will furnish to each Holder
of Shares covered by such registration statement and the underwriters, if
any, copies of all such documents proposed to be filed (excluding exhibits,
unless any such person shall specifically request exhibits), which
documents will be subject to the review of such Holders and underwriters,
and the Company will not file such registration statement or any amendment
thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing or (B) if
information in such registration statement or prospectus concerning a
particular selling Holder has changed and such Holder or the underwriters,
if any, shall reasonably object.
(ii) Prepare and file with the Commission such amendments and post-
effective amendments to such registration statement as may be necessary to
keep such registration statement effective during the period referred to in
Section 10(b)(i) and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement, and cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed with the
Commission pursuant to Rule 424 under the Securities Act.
(iii) Furnish to the selling Holder(s) such numbers of copies of such
registration statement, each amendment thereto, the prospectus included in
such registration statement (including each preliminary prospectus), each
supplement thereto and such other documents as they may reasonably request
in order to facilitate the disposition of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such other
securities laws of such jurisdictions as shall be reasonably requested by
any selling Holder in writing within twenty (20) days following the
original filing of the registration statement and do any and all other acts
and things which may be reasonably necessary or advisable to enable such
selling Holder to consummate the disposition of the Shares owned by such
Holder, in such jurisdictions; provided, however, that the Company shall
not be required in connection therewith or as a condition thereto to
qualify to transact business or to file a general consent to service of
process in any such states or jurisdictions.
(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading and, at the request
of any such Holder, the Company will prepare a
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<PAGE>
supplement or amendment to such prospectus so that, as thereafter delivered
to the purchasers of such Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading.
(vi) Provide a transfer agent and registrar for all such Shares not
later than the effective date of such registration statement.
(vii) Make available for inspection by any selling Holder or any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
selling Holder or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the officers,
directors, employees and independent accountants of the Company to supply
all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration
statement.
(viii) Promptly notify the selling Holder(s) and the underwriters, if
any, of the following events and (if requested by any such person) confirm
such notification in writing: (A) the filing of the prospectus or any
prospectus supplement and the registration statement and any amendment or
post-effective amendment thereto and, with respect to the registration
statement or any post-effective amendment thereto, the declaration of the
effectiveness of such documents, (B) any requests by the Commission for
amendments or supplements to the registration statement or the prospectus
or for additional information, (C) the issuance or threat of issuance by
the Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that
purpose and (D) the receipt by the Company of any notification with respect
to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation or threat of initiation of any proceeding
for such purposes.
(ix) Make every reasonable effort to prevent the entry of any order
suspending the effectiveness of the registration statement and to obtain
the withdrawal of any such order, if entered.
(x) Provide a CUSIP number for all the Shares not later than the
effective date of the registration statement.
(xi) At each closing of an underwritten offering: (A) use its best
efforts to obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants addressed to the selling
Holders and the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters by underwriters in connection with primary underwritten offerings;
(B) deliver such documents and certificates as may be reasonably requested
(1) by the holders of a majority of the Shares being sold, and (2) by the
underwriters, if any, to evidence compliance with any customary conditions
contained in the underwriting agreement or other agreement entered into by
the Company; and (C) obtain opinions of counsel to the Company and updates
thereof (which counsel and which opinions shall be
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<PAGE>
reasonably satisfactory to the underwriters, if any), covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by the selling Holders
and underwriters or their counsel. Such counsel shall also state that no
facts have come to the attention of such counsel which cause them to
believe that such registration statement, the prospectus contained therein,
or any amendment or supplement thereto, as of their respective effective or
issue dates, contains any untrue statement of any material fact or omits to
state any material fact necessary to make the statements therein not
misleading (except that no statement need be made with respect to any
financial statements, notes thereto or other financial data or other
expertized material contained therein). If for any reason the Company's
counsel is unable to give such opinion, the Company shall so notify the
Holders of the Shares and shall use its best efforts to remove
expeditiously all impediments to the rendering of such opinion.
(xii) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act, no later than forty-five (45) days
after the end of any twelve-month period (or ninety (90) days, if such
period is a fiscal year) (A) commencing at the end of any fiscal quarter in
which the Shares are sold to underwriters in a firm or best efforts
underwritten offering, or (B) if not sold to underwriters in such an
offering, beginning with the first month of the first fiscal quarter of the
Company commencing after the effective date of the registration statement,
which statements shall cover such twelve-month periods.
(c) Except for registration rights granted from time to time to additional
holders of any shares of Preferred Stock of the Company (and provided such
rights are substantially similar to the rights granted to the existing holders
of the Company's Preferred Stock as set forth in the Stock Purchase Agreement),
after the date hereof, the Company shall not grant to any holder of securities
of the Company any registration rights which have a priority greater than or
equal to those granted to Holders pursuant to this Warrant without the prior
written consent of the Holder(s) unless such registration rights are granted to
Holder.
(d) The Company's obligations under Section 10(a) above with respect to
each holder of Shares are expressly conditioned upon such holder's furnishing to
the Company in writing such information concerning such holder and the terms of
such holder's proposed offering as the Company shall reasonably request for
inclusion in the registration statement. If any registration statement
including any of the Shares is filed, then the Company shall indemnify each
holder thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act) from any
loss, claim, damage or liability arising out of, based upon or in any way
relating to any untrue statement of a material fact contained in such
registration statement or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except for any such statement or omission based on information furnished in
writing by such holder of the Shares expressly for use in connection with such
registration statement; and such holder shall indemnify the Company (and each of
its officers and directors who has signed such registration statement, each
director, each person, if any, who controls the Company within the meaning of
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<PAGE>
the Securities Act, each underwriter for the Company and each person, if any,
who controls such underwriter within the meaning of the Securities Act) and each
other such holder against any loss, claim, damage or liability arising from any
such statement or omission which was made in reliance upon information furnished
in writing to the Company by such holder of the Shares expressly for use in
connection with such registration statement.
(e) For purposes of this Section 10, all of the Shares shall be deemed to
be issued and outstanding.
(f) With respect to each inclusion of Shares in a registration statement
pursuant to this Section 10, the Company shall bear the following fees, costs
and expenses: all registration, filing and NASD fees, printing expenses, fees
and disbursements of counsel and accountants for the Company, fees and
disbursements of counsel for the underwriter or underwriters of such securities
(if the Company is required to bear such fees and disbursements), all internal
Company expenses, all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, and the premiums
and other costs of policies and insurance against liability (if any) arising out
of such public offering. Fees and disbursements of counsel and accountants for
the selling holders, underwriting discounts and commissions and transfer taxes
relating to the Shares included in the offering by the selling holders, and any
other expenses incurred by the selling holders not expressly included above,
shall be borne by the selling holders.
(g) Each Holder hereby agrees that it will not, to the extent required by
the Company or any underwriter of securities of the Company, sell or otherwise
transfer or dispose of any Shares, except Shares included in such registration,
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Securities Act.
11. CERTAIN NOTICES. In case at any time the Company shall propose to:
---------------
(a) declare any cash dividend upon its Common Stock;
(b) declare any dividend upon its Common Stock payable in stock or make
any special dividend or other distribution to the holders of its Common Stock;
(c) offer for subscription to the holders of any of its Common Stock any
additional shares of stock in any class or other rights;
(d) reorganize, or reclassify the capital stock of the Company, or
consolidate, merge or otherwise combine with, or sell of all or substantially
all of its assets to, another corporation;
(e) voluntarily or involuntarily dissolve, liquidate or wind up of the
affairs of the Company; or
(f) redeem or purchase any shares of its capital stock or securities
convertible into its capital stock;
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<PAGE>
then, in any one or more of said cases, the Company shall give to the Holder of
the Warrant, by certified or registered mail, (i) at least twenty (20) days'
prior written notice of the date on which the books of the Company shall close
or a record shall be taken for such dividend, distribution or subscription
rights or for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, and (ii) in the case of such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place. Any notice required by clause (i) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto, and any notice required by
clause (ii) shall specify the date on which the holders of Common Stock shall be
entitled to exchange their Common Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation or winding up, as the case may be.
12. RIGHTS OF CO-SALE.
------------------
(a) Co-Sale Right. Except for sales made to the Company or to the
-------------
Founders or Purchasers (as each term is defined in the Shareholder's Agreement
dated as of October 23, 1996, as amended, among the Company and certain
shareholder thereof (the "Shareholder Agreement")), none of Philip A. Roberts,
Peter J. Mihajlov, Don W. Hays, Joseph P. Micatrotto, or Barbara Marshall (each
a "Management Shareholder") shall enter into any transaction that would result
in the sale by him or her of any Common Stock now or hereafter owned by him or
her, unless prior to such sale such Management Shareholder shall give notice to
Holder of his or her intention to effect such sale in order that Holder may
exercise its rights under this Section 12 as hereinafter described. Such notice
shall set forth (i) the number of shares to be sold by such Management
Shareholder, (ii) the principal terms of the sale, including the price at which
the shares are intended to be sold, and (iii) an offer by such Management
Shareholder to use his or her best efforts to cause to be included with the
shares to be sold by it in the sale, on the pro rata basis set forth below, and
on the same terms and conditions, the Shares issuable or issued to Holder
pursuant to this Warrant.
(b) Rejection of Co-Sale Offer. If Holder has not accepted such offer in
--------------------------
writing within a period of ten (10) days from the date of receipt of the notice,
then such Management Shareholder shall thereafter be free for a period of ninety
(90) days to sell the number of shares specified in such notice, at a price no
greater than the price set forth in such notice and on otherwise no more
favorable terms, to such Management Shareholder than as set forth in such
notice, without any further obligation to Holder in connection with such sale.
In the event that such Management Shareholder fails to consummate such sale
within such ninety-day period, the shares specified in such notice shall
continue to be subject to this Section.
(c) Acceptance of Co-Sale Offer. If Holder accepts such offer in writing
---------------------------
within ten (10) day period, such acceptance shall be irrevocable unless such
Management Shareholder shall be unable to cause to be included in his sale the
number of Shares of stock held by Holder and set forth in the written
acceptance. In that event, such Holder shall be entitled to sell an amount of
shares in connection with such sale equal to the product of (A) a fraction, the
numerator of
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<PAGE>
which is the number of shares issuable or issued to Holder pursuant to this
Warrant and the denominator of which is the total number of outstanding shares
of all classes of capital stock of the Company then held by the Holder and the
Management Shareholder (assuming for purposes hereof full conversion of any
convertible securities and full exercise of any options, warrants or rights to
acquire shares of any class of capital stock of the Company held by the Holder
and the Management Shareholder), times (B) the number of shares to be sold by
the Management Shareholder less that number of shares to be sold by the
Purchasers in connection therewith under Section 2 of the Shareholders
Agreement.
13. ARTICLE AND SECTION HEADINGS. Numbered and titled article and section
----------------------------
headings are for convenience only and shall not be construed as amplifying or
limiting any of the provisions of this Warrant.
14. NOTICE. Any and all notices, elections or demands permitted or
------
required to be made under this Warrant shall be in writing, signed by the party
giving such notice, election or demand and shall be delivered personally,
telecopied, telexed, or sent by certified mail or overnight via nationally
recognized courier service (such as Federal Express), to the other party at the
address set forth below, or at such other address as may be supplied in writing
and of which receipt has been acknowledged in writing. The date of personal
delivery or telecopy or two (2) business days after the date of mailing (or the
next business day after delivery to such courier service), as the case may be,
shall be the date of such notice, election or demand. For the purposes of this
Warrant:
The Address of Holder is: Sirrom Capital Corporation
Suite 200
500 Church Street
Nashville, TN 37219
Attention: John Dyslin
Telecopy No. 615/726-1208
with a copy to: Caldwell & Caldwell
Suite 200
500 Church Street
Nashville, TN 37219
Attention: Maria-Lisa Caldwell, Esq.
Telecopy No. 615/256-9958
The Address of Company is: Buca, Inc.
1422 W. Lake Street, Suite 220
Minneapolis, MN 55408
Attention: Greg Gadel
with a copy to: Faegre & Benson
2200 Norwest Center
90 South 7th Street
Minneapolis, MN 55402
Attention: Rich Ersted
-12-
<PAGE>
15. SEVERABILITY. If any provisions(s) of this Warrant or the application
------------
thereof to any person or circumstances shall be invalid or unenforceable to any
extent, the remainder of this Warrant and the application of such provisions to
other persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
16. ENTIRE AGREEMENT. This Warrant between the Company and Holder
----------------
represents the entire agreement between the parties concerning the subject
matter hereof, and all oral discussions and prior agreement are merged herein.
17. GOVERNING LAW AND AMENDMENTS. This Warrant shall be construed and
----------------------------
enforced under the laws of the State of Tennessee applicable to contracts to be
wholly performed in such State. No amendment or modification hereof shall be
effective except in a writing executed by each of the parties hereto.
18. COUNTERPARTS. This Warrant may be executed in any number of
------------
counterparts and be different parties to this Warrant in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same Warrant.
19. JURISDICTION AND VENUE. The Company hereby consents to the
----------------------
jurisdiction of the courts of the State of Tennessee and the United States
District Court for the Middle District of Tennessee, as well as to the
jurisdiction of all courts from which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations arising under this Agreement or with respect to the transactions
contemplated hereby, and expressly waives any and all objections it may have as
to venue in any of such courts.
20. EQUITY PARTICIPATION. This Warrant is issued in connection with the
--------------------
Loan Agreement. It is intended that this Warrant constitute an equity
participation under and pursuant to T.C.A. (S)47-24-101, et seq. and that equity
------
participation be permitted under said statutes and not constitute interest on
the Note. If under any circumstances whatsoever, fulfillment of any obligation
of this Warrant, the Loan Agreement, or any other agreement or document executed
in connection with the Loan Agreement, shall violate the lawful limit of any
applicable usury statue or any other applicable law with regard to obligations
of like character and amount, then the obligation to be fulfilled shall be
reduced to such lawful limit, such that in no event shall there occur, under
this Warrant, the Loan Agreement, or any other document or instrument executed
in connection with the Loan Agreement, any violation of such lawful limit, but
such obligation shall be fulfilled to the lawful limit. If any sum is collected
in excess of the lawful limit, such excess shall be applied to reduce the
principal amount of the Note.
21. AMENDMENT TO FIRST WARRANT. The Stock Purchase Warrant dated October
--------------------------
31, 1997 issued to the Holder pursuant to Section 5.1 of the Loan Agreement (the
"First Warrant") is hereby amended as follows:
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<PAGE>
(i) The last sentence of Section 1 of the First Warrant is amended
to read as follows:
"This Warrant shall be exercisable at any time and from time to time
from the date hereof until November 30, 2002";
(ii) the term "Aggregate Warrants" as used in the First Warrants is
amended to mean the First Warrant, this Warrant and the other warrants
granted the date hereof and on October 31, 1997 under the Loan Agreement;
and
(iii) Section 7 of the First Warrant is deleted in its entirety.
22. APPROVAL UNDER FIRST WARRANT. For purposes of the First Warrant, the
----------------------------
Holder hereby approves (i) the issuance of the Aggregate Warrants issued the
date hereof and agrees that the issuance thereof and of shares of stock issued
upon exercise or exchange of such Aggregate Warrants shall not cause any
increase in the number of shares issuable under the First Warrant, and (ii) the
grant of the registration rights contained in the Aggregate Warrants issued the
date hereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date
first above written.
COMPANY: BUCA, INC.,
-------
a Minnesota corporation
By: /s/ Greg A. Gadel
-------------------------
Title: CFO
------------------
HOLDER: SIRROM CAPITAL CORPORATION,
------
a Tennessee corporation
By: /s/ John Dyslin
-------------------------
Title: VP
------------------
IN WITNESS WHEREOF, the parties hereto have executed or caused this Warrant
to be executed as of the date first above written for the purpose of agreeing to
the terms and conditions of Section 12 hereof.
MANAGEMENT
----------
SHAREHOLDERS:
------------
/s/ Don W. Hays
------------------------------
Don W. Hays
/s/ Barbara Marshall
------------------------------
Barbara Marshall
/s/ Joseph P. Micatrotto
------------------------------
Joseph P. Micatrotto
/s/ Peter J. Mihajlov
------------------------------
Peter J. Mihajlov
/s/ Philip A. Roberts
------------------------------
Philip A. Roberts
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<PAGE>
EXHIBIT 10.15
BUCA, INC.
NON-STATUTORY STOCK OPTION AGREEMENT
This NON-STATUTORY STOCK OPTION AGREEMENT is dated as of June 1, 1998 by
and between BUCA, Inc., a Minnesota corporation (the "Company"), and 1204 Harmon
Partnership, a Minnesota general partnership ("Optionee").
WHEREAS, a wholly-owned subsidiary of the Company, BUCA (DT
Minneapolis), Inc., and Optionee have entered into an Amendment to the Lease
Agreement dated as of June 1, 1998 between BUCA (DT Minneapolis), Inc. ("BUCA
Mpls") and Optionee (as amended, the "Lease Agreement"); and
WHEREAS, in connection with the Amendment, the Company has agreed to
grant to Optionee a non-statutory stock option permitting the purchase of up to
24,000 shares of Common Stock of the Company, par value $.01 per share ("Common
Shares"), subject to certain vesting and other terms and conditions; and
WHEREAS, the Company and Optionee desire to enter into this Agreement to
reflect the grant of the option and such vesting and other terms and conditions.
NOW THEREFORE, the Company and Optionee mutually agree as follows:
1. Grant of Option. The Company hereby grants to Optionee the
right and option (the "Option") to purchase up to 24,000 Common Shares on the
terms and conditions hereinafter set forth. The Option is not intended by the
Company to be an "incentive stock option" for purposes of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of each of the Common
Shares subject to the Option shall be $4.50.
3. Option Period.
(a) Subject to the provisions of paragraph 5 hereof, the Option
shall become exercisable as to the respective number of shares and on the
respective initial dates of exercisability specified on the Vesting Schedule
attached as Schedule A to this Agreement. The Vesting Schedule shall be
cumulative; thus, to the extent the Option has not already been exercised and
has not expired, terminated or been canceled, Optionee may at any time, and from
time to time, purchase all or any portion of the Common Shares then purchasable
under the Vesting Schedule.
<PAGE>
(b) This Option and all rights to purchase shares hereunder shall
cease on the earliest of:
(i) May 31, 2008; or
(ii) the date (if any) fixed for cancellation pursuant
to paragraph 9 hereof.
Notwithstanding any other provision in this Agreement, in no event may this
Option be exercised, in whole or in part, after it has expired.
4. Manner of Exercising Options.
(a) Subject to the terms and conditions of this Agreement, this
Option may be exercised by mailing written notice of exercise to the Company at
its principal executive office, marked for the attention of its Secretary. The
notice shall state the election to exercise the Option and the number of Common
Shares in respect of which it is being exercised, and shall be signed by the
person exercising the Option. If the person exercising the Option is not
Optionee, such person shall also send with the notice appropriate proof of such
person's right to exercise the Option in accordance with this Agreement. Such
notice shall be accompanied by payment (by check, bank draft or money order
payable to the Company) of the full purchase price of the Common Shares being
purchased.
(b) Until the date (if any) a registration statement covering the
Common Shares issuable upon exercise of this Option has been declared effective
under applicable Federal and state securities laws, the person exercising the
Option shall include in the notice of exercise given pursuant to subparagraph
(a), and the issuance of the Common Shares will be contingent upon the receipt
of, representations by such person that (i) at the time of such exercise it is
such person's then-present intention to acquire the Common Shares for investment
and not with a view to, or for resale in connection with, any distribution
thereof; (ii) such person acknowledges that the Common Shares to be issued upon
exercise of the Option are "restricted securities" within the meaning of Rule
144 of the general Rules and Regulations of the Securities and Exchange
Commission and that there is no assurance that such Rule will apply to future
resales of the Common Shares; (iii) such person will make no sale or other
distribution that would cause such person to be deemed an "underwriter" within
the meaning of Section 2(11) of the Securities Act of 1933, as amended; and (iv)
such person will make no sale, pledge, transfer or other disposition of the
Common Shares received unless a registration statement with respect to such
Common Shares is then in effect under applicable Federal and state securities
laws or unless such person obtains an opinion of counsel satisfactory to the
Company that such disposition may be effected without violation of applicable
Federal or state securities laws. The certificates representing such Common
Shares will contain restrictive legends reflecting such restrictions.
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<PAGE>
(c) As soon as practicable after receipt of the purchase price
provided for above, the Company shall deliver to the person exercising the
Option a certificate or certificates representing the Common Shares being
purchased. The Company shall pay all original issue and transfer taxes, if any,
with respect to the issue or transfer of the Common Shares to the person
exercising the Option and all fees and expenses necessarily incurred by the
Company in connection therewith. All Common Shares so issued shall be fully paid
and nonassessable. The Optionee shall have no right to require the Company, and
the Company shall have no obligation, to register the issuance or sale of any
security acquired pursuant to the exercise of this Option under applicable
Federal or state securities laws.
5. Exercisability of Options After Termination of Lease
Agreement. No shares under this Option shall vest and become exercisable in
accordance with the Vesting Schedule if prior to such scheduled vesting date the
Lease Agreement has been terminated due to a breach or other default by Optionee
of the Lease Agreement. A termination of the Lease Agreement under the terms
provided in this Section 5 shall have no effect on the continued exercisability
of the Option with respect to any Common Shares that became exercisable prior to
the effective date of the termination of the Lease Agreement. Optionee
acknowledges that BUCA Mpls may terminate the Lease Agreement pursuant to its
terms and may otherwise deal with Optionee under the Lease Agreement without
regard to the effect it may have on Optionee under this Agreement.
6. Limitation on Transfer. Optionee shall not assign or transfer
this Agreement or Option without the prior written consent of the Company, which
consent shall not be unreasonably withheld. Any request by Optionee for such
consent shall be accompanied by a written opinion of counsel satisfactory to the
Company that such disposition may be effected without violation of applicable
Federal or state securities laws. The Options shall not be subject to pledge,
hypothecation, execution, attachment or similar process, except this Option may
be pledged in connection with a bona fide business loan. Any attempt to assign,
transfer, pledge, hypothecate or otherwise dispose of this Option (or any
portion thereof) contrary to the provisions hereof, and the levy of any
attachment or similar process upon the Option, shall be null and void.
7. Shareholder Rights Before Exercise. Optionee shall have none
of the rights of a shareholder of the Company with respect to any Common Share
subject to this Option until the Option is exercised.
8. Adjustment in Certain Circumstances. The Company's Board of
Directors shall make appropriate adjustments in the number of shares subject to
this Option and in the purchase price per share to give effect to any
distribution of assets (other than regular dividends) or debt securities to
holders of Common Shares or any change made in the number of outstanding Common
Shares of the Company through a recapitalization, reclassification, combination,
share dividend, share division, share combination or other similar change,
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<PAGE>
provided that fractional shares shall be rounded to the nearest whole share. The
Company shall give Optionee notice of any such adjustment.
9. Acceleration of Option. In the event of a proposed Fundamental
Change (as defined below), the Company may, but shall not be obligated to:
(a) if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the protection of this
Option by the substitution of options and appropriate voting common stock of the
corporation surviving any merger or consolidation or, if appropriate, the parent
corporation of the Company or such surviving corporation to be issuable upon the
exercise of this Option, in lieu of options and capital stock of the Company; or
(b) at least 30 days prior to the occurrence of the Fundamental
Change (including a merger or consolidation or statutory share exchange),
declare, and provide written notice to Optionee of the declaration, that this
Option, whether or not then exercisable, shall be canceled at the time of, or
immediately prior to the occurrence of the Fundamental Change in exchange for
payment to Optionee, within ten days after the Fundamental Change, of cash equal
to, for each share covered by the canceled Option, the amount, if any, by which
the Fair Value (as hereinafter defined in this subparagraph) per share exceeds
the exercise price per share covered by this Option. At the time of the
declaration provided for in the immediately preceding sentence, this Option
shall immediately become exercisable in full (provided, however, that if the
Lease Agreement has been terminated prior to the date of such declaration, this
Option shall remain exercisable only with respect to those shares that were
exercisable at the time of the termination of the Lease Agreement) and Optionee
shall have the right, during the period preceding the time of cancellation of
the Option, to exercise this Option as to all or any part of the shares covered
by this Option (except as provided above) in whole or in part, as the case may
be; provided, however, that if such proposed Fundamental Change does not become
effective, then the declaration pursuant to this subparagraph 9(b) shall be
rescinded, the acceleration of the exercisability of the Option pursuant to this
subparagraph 9(b) shall be void, and the Option shall be exercisable in
accordance with its original terms. In the event of a declaration pursuant to
this subparagraph 9(b), to the extent this Option has not been exercised prior
to the Fundamental Change, the unexercised part of this Option shall be canceled
at the time of, or immediately prior to, the Fundamental Change, as provided in
the declaration. Notwithstanding the foregoing, Optionee shall not be entitled
to the payment provided for in this subparagraph 9(b) if this Option shall have
expired pursuant to paragraph 3 above. For purposes of this subparagraph 9(b)
only, "Fair Value" per share means the cash plus the fair market value, as
determined in good faith by the Board of Directors of the Company, of the
non-cash consideration to be received per share by the shareholders of the
Company upon the occurrence of the Fundamental Change, notwithstanding anything
to the contrary provided in this Agreement. For purposes of this Agreement,
"Fundamental Change" shall mean a dissolution or liquidation of the Company, a
sale of substantially all of the assets of the
-4-
<PAGE>
Company, a merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving corporation, or
a statutory share exchange involving capital stock of the Company.
10. Investment Representations. Optionee acknowledges that
neither this Option nor any Common Shares issuable upon exercise hereof have
been registered under applicable Federal or state securities laws. Optionee
represents to the Company that it has acquired this Option for investment and
not with a view to distribution of this Option or the Common Shares issuable
upon exercise hereof within the meaning of the Securities Act of 1933, as
amended (the "Act") and the rules and regulations thereunder. Furthermore,
Optionee represents and warrants to the Company that as of the date hereof and
as of the date of any exercise of this Option, it is and will be an "accredited
investor" as defined in Regulation D under the Act (and has completed Schedule B
hereto identifying Optionee's accredited investor status) and that it has and
will have the knowledge, expertise and sophistication necessary to evaluate an
investment in the Company. The Optionee also represents and warrants to the
Company that it has had an opportunity to ask questions and receive answers
concerning the terms and conditions of this Agreement and concerning the risks
relating to an investment in the Company.
11. Incidental Registration.
(a) Each time the Company shall determine to proceed with the
actual preparation and filing of a registration statement under the Act in
connection with the proposed offer and sale for cash of any of its securities by
it or any of its security holders (other than the first offering by the Company
of Common Shares pursuant to a registration statement filed under the Act and
other than a registration statement on a form that does not permit the inclusion
of shares by its security holders), the Company will give written notice of its
determination to Optionee. Upon the written request of Optionee given within
twenty days after receipt of any such notice from the Company, the Company will,
except as herein provided, cause all shares of Purchased Stock (as hereinafter
defined) as to which Optionee shall have requested registration to be included
in such registration statement, all to the extent requisite to permit the sale
or other disposition by Optionee of the Purchased Stock to be so registered;
provided, however, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any such registration initiated by it. If any
registration pursuant to this Section 11 shall be underwritten in whole or in
part, the Company may require that the Purchased Stock requested for inclusion
pursuant to this Section 11 be included in the underwriting on the same terms
and conditions as the securities otherwise being sold through the underwriters.
If in the good faith judgment of the managing underwriter of such public
offering the inclusion of any or all of the Purchased Stock originally covered
by a request for registration would reduce the number of shares to be offered by
the Company, the number of shares of Purchased Stock otherwise to be included in
the underwritten public offering may be reduced pro rata (by number of shares)
among Optionee and holders of other shares proposed to be included in such
registration. Notwithstanding the foregoing, if any securities are
-5-
<PAGE>
registered by the Company pursuant to (i) that certain Stock Purchase Agreement
dated as of September 3, 1997 amount the Company and certain preferred
stockholders of the Company (as the same may be amended from time to time
hereafter), (ii) warrants to purchase Company securities outstanding as of the
date hereof, and (iii) rights granted from time to time to additional purchasers
of shares of preferred stock of the Company (all such securities included in
(i), (ii) and (iii) being referred to as "Registrable Securities"), then
Purchased Stock shall be included in such offering and registration statement
only to the extent that inclusion of the Purchased Stock will not reduce the
amount of Registrable Securities to be registered in such offering.
(b) If and whenever the Company is required by the provisions of
this Section 11 to effect the registration of shares of Purchased Stock under
the Act, the Company will:
(i) prepare and file with the Securities and Exchange Commission
(the "Commission") a registration statement with respect to such
securities, and use all reasonable efforts to cause such registration
statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to
exceed six months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained
therein as may be necessary to keep such registration statement
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed six months;
(iii) furnish to Optionee such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and
such other documents as Optionee may reasonably request in order to
facilitate the public offering of such securities;
(iv) use all reasonable efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as Optionee may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that the Company shall not
for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(v) notify Optionee promptly after it shall receive notice
thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such
registration statement has been filed;
-6-
<PAGE>
(vi) notify Optionee promptly of any request by the Commission
for the amending or supplementing of such registration statement or
prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the
request of Optionee, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for Optionee
(and concurred in by counsel for the Company), is required under the Act
or the rules and regulations thereunder in connection with the
distribution of the Purchased Stock by Optionee;
(viii) prepare and promptly file with the Commission and promptly
notify Optionee of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to
such securities is required to be delivered under the Act, any event
shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of
a material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(ix) advise Optionee, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement
or the initiation or threatening of any proceeding for that purpose and
promptly use all reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such stop order should be issued;
(x) otherwise use its best efforts to comply with all the rules
and regulations of the Commission, and make available to the security
holders, as soon as is reasonably practicable (but not more than 18
months) after the effective date of a registration statement, an
earnings statement which shall satisfy the provisions of Section 11(a)
of the Act;
(xi) make available for inspection by Optionee and its attorneys
and representatives all financial and other record sand other
information, pertinent corporate records and properties of the Company
as shall be necessary for Optionee to exercise its due diligence
responsibilities; and
(xii) at the request of Optionee, furnish: (i) an opinion, dated
as of the closing date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any,
and to the Optionee, in form and substance as is customarily given to
underwriters in an underwriter public offering; and (ii) letters dated
as of the effective date of the registration statement and as of the
closing date, from the independent certified public accountants of the
Company, addressed to the underwriters,
-7-
<PAGE>
if any, and to Optionee, in form and substance as is customarily given
to underwriters in an underwritten public offering.
(c) With respect to each inclusion of shares of Purchased Stock
in a registration statement pursuant to this Section 11 the Company shall bear
the following fees, costs and expenses: all registration, filing and NASD fees,
printing expenses, fees and disbursements of counsel and accountants for the
Company, fees and disbursements of counsel for the underwriter or underwriters
of such securities, including the fees or expenses of any "qualified independent
underwriter" pursuant to NASD rules or fees and expenses related to any "road
show" (if the Company is required to bear such fees and disbursements), all
internal Company expenses, all legal fees and disbursements and other expenses
of complying with state securities or blue sky laws of any jurisdictions in
which the securities to be offered are to be registered or qualified, the
premiums and other costs of policies of insurance against liability (if any)
arising out of such public offering. Fees and disbursements of counsel and
commissions and transfer taxes relating to the shares included in the offering
by Optionee, and any other expenses incurred by Optionee not expressly included
above, shall be borne by the Optionee; provided that if the Company provides
counsel or pays the expense of counsel for any other holder of securities
included in any such offering the Company shall seek to have such counsel also
represent the Optionee (provided that the Company shall not be required to incur
or be responsible for any additional costs, fees or expenses of such counsel
arising from its representation of the Optionee).
(d) In the event that any Purchased Stock is included in a
registration statement under this Section 11:
(i) The Company will indemnify and hold harmless Optionee, its
directors and officers, and each person, if any, who controls Optionee
or such underwriter within the meaning of the Act, from and against, and
will reimburse Optionee and each such underwriter and controlling person
with respect to, any and all loss, damage, liability, cost and expense
to which Optionee or any such underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses,
damages, liabilities, cost or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by Optionee, any other indemnified party or person
controlling the indemnified party in writing specifically for use in the
preparation thereof.
-8-
<PAGE>
(ii) Optionee will indemnify and hold harmless the Company, its
directors and officers, any controlling person and any underwriter from
and against, and will reimburse the Company, its directors and officers,
any controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue or alleged untrue statement of any
material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they
were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was so made in reliance upon and in strict
conformity with written information furnished by such holder
specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant to
the provisions of paragraph (i) or (ii) of this Section 11(d) of notice
of the commencement of any action involving the subject matter of the
foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the
provisions of said paragraph (i) or (ii), promptly notify the
indemnifying party of the commencement thereof; but the omission to so
notify the indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than hereunder. In
case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of
interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (i) or (ii) for any legal or other expense
subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless (A)
the indemnified party shall have
-9-
<PAGE>
employed counsel in accordance with the provision of the preceding
sentence, (B) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after the notice of the commencement of the
action, or (C) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying
party, but in each such case, only for reasonable cost and expenses and
only for one such counsel.
(iv) If the indemnification provided for in this Section 11(d) is
unavailable or insufficient to hold harmless an indemnified party under
subsection (i) or (ii) above, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of the losses, claims, damages or liabilities referred to in
subsection (i) or (ii) above, (A) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the
Optionee from the offering of the Purchased Stock and (B) the relative
fault of the Company and the Optionee in connection with the statements
or omissions that resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations.
Optionee shall not be required to contribute any amount in excess of the
amount received by Optionee in such offering less the amount of damages
which Optionee has otherwise been required to pay by reason of an untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation.
(e) The registration rights set forth in this Section 11 shall
cease upon the earliest of (i) the effective registration under the Act of all
of the Purchased Stock, (ii) registration under the Act is no longer required
for the immediate public distribution of all of the Purchased Stock as a result
of the provisions of Rule 144 under the Act (or any successor provision thereto
(provided that registration shall be available for any stock acquired upon
further purchases under the Option in accordance with the terms hereof), and
(iii) such Purchased Stock ceases to be outstanding.
(f) "Purchased Stock" means all shares of Common Stock of the
Company issued upon exercise of this Option, and the stock or other securities
of the Company issued in a stock split or reclassification of, or a stock
dividend or other distribution with respect to such Common Stock.
12. General. This Agreement shall be binding in all respects on
Optionee's successors and assigns. This Agreement sets forth the entire
agreement and understanding of the parties with respect to the grant and
exercise of this Option and supersedes all prior agreements, arrangements, plans
and undertakings relating to the grant and exercise of this
-10-
<PAGE>
Option. This Agreement is entered into under the laws of the State of
Minnesota and shall be construed and interpreted thereunder.
-11-
<PAGE>
IN WITNESS WHEREOF, Optionee and the Company have executed this
Agreement as of the day and year first above written.
BUCA, INC.
By /s/ Greg A. Gadel
---------------------------------------
Its CFO
------------------------------------
1204 HARMON PARTNERSHIP
By /s/ Robert O. Naegele, Jr.
---------------------------------------
Robert O. Naegele, Jr.
And /s/ Ellis Naegele
--------------------------------------
Ellis Naegele
(Constituting all partners thereof)
-12-
<PAGE>
Schedule B
----------
VESTING SCHEDULE
----------------
No. of Shares
Initial Date of As to Which Option
Exercisability Becomes Exercisable
- -------------- -------------------
May 31, 1999 3,000
May 31, 2000 3,000
May 31, 2001 3,000
May 31, 2002 3,000
May 31, 2003 3,000
May 31, 2004 3,000
May 31, 2005 3,000
May 31, 2006 3,000
<PAGE>
EXHIBIT 10.16
===============================
BUCA, INC.
===============================
STOCK PURCHASE AGREEMENT
===============================
Dated as of
September 2, 1997
<PAGE>
TABLE OF CONTENTS
1. Authorization of Securities...............................................1
2. Sale and Purchase of Securities...........................................2
3. Closing...................................................................2
4. Restriction on Transfer of Securities.....................................2
4.1 Restrictions.....................................................2
4.2 (a) Legend...................................................2
4.3 Removal of Legend................................................3
4.4 Register of Securities...........................................3
5. Representations and Warranties by Company.................................4
5.1 Organization, Standing, etc......................................4
5.2 Qualification....................................................4
5.3 Financial Statements.............................................4
5.4 Tax Returns and Audits...........................................5
5.5 Changes, Dividends, etc..........................................5
5.6 Title to Properties and Encumbrances.............................6
5.7 Litigation; Governmental Proceedings.............................6
5.8 Compliance with Applicable Laws and Other Instruments............6
5.9 Series B Preferred Shares and Conversion Stock...................7
5.10 Securities Laws..................................................7
5.11 Patents and Other Intangible Rights..............................7
5.12 Capital Stock....................................................8
5.13 Outstanding Debt.................................................9
5.14 Schedule of Assets and Contracts.................................9
5.15 Corporate Acts and Proceedings..................................11
5.16 Insurance Coverage..............................................11
5.17 No Brokers or Finders...........................................11
5.18 Conflicts of Interest...........................................11
5.19 Licenses........................................................12
5.20 Registration Rights.............................................12
5.21 Retirement Plans................................................12
5.22 Environmental and Safety Laws...................................12
5.23 Employees.......................................................13
5.24 Absence of Restrictive Agreements...............................13
5.25 Small Business Concern..........................................13
5.26 Application of Proceeds.........................................13
5.27 Disclosure......................................................14
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6. Representations and Warranties of Purchasers.............................14
6.1 Investment Intent...............................................14
6.2 Location of Principal Office and Qualification as Accredited
Investor........................................................15
6.3 Acts and Proceedings............................................15
6.4 No Brokers or Finders...........................................15
6.5 Investigation...................................................15
7. Conditions of Each Purchaser's Obligation................................15
7.1 No Errors, etc..................................................16
7.2 Compliance with Agreement.......................................16
7.3 Certificate of Officers.........................................16
7.4 Opinion of Company's Counsel....................................16
7.5 No Event of Default.............................................19
7.6 Qualification Under State Securities Laws.......................19
7.7 Proceedings and Documents.......................................19
7.8 First Amendment to Shareholder Agreements.......................19
7.9 Execution of SBA Form 480.......................................19
7.10 Execution of SBA Form 652.......................................19
8. Affirmative Covenants....................................................20
8.1 Corporate Existence.............................................20
8.2 Books of Account and Reserves...................................20
8.3 Furnishing of Financial Statements and Information..............20
8.4 Inspection......................................................22
8.5 Preparation and Approval of Budgets.............................23
8.6 Payment of Taxes and Maintenance of Properties..................23
8.7 Insurance.......................................................24
8.8 Payment of Indebtedness and Discharge of Obligations............24
8.9 Directors' and Shareholders' Meetings...........................25
8.10 Replacement of Certificates Representing Preferred Shares or
Conversion Stock................................................26
8.11 Application of Proceeds.........................................27
8.12 Retirement Plans................................................27
8.13 Filing of Reports...............................................27
8.14 Patents and Other Intangible Rights.............................27
8.15 Insurance on Lives of Key Personnel.............................28
8.16 Rights to Purchase Additional Securities........................28
8.17 Rule 144A.......................................................29
8.18 Compliance......................................................30
8.19 Net Worth.......................................................30
9. Negative Covenants.......................................................30
9.1 Dividends on or Redemption of Junior Stock......................31
ii
<PAGE>
9.2 Future Registration Rights......................................31
9.3 Other Restrictions..............................................31
10. Preferred Shares.........................................................32
10.1 Conversion of Preferred Shares..................................32
10.2 Stock Fully Paid; Reservation of Shares.........................32
10.3 Adjustment of Number of Shares and Conversion Price.............32
10.4 Mandatory Conversion of Preferred Shares........................32
11. Redemption of Preferred Shares...........................................32
12. Registration of Stock....................................................33
12.1 Required Registration...........................................33
12.2 Incidental Registration.........................................34
12.3 Registration Procedures........................................35
12.4 Expenses........................................................37
12.5 Indemnification.................................................38
13. Default..................................................................40
13.1 Events of Default...............................................40
13.2 Remedies Upon Events of Default.................................41
13.3 Notice of Defaults.............................................42
13.4 Suits for Enforcement...........................................42
13.5 Remedies Cumulative.............................................42
13.6 Remedies not Waived.............................................42
14. Termination of Certain Covenants.........................................42
15. Definitions..............................................................43
16. Consents; Waivers and Amendments.........................................45
17. Changes, Waivers, etc....................................................46
18. Payment of Fees and Expenses of Purchasers...............................46
19. Understanding Among Purchasers...........................................46
20. Notices..................................................................47
21. Survival of Representations and Warranties, etc..........................47
22. Parties in Interest......................................................47
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<PAGE>
23. Headings.................................................................47
24. Choice of Law............................................................47
25. Counterparts.............................................................48
26. 1996 Stock Purchase Agreement............................................48
Schedule A - Purchasers
Exhibit 1 - Capital Stock Provisions
Exhibit 2 - Exception Schedule
Exhibit 3 - Financial Statements
Exhibit 4 - Schedule of Assets and Contracts
Exhibit 5 - Form of First Amendment to Shareholder Agreement
iv
<PAGE>
BUCA, INC.
STOCK PURCHASE AGREEMENT
Dated as of September 2, 1997
To Each of the Persons Named in
Schedule A to this Agreement
(the "Purchasers")
Ladies and Gentlemen:
In consideration of the agreement of the Purchasers to purchase the
Series B Preferred Shares (as hereinafter defined), as provided for herein, the
undersigned BUCA, INC., a Minnesota corporation (the "Company"), hereby agrees
with each of the Purchasers as follows:
1. Authorization of Securities. The Company proposes to authorize,
issue and sell an aggregate of up to 1,922,222 series B convertible preferred
shares, to be issued pursuant to and be entitled to the benefits of the capital
stock provisions of the Articles of Incorporation of the Company, as amended
(the "Capital Stock Provisions"; the Articles of Incorporation of the Company,
as amended, shall hereinafter be referred to as the "Articles of
Incorporation"), substantially as set forth in Exhibit 1 hereto.
The term Series B Preferred Shares as used herein shall mean the series
B convertible preferred shares set forth in Schedule A hereto and all preferred
shares of the Company issued in exchange or substitution therefor. The term
Series A Preferred Shares as used herein shall mean the series A convertible
preferred shares issued by the Company pursuant to the Stock Purchase Agreement,
dated October 23, 1996, among the Company and the parties named therein (the
"1996 Stock Purchase Agreement"), and all preferred shares issued in exchange or
substitution therefor. The term Preferred Shares as used herein shall mean the
Series A Preferred Shares and the Series B Preferred Shares.
The Series B Preferred Shares shall be convertible into shares of the
Company's Common Stock (as hereinafter defined) (such shares of Common Stock
into which the Series B Preferred Shares are convertible and all shares of
Common Stock of the Company issued in exchange or substitution therefor being
hereinafter sometimes referred to as the "Conversion Stock"), initially at the
rate of one share of Conversion Stock for each Series B Preferred Share (subject
to adjustment as hereinafter provided), all as more fully set forth
1
<PAGE>
in the Capital Stock Provisions. The Series B Preferred Shares shall be subject
in all respects to all of the other provisions of the Capital Stock Provisions.
2. Sale and Purchase of Securities. Subject to the terms and conditions
hereof, the Company agrees to sell to each Purchaser, and each Purchaser agrees
to purchase from the Company, the number of Series B Preferred Shares set forth
opposite such Purchaser's name in Schedule A hereto, at the purchase price set
forth opposite such Purchaser's name in Schedule A hereto.
3. Closing. The closings of the sale to, and purchase by, the
Purchasers of the Series B Preferred Shares (the "Closings") shall occur at the
offices of Faegre & Benson LLP, 2200 Norwest Center, 90 South Seventh Street,
Minneapolis, Minnesota, at the hour of 2:30 P.M., Minneapolis time, on September
2, 1997, and December 19, 1997, or on such other days or at such other times or
places as the Purchasers and the Company shall agree upon (the "Closing Dates").
At each Closing, the Company will deliver to the Purchasers
certificates representing the Series B Preferred Shares being purchased by the
Purchasers on such Closing Date, registered in their respective names as stated
in Schedule A hereto (or in the names of their respective nominees as may be
specified to the Company at least 48 hours prior to such Closing Date), against
delivery to the Company by wire transfer in immediately available funds of the
amounts set forth after their respective names in Schedule A hereto for such
Closing Date, in payment of the total purchase price of the Series B Preferred
Shares being purchased by the Purchasers on such Closing Date.
4. Restriction on Transfer of Securities.
4.1 Restrictions. The Series B Preferred Shares and the
Conversion Stock are transferable only pursuant to (a) a public offering
registered under the Securities Act of 1933, as amended (the "Securities Act"),
(b) Rule 144 (or any similar rule then in effect) adopted under the Securities
Act, if such rule is available, and (c) subject to the conditions elsewhere
specified in this Section 4, any other legally available means of transfer.
4.2 (a) Legend. Each certificate representing Series B
Preferred Shares shall be endorsed with the following legend:
"The securities evidenced hereby may not be
transferred without (i) the opinion of counsel
satisfactory to the Company that such transfer may be
lawfully made without registration under the Federal
Securities Act of 1933 and all applicable state
securities laws or (ii) such registration."
Upon the conversion of any Series B Preferred Shares, unless the Company
receives an opinion of counsel from the holder of such a security satisfactory
to the Company to the
2
<PAGE>
effect that a sale, transfer, assignment, pledge or distribution of the
Conversion Stock issuable upon such conversion may be made without registration,
or unless such Conversion Stock is being disposed of pursuant to registration
under the Securities Act and any applicable state act, the same legend shall be
endorsed on the certificate evidencing such Conversion Stock.
The aforesaid legend shall be removed with respect to securities held
for at least two years (including, with respect to the Conversion Stock, the
period during which the related converted Series B Preferred Shares had been
held) by a person who has not been an affiliate of the Company (as defined in
Rule 144 under the Securities Act) during the three months preceding the request
for removal of such legend. The foregoing legend removal requirement is based on
Rule 144(k) under the Securities Act as currently in force, and assumes that
such Rule (or a successor thereto) in substantially its current form shall be in
effect at the time of any such request for legend removal.
(b) Stop Transfer Order. A stop transfer order shall
be placed with the Company's transfer agent preventing transfer of any of the
securities referred to in paragraph (a) above pending compliance with the
conditions set forth in any such legend (except as otherwise provided in
paragraph (a) above).
4.3 Removal of Legend. Any legend endorsed on a certificate or
instrument evidencing a security pursuant to Section 4.2 hereof shall be
removed, and the Company shall issue a certificate or instrument without such
legend to the holder of such security, (a) in accordance with Section 4.2(a)
hereof, (b) if such security is being disposed of pursuant to registration under
the Securities Act and any applicable state acts or pursuant to Rule 144 or any
similar rule then in effect, or (c) if such holder provides the Company with an
opinion of counsel satisfactory to the Company to the effect that a sale,
transfer, assignment, offer, pledge or distribution for value of such security
may be made without registration and that such legend is not required to satisfy
the applicable exemption from registration.
4.4 Register of Securities. The Company or its duly appointed
agent shall maintain a separate register for the Series B Preferred Shares in
which it shall register the issuance and transfer of all Series B Preferred
Shares. All transfers of Series B Preferred Shares shall be recorded on the
register maintained by the Company or its agent, and the Company shall be
entitled to regard the registered holder of such securities as the actual owner
of the securities so registered until the Company or its agent is required to
record a transfer of such securities on its register. The Company or its agent
shall be required to record any such transfer when it receives (a) the security
to be transferred duly and properly endorsed by the registered holder thereof or
by its attorney duly authorized in writing, and (b) the opinion of counsel
referred to in Sections 4.2 and 4.3 hereof or evidence of compliance with the
registration provisions referred to in those Sections.
3
<PAGE>
5. Representations and Warranties by Company. Except as disclosed in
Exhibit 2 hereto, the Company represents and warrants to the Purchasers that:
5.1 Organization, Standing, etc. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation, and has the requisite
corporate power and authority to own its properties and to carry on its business
in all material respects as it is now being conducted. The Company has the
requisite corporate power and authority to issue the Series B Preferred Shares
and the Conversion Stock, and to otherwise perform its obligations under this
Agreement. The copies of the Articles of Incorporation and Bylaws of the Company
delivered to the Purchasers or their agents prior to the execution of this
Agreement are true and complete copies of the duly and legally adopted Articles
of Incorporation and Bylaws of the Company in effect as of the date of this
Agreement. The Company does not have any direct or indirect equity interest in
any other firm, corporation, partnership, joint venture association or other
business organization except as set forth in Exhibit 2 hereto.
5.2 Qualification. The Company and each of its Subsidiaries is
duly qualified or licensed as a foreign corporation in good standing in each
jurisdiction wherein the nature of its activities or of its properties owned or
leased makes such qualification or licensing necessary and failure to be so
qualified or licensed would have a Material Adverse Effect (as hereinafter
defined).
5.3 Financial Statements. Attached hereto as Exhibit 3 are (a)
a consolidated balance sheet of the Company and its Subsidiaries at December 31,
1996, together with the related consolidated statements of operations,
shareholders' equity and cash flow for the fiscal year then ended, and the
report thereon of Arthur Andersen LLP, certified public accountants, and (b) an
unaudited consolidated balance sheet at June 29, 1997 (the "Balance Sheet
Date"), and the related consolidated statement of operations for the six months
then ended, prepared by the Company. Such financial statements (i) are in
accordance with the books and records of the Company and its Subsidiaries, (ii)
present fairly the financial condition of the Company and its Subsidiaries at
the balance sheet dates and the results of its operations for the periods
therein specified, and (iii) have, in all material respects, been prepared in
accordance with generally accepted accounting principles applied on a basis
consistent with prior accounting periods (except, with respect to the unaudited
financial statements, for the omission of footnotes and normal year-end
adjustments, which adjustments are not expected by the Company to be material in
the aggregate). Specifically, but not by way of limitation, the balance sheets
or notes thereto disclose all of the debts, liabilities and obligations of any
nature (whether absolute, accrued or contingent and whether due or to become
due) of the Company and its Subsidiaries at December 31, 1996 and at the Balance
Sheet Date which, individually or in the aggregate, are material and which in
accordance with generally accepted accounting principles would be required to be
disclosed in such balance sheets, and the omission of which would, in the
aggregate, have a Material Adverse Effect.
4
<PAGE>
5.4 Tax Returns and Audits. All required federal, state and
local tax returns or appropriate extension requests of the Company and each of
its Subsidiaries have been filed, and all federal, state and local taxes
required to be paid with respect to such returns have been paid or due provision
for the payment thereof has been made. Neither the Company nor any of its
Subsidiaries is delinquent in the payment of any such tax or in the payment of
any assessment or governmental charge. Neither the Company nor any of its
Subsidiaries has received notice of any tax deficiency proposed or assessed
against it, and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax. None of the Company's or any subsidiary's
tax returns has been audited by governmental authorities in a manner to bring
such audits to the Company's attention. Neither the Company nor any of its
Subsidiaries has any tax liabilities except those reflected in Exhibit 3 hereto
and those incurred in the ordinary course of business since the Balance Sheet
Date.
5.5 Changes, Dividends, etc. Except for the transactions
contemplated by this Agreement, since the Balance Sheet Date neither the Company
nor any Subsidiary has: (a) incurred any debts, obligations or liabilities,
absolute, accrued or contingent and whether due or to become due, except current
liabilities incurred in the ordinary course of business, which (individually or
in the aggregate) will have a Material Adverse Effect; (b) paid any obligation
or liability other than, or discharged or satisfied any liens or encumbrances
other than those securing, current liabilities, in each case in the ordinary
course of business; (c) declared or made any payment or distribution to its
shareholders as such, or purchased or redeemed any of its shares of capital
stock or other securities, or obligated itself to do so; (d) mortgaged, pledged
or subjected to lien, charge, security interest or other encumbrance any of its
assets, tangible or intangible, except in the ordinary course of business; (e)
sold, transferred or leased any of its assets except in the ordinary course of
business; (f) canceled or compromised any debt or claim, or waived or released
any right of material value; (g) suffered any physical damage, destruction or
loss (whether or not covered by insurance) which will have a Material Adverse
Effect; (h) entered into any transaction other than in the ordinary course of
business; (i) encountered any labor difficulties or labor union organizing
activities; (j) issued or sold any shares of capital stock or other securities
or granted any options, warrants or other purchase rights with respect thereto
other than as contemplated by this Agreement; (k) made any acquisition or
disposition of any material assets or become involved in any other material
transaction, other than for fair value in the ordinary course of business; (l)
increased the compensation payable, or to become payable, to any of its
directors or employees, or made any bonus payment or similar arrangement with
any directors or employees or increased the scope or nature of any fringe
benefits provided for its employees or directors other than increases in
compensation or benefits to employees in the ordinary course of business; or (m)
agreed to do any of the foregoing other than pursuant hereto. There has been no
material adverse change in the financial condition, operations, results of
operations or business of the Company and the Subsidiaries taken as a whole
since the Balance Sheet Date.
5
<PAGE>
5.6 Title to Properties and Encumbrances. The Company and each
of its Subsidiaries has good and marketable title to all its owned properties
and assets, including without limitation the properties and assets reflected in
Exhibit 3 hereto and the properties and assets used in the conduct of its
business, except for property disposed of in the ordinary course of business
since the Balance Sheet Date, which properties and assets are not subject to any
mortgage, pledge, lease, lien, charge, security interest, encumbrance or
restriction, except (a) those which are shown and described in Exhibit 3 hereto
or the notes thereto, and (b) Permitted Liens (as hereinafter defined). The
plant, offices and equipment owned and leased by the Company and its
Subsidiaries have been kept in good condition and repair in the ordinary course
of business, and neither the Company nor any of its Subsidiaries has been
threatened with any action or proceeding under any building or zoning ordinance,
law or regulation.
5.7 Litigation; Governmental Proceedings. There are no legal
actions, suits, arbitrations or other legal, administrative or governmental
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, their properties,
assets or business, which if determined adversely to the Company or any of its
Subsidiaries would be reasonably likely to have a Material Adverse Effect, and
the Company is not aware of any facts which are likely to result in or form the
basis for any such action, suit or other proceeding. Neither the Company nor any
of its Subsidiaries is in default with respect to any judgment, order or decree
of any court or any governmental agency or instrumentality. Neither the Company
nor any of its Subsidiaries has been threatened with any action or proceeding
under any business or zoning ordinance, law or regulation.
5.8 Compliance with Applicable Laws and Other Instruments. To
the knowledge of the Company, the business and operations of the Company and
each of its Subsidiaries have been and are being conducted in accordance with
all applicable laws, rules and regulations of all governmental authorities and
there is no other violation that would constitute a Material Adverse Effect.
Neither the execution nor delivery of, nor the performance of or compliance
with, this Agreement nor the consummation of the transactions contemplated
hereby or thereby will conflict with, or, with or without the giving of notice
or passage of time, result in any breach of, or constitute a default under, or
result in the imposition of any lien or encumbrance upon any asset or property
of the Company or any of its Subsidiaries pursuant to, any applicable law,
administrative regulation or judgment, order or decree of any court or
governmental body, any agreement or other instrument to which the Company and
its Subsidiaries or the Existing Shareholders (as hereinafter defined) is a
party or by which it or any of its properties, assets or rights is bound or
affected, and will not violate the Articles of Incorporation or Bylaws of the
Company or any of its Subsidiaries. The Company and each of its Subsidiaries is
not in violation of its Articles of Incorporation or its Bylaws nor in violation
of, or in default under, any lien, indenture, mortgage, lease, agreement,
instrument, commitment or arrangement in any material respect.
6
<PAGE>
5.9 Series B Preferred Shares and Conversion Stock. The Series
B Preferred Shares, when issued and paid for pursuant to the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof, and the shares of
Conversion Stock issuable upon conversion of the Series B Preferred Shares have
been reserved for issuance based upon the initial Conversion Price (as
hereinafter defined), and when issued upon conversion will be duly authorized,
validly issued and outstanding, fully paid, nonassessable and free and clear of
all pledges, liens, encumbrances and restrictions, except as set forth in
Section 4 hereof. The certificates representing the Series B Preferred Shares to
be delivered by the Company hereunder, and the certificates representing the
Conversion Stock to be delivered upon the conversion of the Series B Preferred
Shares, will be genuine, and the Company has no knowledge of any fact which
would impair the validity thereof.
5.10 Securities Laws. Based in part upon the representations
and warranties contained in Section 6 hereof, no consent, authorization,
approval, permit or order of or filing with any governmental or regulatory
authority is required under current laws and regulations in connection with the
execution and delivery of this Agreement or the offer, issuance, sale or
delivery of the Series B Preferred Shares or the offer of the Conversion Stock
other than the qualification thereof, if required, under applicable state
securities laws, which qualification has been or will be effected as a condition
of these sales. Under the circumstances contemplated hereby, the offer,
issuance, sale and delivery of the Series B Preferred Shares and the offer of
the Conversion Stock will not under current laws and regulations require
compliance with the prospectus delivery or registration requirements of the
Securities Act.
5.11 Patents and Other Intangible Rights. The Company and each
of its Subsidiaries (a) owns or has the exclusive rights throughout North
America to use, free and clear of all material liens, claims and restrictions,
all patents, trademarks, service marks, trade names, copyrights, licenses and
rights with respect to the foregoing, used in the conduct of its business as now
conducted, (b) is not obligated or under any liability whatsoever to make any
payments of a material nature by way of royalties, fees or otherwise to any
owner of, licensor of, or other claimant to, any patent, trademark, trade name,
copyright or other intangible asset, with respect to the use thereof or in
connection with the conduct of its business or otherwise, (c) owns or has the
unrestricted right to use all trade secrets, including know-how, inventions,
designs, processes, computer programs, recipes and technical data necessary to
the development, operation and sale of all products and services sold or
proposed to be sold by it, free and clear of any rights, liens or claims of
others, and (d) is not using any confidential information or trade secrets of
others. The Company and each of its Subsidiaries is not, nor has it received
notice with respect to, infringing upon or otherwise acting adversely to any
known right or claimed right of any person under or with respect to any patents,
trademarks, service marks, trade names, copyrights, licenses or rights with
respect to the foregoing.
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5.12 Capital Stock. The authorized capital stock of the
Company consists of 22,000,000 shares, of which 17,000,000 shares have been
designated Common Stock, 2,396,800 shares have been designated Series A
Convertible Preferred Stock, 2,100,000 shares have been designated Series B
Convertible Preferred Stock, and 503,200 shares are undesignated. Of the Common
Stock, 3,667,000 shares are issued and outstanding, and of the Series A
Convertible Preferred Stock, 2,240,000 shares are issued and outstanding. No
other shares of the Company's capital stock are outstanding. All of the
outstanding shares of capital stock of the Company were duly authorized and
validly issued and are fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
Convertible Securities (as hereinafter defined) or other agreements or
arrangements of any character or nature whatever, except as otherwise disclosed
in Exhibit 2 hereto or as contemplated by this Agreement, under which the
Company is or may be obligated to issue capital stock or other securities of any
kind representing an ownership interest or contingent ownership interest in the
Company. Neither the offer nor the issuance or sale of the Series B Preferred
Shares or the Conversion Stock constitutes an event, under any anti-dilution
provisions of any securities issued or issuable by the Company or any agreements
with respect to the issuance of securities by the Company, which will either
increase the number of shares issuable pursuant to such provisions or decrease
the consideration per share to be received by the Company pursuant to such
provisions. All of the issued and outstanding shares of capital stock of each of
the Subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable, and the Company owns of record and beneficially, free
and clear of any security interests, claims, liens, proxies, equities or other
encumbrances, all of the issued and outstanding shares of such stock. No holder
of any security of the Company is entitled to any preemptive or similar rights
to purchase securities from the Company except as otherwise contemplated by this
Agreement, provided, however, that nothing in this Section 5.12 shall affect,
alter or diminish any right granted under this Agreement. All outstanding
securities of the Company have been issued in full compliance with an exemption
or exemptions from the registration and prospectus delivery requirements of the
Securities Act and from the registration and qualification requirements of all
applicable state securities laws. The Company is not a party or subject to any
agreement or understanding, and to the knowledge of the Company, there is no
agreement or understanding between any persons or entities or by a director of
the Company, which affects or relates to the voting or giving of written
consents with respect to, or purchase of, any security of the Company.
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5.13 Outstanding Debt. The Company and each of its
Subsidiaries has no Indebtedness for Borrowed Money (as hereinafter defined)
except as otherwise set forth in Exhibit 3 hereto or the notes thereto. Neither
the Company nor any of its Subsidiaries is in default in the payment of the
principal of or interest or premium on any such Indebtedness for Borrowed Money,
and no event has occurred or is continuing under the provisions of any
instrument, document or agreement evidencing or relating to any such
Indebtedness for Borrowed Money which with the lapse of time or the giving of
notice, or both, would constitute an event of default thereunder.
5.14 Schedule of Assets and Contracts. Attached hereto as
Exhibit 4 is a Schedule of Assets and Contracts containing:
(a) Annex A: a listing of all real properties owned
by the Company and each of its Subsidiaries;
(b) Annex B: a listing of each indenture, lease,
sublease, license or other instrument under which the Company and each
of its Subsidiaries claims or holds a leasehold interest in real
property;
(c) Annex C: a listing of all written and oral
contracts, agreements, subcontracts, purchase orders, commitments and
arrangements involving payments remaining to or from the Company and
each of its Subsidiaries in excess of $100,000 and other agreements
material to the Company's business to which the Company or any of its
Subsidiaries is a party or by which it is bound, under which full
performance (including payment) has not been rendered by any party
thereto;
(d) Annex D: a listing of all collective bargaining
agreements, employment agreements, consulting agreements,
noncompetition agreements, nondisclosure agreements, executive
compensation plans, profit sharing plans, bonus plans, deferred
compensation agreements, employee pension retirement plans and employee
benefit stock option or stock purchase plans and other employee benefit
plans, entered into or adopted by the Company and each of its
Subsidiaries;
(e) Annex E: a listing of all deeds of trust,
mortgages, security agreements, pledge agreements and other agreements
or arrangements whereby any of the assets or properties of the Company
or any of its Subsidiaries are subject to any lien, encumbrance,
security interest or charge;
(f) Annex F: a listing of all leases of personal
property involving payment remaining to or from the Company or its
Subsidiaries in excess of $100,000;
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(g) Annex G: a listing of all bank accounts (or
accounts with other financial institutions) maintained by the Company
or its Subsidiaries, together with the persons authorized to make
withdrawals from such accounts;
(h) Annex H: the name of each employee of the Company
or its Subsidiaries whose annual compensation is in excess of $50,000
and the remuneration currently payable to each such employee;
(i) Annex I: the name of each shareholder of the
Company and the number of shares owned by such shareholder;
(j) Annex J: a listing of all insurance policies in
force and referred to in Section 5.16 hereof; and
(k) Annex K: a listing of all patents (including
applications therefor), royalty and license agreements, trademarks,
trade names, service marks and copyrights relating to Company products
or the products of its Subsidiaries.
Prior to the initial Closing Date, the Company shall provide
Purchasers or their legal counsel with a true and complete copy of each document
referred to above which such counsel requests to examine.
The Company has in all material respects substantially
performed all obligations required to be performed by it to date and is not in
default in any material respect under any of the contracts, agreements, leases,
documents, commitments or other arrangements to which it is a party or by which
it is otherwise bound. All instruments referred to above are in effect and
enforceable according to their respective terms (except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies), and there is not under any of such
instruments any existing material default or event of default or event which,
with notice or lapse of time or both, would constitute an event of default
thereunder. To the knowledge of the Company, all parties having material
contractual arrangements with the Company and its Subsidiaries are in
substantial compliance therewith and none are in material default in any respect
thereunder. All plans or arrangements listed pursuant to clause (d) above are
fully funded to the extent that such funding is required by generally accepted
accounting principles.
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5.15 Corporate Acts and Proceedings. This Agreement has been
duly authorized by all necessary corporate action on behalf of the Company, and
has been duly executed and delivered by authorized officers of the Company. All
corporate action necessary to the authorization, creation, issuance and delivery
of the Series B Preferred Shares and the Conversion Stock has been taken on the
part of the Company, or will be taken by the Company on or prior to the initial
Closing Date. This Agreement is a valid and binding agreement of the Company and
of the Existing Shareholders enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, moratorium,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally, and except for judicial limitations on the enforcement of the
remedy of specific enforcement and other equitable remedies.
5.16 Insurance Coverage. There are in full force policies of
insurance issued by insurers of recognized responsibility insuring the Company
and each of its Subsidiaries, their properties and businesses against such
losses and risks, and in such amounts, as in the Company's best judgment, after
advice from its insurance broker, are acceptable for the nature and extent of
its business and the Company's resources.
5.17 No Brokers or Finders. No person, firm or corporation
has or will have, as a result of any act or omission of the Company, any right,
interest or valid claim against or upon the Company or any Purchaser for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Company will indemnify and hold each Purchaser harmless against any and all
liability with respect to any such commission, fee or other compensation which
may be payable or determined to be payable in connection with the transactions
contemplated by this Agreement.
5.18 Conflicts of Interest. No officer, director or
shareholder of the Company or any affiliate (as such term is defined in Rule 405
under the Securities Act (for the purposes of this Agreement, Brand Equity
Ventures, L.P. shall be considered an affiliate of Consumer Venture Partners II,
L.P.)) (the "Affiliate") of any such person has any direct or indirect interest
(a) in any entity which does business with the Company or any of its
Subsidiaries, or (b) in any property, asset or right which is used by the
Company or any of its Subsidiaries in the conduct of its business, or (c) in any
contractual relationship with the Company or any of its Subsidiaries other than
as an employee. For the purpose of this Section 5.18, there shall be disregarded
any interest which arises solely from the ownership of less than a 1% equity
interest in a corporation whose stock is regularly traded on any national
securities exchange or in the over-the-counter market.
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5.19 Licenses. The Company and each of its Subsidiaries
possesses from the appropriate agency, commission, board and government body and
authority, whether state, local or federal, all licenses, permits,
authorizations, approvals, franchises and rights which (a) are necessary for it
to engage in the business currently conducted by it, and (b) if not possessed by
the Company or any of its Subsidiaries would have an adverse impact on the
Company's business. The Company has no knowledge that would lead it to believe
that it will not be able to obtain all licenses, permits, authorizations,
approvals, franchises and rights that may be required for any business the
Company or any of its Subsidiaries proposes to conduct.
5.20 Registration Rights. Other than under this Agreement and
the 1996 Stock Purchase Agreement, the Company has not agreed to register any of
its authorized or outstanding securities under the Securities Act.
5.21 Retirement Plans. Neither the Company nor any of its
Subsidiaries have any retirement plan in which any employees of the Company or
its Subsidiaries participate that is subject to any provisions of the Employee
Retirement Income Security Act of 1974 and of the regulations adopted pursuant
thereto ("ERISA").
5.22 Environmental and Safety Laws. To the best of its
knowledge, neither the Company nor its Subsidiaries is in violation of any
applicable statute, law or regulation relating to the environment or
occupational health and safety where such failure will have a Material Adverse
Effect, and no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation.
The operations of the Company and its Subsidiaries do not
involve any asbestos, urea-formaldehyde foamed-in-place insulation,
polyclorinated biphenyls ("PCBs") or any other hazardous substances or materials
including, but not limited to, hazardous substances or materials under the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
by the Superfund Amendments and Reauthorization Act, the Resource Conservation
and Recovery Act, the Minnesota Environmental Response and Liability Act, or any
other federal, state or local statute, regulation, code or ordinance.
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5.23 Employees. To the best of the Company's knowledge, no
officer of the Company or any of its Subsidiaries or employee of the Company or
any of its Subsidiaries whose annual compensation is in excess of $50,000 has
any plans to terminate his or her employment with the Company or any of its
Subsidiaries. The Company and its Subsidiaries have complied in all material
respects with all laws relating to the employment of labor, including provisions
relating to wages, hours, equal opportunity, collective bargaining and payment
of Social Security and other taxes, and neither the Company nor any of its
Subsidiaries has encountered any material labor difficulties. To the best of its
knowledge, neither the Company nor any of its Subsidiaries has any worker's
compensation liabilities, except those reflected in Exhibit 3 hereto and there
are no other worker's compensation liabilities that would constitute a Material
Adverse Effect.
5.24 Absence of Restrictive Agreements. To the best of the
Company's knowledge, no employee of the Company or any of its Subsidiaries is
subject to any secrecy or non-competition agreement or any agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of the Company. To the best of the Company's knowledge, no employer
or former employer of any employee of the Company or any of its Subsidiaries has
any claim of any kind whatsoever in respect of any of the rights described in
Section 5.11 hereof.
5.25 Small Business Concern. The Company is a "small business
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations thereunder, including Title 13, Code of Federal
Regulations, ss. 121.802 (the "SBIA"). The information set forth in the Small
Business Administration Forms 480, 652 and Section A of Form 1031 regarding the
Company is accurate and complete. Copies of such forms shall have been completed
and executed by the Company and delivered to each Purchaser that is a licensed
small business investment company (an "SBIC") at the Closing Date. The Company
does not presently engage in, and it shall not hereafter engage in, any
activities, and shall not use directly or indirectly the proceeds from the sale
of the Series B Preferred Shares for any purpose for which an SBIC is prohibited
from providing funds by the SBIA.
5.26 Application of Proceeds. The proceeds from the issuance
and sale of Series B Preferred Shares pursuant to this Agreement will be used
for development and construction of additional restaurants, and for general
corporate purposes. No portion of such proceeds (i) will be used to provide
capital to a corporation licensed under the SBIA, (ii) will be used outside the
United States (except (x) to acquire abroad materials and industrial property
rights for a domestic operation or (y) for transfer to a controlled foreign
subsidiary, so long as at least 51% of the assets and activities of the Company
will remain within the United States), or (iii) will be used for any purpose
contrary to the public interest
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(including but not limited to activities which are in violation of law) or
inconsistent with free competitive enterprise, in each case, within the meaning
of 13 CFR ss. 107.901. The Company's primary business activity does not involve,
directly or indirectly, providing funds to others, the purchase or discounting
of debt obligations, factoring or long-term leasing of equipment with no
provision for maintenance or repair, and the Company is not classified under
Major Group 65 (Real Estate) of the SIC Manual.
5.27 Disclosure. The Company has not knowingly withheld from
the Purchasers any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule, statement or other document
furnished or to be furnished to any Purchaser pursuant hereto or in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated herein or therein or necessary to make the statements
herein or therein not misleading.
6. Representations and Warranties of Purchasers. Each of the Purchasers
severally represents and warrants for itself that:
6.1 Investment Intent. The Series B Preferred Shares being
acquired by such Purchaser hereunder are being purchased, and the Conversion
Stock acquired by such Purchaser upon conversion of such Series B Preferred
Shares will be acquired, for such Purchaser's own account and not with the view
to, or for resale in connection with, any distribution or public offering
thereof within the meaning of the Securities Act. Such Purchaser understands
that the Series B Preferred Shares and the Conversion Stock have not been
registered under the Securities Act or any applicable state laws by reason of
their issuance or contemplated issuance in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act and such
laws, and that the reliance of the Company and others upon this exemption is
predicated in part upon this representation and warranty. Such Purchaser further
understands that the Series B Preferred Shares and Conversion Stock may not be
transferred or resold without (a) registration under the Securities Act and any
applicable state securities laws, or (b) an exemption from the requirements of
the Securities Act and applicable state securities laws.
Such Purchaser understands that an exemption from such
registration is not presently available pursuant to Rule 144 promulgated under
the Securities Act by the Securities and Exchange Commission (the "Commission")
and that in any event such Purchaser may not sell any securities pursuant to
Rule 144 prior to the expiration of a one-year period after such Purchaser has
acquired the securities. Such Purchaser understands that any sales pursuant to
Rule 144 may only be made in full compliance with the provisions of Rule 144.
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6.2 Location of Principal Office and Qualification as
Accredited Investor. The state in which such Purchaser's principal office (or
domicile, if such Purchaser is an individual) is located is set forth in such
Purchaser's address in Schedule A hereto. Unless otherwise indicated on such
Purchaser's Certification attached to this Agreement, such Purchaser qualifies
as an accredited investor within the meaning of Rule 501 under the Securities
Act for the reasons specified on such Certification. Such Purchaser has such
knowledge and experience in financial and business matters that such Purchaser
is capable of evaluating the merits and risks of the investment to be made
hereunder by such Purchaser. Such Purchaser has and has had access to all of the
Company's material books and records and access to the Company's executive
officers has been provided to such Purchaser or to such Purchaser's qualified
agents.
6.3 Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of such Purchaser, has been duly
executed and delivered by such Purchaser, and is a valid and binding agreement
upon the part of such Purchaser.
6.4 No Brokers or Finders. No person, firm or corporation has
or will have, as a result of any act or omission by such Purchaser, any right,
interest or valid claim against the Company for any commission, fee or other
compensation as a finder or broker, or in any similar capacity, in connection
with the transactions contemplated by this Agreement. Such Purchaser will
indemnify and hold the Company harmless against any and all liability with
respect to any such commission, fee or other compensation which may be payable
or determined to be payable as a result of the actions of such Purchaser in
connection with the transactions contemplated by this Agreement.
6.5 Investigation. Purchaser acknowledges that it has made its
own independent examination, investigation, analysis and evaluation of the
Company and has had an opportunity to visit with the Company and its respective
officers and other representatives to discuss the business and the assets,
liabilities, financial condition, cash flow and operations of the Company.
Furthermore, such Purchaser acknowledges that the only representations and
warranties deemed to have been made by the Company in connection with this
Agreement and the sale of the Series B Preferred Shares are those expressly
contained in Article 5 of this Agreement.
7. Conditions of Each Purchaser's Obligation. The obligation to
purchase and pay for the Series B Preferred Shares which each Purchaser has
agreed to purchase on each Closing Date is subject to the fulfillment prior to
or on such Closing Date of the following conditions. In the event that any such
condition is not satisfied to the satisfaction of each Purchaser prior to or on
such Closing Date, then no Purchaser shall be obligated to proceed with the
purchase of such Series B Preferred Shares on such Closing Date.
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7.1 No Errors, etc. The representations and warranties of the
Company under this Agreement shall be true in all material respects as of such
Closing Date with the same effect as though made on and as of such Closing Date.
7.2 Compliance with Agreement. The Company shall have
performed and complied with all agreements or conditions required by this
Agreement to be performed and complied with by it prior to or as of such Closing
Date.
7.3 Certificate of Officers. The Company shall have delivered
to the Purchasers a certificate, dated such Closing Date, executed by the Chief
Executive Officer and the senior financial officer of the Company and certifying
to the satisfaction of the conditions specified in Sections 7.1, 7.2 and 7.5
hereof.
7.4 Opinion of Company's Counsel. The Company shall have
delivered to each of the Purchasers an opinion or opinions of Faegre & Benson
LLP, counsel for the Company, dated such Closing Date, to the effect that:
(a) The Company and each of its Subsidiaries is a
duly and validly incorporated and existing corporation in good standing
under the laws of the state of its incorporation; has the corporate
power and authority to own and hold its properties owned and leased and
to carry on the business in which it is engaged and has the corporate
power and authority to enter into this Agreement, to issue and sell the
Series B Preferred Shares and the Conversion Stock as contemplated by
this Agreement, and to carry out the provisions of this Agreement; and
(b) This Agreement has been duly authorized, executed
and delivered by the Company, and is a legal, valid and binding
agreement of the Company enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws affecting the
enforcement of creditors' rights generally, and except for judicial
limitations on the enforcement of the remedy of specific performance
and other equitable remedies.
(c) The Capital Stock Provisions, substantially in
the form set forth as Exhibit 1 hereto, have been duly adopted by all
necessary corporate action, and have been duly filed with the Secretary
of State of the State of Minnesota (no other or additional filing or
recording being necessary in order to perfect the rights and privileges
of the holders of the Series B Preferred Shares contained in the
Capital Stock Provisions) as an amendment to the Company's Articles of
Incorporation.
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(d) The Series B Preferred Shares are entitled to the
rights, preferences and provisions of the Capital Stock Provisions.
(e) The Series B Preferred Shares have been duly
authorized, issued and delivered by the Company and are fully paid and
nonassessable, and the certificates for the Series B Preferred Shares
are in valid and sufficient form, and the Series B Preferred Shares are
entitled to the benefits of this Agreement applicable thereto.
(f) The Conversion Stock has been duly authorized and
reserved for issuance upon conversion of the Series B Preferred Shares
based upon the initial Conversion Price, and when issued upon such
conversion in accordance with the terms and conditions of the Series B
Preferred Shares and those of this Agreement the Conversion Stock will
be duly authorized and issued and will be fully paid and nonassessable.
(g) All corporate proceedings required by law or by
the provisions of this Agreement to be taken by the Board of Directors
and the shareholders of the Company on or prior to the Closing Date in
connection with the execution and delivery of this Agreement, the
offer, issuance and sale of the Series B Preferred Shares and the
Conversion Stock and in connection with the consummation of the
transactions contemplated by this Agreement, have been duly and validly
taken.
(h) The Company is authorized by its Articles of
Incorporation to issue 22,000,000 shares, of which 17,000,000 are
designated common shares, 2,396,800 are designated series A convertible
preferred Shares, 2,100,000 are designated series B convertible
preferred shares and 503,200 are undesignated. Except for such Series A
Preferred Shares, such common shares and the Series B Preferred Shares,
the Company has no other authorized or outstanding series or class of
capital stock, and, to the knowledge of such counsel, there are no
outstanding securities convertible into common shares of the Company or
outstanding options, warrants or other rights to acquire securities of
the Company, other than (a) the Preferred Shares, and (b) options,
warrants and Convertible Securities disclosed in Exhibit 2 to this
Agreement. To the knowledge of such counsel, there are no agreements or
understandings on the part of the Company with respect to the
registration of any securities of the Company under the Securities Act,
other than those granted under this Agreement and as otherwise
disclosed in Exhibit 2 to this Agreement, and there are no obligations
on the part of the Company to purchase or redeem any outstanding shares
of capital stock of the Company, other than as set forth in the Capital
Stock Provisions and as otherwise disclosed in Exhibit 2 to this
Agreement.
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(i) No security holder of the Company is entitled to
preemptive or, to the best of such counsel's knowledge, similar rights
to subscribe for or to purchase any shares of capital stock of the
Company except as otherwise contemplated by this Agreement, nor will
any security holder of the Company be entitled to any such rights as a
result of the execution or delivery of this Agreement or the issuance
of the Series B Preferred Shares or the Conversion Stock.
(j) Assuming the accuracy of the representations of
the Purchasers set forth in Section 6 hereof and assuming that the
limitations on the manner of offering contained in Rule 502(c) of the
Securities Act have been complied with, the Company has obtained the
approval or consent of all governmental agencies or bodies required to
be obtained by it for the legal and valid execution and delivery of
this Agreement and the legal and valid offer, issuance and sale of the
Series B Preferred Shares and the offer of the Conversion Stock to the
Purchasers through conversion by them of the Series B Preferred Shares
and for the performance of the obligations of the Company under any
provisions of this Agreement. To the best of such counsel's knowledge,
neither the Company nor any of its Subsidiaries is in violation of any
term, provision or condition of its Articles of Incorporation or
Bylaws; and the execution, delivery and performance of this Agreement
by the Company, the offer, issuance and sale of the Series B Preferred
Shares and the Conversion Stock and the consummation of the
transactions contemplated by this Agreement by the Company will not
result in any breach or violation of the terms or provisions of, or
constitute a default under, the Articles of Incorporation or the Bylaws
of the Company or its Subsidiaries or in violation of any agreement
listed on Schedule A attached to this Agreement, or any judgement,
decree or order specifically directed to the Company or any Subsidiary
listed in Exhibit 2 to this Agreement, or any statute, rule or
regulation.
(k) Assuming the accuracy of the representations of
the Purchasers set forth in Section 6 hereof and assuming that the
limitations on the manner of offering contained in Rule 502(c) of the
Securities Act have been complied with, the offer, sale, issuance and
delivery of the Series B Preferred Shares and the offer of the
Conversion Stock to the Purchasers through conversion by them of the
Series B Preferred Shares under the circumstances contemplated by the
Capital Stock Provisions and this Agreement are exempt from the
registration and prospectus delivery requirements of the Securities
Act, and all registrations, qualifications, permits and approvals
required under applicable state securities laws for the lawful offer,
sale, issuance and delivery of the Series B Preferred Shares and the
Conversion Stock have been obtained.
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(l) Such counsel have no knowledge of any litigation,
proceeding or governmental investigation pending or threatened in
writing against the Company or its Subsidiaries, its key management
employees, properties or business which, if determined adversely to the
Company or its Subsidiaries, would have a Material Adverse Effect.
7.5 No Event of Default. There shall exist at the time of such
Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or which, after notice or lapse of time or both, would
constitute an Event of Default.
7.6 Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Series B Preferred Shares and
the offer of the Conversion Stock shall have been obtained.
7.7 Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
hereby and all certificates, opinions, agreements, instruments and documents
mentioned herein or incident to any such transaction shall be satisfactory in
form and substance to the Purchasers and their special counsel.
7.8 First Amendment to Shareholder Agreements. Each of the
Purchasers and Philip A. Roberts, Peter J. Mihajlov, Don W. Hays, David Roberts
and Barbara Marshall shall have entered into a First Amendment to Shareholder
Agreement with the Purchasers substantially in the form of Exhibit 5 hereto.
7.9 Execution of SBA Form 480. Each of the Purchasers that is
an SBIC and the Company shall have executed the Size Status Declaration on SBA
Form 480 referred to in Section 5.25 hereof, and each of such Purchasers shall
have received an executed copy of such Form for its records.
7.10 Execution of SBA Form 652. Each of the Purchasers that is
an SBIC shall have received from the Company its duly executed certification,
dated such Closing Date, on SBA Form 652, that the Company will not illegally
discriminate in its operations, employment practices or facilities.
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8. Affirmative Covenants. Subject to the provisions of Section 14
hereof, the Company covenants and agrees that:
8.1 Corporate Existence. Except in the event of the merger or
consolidation of a Subsidiary with another Subsidiary or into the Company, the
Company will maintain and cause each Subsidiary (as hereinafter defined) to
maintain its corporate existence in good standing and comply with all applicable
laws and regulations of the United States or of any state or states thereof or
of any political subdivision thereof and of any governmental authority where
failure to so comply would have a material adverse impact on the Company or its
business or operations taken as a whole.
8.2 Books of Account and Reserves. The Company will, and will
cause each of its Subsidiaries to, keep books of record and account in which
full, true and correct entries are made of all of its and their respective
dealings, business and affairs, in accordance with generally accepted accounting
principles. The Company will employ certified public accountants selected by the
Board of Directors of the Company who are "independent" within the meaning of
the accounting regulations of the Commission and who are either one of the
so-called "Big Six" accounting firms or an otherwise nationally recognized
accounting firm, and have annual audits made by such independent public
accountants in the course of which such accountants shall make such
examinations, in accordance with generally accepted auditing standards, as will
enable them to give such reports or opinions with respect to the financial
statements of the Company and its Subsidiaries as will satisfy the requirements
of the Commission in effect at such time with respect to certificates and
opinions of accountants.
8.3 Furnishing of Financial Statements and Information. The
Company will deliver to each Preferred Shareholder:
(a) as soon as practicable, but in any event within
30 days after the close of each month, unaudited consolidated balance
sheets of the Company and its Subsidiaries as of the end of such month,
together with the related consolidated statements of operations for
such month, setting forth the budgeted figures for such month prepared
and submitted in connection with the Company's annual plan as required
under Section 8.5 hereof and in comparative form figures for the
corresponding month of the previous fiscal year, all in reasonable
detail and certified by an authorized accounting officer of the
Company, subject to year-end adjustments;
(b) as soon as practicable, but in any event within
120 days after the end of each fiscal year, a consolidated balance
sheet of the Company and its Subsidiaries, as of the end of such fiscal
year, together with the related consolidated
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statements of operations, shareholders' equity and cash flow for such
fiscal year, setting forth in comparative form figures for the previous
fiscal year, all in reasonable detail and duly certified by the
Company's independent public accountants, which accountants shall have
given the Company an opinion, unqualified as to the scope of the audit,
regarding such statements;
(c) within 120 days after the end of each fiscal
year, written notice of any change during the past fiscal year of the
conversion price for the Series A Preferred Shares or for the Series B
Preferred Shares, including a brief statement indicating any
adjustments reasonably anticipated;
(d) concurrently with the delivery in each year of
the financial statements referred to in paragraph (b) of this Section
8.3, a statement and report signed by the independent public
accountants who certified such financial statements to the effect that
they have read this Agreement and that in the course of the audit upon
which their certificate was based they became aware of no condition or
event which constituted an Event of Default or which, after notice or
lapse of time or both, would constitute an Event of Default or if such
accountants did become aware of any such condition or event, specifying
the nature and period of existence thereof;
(e) promptly after the submission thereof to the
Company, copies of all reports and recommendations submitted by
independent public accountants in connection with any annual or interim
audit of the accounts of the Company or any of its Subsidiaries made by
such accountants;
(f) promptly upon transmission thereof, copies of all
reports, proxy statements, registration statements and notifications
filed by it with the Commission pursuant to any act administered by the
Commission or furnished to shareholders of the Company or to any
national securities exchange;
(g) with reasonable promptness, such other financial
data relating to the business, affairs and financial condition of the
Company and any Subsidiaries as is available to the Company and as from
time to time the Preferred Shareholders may reasonably request;
(h) promptly following the issuance of any Additional
Shares of Common Stock or of any Convertible Securities, or any
options, warrants or other rights to purchase Additional Shares of
Common Stock or Convertible Securities (other than the issuance of any
such securities pursuant to key employee and consultant benefit plans
adopted by the Company's Board of Directors), as these
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terms are hereinafter defined, written notice of the amount of
securities so issued and the total consideration received therefor;
(i) at least 20 days prior to the earlier of (i) the
execution of any agreement relating to any merger or consolidation of
the Company or any of its Subsidiaries with another corporation, or a
plan of exchange involving the outstanding capital stock of the Company
or any of its Subsidiaries, or the sale, transfer or other disposition
of all or substantially all of the property, assets or business of the
Company or any of its Subsidiaries to another corporation, or (ii) the
holding of any meeting of the shareholders of the Company for the
purpose of approving such action, written notice of the terms and
conditions of such proposed merger, consolidation, plan of exchange,
sale, transfer or other disposition;
(j) within 15 days after the Company learns in
writing of the commencement or threatened commencement of any material
suit, legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company, any of its
Subsidiaries or their respective businesses, assets or properties,
written notice of the nature and extent of such suit or proceeding.
(k) as soon as reasonably practical after the written
request of any Preferred Shareholder that is an SBIC, confirm the use
of the proceeds as described in Section 5.26 hereof; and
(l) promptly furnish to each Preferred Shareholder
that is an SBIC all information necessary in order for such Preferred
Shareholder to prepare and file SBA Form 468 and other information
requested or required by any governmental authority asserting
jurisdiction over such Preferred Shareholder, such information to be
provided within 20 days of such Preferred Shareholder's request, but in
no event shall such Preferred Shareholder request any information that
has previously been disclosed pursuant to the reporting requirements
set forth herein;
8.4 Inspection. The Company will permit each Preferred
Shareholder and any of its partners, officers or employees, or any outside
representatives designated by such Preferred Shareholder and reasonably
satisfactory to the Company, to visit and inspect at such Preferred
Shareholder's expense any of the properties of the Company or its Subsidiaries,
including their books and records (and to make photocopies thereof or make
extracts therefrom), and to discuss their affairs, finances, and accounts with
their officers, lawyers and accountants, except with respect to trade secrets
and similar confidential information, all to such reasonable extent and at such
reasonable times and intervals as such Preferred Shareholder may reasonably
request. Except as otherwise required by laws or regulations applicable to a
Preferred Shareholder, the Preferred Shareholders shall
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maintain, and shall require their representatives to maintain, all information
obtained pursuant to Section 8.3 hereof, this Section 8.4 and Section 8.5 hereof
on a confidential basis.
8.5 Preparation and Approval of Budgets. At least one month
prior to the beginning of each fiscal year of the Company, the Company shall
prepare and submit to its Board of Directors, for its review and approval, an
annual plan for such year (the "Annual Plan"), which shall include monthly
capital and operating expense budgets, cash flow statements and profit and loss
projections itemized in such detail as the Board of Directors may reasonably
request. The Annual Plan shall also include, without limitation, a development
plan for restaurants for the ensuing year including plans for market locations
of such restaurants, estimated timing of openings and a budget of expenses. Each
Annual Plan shall be modified as often as is necessary in the judgment of the
Board of Directors to reflect changes required as a result of operating results
and other events that occur, or may be reasonably expected to occur, during the
year covered by the Annual Plan, and copies of each such modification shall be
submitted to the Board of Directors. Each Annual Plan, or modification thereof,
must be approved by at least 66-2/3% of the members of the Board of Directors.
The Company will, simultaneously with the submission thereof to the Board of
Directors, deliver a copy of each such annual plan and modification thereof to
each Preferred Shareholder. Each site for a new restaurant shall be approved by
a real estate site selection committee comprised of five members selected by the
Board of Directors in the same manner the Annual Plan is approved from members
of the Board of Directors and senior management, at least one of which shall be
a member of the Board of Directors elected by the holders of the Series A
Preferred Shares (the "Series A Preferred Shareholders"). Each new restaurant
site shall be approved by four of the five members of such committee; provided,
however, that each site so approved shall be in accordance with the Annual Plan
then in effect.
8.6 Payment of Taxes and Maintenance of Properties. The
Company will, and will cause each Subsidiary to:
(a) pay and discharge promptly, or cause to be paid
and discharged promptly when due and payable, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income
or upon any of its properties, as well as all material claims of any
kind (including claims for labor, material and supplies) which, if
unpaid, might by law become a lien or charge upon its property;
provided, however, that neither the Company nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim if the
amount, applicability or validity thereof shall currently be contested
in good faith by appropriate proceedings and if the Company or such
Subsidiary as the case may be shall have set aside on its books
reserves (segregated to the extent required by generally accepted
accounting principles) deemed adequate by it with respect thereto; and
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(b) maintain and keep, or cause to be maintained and
kept, its properties in good repair, working order and condition, and
from time to time make, or cause to be made, all repairs and renewals
and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; the Company will
maintain or cause to be maintained back-up copies of all valuable
papers and software.
8.7 Insurance. The Company will, and will cause each
Subsidiary to, obtain and maintain in force such property damage, public
liability, business interruption, worker's compensation, indemnity bonds and
other types of insurance as the Company's executive officers, after consultation
with an accredited insurance broker, shall determine to be necessary or
appropriate to protect the Company from the insurable hazards or risks
associated with the conduct of the Company's business. The Company's executive
officers shall periodically report to the Board of Directors on the status of
such insurance coverage.
All such insurance shall be effected and maintained in force
under a policy or policies issued by insurers of recognized responsibility,
except that the Company or any Subsidiary may effect worker's compensation or
similar insurance in respect of operations in any state or other jurisdiction
either through an insurance fund operated by such state or other jurisdiction or
by causing to be maintained a system or systems of self-insurance which is in
accord with applicable laws.
8.8 Payment of Indebtedness and Discharge of Obligations. The
Company will, and will cause each Subsidiary to, pay or cause to be paid the
principal of and interest and premium, if any, on all Indebtedness for Borrowed
Money heretofore or hereafter incurred or assumed by it when and as the same
shall become due and payable, unless such Indebtedness for Borrowed Money is
renewed or extended. The Company will, and will cause each Subsidiary to,
faithfully observe, perform and discharge all of the material covenants,
conditions and obligations which are imposed on it by any and all indentures and
other agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is or under the provisions
thereof may be declared to be a material default thereunder, unless such default
is waived pursuant to the provisions thereof. Neither the Company nor any
Subsidiary shall be required to make any payment or to take any other action by
reason of this Section 8.8 at any time while it shall be currently contesting in
good faith by appropriate proceedings its obligations to make such payment or to
take such action provided that the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the extent
required by generally accepted accounting principles) deemed adequate by it with
respect thereto.
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8.9 Directors' and Shareholders' Meetings. The Series A
Preferred Shareholders shall have the right to elect two directors of the
Company (the "Series A Preferred Stock Directors") as set forth in the Capital
Stock Provisions. Each Series A Preferred Shareholder agrees to vote or execute
written consents in respect of such Series A Preferred Shareholder's respective
shares of Series A Preferred Stock now owned or hereafter acquired, at all
regular, special or adjourned meetings of the Series A Preferred Shareholders of
the Company at which such Series A Preferred Shareholders are entitled to vote
such shares in respect of the election of directors to be elected by the Series
A Preferred Shareholders, or in connection with any written action in lieu
thereof, for the following persons: (i) one person nominated by Norwest Equity
Partners V, or its successors or assigns; and (ii) one person nominated by
Consumer Venture Partners II, L.P.; provided, however, that upon such time as a
current Series A Preferred Shareholder, other than Norwest Equity Partners V,
holds, together with such Series A Preferred Shareholder's Affiliates, a number
of shares exceeding 130% of the number of shares held by Consumer Venture
Partners II, L.P. and its Affiliates, such Series A Preferred Shareholder shall
then make the nomination provided under clause (ii) of this section. Such
persons so nominated shall constitute both of the two Series A Preferred Stock
Directors.
The holders of the Common Shares (the "Common Shareholders")
shall have the right to elect three directors of the Company as provided in the
Capital Stock Provisions. The remaining two directors (the "Remaining
Directors") shall be elected by the Series B Preferred Shareholders, the Series
A Preferred Shareholders and the Common Shareholders as provided in the Capital
Stock Provisions. In electing the Remaining Directors, the Company, the
Preferred Shareholders and the Common Shareholders which are parties to this
Agreement agree that they shall cause to be nominated and shall vote or execute
written consents in respect of such shareholder's respective shares of Preferred
Stock and Common Stock now owned or hereafter acquired, at all regular, special
or adjourned meetings of the shareholders of the Company at which such
shareholders are entitled to vote such shares in respect of the election of
directors to be elected, or in connection with any written action in lieu
thereof, for the following persons: (i) Henry T. Wilson, (ii) Don W. Hays, and
(iii) upon expiration of any Remaining Director's term, persons nominated as
provided below. Henry T. Wilson and Don W. Hays shall each serve until a
successor is duly elected as hereinafter provided. The Remaining Directors who
shall thereafter be nominated and elected to replace Henry T. Wilson and Don W.
Hays (which nomination and election are expected to occur before December 31,
1997) shall be individuals with substantial experience in the restaurant
industry. Such persons shall be nominated to serve as Remaining Directors by the
affirmative vote of at least two-thirds of the Board of Directors.
The Company shall reimburse such holders of Series A Preferred
Shares for the reasonable out-of-pocket expenses incurred by them or the
directors elected by them
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pursuant to the Capital Stock Provisions in connection with the attending of
meetings by their director designees or carrying out any other duties by such
director designees that may be specified by the Board of Directors; shall pay
the same directors' fees to directors elected by holders of Series A Preferred
shares and to directors who are not employees; and shall maintain as part of its
Articles of Incorporation or Bylaws a provision for the indemnification of its
directors to the full extent permitted by law.
So long as an officer or partner or employee of a Preferred
Shareholder or an Affiliate thereof is not a director of the Company, the
Company shall notify such Preferred Shareholder of all regular meetings and
special meetings of the Board of Directors of the Company at least two business
days in advance of such meetings, and afford any representative designated by
such Preferred Shareholder the right and opportunity to attend any such meeting.
Such right to attend the meetings of the Board of Directors shall extend only to
Preferred Shareholders who, together with any Affiliates thereof, hold at least
250,000 Series A Preferred Shares or 250,000 Series B Preferred Shares. Such
representative shall be entitled to receive all written materials and other
information given to directors of the Company in connection with any such
meeting at the time such materials or information are given to such directors.
The Company agrees, as a general practice, to hold a meeting
of its Board of Directors at least once every two months, and during each year
to hold its annual meeting of shareholders on or approximately on the date
provided in its Bylaws.
8.10 Replacement of Certificates Representing Preferred Shares
or Conversion Stock. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any certificates
representing Series A Preferred Shares, Series B Preferred Shares or any shares
of stock issued upon conversion thereof or in exchange therefor, and, in the
case of any such loss, theft or destruction, upon delivery of a bond of
indemnity satisfactory to the Company, or, in the case of any such mutilation,
upon surrender and cancellation of the certificates representing Series A
Preferred Shares, Series B Preferred Shares or any shares of stock issued upon
conversion thereof or in exchange therefor, as the case may be, the Company will
issue new certificates representing such shares of like tenor, in lieu of such
lost, stolen, destroyed or mutilated certificates representing such shares.
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8.11 Application of Proceeds. Unless otherwise approved by the
Purchasers, the net proceeds received by the Company from the sale of the Series
B Preferred Shares shall be used substantially for development and construction
of additional restaurants, and for general corporate purposes. Pending use of
the proceeds in the business, they shall be deposited in a bank or banks having
deposits of $125,000,000 or more, invested in money market mutual funds having
assets of $500,000,000 or more, or invested in securities issued or guaranteed
by the United States Government.
8.12 Retirement Plans. The Company will cause each retirement
plan of the Company or any of its Subsidiaries in which any employees of the
Company or of any of its Subsidiaries participate that is subject to the
provisions of ERISA and the documents and instruments governing each such plan
to be conformed to when necessary, and to be administered in a manner consistent
with, those provisions of ERISA which may, from time to time, become effective
and operative with respect to such plans; if requested by the Preferred
Shareholders in writing from time to time, furnish to the Preferred Shareholders
a copy of any annual report with respect to each such plan that the Company
files with the Secretary of Labor pursuant to ERISA; and at such time as such
insurance shall be available at rates deemed commercially reasonable by the
Company, maintain insurance against the contingent liability imposed in respect
of each such plan by the provisions of ERISA.
8.13 Filing of Reports. The Company will, from and after such
time as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to the
Securities Act, make timely filing of such reports as are required to be filed
by it with the Commission so that Rule 144 under the Securities Act or any
successor provision thereto will be available to the security holders of the
Company who are otherwise able to take advantage of the provisions of such Rule.
8.14 Patents and Other Intangible Rights. The Company will
apply for, or obtain assignments of, or licenses to use, all patents,
trademarks, trademark rights, trade names, trade name rights, recipes and
copyrights which in the opinion of a prudent and experienced businessman
operating in the industry in which the Company is operating are desirable or
necessary for the conduct and protection of the business of the Company.
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8.15 Insurance on Lives of Key Personnel. The Company will
maintain life insurance under the current policy (or a substantially equivalent
policy) on the life of Joseph Micatrotto so long as Mr. Micatrotto is an
employee of the Company. Such policy shall name the Company as the beneficiary
thereunder, and shall be in addition to any policy or policies maintained by the
Company to fund potential stock repurchase obligations of the Company.
8.16 Rights to Purchase Additional Securities. If the Company
should decide to issue and sell additional shares of any capital stock of the
Company or any warrants, securities convertible into capital stock of the
Company or other rights to subscribe for or to purchase any capital stock of the
Company, other than (a) shares of Common Stock sold to the public pursuant to a
registration statement filed under the Securities Act, if such offering is
underwritten on a firm commitment basis by an underwriter, or group of
underwriters represented by an underwriter or underwriters, which is a member of
the New York Stock Exchange, (b) shares of Common Stock awarded or issued upon
the exercise of options granted pursuant to employee and consultant benefit
plans adopted by the Company, and the grant of such options themselves, provided
that the aggregate number of shares thus awarded and issued and issuable
pursuant to the exercise of all such options shall not be in excess of 650,000
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the Closing
Date), (c) shares of Common Stock issued upon conversion of the Company's
outstanding Series A Convertible Debentures, (d) shares of Series A Preferred
Shares issued upon exercise of warrants to Piper Jaffray Inc. for 112,000 shares
and to Michael L. Bochert for 44,800 shares or shares of Common Stock issued
upon conversion of such Series A Preferred Shares, (e) shares of Common Stock
issued upon conversion of the Series A Preferred Shares and the Series B
Preferred Shares, (f) warrants to purchase up to 50,000 shares of the Company's
series B convertible preferred stock to be issued to Piper Jaffray at the
initial Closing, any shares of the Company's series B convertible preferred
stock issued upon the exercise of such warrants, and any shares of Common Stock
issued upon conversion of such Series B Convertible Preferred Stock, and (g)
warrants to purchase up to 193,332 shares of Common Stock to be issued to
subordinated debt lenders after the initial Closing and any shares of Common
Stock issued up the exercise of such warrants, (all such capital stock,
warrants, securities convertible into capital stock and other rights, other than
securities referred to in (a), (b), (c), (d), (e), (f) and (g) above, being
hereinafter sometimes collectively referred to as "Additional Securities"), the
Company shall first offer to sell to each of the Preferred Shareholders, or an
Affiliate thereof, upon the same terms and conditions as the Company is
proposing to issue and sell such Additional Securities to others, such Preferred
Shareholder's pro rata share (as defined below) of such Additional Securities.
Such offer shall be made by written notice given to each such Preferred
Shareholder and specifying therein the amount of the Additional Securities being
offered, the purchase price and other terms of such offer. Such Preferred
Shareholder shall have
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a period of 30 days from and after the date of receipt by it of such notice
within which to accept such offer. If a Preferred Shareholder elects to accept
such offer in whole or in part, such Preferred Shareholder shall so accept by
written notice to the Company given within such 30-day period. If a Preferred
Shareholder fails to accept such offer in whole or in part within such 30-day
period, any of such Additional Securities not purchased by such Preferred
Shareholder pursuant to such offer may be offered for sale to others by the
Company for a period of 90 days from the last day of such 30-day period, but
only on the same terms and conditions as set forth in the initial offer to such
Preferred Shareholder, free and clear of the restrictions imposed by this
Section 8.16.
For purposes of the previous paragraph, a Preferred
Shareholder's "pro rata share" is the number of shares of Additional Securities
(rounded to the nearest whole share) as is equal to the product of (a)(i) the
number of shares of Common Stock issued, or issuable upon the exercise or
conversion of rights, options or Convertible Securities without the payment of
any additional cash consideration or with the payment of a nominal cash
consideration, as the case may be (collectively, "Fully Paid Securities"), to
such Preferred Shareholder immediately prior to the issuance of the Additional
Securities being offered divided by (ii) the total number of Fully Paid
Securities issued or issuable by the Company immediately prior to the issuance
of the Additional Securities, multiplied by (b)(i) if so approved by the
affirmative vote of the holders of two-thirds of the shares of Purchased Stock
(as hereinafter defined) held by Preferred Shareholders entitled by this Section
8.16 to purchase a portion of such Additional Securities, that portion of the
offering of Additional Securities that remains after considering binding
commitments to purchase that have been received from persons other than the
Preferred Shareholders, or (ii) if not so approved, the entire offering of
Additional Securities.
8.17 Rule 144A. The Company agrees that, upon the request of
any holder of Series A Preferred Shares, Series B Preferred Shares or shares
issued upon conversion thereof or exchange therefor, or any prospective
purchaser of such shares, the Company shall promptly provide (but in any case
within 15 days of a request) to such holder or potential purchaser the following
information: (a) a brief statement of the nature of the business of the Company
and its Subsidiaries and the products and services they offer; (b) the Company's
most recent consolidated balance sheets and profit and loss and retained
earnings statements, and similar financial statements for such part of the two
preceding fiscal years prior to such request as the Company has been in
operation (such financial information shall be audited, to the extent reasonably
available); and (c) such other information about the Company, its Subsidiaries
and their business, financial condition and results of operations as the
requesting person shall request in order to comply with Rule 144A promulgated
under the Securities Act and the antifraud provisions of the federal and state
securities laws.
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The Company hereby represents and warrants to any such
requesting person that the information provided by the Company pursuant to this
Section 8.17 will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
8.18 Compliance. So long as any Preferred Shareholder that is
an SBIC holds any Series A Preferred Shares or any Series B Preferred Shares (i)
without the prior written consent of such Preferred Shareholder, the Company
shall not use the proceeds from the sale of the Preferred Shares issued and sold
pursuant to this Agreement and the 1996 Stock Purchase Agreement for any purpose
other than as set forth in Section 8.11 above, (ii) the Company shall not use
the proceeds from the sale of the Preferred Shares issued and sold pursuant to
this Agreement and the 1996 Stock Purchase Agreement for any prohibited purposes
outlined in the second sentence of Section 5.26, (iii) the Company shall not
change its business activity in any manner which, by reason of such change in
business activity, would cause the Company to fall within a different SIC Code
and thereby render the Company ineligible as a "small business concern" under
the SBIA and (iv) the Company shall at all times comply with the
non-discrimination requirements of 13 CFR Parts 112, 113 and 117. The Company
shall at all times permit any Preferred Shareholder that is an SBIC and, if
necessary, a representative of the Small Business Administration, access to the
Company's records and the Company shall provide such information as such
Preferred Shareholder that is an SBIC may request in order to verify compliance
with this Section 8.17 including, without limitation, an officer's certificate
indicating such compliance. The Company hereby acknowledges that (A) any
diversion of the proceeds from their intended use as specified in Section 5.26,
Section 8.11 and this Section 8.18, (B) the Company's becoming ineligible as a
"small business concern" by reason of a change in the Company's business
activity within one year from the Closing Date or (C) failure to provide the
information specified in Section 8.3(l) and 8.3(m), shall entitle any Preferred
Shareholder that is an SBIC, upon demand, and in addition to any other remedies
that may exist, to immediate rescission of this Agreement and the 1996 Stock
Purchase Agreement and repayment in full of the funds invested hereunder and
thereunder as contemplated by 13 CFR ss. 107.305 and 13 CFR ss. 107.706.
8.19 Net Worth. The Company agrees that it will at all times
maintain Consolidated Tangible Net Worth (as hereinafter defined) in an amount
(a) after the initial Closing of at least equal to $4,000,000 plus ninety
percent (90%) of the gross proceeds to the Company from the initial Closing, and
(b) after the second Closing of at least $4,000,000 plus ninety percent (90%) of
the gross proceeds to the Company from the initial Closing and the second
Closing.
9. Negative Covenants. Subject to the provisions of Section 14 hereof,
the Company will be limited and restricted as follows:
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9.1 Dividends on or Redemption of Junior Stock. Without the
prior approval of the Preferred Shareholders, the Company will not declare or
pay any dividend or make any other distribution on any shares of Junior Stock
(as hereinafter defined), other than those payable solely in shares of Junior
Stock, or purchase, redeem or otherwise acquire for any consideration (other
than in exchange for or out of the net cash proceeds of the contemporaneous
issue or sale of other shares of Junior Stock or debt securities convertible
into other shares of Junior Stock), or set aside a sinking fund or other fund
for the redemption or repurchase of any shares of Junior Stock or any warrants,
rights or options to purchase shares of Junior Stock, except for repurchases of
Common Stock required by the Redemption Agreement dated September 30, 1996
between the Company and Parasole Restaurant Holdings, Inc. or repurchases of
capital stock approved by the Company's Board of Directors at the time of
repurchase and pursuant to options and awards to key employee and consultant
plans adopted by the Company, including, without limitation, the Buca, Inc.
Employee Stock Option Plan.
9.2 Future Registration Rights. Except for any registration
expressly permitted by Section 12 hereof and registration rights which may be
granted, with the approval of the Company's Board of Directors, in connection
with warrants to purchase up to 193,332 shares of Common Stock to be issued to
subordinated debt holders in 1997, the Company will not, without the prior
approval of the Preferred Shareholders, agree with the holders of any securities
issued or to be issued by the Company to register such securities under the
Securities Act nor will it grant any incidental registration rights.
9.3 Other Restrictions. The Company will not without the prior
approval of a majority of the Board of Directors or a duly appointed committee
thereof, which majority shall include at least one of the directors designated
by the holders of the Series A Preferred Shares:
(a) guarantee, endorse or otherwise be or become
contingently liable, or permit any Subsidiary to guarantee, endorse or
otherwise become contingently liable, in connection with the
obligations, securities or dividends of any person, firm, association
or corporation, other than the Company or any of its Subsidiaries,
except that the Company and any Subsidiary may endorse negotiable
instruments for collection in the ordinary course of business; or
(b) make or permit any Subsidiary to make loans or
advances to any person (including without limitation to any officer,
director or shareholder of the Company or any Subsidiary), firm,
association or corporation, except loans and advances to the Company
and its wholly-owned Subsidiaries and advances to suppliers and
employees made in the ordinary course of business; or
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(c) purchase or invest, or permit any Subsidiary to
purchase or invest, in the stock or obligations of any other person,
firm or corporation, other than a wholly-owned Subsidiary; or
(d) pay, or permit any Subsidiary to pay,
compensation, whether by way of salaries, bonuses, participations in
pension or profit sharing plans, options, warrants, fees under
management contracts or for professional services or fringe benefits to
any officer in excess of amounts fixed by the Board of Directors of the
Company prior to any payment to such officer; or
(e) make any material change in the nature of its
business as carried on at the date of this Agreement.
10. Preferred Shares.
10.1 Conversion of Preferred Shares. Any holder of any
Preferred Shares may, at its option, at any time and from time to time, convert
such Preferred Shares, or any thereof, into Common Stock at the rate and upon
the terms and conditions and subject to the adjustments set forth in the Capital
Stock Provisions.
10.2 Stock Fully Paid; Reservation of Shares. The Company
covenants and agrees that all Common Stock that may be issued upon conversion of
the Preferred Shares will, upon issuance in accordance with the terms of the
Capital Stock Provisions, be fully paid and nonassessable, and that the issuance
thereof shall not give rise to any preemptive rights on the part of any person.
The Company further covenants and agrees that the Company will at all times have
authorized and reserved a sufficient number of shares of its Common Stock for
the purpose of issue upon the conversion of the Preferred Shares.
10.3 Adjustment of Number of Shares and Conversion Price. The
number of shares of Common Stock issuable upon conversion of Preferred Shares
and the conversion price with respect thereto shall be subject to adjustment
from time to time as set forth in the Capital Stock Provisions.
10.4 Mandatory Conversion of Preferred Shares. The Preferred
Shares shall automatically be converted into shares of Common Stock, without any
act by the Company or the holders of the Preferred Shares, concurrently with the
closing of a public offering by the Company of shares of Common Stock registered
under the Securities Act that meets the conditions set forth in the Capital
Stock Provisions for such mandatory conversion of the Preferred Shares.
11. Redemption of Preferred Shares. The Company will redeem and
repurchase the Preferred Shares from the holders thereof at the times and upon
the terms and conditions set forth in the Capital Stock Provisions to the extent
funds are legally available
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to do so. Optional redemptions of Preferred Shares by the Company shall not be
permitted.
12. Registration of Stock.
12.1 Required Registration. If the Company shall receive at
any time after the earlier of (1) October 1, 1999, or (2) six (6) months after
the effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request therefor from any record holder or holders of an aggregate of at
least two-thirds of the shares of Purchased Stock not theretofore registered
under the Securities Act and sold, the Company shall prepare and file a
registration statement under the Securities Act covering the shares of Purchased
Stock which are the subject of such request and shall use its best efforts to
cause such registration statement to become effective. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of shares of Purchased Stock not theretofore registered
under the Securities Act and sold that such registration is to be effected. The
Company shall include in such registration statement such shares of Purchased
Stock for which it has received written requests to register by such other
record holders within 30 days after the delivery of the Company's written notice
to such other record holders. The Company shall be obligated to prepare, file
and cause to become effective only two registration statements pursuant to this
Section 12.1, and to pay the expenses associated with such registration
statements. In the event that the holders of a majority of the Purchased Stock
for which registration has been requested pursuant to this Section 12.1
determine for any reason not to proceed with a registration at any time before a
registration statement has been declared effective by the Commission, and such
registration statement, if theretofore filed with the Commission, is withdrawn
with respect to the Purchased Stock covered thereby, and the holders of such
Purchased Stock agree to bear their own expenses incurred in connection
therewith and to reimburse the Company for the expenses incurred by it
attributable to the registration of such Purchased Stock, then the holders of
such Purchased Stock shall not be deemed to have exercised their right to
require the Company to register Purchased Stock pursuant to this Section 12.1.
If, at the time any written request for registration is
received by the Company pursuant to this Section 12.1, the Company has
determined to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders,
such written request shall be deemed to have been given pursuant to Section 12.2
hereof rather than this Section 12.1, and the rights of the holders of Purchased
Stock covered by such written request shall be governed by Section 12.2 hereof.
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Without the written consent of the holders of a majority of
the Purchased Stock for which registration has been requested pursuant to this
Section 12.1, neither the Company nor any other holder of securities of the
Company may include securities in such registration if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
such securities would interfere with the successful marketing of the Purchased
Stock or require the exclusion of any portion of the Purchased Stock to be
registered.
Notwithstanding any of the foregoing, if the Company shall
furnish to holders requesting a registration statement pursuant to this Section
12.1, a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors, it would be seriously detrimental
to the Company and its shareholders to proceed with such registration and it is
therefor essential to defer such registration, the Company shall have the right
to defer action under this Section 12.1 for a period of not more than 90 days
after receipt of the request of the holders; provided, however, that the Company
may not utilize this right more than once in any 12 month period. During the
period of deferral, the Company shall not file any other registration statement
under the Securities Act.
12.2 Incidental Registration. Each time the Company shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders
(other than a registration statement on a form that does not permit the
inclusion of shares by its security holders), the Company will give written
notice of its determination to all record holders of Purchased Stock not
theretofore registered under the Securities Act and sold. Upon the written
request of a record holder of any shares of Purchased Stock given within 30 days
after receipt of any such notice from the Company, the Company will, except as
herein provided, cause all such shares of Purchased Stock, the record holders of
which have so requested registration thereof, to be included in such
registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Purchased Stock to be so
registered; provided, however, that nothing herein shall prevent the Company
from, at any time, abandoning or delaying any such registration initiated by it;
provided further, however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with the Commission
and the Company's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by the Company,
the Company shall promptly complete the registration for the benefit of those
selling security holders who wish to proceed with a public offering of their
securities and who bear all expenses for such registration incurred after the
Company has decided not to proceed. If any registration pursuant to this Section
12.2 shall be underwritten in whole or in part, the Company may require that the
Purchased Stock requested for
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inclusion pursuant to this Section 12.2 be included in the underwriting on the
same terms and conditions as the securities otherwise being sold through the
underwriters. In the event that the Purchased Stock requested for inclusion
pursuant to this Section 12.2 would constitute more than 25% of the total number
of shares to be included in a proposed underwritten public offering, and if in
the good faith judgment of the managing underwriter of such public offering the
inclusion of all of the Purchased Stock originally covered by a request for
registration would reduce the number of shares to be offered by the Company or
interfere with the successful marketing of the shares of stock offered by the
Company, the number of shares of Purchased Stock otherwise to be included in the
underwritten public offering may be reduced, first by excluding the Warrants and
Warrant Stock, and then, if necessary, pro rata (by number of shares) among the
holders of other Purchased Stock requesting such registration, but in either
case only after exclusion of all other shares proposed to be sold by other
selling security holders; provided, however, that in any offering other than an
initial public offering by the Company, after any such required reduction, the
Purchased Stock to be included in such offering shall constitute at least 25% of
the total number of shares to be included in such offering. Those shares of
Purchased Stock which are thus excluded from the underwritten public offering
shall be withheld from the market by the holders thereof for a period, not to
exceed 90 days, which the managing underwriter reasonably determines is
necessary in order to effect the underwritten public offering.
12.3 Registration Procedures. If and whenever the Company is
required by the provisions of Section 12.1 or 12.2 hereof to effect the
registration of shares of Purchased Stock under the Securities Act, the Company
will:
(a) prepare and file with the Commission a
registration statement with respect to such securities, and use its
best efforts to cause such registration statement to become and remain
effective for such period as may be reasonably necessary to effect the
sale of such securities, not to exceed nine months;
(b) prepare and file with the Commission such
amendments to such registration statement and supplements to the
prospectus contained therein as may be necessary to keep such
registration statement effective for such period as may be reasonably
necessary to effect the sale of such securities, not to exceed nine
months;
(c) furnish to the security holders participating in
such registration and to the underwriters of the securities being
registered such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other
documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
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(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such participating
holders may reasonably request in writing within 20 days following the
original filing of such registration statement, except that the Company
shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration
statement has been filed;
(f) notify such holders promptly of any request by
the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly
upon the request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the opinion of
counsel for such holders (and concurred in by counsel for the Company),
is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Purchased Stock
by such holder;
(h) prepare and promptly file with the Commission and
promptly notify such holders of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when a
prospectus relating to such securities is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
(i) advise such holders, promptly after it shall
receive notice or obtain knowledge thereof, of the issuance of any stop
order by the Commission suspending the effectiveness of such
registration statement or the initiation or threatening of any
proceeding for that purpose and promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal if
such stop order should be issued;
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(j) not file any amendment or supplement to such
registration statement or prospectus to which a majority in interest of
such holders shall have reasonably objected on the grounds that such
amendment or supplement does not comply in all material respects with
the requirements of the Securities Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least
five business days prior to the filing thereof, unless in the opinion
of counsel for the Company the filing of such amendment or supplement
is reasonably necessary to protect the Company from any liabilities
under any applicable federal or state law and such filing will not
violate applicable law; and
(k) at the request of any such holder, furnish: (i)
an opinion, dated as of the closing date, of the counsel representing
the Company for the purposes of such registration, addressed to the
underwriters, if any, and to the holder or holders making such request,
covering such matters as such underwriters and holder or holders may
reasonably request; and (ii) letters dated as of the effective date of
the registration statement and as of the closing date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder or
holders may reasonably request.
12.4 Expenses. With respect to each registration requested
pursuant to Section 12.1 hereof (except as otherwise provided in such Section
with respect to registrations voluntarily terminated at the request of the
requesting security holders) and with respect to each inclusion of shares of
Purchased Stock in a registration statement pursuant to Section 12.2 hereof
(except as otherwise provided in Section 12.2 with respect to registrations
initiated by the Company but with respect to which the Company has determined
not to proceed), the Company shall bear the following fees, costs and expenses:
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and disbursements
of counsel for the underwriter or underwriters of such securities (if the
Company and/or selling security holders are required to bear such fees and
disbursements), all internal Company expenses, all legal fees and disbursements
and other expenses of complying with state securities or blue sky laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified, and the premiums and other costs of policies of insurance against
liability (if any) arising out of such public offering. Fees and disbursements
of counsel and accountants for the selling security holders, underwriting
discounts and commissions and transfer taxes relating to the shares included in
the offering by the selling security holders, and any other expenses incurred by
the selling security holders not expressly included above, shall be borne by the
selling security holders.
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12.5 Indemnification. In the event that any Purchased Stock is
included in a registration statement under Section 12.1 or 12.2 hereof:
(a) The Company will indemnify and hold harmless each
holder of shares of Purchased Stock which are included in a
registration statement pursuant to the provisions of this Section 12,
its directors and officers, and any underwriter (as defined in the
Securities Act) for such holder and each person, if any, who controls
such holder or such underwriter within the meaning of the Securities
Act, from and against, and will reimburse such holder and each such
underwriter and controlling person with respect to, any and all loss,
damage, liability, cost and expense to which such holder or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) Each holder of shares of Purchased Stock which
are included in a registration pursuant to the provisions of this
Section 12 will indemnify and hold harmless the Company, its directors
and officers, any controlling person and any underwriter from and
against, and will reimburse the Company, its directors and officers,
any controlling person and any underwriter with respect to, any and all
loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged
untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information
furnished by such holder specifically for use in the preparation
thereof. The liability of holders of
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shares of Purchased Stock under this Section 12.5(b) shall not exceed,
in aggregate, the proceeds of the offering through which the Purchased
Stock was acquired from the Company.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 12.5
of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said paragraph (a) or (b), promptly
notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if the
defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of
interest which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party or
parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or
parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party
pursuant to the provisions of said paragraph (a) or (b) for any legal
or other expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the proviso of the preceding sentence, (ii)
the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a
reasonable time after the notice of the commencement of the action, or
(iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.
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13. Default.
13.1 Events of Default. Each of the following events shall be
an event of default (an "Event of Default") for purposes of this Agreement:
(a) if the Company or any Subsidiary makes an
assignment for the benefit of creditors, or ceases doing business as a
going concern, or the Company or any Subsidiary applies for or consents
to the appointment of a trustee or receiver for the Company or any
Subsidiary, or for the major part of the property of either; provided,
however, that this subparagraph (a) shall not apply to any Subsidiary
(i) that ceases to do business due to the closure of one or more
restaurants or any merger with another Subsidiary or the Company with
the approval of the majority of the Board of Directors of the Company
or (ii) that is not a Significant Subsidiary within the meaning of Rule
405 of Regulation C under the Securities Act of 1933; or
(b) if a trustee or receiver is appointed for the
Company or any Subsidiary or for the major part of the property of
either and the order of such appointment is not discharged, vacated or
stayed within 30 days after such appointment; or
(c) if an order for relief shall be entered in any
Federal bankruptcy proceeding in which the Company or any Subsidiary is
the debtor; or if bankruptcy, reorganization, arrangement, insolvency,
or liquidation proceedings, or other proceedings for relief under any
bankruptcy or similar law or laws for the relief of debtors, are
instituted by or against the Company or any Subsidiary and, if
instituted against the Company or any Subsidiary, are consented to or,
if contested by the Company or the Subsidiary, are not dismissed by the
adverse parties or by an order, decree or judgment within 30 days after
such institution; or
(d) if any representation or warranty made by or on
behalf of the Company in this Agreement or in any certificate, report
or other instrument delivered under or pursuant to any term hereof or
thereof shall prove to have been untrue or incorrect in any material
respect as of the date of this Agreement or as of the Closing Date; or
(e) if default shall be made in the Company's
obligation to redeem Preferred Shares, as required by the Capital Stock
Provisions, whether or not funds are legally available therefor; or
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(f) if any of the Series A Shareholders' designees to
the Company's Board of Directors shall fail to be elected to the Board
of Directors in the manner and under the terms and conditions set forth
in Section 8.9 hereof; provided, however, that there shall be no event
of default if such failure to elect Series A Shareholders' designees is
due to the act of the Preferred Shareholders;
(g) if default shall be made in the due and punctual
performance or observance of any of the terms contained in Section 8.5,
Section 8.19, Section 9.1, Section 9.2, or Section 9.3 hereof, and such
default shall have continued for a period of 30 days after written
notice thereof to the Company by any holder of Preferred Shares which
period shall be extended, not to exceed a total of 90 days, if the
Company reasonably demonstrates to Preferred Shareholders' diligent and
good faith efforts to cure the default; or
(h) if Joseph Micatrotto shall not be employed as
President and Chief Executive Officer of the Company, and the Company
shall have failed to employ within 60 days of such termination of
employment a successor to Mr. Micatrotto approved by a majority of the
Board of Directors of the Company, which majority shall include at
least one of the directors designated by the holders of the Series A
Preferred Shares. Such 60 day period shall be extended, to not exceed a
total of 180 days, if the Company reasonably demonstrates good faith
and diligent efforts to retain a qualified successor.
13.2 Remedies Upon Events of Default. Upon the occurrence of
an Event of Default as herein defined, and so long as such Event of Default
continues unremedied, then, unless such Event of Default shall have been waived
by the holders of two-thirds of the Preferred Shares then outstanding, (a) the
holders of two-thirds of the Preferred Shares then outstanding shall be entitled
to designate a majority of the Board of Directors of the Company as provided in
the Capital Stock Provisions, and (b) the holders of two-thirds of the Preferred
Shares then outstanding may require the Company immediately to redeem, at $3.75
per Series A Preferred Share and $4.50 per Series B Preferred Share
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes hereafter effected) plus all
dividends unpaid and accumulated or accrued thereon, if any, to the date of such
redemption, all Series A Preferred Shares and Series B Preferred Shares then
outstanding, and thereupon the Company shall be obligated to redeem all Series A
Preferred Shares and Series B Preferred Shares then outstanding.
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13.3 Notice of Defaults. When, to its knowledge, any Event of Default
has occurred or exists, the Company agrees to give written notice within three
business days of such Event of Default to the holders of all outstanding
Preferred Shares. If the holder of any Preferred Shares shall give any notice or
take any other actions in respect of a claimed Event of Default, the Company
will forthwith give written notice thereof to all other holders of Preferred
Shares at the time outstanding, describing such notice or action and the nature
of the claimed Event of Default.
13.4 Suits for Enforcement. In case any one or more Events of
Default shall have occurred and be continuing, unless such Events of Default
shall have been waived in the manner provided in Section 13.2 hereof, the
holders of two-thirds of the Preferred Shares may proceed to protect and enforce
their rights under this Section 13 by suit in equity or action at law. It is
agreed that in the event of such action such holders of Preferred Shares shall
be entitled to receive all reasonable fees, costs and expenses incurred,
including without limitation such reasonable fees and expenses of attorneys
(whether or not litigation is commenced) and reasonable fees, costs and expenses
of appeals.
13.5 Remedies Cumulative. No right, power or remedy conferred
upon any holder of Preferred Shares shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to every other right, power
or remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
13.6 Remedies not Waived. No course of dealing between the
Company and any Preferred Shareholder , and no delay in exercising any right,
power or remedy conferred hereby or by any such security or now or hereafter
existing at law or in equity or by statute or otherwise, shall operate as a
waiver of or otherwise prejudice any such right, power or remedy; provided,
however, that this Section 13.7 shall not be construed or applied so as to
negate the provisions and intent of any statute which is otherwise applicable.
14. Termination of Certain Covenants. The obligations of the Company
under Sections 8 and 9 hereof, other than its obligations under Sections 8.10
and 8.13 hereof, shall, notwithstanding any provisions hereof apparently to the
contrary, terminate and shall be of no further force or effect from and after
the earlier to occur of (i) the date on which less than 25% of the Series A
Preferred Shares is outstanding and less than 25% of the Series B Preferred
Shares is outstanding, and (ii) the date on which all of the Preferred
Shareholders hold, in aggregate, less than 5% of the Fully Paid Securities of
the Company.
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15. Definitions. Unless the context otherwise requires, the terms defined in
this Section 15 shall have the meanings herein specified for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms herein defined. All accounting terms defined below shall, except as
otherwise expressly provided, be determined by reference to the Company's books
of account and in conformity with generally accepted accounting principles as
applied to such books of account in the opinion of the independent certified
public accountants selected by the Board of Directors of the Company as required
under the provisions of Section 8.3 hereof.
15.1 "Additional Shares of Common Stock" shall mean all shares
of Common Stock of the Company issued by the Company on or after the Closing
Date, except Common Stock issued upon conversion of Preferred Shares.
15.2 "Common Stock" shall mean the Company's authorized common
shares, any additional common shares which may be authorized in the future by
the Company, and any stock into which such common shares may hereafter be
changed, and shall also include stock of the Company of any other class which is
not preferred as to dividends or as to distributions of assets on liquidation,
dissolution or winding up of the Company over any other class of stock of the
Company, and which is not subject to redemption.
15.3 "Consolidated Tangible Net Worth" shall mean the
aggregate amount of shareholder's equity of the Company and its Subsidiaries on
a consolidated basis determined in accordance with generally accepted accounting
principles consistent with those followed in preparation of the financial
statements referred to in Section 5.3, plus the aggregate principal amount of
the outstanding Convertible Debentures, less the purchase price of acquired
businesses in excess of the fair market value of tangible net assets, other
items of goodwill, patents, trademarks, trade names, copyrights, organization
expense, treasury stock, unamortized debt discount and expense, any write-up of
the value of any asset, and other like intangibles (but excluding the book value
of capitalized pre-opening expenses), all determined on a consolidated basis in
accordance with generally accepted accounting principles consistent with those
followed in the preparation of the financial statements referred to in Section
5.3.
15.4 "Conversion Price" shall mean such price at which the
Series B Preferred Shares are convertible into Common Stock pursuant to Section
10 hereof and the Capital Stock Provisions.
15.5 "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are at any time directly
or indirectly convertible into or exchangeable for Additional Shares of Common
Stock.
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15.6 "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.
15.7 "Junior Stock" shall mean Common Stock and all other
shares of stock of any other class of the Company at any time created and issued
ranking junior to the Series B Preferred Shares or the Series A Preferred Shares
with respect to the right to receive dividends and/or the right to the
distribution of assets upon liquidation, dissolution or winding up of the
Company.
15.8 Any reference to any event, change, condition or effect
being "material" with respect to any entity or group of entities shall mean any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, prospects, operations or results of operations of the Company and its
Subsidiaries, taken as a whole.
15.9 "Material Adverse Effect" shall mean any event, change or
effect that is materially adverse to the condition (financial or otherwise),
properties, assets, liabilities, business, prospects, operations or results of
operations of the Company and its Subsidiaries, taken as a whole.
15.10 "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; (b) capitalized leases and purchase money liens; and
(c) liens in respect of pledges or deposits under worker's compensation laws or
similar legislation, carriers', warehousemen's, mechanics', laborers' and
materialmen's, landlord's and statutory and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith, and liens and encumbrances incidental to the conduct of the business of
the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
15.11 "Preferred Shareholder" shall mean the Purchasers under
this Agreement and the 1996 Stock Purchase Agreement.
15.12 "Purchased Stock" shall mean the Series A Preferred
Shares, the Series B Preferred Shares and all shares of Common Stock of the
Company issued in exchange or substitution therefor, and the stock or other
securities of the Company issued in a stock
44
<PAGE>
split or reclassification of, or a stock dividend or other distribution on or in
substitution or exchange for, or otherwise in connection with, any of the
foregoing securities, or in a merger or consolidation involving the Company or a
sale of all or substantially all of the Company's assets. Solely for the purpose
of Section 12, the term Purchased Stock shall also include (a) the warrants
dated October 23, 1996 issued to Piper Jaffray Inc. and Michael Bochert (the
"Warrants"), the Common Stock issuable upon exercise of the Warrants and all
shares of Common Stock issued in exchange or substitution therefor (the "Warrant
Stock"), and (b) the warrants to purchase up to 50,000 Series B Preferred Shares
to be issued to Piper Jaffray Inc. at the initial Closing (the "1997 Warrants"),
the Series B Preferred Shares issuable upon exercise of such warrants, the
shares of Common Stock issuable upon conversion of such Series B Preferred
Shares and all shares of Common Stock issued in exchange or substitution
therefor. Nothing in this Section 15.8 shall be deemed to require the Company to
register any Series A Preferred Shares, Series B Preferred Shares, Warrants or
the 1997 Warrants, it being understood that the registration rights granted by
Section 12 hereof relate only to shares of Common Stock and securities issued in
substitution or exchange therefor.
15.13. "Senior Indebtedness" shall mean (a) the principal of
all Indebtedness for Borrowed Money of the Company and its Subsidiaries to
banks, insurance companies or other financial institutions, (b) the present
value of net minimum lease payments of all leases under which the Company or any
of its Subsidiaries is the lessee and which are required to be capitalized under
generally accepted accounting principles, (c) the principal of all indebtedness
of the Company or any of its Subsidiaries under installment purchase agreements,
and (d) the principal of all indebtedness of the Company or any of its
Subsidiaries to the owners of any real property leased by the Company for
leasehold improvements financed by such owners.
15.14 "Subsidiary" shall mean any corporation, association or
other business entity more than a majority (by number of votes) of the voting
stock of which is owned or controlled, directly or indirectly, by the Company or
by one or more of its Subsidiaries or both.
16. Consents; Waivers and Amendments. Except as otherwise specifically
provided herein, in each case in which approval of the Preferred Shareholders is
required by the terms of this Agreement, such requirement shall be satisfied by
a vote or the written consent of Preferred Shareholders owning at least
two-thirds of the Purchased Stock then owned by the Preferred Shareholders (for
purposes of this Section 16, the holders of Preferred Shares shall have a number
of votes equal to the number of shares of Common Stock into which the Preferred
Shares are convertible.) With the written consent of Preferred Shareholders
owning at least two-thirds of the Purchased Stock then owned by the Preferred
Shareholders, the obligations of the Company under this Agreement may be
45
<PAGE>
waived (either generally or in a particular instance and either retroactively or
prospectively), and with the same approval the Company may enter into a
supplementary agreement for the purpose of adding any provisions to or changing
in any manner or eliminating any of the provisions of this Agreement or of any
supplemental agreement or modifying in any manner the rights and obligations of
the holders of the Purchased Stock and of the Company; provided, however, that
no such waiver or supplemental agreement shall (a) amend the terms of the
Preferred Shares as set forth in the Capital Stock Provisions (any such
amendment to the terms of the Preferred Shares shall require the vote of the
holders of the Preferred Shares called for by the Capital Stock Provisions), or
(b) reduce the aforesaid percentage of Purchased Stock, the holders of which are
required to consent to any waiver or supplemental agreement, without the consent
of all of the record holders of shares whose rights would be affected by such
reduction. Written notice of any such waiver, consent or agreement of amendment,
modification or supplement shall be given to the record holders of the Purchased
Stock who have not previously consented thereto in writing.
17. Changes, Waivers, etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in Section 16 hereof.
18. Payment of Fees and Expenses of Purchasers. Upon the consummation
of the sale of Series B Preferred Shares anticipated by this Agreement or upon
failure by the Company to consummate such sales, the Company will pay the
reasonable out-of-pocket expenses incurred by the Purchasers in connection with
the transactions herein contemplated, including without limitation the
reasonable fees and out-of-pocket expenses of Dorsey & Whitney LLP for their
services as special counsel to the Purchasers in connection with the
transactions herein contemplated not to exceed $10,000. The Company will also
pay (a) all fees and expenses incurred by the Preferred Shareholders with
respect to any amendments or waivers requested by the Company (whether or not
the same become effective) under or in respect of this Agreement or the
agreements contemplated hereby, and (b) all fees and expenses incurred by the
Preferred Shareholders with respect to the enforcement of the rights granted
under this Agreement or the agreements contemplated hereby.
19. Understanding Among Purchasers. The determination by each of the
Purchasers to purchase Series B Preferred Shares pursuant to this Agreement has
been made by such Purchaser independent of the other Purchasers, and independent
of any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by any
agent or employee of the other
46
<PAGE>
Purchasers. In addition, it is acknowledged by each of the Purchasers that the
other Purchasers have not acted as such Purchaser's agent in connection with
making its investment hereunder and that the other Purchasers will not be acting
as such Purchaser's agent in connection with monitoring such Purchaser's
investment hereunder.
20. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail,
(a) if to any holder of any Purchased Stock, addressed to such
holder at its address as shown on the books of the Company, or at such
other address as such holder may specify by written notice to the
Company, or
(b) if to the Company, addressed to the Company, 1422 West
Lake Street, Suite 220, Minneapolis, Minnesota 55408, attention
President, or to such other address as the Company may specify by
written notice to the Preferred Shareholders, and such notices and
other communications shall for all purposes of this Agreement be
treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
21. Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the Purchasers
or on their behalf, and the sale and purchase of the Series B Preferred Shares
and payment therefor. All statements contained in any certificate, instrument or
other writing delivered by or on behalf of the Company pursuant hereto or in
connection with or contemplation of the transactions herein contemplated (other
than legal opinions) shall constitute representations and warranties by the
Company hereunder.
22. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Purchased Stock.
23. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
24. Choice of Law. It is the intention of the parties that the laws of
Minnesota, without giving regard to the conflicts of laws provisions thereof,
shall govern the validity
47
<PAGE>
of this Agreement, the construction of its terms and the interpretation of the
rights and duties of the parties.
25. Counterparts. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
26. 1996 Stock Purchase Agreement. After the initial Closing of the
sale of Series B Preferred Shares hereunder, this Agreement shall supersede the
1996 Stock Purchase Agreement in its entirety, and the 1996 Stock Purchase
Agreement shall be of no further force or effect.
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.
Very truly yours,
BUCA, INC.
By /s/ Greg A. Gadel
-----------------------------------
Its CFO
----------------------------------
48
<PAGE>
Section 8.9 of the foregoing Agreement is hereby accepted as of the
date first above written by the following persons (collectively the "Existing
Shareholders").
/s/ Don W. Hays
===================================
Don W. Hays
/s/ Peter J. Mihajlov
===================================
Peter J. Mihajlov
/s/ Philip A. Roberts
===================================
Philip A. Roberts
/s/ David Roberts
===================================
David Roberts
/s/ Barbara Marshall
===================================
Barbara Marshall
The foregoing Agreement is hereby accepted
as of the date first above written.
NORWEST EQUITY PARTNERS V, A
MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P., General Partner
By /s/ John P. Whaley
----------------------------------
Its Partner
----------------------------------
49
<PAGE>
CONSUMER VENTURE PARTNERS II, L.P.
By: Consumer Venture Associates II, L.P.
By /s/ Pearson Cummins III
----------------------------------
Its General Partner
----------------------------------
REGENT CAPITAL PARTNERS, L.P.
By: Regent Capital Holdings, L.P., General Partner
By: Regent Capital Holdings, Inc., General Partner
By /s/ J. Oliver Maggard
----------------------------------
J. Oliver Maggard
Its Managing Director
----------------------------------
STANDBY FUND 1997
By /s/ Rick Hines
----------------------------------
Rick Hines
Its General Partner
----------------------------------
WA&H INVESTMENT, L.L.C.
By: Wessels, Arnold & Henderson Group, L.L.C.
Its: Managing Member
By /s/ Thomas J. Brigl
----------------------------------
Thomas J. Brigl, its CFO/Managing Director
50
<PAGE>
NORTHWOOD VENTURES LLC
By /s/ Henry T. Wilson
==============================
Henry T. Wilson
Its Managing Director
===========================
NORTHWOOD CAPITAL PARTNERS LLC
By /s/ Henry T. Wilson
==============================
Henry T. Wilson
Its Managing Director
===========================
NATIONAL DINING CONCEPTS, INC.
By /s/ Steven C. Simon
==============================
Its President
===========================
WALDEN INVESTORS
By Walden General Partner, its General Partner
By /s/ Arthur S. Berliner
==============================
Arthur S. Berliner
51
<PAGE>
Its General Partner
===========================
WALDEN VENTURES
By /s/ Arthur S. Berliner
==============================
Arthur S. Berliner
Its General Partner
===========================
WALDEN CAPITAL PARTNERS
By /s/ Arthur S. Berliner
==============================
Arthur S. Berliner
Its General Partner
===========================
WALDEN - SBIC, L.P.
By /s/ Arthur S. Berliner
==============================
Arthur S. Berliner
Its General Partner
===========================
WALDEN TECHNOLOGY VENTURES II, L.P.
By: Walden Technology Partners, L.P.
Its: General Partner
By /s/ Arthur S. Berliner
==============================
Arthur S. Berliner
Its General Partner
===========================
52
<PAGE>
EXHIBIT 10.17
BUCA, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of October 13, 1998
[As Amended by Amendment No. 1
to Securities Purchase Agreement
dated as of December 21, 1998]
To Each of the Persons Named in
Schedule A to this Agreement
(the "Purchasers")
----------
Ladies and Gentlemen:
In consideration of the agreement of the Purchasers to purchase the Series C
Preferred Shares (as hereinafter defined), as provided for herein, the
undersigned BUCA, INC., a Minnesota corporation (the "Company"), hereby agrees
-------
with each of the Purchasers as follows:
1. Authorization of Securities. The Company, by all requisite action, has
---------------------------
designated as authorized capital, 3,679,053 Series C Preferred Shares and has
authorized the issuance and sale pursuant to this Agreement of 2,614,635 Series
C Preferred Shares, to be issued pursuant to and be entitled to the benefits of
the capital stock provisions of the Articles of Incorporation of the Company, as
amended, (the "Articles"; the Articles of Incorporation of the Company, as
--------
amended, shall hereinafter be referred to as the "Articles of Incorporation") as
-------------------------
set forth in Exhibit 1 hereto.
The Company, by all requisite action, has authorized the issuance and sale to
the Purchasers of the Contingent Value Rights in the form annexed hereto as
Exhibit 3 ("CVRs," and together with the Series C Preferred Shares, the
----
"Purchased Securities") in accordance with the provisions of this Agreement.
- ---------------------
The CVRs shall be exercisable for Series C Preferred Shares having the rights,
privileges and conditions set forth in the Articles or, in the event that the
Common Stock (as hereinafter defined) is traded on a national securities
exchange, the NASDAQ National Market or the NASDAQ Small Cap Market, then Common
Stock as provided therein.
The term "Series C Preferred Shares" as used herein shall mean the series C
-------------------------
convertible preferred shares set forth in Schedule A hereto, any series C
convertible preferred shares issued pursuant to a Phase II Closing (as
hereinafter defined) and all preferred shares of the Company issued in exchange
or substitution therefor. The term "Series B Preferred Shares" as used herein
-------------------------
shall mean the series B convertible preferred shares issued by the Company
pursuant to the Stock Purchase Agreement, dated September 2, 1997, among the
Company and the parties named therein (the "1997 Stock Purchase Agreement"), and
-----------------------------
all preferred shares issued in exchange or substitution therefor. The term
"Series A Preferred Shares" as used herein shall mean the Series A convertible
- --------------------------
preferred shares issued by the Company pursuant to the Stock Purchase
1
<PAGE>
Agreement, dated October 23, 1996, among the Company and the parties named
therein (the "1996 Stock Purchase Agreement"), and all preferred shares issued
------------------------------
in exchange or substitution therefor. The term "Preferred Shares" as used herein
----------------
shall mean the Series A Preferred Shares, the Series B Preferred Shares and the
Series C Preferred Shares.
The Series C Preferred Shares shall be convertible into shares of the
Company's Common Stock (such shares of Common Stock into which the Series C
Preferred Shares are convertible and all shares of Common Stock of the Company
issued in exchange or substitution therefor being hereinafter sometimes referred
to as the "Conversion Stock"), initially at the rate of one share of Conversion
----------------
Stock for each Series C Preferred Share (subject to adjustment as hereinafter
provided), all as more fully set forth in the Articles; provided, that the
--------
Series C Conversion Price (as defined in the Articles of Incorporation) per
Series C Preferred Share purchased at a Phase II Closing shall increase by an
amount equal to ten percent (10%) per annum computed on $5.125 for the period
from October 5, 1998, or the date the Articles are first amended to provide for
the authorization of the Series C Preferred Shares (as evidenced by the filing
of such amendment with the Secretary of State of the State of Minnesota),
whichever is the last to occur, until the time of such Phase II Closing. The
Series C Preferred Shares shall be subject in all respects to all of the other
provisions of the Articles.
The CVRs shall be convertible into either Series C Preferred Shares or Common
Stock (such Series C Preferred Shares or shares of Common Stock issued pursuant
to the CVRs and all shares of capital stock of the Company issued in exchange or
substitution therefor being hereinafter sometimes referred to as the "CVR
---
Stock"), all as more fully set forth in Exhibit 3 hereto.
- -----
2. Sale and Purchase of Securities.
-------------------------------
(a) Subject to the terms and conditions hereof, on the Phase I Closing
Date (as hereinafter defined) the Company shall sell, assign, transfer, convey
and deliver to each Purchaser, and each Purchaser shall purchase from the
Company, free and clear of all pledges, liens, encumbrances and restrictions
(other than restrictions imposed by the Amended and Restated Shareholder
Agreement, in the form of Exhibit 2 hereto (the "Stockholders' Agreement")),
-----------------------
the number of Series C Preferred Shares and CVRs set forth opposite such
Purchaser's name in Schedule A hereto.
(b) Subject to the terms and conditions hereof, on each Phase II Closing
Date (as hereinafter defined) the Company shall sell, assign, transfer, convey
and deliver to each of the first six Purchasers named in Schedule A (each a
"Centre Purchaser" and collectively, the "Centre Purchasers"), in
---------------- -----------------
proportion to the maximum number of Series C Preferred Shares and CVRs
reflected on Schedule A hereto, and each Centre Purchaser shall purchase from
the Company, free and clear of all pledges, liens, encumbrances and
restrictions (other than restrictions imposed by the Stockholders Agreement),
the number of Purchased Securities specified in a notice provided pursuant to
Section 2(d) below.
2
<PAGE>
(c) The purchase price for the Purchased Securities purchased on the
Phase I Closing Date or any Phase II Closing Date shall be $5.125 per unit
consisting of one Series C Preferred Share and one CVR (the "Purchase
--------
Price"), and the aggregate purchase price paid by the Purchasers for the
-----
Purchased Securities purchased on the Phase I Closing shall be $8,400,007.02,
and the aggregate purchase price paid by the Centre Purchasers for the
Purchased Securities purchased in all Phase II Closings shall not exceed
$5,000,000.
(d) The aggregate number of Purchased Securities to be issued on a Phase
II Closing Date shall be specified (i) in the event of a Phase II Closing
initiated by the Company, in one or more written notices given by the Company
to the Centre Purchasers at any time prior to October 13, 1999 (the aggregate
number of Series C Preferred Shares to be issued on any Phase II Closing Date
not to be less than 400,000 or in the event that fewer than 400,000 shares
remain, all such remaining shares as set forth in the proviso hereto), or (ii)
in the event less than 975,610 Series C Preferred Shares have been issued in
one or more Phase II Closings initiated by the Company on or prior to October
13, 1999, in a written notice given on or prior to October 13, 1999 by the
Centre Purchasers to the Company; provided that the aggregate number of Series
--------
C Preferred Shares purchased in all Phase II Closings shall not exceed
975,610. The Company shall be permitted to initiate a Phase II Closing
hereunder solely for the purpose of funding impending working capital and
expansion capital requirements in excess of funds on hand and availability
under loan facilities.
(e) The Company and the Purchasers hereby acknowledge and agree that the
Series C Preferred Shares and the CVRs should be treated as an investment
unit under principles similar to rules governing debt instruments under
Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the
"Code"). Notwithstanding anything to the contrary contained herein, the
----
Company and the Purchasers hereby further acknowledge and agree that, for
United States federal, state and local income and franchise tax purpose, the
"issue price" of the Series C Preferred Shares under Section 305 of the Code
shall equal $5.07 per share and that they will use the foregoing issue price
for all income and franchise tax purposes with respect to the transactions
contemplated herein. The Purchasers and the Company also agree to allocate the
remainder of the Purchase Price to the CVRs.
3. Closings.
--------
(a) Subject to the satisfaction of the conditions set forth in Section 7,
the closing of the sale to, and purchase by, the Purchasers of the Purchased
Securities provided for in Section 2(a) hereof (the "Phase I Closing")
---------------
shall occur at the offices of Faegre & Benson LLP, 2200 Norwest Center, 90
South Seventh Street, Minneapolis, Minnesota, at the hour of 8:30 A.M.,
Minneapolis time, on October 13, 1998 or on such other day or at such other
time or place as the Purchasers and the Company shall mutually agree upon (the
"Phase I Closing Date").
--------------------
3
<PAGE>
(b) Subject to the satisfaction of the conditions set forth in Section 8,
the closing(s) of the sale to, and purchase by, the Centre Purchasers of the
Purchased Securities provided for in Section 2(b) hereof (each a "Phase II
--------
Closing" and, collectively with the Phase I Closing, sometimes referred to
-------
herein as a "Closing") shall occur at the offices of Faegre & Benson LLP,
-------
2200 Norwest Center, 90 South Seventh Street, Minneapolis, Minnesota, at the
hour of 8:30 a.m., Minneapolis time, on the date that is fifteen (15) Business
Days following the date of the written notice(s) triggering such purchase and
sale, or on such other day or at such other time or place as the Centre
Purchasers and the Company shall mutually agree upon. The date on which a
Phase II Closing shall be held is referred to in this Agreement as a "Phase II
--------
Closing Date."
------------
(c) At each Closing, (i) the Company shall deliver to the Purchasers
certificates representing the Series C Preferred Shares and CVRs being
purchased by the Purchasers, registered in their respective names as stated in
Schedule A hereto, against payment of the amount of the purchase price
therefor, payable in accordance with Section 2 hereof by wire transfer of
immediately available funds to an account designated in writing by the Company
and (ii) the parties shall make the other deliveries provided in Section 16 or
17 hereof, as applicable.
4. Restriction on Transfer of Securities.
-------------------------------------
4.1 Restrictions. The Purchased Securities and the Conversion Stock
------------
are transferable only pursuant to (a) a public offering registered under the
Securities Act of 1933, as amended (the "Securities Act"), (b) Rule 144 (or
--------------
any similar rule then in effect) adopted under the Securities Act, if such
rule is available, and (c) subject to the conditions elsewhere specified in
this Section 4, any other legally available means of transfer.
4.2 (a) Legend. Each certificate representing Purchased Securities
------
shall be endorsed with the following legend:
"The securities evidenced hereby may not be transferred without (i) the
opinion of counsel reasonably satisfactory to the Company that such
transfer may be lawfully made without registration under the federal
Securities Act of 1933 and all applicable state securities laws or (ii)
such registration."
Upon the conversion of any Series C Preferred Shares, unless the Company
receives an opinion of counsel from the holder of such a security reasonably
satisfactory to the Company to the effect that a sale, transfer, assignment,
pledge or distribution of the Conversion Stock issuable upon such conversion
may be made without registration, or unless such Conversion Stock is being
disposed of pursuant to registration under the Securities Act and any
applicable state act, the same legend shall be endorsed on the certificate
evidencing such Conversion Stock.
The aforesaid legend shall be removed with respect to securities held for at
least two years (including, with respect to the Conversion Stock, the period
during which the related
4
<PAGE>
converted Series C Preferred Shares had been held) by a person who has not been
an affiliate of the Company (as defined in Rule 144 under the Securities Act)
during the three months preceding the request for removal of such legend. The
foregoing legend removal requirement is based on Rule 144(k) under the
Securities Act as currently in force, and assumes that such Rule (or a successor
thereto) in substantially its current form shall be in effect at the time of any
such request for legend removal.
(b) Stop Transfer Order. A stop transfer order shall be placed
-------------------
with the Company's transfer agent preventing transfer of any of the securities
referred to in paragraph (a) above pending compliance with the conditions set
forth in any such legend (except as otherwise provided in paragraph (a) above).
4.3 Removal of Legend. Any legend endorsed on a certificate or instrument
-----------------
evidencing a security pursuant to Section 4.2 hereof shall be removed, and the
Company shall issue a certificate or instrument without such legend to the
holder of such security, (a) in accordance with Section 4.2(a) hereof, (b) if
such security is being disposed of pursuant to registration under the Securities
Act and any applicable state acts or pursuant to Rule 144 or any similar rule
then in effect, or (c) if such holder provides the Company with an opinion of
counsel reasonably satisfactory to the Company to the effect that a sale,
transfer, assignment, offer, pledge or distribution for value of such security
may be made without registration and that such legend is not required to satisfy
the applicable exemption from registration.
4.4 Register of Securities. The Company or its duly appointed agent shall
----------------------
maintain separate registers for the Series C Preferred Shares and the CVRs in
which it shall register the issuance and transfer of such securities. All
transfers of Series C Preferred Shares and CVRs shall be recorded on the
registers maintained by the Company or its agent, and the Company shall be
entitled to regard the registered holder of such securities as the actual owner
of the securities so registered until the Company or its agent is required to
record a transfer of such securities on its register. The Company or its agent
shall be required to record any such transfer when it receives (a) the security
to be transferred duly and properly endorsed by the registered holder thereof or
by its attorney duly authorized in writing, and (b) the opinion of counsel
referred to in Sections 4.2 and 4.3 hereof or evidence of compliance with the
registration provisions referred to in those Sections.
5. Representations and Warranties by Company. The Company represents and
-----------------------------------------
warrants to the Purchasers that:
5.1 Organization, Standing, Etc. The Company and each of its Subsidiaries
----------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all requisite corporate power
and authority to own, lease and operate its properties and to carry on its
business as it is now being conducted. The Company has all requisite corporate
power and authority to issue the Purchased Securities, the Conversion Stock and
the CVR Stock, and to otherwise perform its obligations under this Agreement.
The copies of the Articles of Incorporation and Bylaws of the Company delivered
to the Purchasers or their agents prior to the execution of this Agreement are
true, correct and
5
<PAGE>
complete copies of the duly and legally adopted Articles of Incorporation and
Bylaws of the Company in effect as of the date of this Agreement. The Company
does not have any direct or indirect equity interest in any other firm,
corporation, partnership, joint venture association or other business
organization except as set forth in Schedule 5.1 hereto.
------------
5.2 Qualification. The Company and each of its Subsidiaries is duly
-------------
qualified or authorized to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction in which it owns or leases real
property and each other jurisdiction, wherein the nature of its activities or of
its properties owned or leased makes such qualification or authorization
necessary and failure to be so qualified or authorized could reasonably be
expected to have a Material Adverse Effect (as hereinafter defined). Schedule
--------
5.2 sets forth a true, correct and complete list of each jurisdiction in which
- ---
the Company or any of its Subsidiaries is qualified or authorized to do business
as a foreign corporation.
5.3 Financial Statements. Attached hereto as Schedule 5.3 are (a) the
-------------------- ------------
audited consolidated balance sheets of the Company and its Subsidiaries as at
December 31, 1995 and 1996 and December 28, 1997 together with the related
audited consolidated statements of operations, shareholders' equity and cash
flows for the fiscal years then ended and (b) an unaudited consolidated balance
sheet of the Company and its Subsidiaries as at June 28, 1998, and the related
consolidated statement of operations for the six months then ended and for the
comparable periods in the prior year, prepared by the Company (such audited and
unaudited statements, including the related notes and schedules thereto, are
referred to herein as the "Financial Statements"). The Financial Statements (i)
--------------------
have been prepared from the books and records of the Company and its
Subsidiaries, (ii) present fairly the financial condition of the Company and its
Subsidiaries at the balance sheet dates and the results of its operations,
shareholders' equity and cash flows as at the dates and for the periods therein
specified, and (iii) have been prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
----
periods indicated, except, in the case of the six-month financial statements,
for the failure of the unaudited financial statements to include the footnotes
required by GAAP, and subject to normal year-end audit adjustments that will not
individually or in the aggregate be material. For the purposes hereof, December
28, 1997 is referred to as the "Balance Sheet Date."
-------------------
5.4 Tax Returns and Audits. Except as set forth on Schedule 5.4, all
---------------------- ------------
required federal, state and local tax returns or appropriate extension requests
of the Company and each of its Subsidiaries have been filed, and all federal,
state and local taxes required to be paid with respect to such returns (whether
or not shown due thereon and whether attributable to a separate, consolidated,
combined or unitary tax return) have been paid or due provision for the payment
thereof has been made. Neither the Company nor any of its Subsidiaries is
delinquent in the payment of any such tax or in the payment of any assessment or
governmental charge. Neither the Company nor any of its Subsidiaries has either
received notice of any tax deficiency proposed or assessed against it, or
executed any waiver of any statute of limitations on the assessment or
collection of any tax. None of the Company's or any Subsidiary's tax returns has
been audited by governmental authorities in a manner to bring such audits to the
Company's attention. Neither the Company nor any of its Subsidiaries has any tax
liabilities except those reflected in
6
<PAGE>
the Financial Statements and those incurred in the ordinary course of business
since the Balance Sheet Date.
5.5 No Undisclosed Liabilities. Except for the transactions contemplated
--------------------------
by this Agreement and as set forth on Schedule 5.5, neither the Company nor any
------------
Subsidiary has any indebtedness, or material obligations or liabilities of any
kind, absolute, accrued, contingent or otherwise and whether due or to become
due which (i) is not fully reflected in, reserved against or otherwise described
in the Financial Statements, (ii) is not disclosed pursuant to any other
representation or warranty set forth in this Agreement or in the Schedules
attached hereto, (iii) was incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date, or (iv) could
reasonably be expected to have a Material Adverse Effect.
5.6 Absence of Certain Developments. Except for the transactions
-------------------------------
contemplated by this Agreement, or as set forth in the Financial Statements or
in Schedule 5.6, since the Balance Sheet Date neither the Company nor any
------------
Subsidiary has: (a) paid any obligation or liability (fixed or contingent) other
than, or discharged or satisfied any liens or encumbrances other than those
securing, current liabilities, in each case in the ordinary course of business
consistent with past practice; (b) declared, set aside or made any payment or
other distribution to its shareholders as such, or purchased, redeemed or
otherwise acquired any of its shares of capital stock, other securities or
ownership interests, or obligated itself to do so; (c) mortgaged, pledged or
subjected to any lien, charge, security interest or other encumbrance any of its
assets, tangible or intangible, except in the ordinary course of business
consistent with past practice; (d) acquired, sold, transferred, assigned,
conveyed or leased or otherwise disposed of any of its assets except in the
ordinary course of business consistent with past practice; (e) cancelled or
compromised any debt or claim, or amended, canceled, terminated, relinquished,
waived or released any contract or right except in the ordinary course of
business consistent with past practice and which, in the aggregate, would not be
material to the Company; (f) suffered any damage, destruction or loss (whether
or not covered by insurance) involving property having a value in excess of
$100,000 or which had or could reasonably be expected to have a Material Adverse
Effect; (g) entered into any transaction or contract or conducted its business
other than in the ordinary course of business consistent with past practice; (h)
encountered any labor difficulties or labor union organizing activities; (i)
issued or sold any shares of capital stock or other securities or granted any
options, warrants or other purchase rights with respect thereto other than as
contemplated by this Agreement; (j) made any acquisition or disposition of any
material assets or become involved in any other material transaction, other than
for fair value in the ordinary course of business consistent with past practice;
(k) awarded or paid any bonuses to employees of the Company and its Subsidiaries
with respect to the period ended on the Balance Sheet Date or in respect of any
period thereafter, except to the extent accrued on the Financial Statements, or
entered into any employment, deferred compensation, severance or similar
agreement (nor amended any such agreement) or agreed to increase the
compensation payable or to become payable by it to any of the Company's or its
Subsidiaries' directors, officers, employees, agents or representatives or
agreed to increase the coverage or benefits available under any severance pay,
termination pay, vacation pay, company awards, salary continuation for
disability, sick leave, deferred compensation, bonus or other incentive
compensation, insurance, pension or other employee benefit plan, payment or
arrangement made to, for or with
7
<PAGE>
such directors, officers, employees, agents or representatives (other than
normal increases in the ordinary course of business consistent with past
practice and that in the aggregate have not resulted in a material increase in
the benefits or compensation expense of the Company and its Subsidiaries); (l)
changed the accounting or tax reporting principles, methods or policies of the
Company or any of its Subsidiaries; (m) failed to promptly pay and discharge
current liabilities except where disputed in good faith by appropriate
proceedings; (n) made any loans, advances or capital contributions to, or
investments in, any Person (other than wholly-owned Subsidiaries) or paid any
fees or expenses to any Affiliate of the Company or its Subsidiaries; (o) made
or committed to make any capital expenditures or capital additions or
improvements in excess of $10,000; (p) instituted or settled any material legal
actions, suits, arbitrations, claims or other legal, administrative or
governmental proceedings; or (q) agreed to do any of the foregoing other than
pursuant hereto.
5.7 Title to Properties and Encumbrances. The Company and each of its
------------------------------------
Subsidiaries has good and marketable title to all its owned properties and
assets, including without limitation the properties and assets reflected in the
Financial Statements and the properties and assets used in the conduct of its
business, except for property disposed of in the ordinary course of business
since the Balance Sheet Date, which properties and assets are not subject to any
mortgage, pledge, lease, lien, charge, security interest, encumbrance or
restriction, except (a) those which are shown and described in the Financial
Statements, (b) Permitted Liens (as hereinafter defined) and (c) as set forth on
Schedule 5.7. The plant, offices and equipment owned and leased by the Company
- ------------
and its Subsidiaries have been kept in good condition and repair in the ordinary
course of business, and neither the Company nor any of its Subsidiaries has been
threatened with any action or proceeding under any building or zoning ordinance,
law or regulation.
5.8 Litigation; Governmental Proceedings . Except as set forth on
------------------------------------
Schedule 5.8, there are no legal actions, suits, arbitrations, claims or other
- ------------
legal, administrative or governmental proceedings or investigations pending or,
to the knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or to the knowledge of the Company, pending or threatened, against
any of the officers, directors or key employees of the Company or any of its
Subsidiaries with respect to their business activities on behalf of the Company
and its Subsidiaries, and the Company is not aware of any facts which are likely
to result in or form the basis for any such action, suit or other proceeding
which could reasonably be expected to have a Material Adverse Effect. Neither
the Company nor any of its Subsidiaries is in default with respect to any
judgment, order or decree of any court or any governmental agency or
instrumentality. Neither the Company nor any of its Subsidiaries has been
threatened with any action or proceeding under any business or zoning ordinance,
law or regulation. Except as set forth on Schedule 5.8, neither the Company
------------
nor any of its Subsidiaries is engaged in any legal action to recover monies due
it or for damages sustained by it.
5.9 Compliance with Applicable Laws and Other Instruments. Except as set
-----------------------------------------------------
forth on Schedule 5.9, the business and operations of the Company and each of
------------
its Subsidiaries have been and are being conducted in accordance with all
applicable laws, rules and regulations of all governmental authorities, except
where the failure to do so has had or would reasonably be
8
<PAGE>
expected to have a Material Adverse Effect. Neither the execution nor delivery
of, nor the performance of or compliance with, this Agreement nor the
consummation of the transactions contemplated hereby or thereby will conflict
with, or, with or without the giving of notice or passage of time, result in any
breach of, or constitute a default under, or result in the imposition of any
lien or encumbrance upon any asset or property of the Company or any of its
Subsidiaries pursuant to, any applicable law, administrative regulation or
judgment, order or decree of any court or governmental body, any agreement or
other instrument to which the Company and its Subsidiaries or the Existing
Shareholders (as hereinafter defined) is a party or by which it or any of its
properties, assets or rights is bound or affected, and will not violate the
Articles of Incorporation or Bylaws of the Company or any of its Subsidiaries.
The Company and each of its Subsidiaries is not in violation of its Articles of
Incorporation or its Bylaws nor in violation of, or in default under, any lien,
indenture, mortgage, lease, agreement, instrument, commitment or arrangement in
any material respect.
5.10 Purchased Securities, Conversion Stock and CVR Stock. The
----------------------------------------------------
Purchased Securities, when issued and paid for pursuant to the terms of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof. The shares of Conversion
Stock issuable upon conversion of the Series C Preferred Shares have been
reserved for issuance based upon the initial Series C Conversion Price, and the
shares of CVR Stock issuable pursuant to the CVRs have been reserved for
issuance, and when issued upon conversion such Conversion Stock and CVR Stock
will be duly authorized, validly issued and outstanding, fully paid,
nonassessable and free and clear of all pledges, liens, encumbrances and
restrictions, except as set forth in Section 4 hereof. The certificates
representing the Purchased Securities to be delivered by the Company hereunder,
the certificates representing the Conversion Stock to be delivered upon the
conversion of the Series C Preferred Shares and the certificates representing
the CVR Stock to be delivered upon the conversion of the CVRs, will be genuine,
and the Company has no knowledge of any fact which would impair the validity
thereof.
5.11 Securities Laws. Based in part upon the representations and
---------------
warranties contained in Section 6 hereof, except as set forth on Schedule 5.11,
-------------
no consent, authorization, approval, permit or order of or filing with any
governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this Agreement or
the offer, issuance, sale or delivery of the Purchased Securities, the offer of
the Conversion Stock or the offer of the CVR Stock other than the filing of a
Form D under the Securities Act and the qualification thereof, if required,
under applicable state securities laws, which qualification has been or will be
effected as a condition of these sales. Under the circumstances contemplated
hereby, the offer, issuance, sale and delivery of the Purchased Securities, the
offer of the Conversion Stock and the offer of the CVR Stock will not under
current laws and regulations require compliance with the prospectus delivery or
registration requirements of the Securities Act.
5.12 Patents and Other Intangible Rights. Schedule 5.12 contains a
----------------------------------- -------------
complete and correct list of each patent, license, trademark, trade name, brand
mark, brand name, assumed name, service mark and copyright owned or used by the
Company or required by the
9
<PAGE>
Company in the operation of its business as well as all registrations thereof
and pending applications therefor, and each license or other agreement relating
thereto, excluding off-the-shelf, commercially available software products with
respect to which the Company is in compliance with the applicable license
agreements. The Company and each of its Subsidiaries (a) owns or has the
exclusive right to use, free and clear of all material liens, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted, (b) is not obligated or under any liability
whatsoever to make any payments of a material nature by way of royalties, fees
or otherwise to any owner of, licensor of, or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise, (c)
owns or has the unrestricted right to use all trade secrets, including know-how,
inventions, designs, processes, computer programs and technical data necessary
to the development, operation and sale of all products and services sold or
proposed to be sold by it, free and clear of any rights, liens or claims of
others, and (d) is not using any confidential information or trade secrets of
others. The Company and each of its Subsidiaries is not, nor has it received
notice with respect to, infringing upon or otherwise acting adversely to any
known right or claimed right of any person under or with respect to any patents,
trademarks, service marks, trade names, copyrights, licenses or rights with
respect to the foregoing.
5.13 Capital Stock. Immediately upon giving effect to the Articles and
-------------
the issuance and sale of the Purchased Securities at the Phase I Closing
pursuant to this Agreement, the authorized capital stock of the Company shall
consist of 28,500,000 shares, of which 19,650,000 shares have been designated
Common Stock, 2,396,800 shares have been designated Series A Convertible
Preferred Stock, 2,100,000 shares have been designated Series B Convertible
Preferred Stock, 3,679,053 shares have been designated Series C Preferred Stock
and 674,147 shares are undesignated. Of the Common Stock, 3,738,997 shares are
issued and outstanding. Of the Series A Convertible Preferred Stock, 2,240,000
shares are issued and outstanding, and of the Series B Convertible Preferred
Stock, 1,922,222 shares are issued and outstanding, and of the Series C
Convertible Preferred Stock, 1,639,025 shares are issued and outstanding. All of
the outstanding shares of capital stock of the Company were duly authorized and
validly issued and are fully paid and nonassessable. There are no outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
Convertible Securities (as hereinafter defined) or other agreements or
arrangements of any character or nature whatever, except as otherwise disclosed
on Schedule 5.13 hereto or as contemplated by this Agreement, under which the
-------------
Company is or may be obligated to issue capital stock or other securities of any
kind representing an ownership interest or contingent ownership interest in the
Company. Schedule 5.13 sets forth the true and correct date of grant, term,
-------------
number of underlying shares and strike price for any such subscriptions,
options, warrants, calls, contracts, demands, commitments, Convertible
Securities or other agreements set forth therein. Neither the offer nor the
issuance or sale of the Purchased Securities, the Conversion Stock or the CVR
Stock, constitutes an event, under any anti-dilution provisions of any
securities issued or issuable by the Company or any agreements with respect to
the issuance of securities by the Company, which will either increase the number
of shares issuable pursuant to such provisions or decrease the consideration per
share to be received by the Company pursuant to such provisions. All of the
issued and outstanding
10
<PAGE>
shares of capital stock of each of the Subsidiaries have been duly and validly
authorized and issued and are fully paid and nonassessable, and the Company owns
of record and beneficially, free and clear of any security interests, claims,
liens, proxies, equities or other encumbrances, all of the issued and
outstanding shares of such stock. No holder of any security of the Company is
entitled to any preemptive or similar rights to purchase securities from the
Company except as otherwise contemplated by this Agreement, provided, however,
that nothing in this Section 5.13 shall affect, alter or diminish any right
granted to the Purchasers in this Agreement. All outstanding securities of the
Company have been issued in full compliance with an exemption or exemptions from
the registration and prospectus delivery requirements of the Securities Act and
from the registration and qualification requirements of all applicable state
securities laws. The Company is not a party or subject to any agreement or
understanding, and to the knowledge of the Company, there is no agreement or
understanding between any persons or entities or by a director of the Company,
which affects or relates to the voting or giving of written consents with
respect to, or purchase, sale, redemption, transfer or other disposition of, any
security of the Company, other than warrants, options and debentures of the
Company outstanding as of the date hereof and disclosed in Schedule 5.13, the
-------------
Stockholders' Agreement and the 1997 Stock Purchase Agreement.
5.14 Outstanding Debt. The Company and each of its Subsidiaries has no
----------------
Indebtedness for Borrowed Money (as hereinafter defined) except as otherwise set
forth in the Financial Statements. Neither the Company nor any of its
Subsidiaries is in default in the payment of the principal of or interest or
premium on any such Indebtedness for Borrowed Money, and no event has occurred
or is continuing under the provisions of any instrument, document or agreement
evidencing or relating to any such Indebtedness for Borrowed Money which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
5.15 Schedule of Assets and Contracts. Attached hereto as Schedule 5.15
-------------------------------- -------------
is a Schedule of Assets and Contracts containing:
(a) Annex A: a listing of all real properties owned by the Company and
each of its Subsidiaries;
(b) Annex B: a listing of each indenture, lease, sublease, license or
other instrument under which the Company and each of its Subsidiaries claims
or holds a leasehold interest in real property;
(c) Annex C: a listing of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving
payments remaining to or from the Company and each of its Subsidiaries in
excess of $100,000 in any 12 month period and other agreements material to
the Company's business to which the Company or any of its Subsidiaries is a
party or by which it is bound, under which full performance (including
payment) has not been rendered by any party thereto;
11
<PAGE>
(d) Annex D: a listing of all collective bargaining agreements,
employment agreements, consulting agreements, noncompetition agreements,
nondisclosure agreements, executive compensation plans, profit sharing
plans, bonus plans, deferred compensation agreements, employee pension
retirement plans and employee benefit stock option or stock purchase plans
and other employee benefit plans, entered into or adopted by the Company
and each of its Subsidiaries;
(e) Annex E: a listing of all deeds of trust, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby
any of the assets or properties of the Company or any of its Subsidiaries
are subject to any lien, encumbrance, security interest or charge;
(f) Annex F: a listing of all leases of personal property involving
payment remaining to or from the Company or its Subsidiaries in excess of
$100,000;
(g) Annex G: a listing of all bank accounts (or accounts with other
financial institutions) maintained by the Company or its Subsidiaries,
together with the persons authorized to make withdrawals from such
accounts;
(h) Annex H: the name of each employee of the Company or its
Subsidiaries whose annual compensation is in excess of $50,000 and the
remuneration currently payable to each such employee;
(i) Annex I: the name of each shareholder of the Company and the
number of shares owned by such shareholder;
(j) Annex J: a listing of all insurance policies in force and
referred to in Section 5.17 hereof; and
(k) Annex K: a listing of all patents (including applications
therefor), royalty and license agreements (other than those relating to
off-the-shelf, commercially available software products), trademarks, trade
names, service marks and copyrights relating to Company products or the
products of its Subsidiaries.
Prior to the Closing Date, the Company shall provide Purchasers or
their legal counsel with a true, correct and complete copy of each document
referred to above.
The Company has in all material respects substantially performed all
obligations required to be performed by it to date and is not in default in any
material respect under any of the contracts, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it is
otherwise bound. All instruments referred to above are in effect and enforceable
according to their respective terms (except as the enforceability thereof may be
12
<PAGE>
limited by bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and except for
judicial limitations on the enforcement of the remedy of specific performance
and other equitable remedies), and there is not under any of such instruments
any existing material default or event of default or event which, with notice or
lapse of time or both, would constitute an event of default thereunder. To the
knowledge of the Company, all parties having material contractual arrangements
with the Company and its Subsidiaries are in substantial compliance therewith
and none are in material default in any respect thereunder. All plans or
arrangements listed pursuant to clause (d) above are fully funded to the extent
that such funding is required by GAAP.
5.16 Corporate Acts and Proceedings. This Agreement has been duly
------------------------------
authorized by all necessary corporate action on behalf of the Company, and has
been duly executed and delivered by authorized officers of the Company. All
corporate action necessary to the authorization, creation, issuance and delivery
of the Purchased Securities, the Conversion Stock and the CVR Stock has been
taken on the part of the Company, or will be taken by the Company on or prior to
the Phase I Closing Date. This Agreement is a valid and binding agreement of the
Company enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
enforcement and other equitable remedies.
5.17 Insurance Coverage. There are in full force policies of insurance
------------------
issued by insurers of recognized responsibility insuring the Company and each of
its Subsidiaries, their properties and businesses against such losses and risks,
and in such amounts, as in the Company's best judgment, after advice from its
insurance broker, are acceptable for the nature and extent of its business and
the Company's resources. A list of such insurance policies is attached hereto as
Schedule 5.17.
- -------------
5.18 No Brokers or Finders. Except as set forth in Schedule 5.18, no
--------------------- -------------
person, firm or corporation has or will have, as a result of any act or omission
of the Company, any right, interest or valid claim against or upon the Company
or any Purchaser for any commission, fee or other compensation as a finder or
broker, or in any similar capacity, in connection with the transactions
contemplated by this Agreement. The Company will indemnify and hold each
Purchaser harmless against any and all liability with respect to any such
commission, fee or other compensation which may be payable or determined to be
payable in connection with the transactions contemplated by this Agreement.
5.19 Conflicts of Interest. Except as set forth on Schedule 5.19, no
--------------------- -------------
officer, director or shareholder of the Company or any affiliate (as such term
is defined in Rule 405 under the Securities Act (for the purposes of this
Agreement, Brand Equity Ventures, L.P. shall be considered an affiliate of
Consumer Venture Partners II, L.P.)) (the "Affiliate") of any such person has
----------
any direct or indirect interest (a) in any entity which does business with the
Company or any of its Subsidiaries, or (b) in any property, asset or right which
is used by the Company or any of its Subsidiaries in the conduct of its
business, or (c) in any contractual relationship with the Company or any of its
Subsidiaries other than as an employee. For the purpose of this
13
<PAGE>
Section 5.19, there shall be disregarded any interest which arises solely from
the ownership of less than a 1% equity interest in a corporation whose stock is
regularly traded on any national securities exchange or in the over-the-counter
market.
5.20 Licenses. The Company and each of its Subsidiaries possesses
--------
from the appropriate agency, commission, board and government body and
authority, whether state, local or federal, all licenses, permits,
authorizations, approvals, franchises and rights which (a) are necessary for it
to engage in the business currently conducted by it, and (b) if not possessed by
the Company or any of its Subsidiaries would have an adverse impact on the
Company's business. Except as set forth on Schedule 5.20, the Company has no
-------------
knowledge that would lead it to believe that it will not be able to obtain all
licenses, permits, authorizations, approvals, franchises and rights that may be
required for any business the Company or any of its Subsidiaries proposes to
conduct.
5.21 Registration Rights. Other than under this Agreement and the 1997
-------------------
Stock Purchase Agreement and as set forth on Schedule 5.21, the Company has not
-------------
agreed to register any of its authorized or outstanding securities under the
Securities Act.
5.22 Employee Benefit Plans.
----------------------
(a) Schedule 5.22 sets forth a list of each Employee Benefit Plan that
-------------
the Company or any of its Subsidiaries maintains or to which the Company or
any of its Subsidiaries contributes.
(b) Each such Employee Benefit Plan (and each related trust, insurance
contract, or fund) complies in form and in operation in all material respects
with the applicable requirements of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as
-----
amended (the "Code"), and other applicable laws. The Company's Employee
----
Stock Ownership Plan complies in form and in operation with the applicable
requirements of ERISA, the Code and other applicable laws.
(c) All required reports and descriptions (including Form 5500 Annual
Reports, Summary Annual Reports, and Summary Plan Descriptions) have been
filed or distributed appropriately with respect to each such Employee Benefit
Plan. The requirements of Part 6 of Subtitle B of Title I of ERISA and of
Code (S) 4980B have been met with respect to each group health plan (as
defined in Section 607(1) of ERISA and Section 4980B(g)(2) of the Code).
(d) All contributions (including all employer contributions and employee
salary reduction contributions) which are due have been paid to each such
Employee Benefit Plan which is an Employee Pension Benefit Plan (as defined
in ERISA (S) 3(2)) and all contributions for any period ending on or before
the Phase I Closing Date which are not yet due have been paid to each such
Employee Pension Benefit Plan or accrued in accordance with the past custom
and practice of the Company and its Subsidiaries. All
14
<PAGE>
premiums or other payments for all periods ending on or before the Phase I
Closing Date have been paid with respect to each such Employee Benefit Plan
which is an Employee Welfare Benefit Plan (as defined in ERISA (S) 3(1)).
(e) Each such Employee Benefit Plan which is an Employee Pension Benefit
Plan meets the requirements of a "qualified plan" under Code (S) 401(a), and,
except as set forth on Schedule 5.22, either (i) in the case of any
-------------
"standardized form plan" (as defined in Rev. Proc. 89-9) which is a defined
contribution plan, a favorable opinion letter has been issued or (ii) in the
case of all other qualified plans, a favorable determination letter has been
received by the plan within the last two years from the Internal Revenue
Service.
(f) Neither the Company nor any of its Subsidiaries has ever maintained
or been required to contribute to any Employee Pension Benefit Plan subject
to Title IV of ERISA.
(g) The Company has made available to the Purchasers correct and
complete copies of the plan documents and summary plan descriptions, and,
where applicable, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report, and all
related trust agreements, insurance contracts, and other funding agreements
which implement each such Employee Benefit Plan.
(h) With respect to each Employee Benefit Plan that the Company or any
of its Subsidiaries maintains or ever has maintained or to which it
contributes, ever has contributed, or ever has been required to contribute:
(1) There have been no Prohibited Transactions (as defined in ERISA
(S) 406 and Code (S) 4975) with respect to any such Employee Benefit
Plan. To the knowledge of the Company, no Fiduciary (as defined in ERISA
(S) 3(21)) has any liability for breach of fiduciary duty or any other
failure to act or comply in connection with the administration or
investment of the assets of any such Employee Benefit Plan. No action,
suit, proceeding, hearing, or investigation (of which the Company has
notice) with respect to the administration or the investment of the
assets of any such Employee Benefit Plan (other than routine claims for
benefits) is pending or, to the knowledge of the Company, threatened; and
(2) Neither the Company nor any of its Subsidiaries has incurred,
any liability to the Pension Benefit Guaranty Corporation ("PGBC") (other
----
than PBGC premium payments) or otherwise under Title IV of ERISA
(including any withdrawal liability) or under the Code with respect to
any such Employee Benefit Plan which is an Employee Pension Benefit Plan.
15
<PAGE>
(i) Neither the Company nor any of its Subsidiaries contributes to,
or has ever contributed to or has ever been required to contribute to any
Multiemployer Plan (as defined in ERISA (S) 3(37)) nor has any liability
(including withdrawal liability) under any Multiemployer Plan.
(j) Neither the Company nor any of its Subsidiaries maintains or
contributes to, or has ever maintained or contributed to, or has ever been
required to contribute to, any Employee Welfare Benefit Plan providing
medical, health or life insurance or other welfare-type benefits for
current or future retired or terminated employees, their spouses, or their
dependents (other than in accordance with Code (S) 4980B).
5.23 Environmental and Safety Laws. Except as set forth on Schedule
----------------------------- --------
5.23, neither the Company nor its Subsidiaries is in violation in any material
- ----
respect of any applicable and material statute, law or regulation relating to
the environment or occupational health and safety, and no material expenditures
are or will be required in order to comply with any such existing statute, law
or regulation.
The operations of the Company and its Subsidiaries do not involve any
asbestos, urea-formaldehyde foamed-in-place insulation, polyclorinated biphenyls
("PCBs") or any other hazardous substances or materials including, but not
----
limited to, hazardous substances or materials under the Comprehensive
Environmental Response, Compensation and Liability Act, as amended by the
Superfund Amendments and Reauthorization Act, the Resource Conservation and
Recovery Act, the Minnesota Environmental Response and Liability Act, or any
other federal, state or local statute, regulation, code or ordinance.
5.24 Employees. To the best of the Company's knowledge, no officer
---------
of the Company or any of its Subsidiaries or employee of the Company or any of
its Subsidiaries whose annual compensation is in excess of $50,000 has any plans
to terminate his or her employment with the Company or any of its Subsidiaries.
Except as set forth on Schedule 5.24, the Company and its Subsidiaries have
-------------
complied in all material respects with all laws relating to the employment of
labor, including provisions relating to wages, hours, equal opportunity,
collective bargaining and payment of Social Security and other taxes, and
neither the Company nor any of its Subsidiaries has encountered any material
labor difficulties. Except as set forth on Schedule 5.24, neither the Company
-------------
nor any of its Subsidiaries has any worker's compensation liabilities, except
those reflected in the Financial Statements and there are no other worker's
compensation liabilities that would constitute a Material Adverse Effect.
5.25 Small Business Concern. The Company is a "small business
----------------------
concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and the regulations thereunder, including Title 13, Code of Federal
Regulations, (S) 121.301 (the "SBIA"). The information set forth in the Small
Business Administration Forms 480, 652 and Section A of Form 1031 regarding the
Company is accurate and complete. Copies of such forms shall have been completed
and executed by the Company and delivered to each Purchaser that is a licensed
small business investment company (an "SBIC") at the Closing. The Company does
not
16
<PAGE>
presently engage in, and it shall not hereafter engage in, any activities,
and shall not use directly or indirectly the proceeds from the sale of the
Purchased Securities for any purpose for which an SBIC is prohibited from
providing funds by the SBIA.
5.26 Absence of Restrictive Agreements. To the best of the Company's
---------------------------------
knowledge, no employee of the Company or any of its Subsidiaries is subject to
any secrecy or non-competition agreement or any agreement or restriction of any
kind that would impede in any way the ability of such employee to carry out
fully all activities of such employee in furtherance of the business of the
Company. To the best of the Company's knowledge, no employer or former employer
of any employee of the Company or any of its Subsidiaries has any claim of any
kind whatsoever in respect of any of the rights described in Section 5.12
hereof.
5.27 Application of Proceeds. The proceeds from the issuance and
-----------------------
sale of the Purchased Securities pursuant to this Agreement will be used for
development and construction of additional restaurants, working capital and for
general corporate purposes.
5.28 Disclosure. The Company has not knowingly withheld from the
----------
Purchasers any material facts relating to the assets, business, operations,
financial condition or prospects of the Company. No representation or warranty
in this Agreement or in any certificate, schedule, statement or other document
furnished or to be furnished to any Purchaser pursuant hereto or in connection
with the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
required to be stated herein or therein or necessary to make the statements
herein or therein not misleading.
5.29 Payables. Except as set forth on Schedule 5.29, all accounts
-------- -------------
payable of the Company and its Subsidiaries reflected on the Company's audited
balance sheet dated December 28, 1997 or arising after the date thereof are the
result of bona fide transactions in the ordinary course of business and have
been paid consistent with past practice or are not yet due and payable.
5.30 Year 2000. The software and hardware operated by the Company are
---------
capable of providing or are being adapted or replaced to provide uninterrupted
millennium functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 and date-dependent data in substantially the
same manner and with the same functionality as such software records, stores
processes and presents such calendar dates and date-dependant data as of the
date hereof, except for the failure to have such capability which would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
17
<PAGE>
6. Representations and Warranties of Purchasers. Each of the Purchasers
--------------------------------------------
severally represents and warrants for itself that:
6.1 Investment Intent. The Purchased Securities being acquired by such
-----------------
Purchaser hereunder are being purchased, the Conversion Stock acquired by such
Purchaser upon conversion of the Series C Preferred Shares and the CVR Stock
acquired by such Purchaser pursuant to the CVRs will be acquired, for such
Purchaser's own account and not with the view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the
Securities Act. Such Purchaser understands that the Purchased Securities, the
Conversion Stock and the CVR Stock have not been registered under the Securities
Act or any applicable state laws by reason of their issuance or contemplated
issuance in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act and such laws, and that the reliance of the
Company and others upon this exemption is predicated in part upon this
representation and warranty. Such Purchaser further understands that the
Purchased Securities, the Conversion Stock and the CVR Stock may not be
transferred or resold without (a) registration under the Securities Act and any
applicable state securities laws, or (b) an exemption from the requirements of
the Securities Act and applicable state securities laws.
Such Purchaser understands that an exemption from such registration is
not presently available pursuant to Rule 144 promulgated under the Securities
Act by the Securities and Exchange Commission (the "Commission") and that in any
----------
event such Purchaser may not sell any securities pursuant to Rule 144 prior to
the expiration of a one-year period after such Purchaser has acquired the
securities. Such Purchaser understands that any sales pursuant to Rule 144 may
only be made in full compliance with the provisions of Rule 144.
6.2 Location of Principal Office and Qualification as Accredited
------------------------------------------------------------
Investor. The state in which such Purchaser's principal office (or domicile,
- --------
if such Purchaser is an individual) is located is set forth in such Purchaser's
address in Schedule A hereto. Such Purchaser is familiar with the definition of
"Accredited Investor" set forth in Rule 501 under the Securities Act and such
Purchaser hereby certifies that it qualifies as an Accredited Investor. Such
Purchaser has such knowledge and experience in financial and business matters
that such Purchaser is capable of evaluating the merits and risks of the
investment to be made hereunder by such Purchaser. Such Purchaser has and has
had access to all of the Company's material books and records and access to the
Company's executive officers has been provided to such Purchaser or to such
Purchaser's qualified agents.
6.3 Acts and Proceedings. This Agreement has been duly authorized by
--------------------
all necessary action on the part of such Purchaser, has been duly executed and
delivered by such Purchaser, and is a valid and binding agreement upon the part
of such Purchaser.
6.4 No Brokers or Finders. Except for the transaction fees referred to
---------------------
in Sections 7.12 and 8.9, no person, firm or corporation has acted, directly or
indirectly, as a broker, finder or financial advisor for the Purchasers in
connection with the transactions contemplated by this Agreement and no person,
firm or corporation is entitled to any fee or
18
<PAGE>
commission or like payment in respect thereof, in each case for which the
Company would be liable.
7. Conditions of Each Purchaser's Obligation at the Phase I Closing.
----------------------------------------------------------------
The obligation to purchase and pay for the Purchased Securities which each
Purchaser has agreed to purchase on the Phase I Closing Date is subject to the
fulfillment prior to or on the Phase I Closing Date of the following conditions
(any or all of which may be waived by the Purchasers in whole or in part to the
extent permitted by applicable law). In the event that any such condition is
not satisfied to the satisfaction of each Purchaser, or in the event that any of
the Purchasers does not proceed with the purchase of the number of Purchased
Securities it has committed to purchase, then no Purchaser shall be obligated to
proceed with the purchase of such Purchased Securities.
7.1 No Errors, Etc. The representations and warranties of the Company
---------------
under this Agreement shall be true in all material respects as of the Phase I
Closing Date with the same effect as though made on and as of the Phase I
Closing Date.
7.2 Compliance with Agreement. The Company shall have performed and
-------------------------
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Phase I Closing Date.
7.3 Material Adverse Change. Nothing shall have occurred that would
-----------------------
constitute a Material Adverse Effect since the Balance Sheet Date.
7.4 Legal Proceedings. No legal actions, suits, arbitrations, claims
-----------------
or other legal, administrative or governmental proceedings shall have been
instituted or threatened or claim or demand made against the Company or the
Purchasers seeking to restrain or prohibit or to obtain substantial damages with
respect to the consummation of the transactions contemplated hereby and there
shall not be in effect any order by a governmental body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby.
7.5 Consents. The Company shall have obtained all required consents
--------
of third parties to the transactions contemplated hereby, including those
required under the Company's outstanding credit facilities, the 1997 Stock
Purchase Agreement and the Articles of Incorporation, and waivers of any
preemptive rights granted under the 1997 Stock Purchase Agreement and all
waivers and consents with respect to all Phase II Closings. In addition, the
Company shall have obtained the consent of the holders of Series A Preferred
Shares (the "Series A Preferred Shareholders") and the holders of the Series B
------------------------------
Preferred Shares (the "Series B Preferred Shareholders") to Sections 9.9 and
-------------------------------
29 hereof, and, if necessary, the consent of the holders of Common Stock (the
"Common Shareholders") to Section 9.9. Furthermore, the Company shall have
-------------------
obtained waivers or modifications of all registration rights granted by the
Company so that they are not inconsistent with Section 13 of this Agreement.
7.6 Certificate of Officers. The Company shall have delivered to the
-----------------------
Purchasers a certificate, dated the Phase I Closing Date, executed by the Chief
Executive Officer
19
<PAGE>
and the senior financial officer of the Company and certifying to the
satisfaction of the conditions specified in Sections 7.1, 7.2, 7.3, 7.4 and 7.8
hereof.
7.7 Opinion of Company's Counsel. The Company shall have delivered to
----------------------------
each of the Purchasers an opinion or opinions of Faegre & Benson LLP, counsel
for the Company, dated the Phase I Closing Date, to the effect that:
(a) The Company and each of its Subsidiaries is a duly and validly
existing corporation in good standing under the laws of the state of its
incorporation; has the corporate power and authority to own and hold its
properties owned and leased and to carry on the business in which it is
engaged; and has the corporate power and authority to enter into this
Agreement, to issue and sell the Series C Preferred Shares and the
Conversion Stock as contemplated by this Agreement, and to carry out the
provisions of this Agreement.
(b) This Agreement has been duly authorized, executed and delivered by
the Company, and is a legal, valid and binding obligation of the Company
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, moratorium, reorganization
or similar laws affecting the enforcement of creditors' rights generally, and
except for judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
(c) The Stockholders' Agreement, substantially in the form set forth as
Exhibit 2 hereto, and the Articles, substantially in the form set forth as
Exhibit 1 hereto, have been duly adopted by all necessary corporate action,
and have been duly filed with the Secretary of State of the State of
Minnesota (no other or additional filing or recording being necessary in
order to perfect the rights and privileges of the holders of the Series C
Preferred Shares contained therein).
(d) The Series C Preferred Shares are entitled to the rights,
preferences and provisions of the Articles.
(e) The Purchased Securities have been duly authorized and delivered by
the Company and are fully paid and nonassessable, and the certificates for
the Purchased Securities are in valid and sufficient form, and the Purchased
Securities are entitled to the benefits of this Agreement applicable thereto.
(f) The Conversion Stock has been duly authorized and reserved for
issuance upon conversion of the Series C Preferred Shares based upon the
initial Series C Conversion Price, and when issued upon such conversion in
accordance with the terms and conditions of the Series C Preferred Shares and
those of this Agreement the Conversion Stock will be duly authorized and
validly issued and will be fully paid and nonassessable.
20
<PAGE>
(g) The CVR Stock has been duly authorized and reserved for issuance
pursuant to the CVRs, and when issued in accordance with the terms and
conditions of the CVRs and those of this Agreement the CVR Stock will be
duly authorized and validly issued and will be fully paid and
nonassessable.
(h) All corporate proceedings required by law or by the provisions of
this Agreement to be taken by the Board of Directors and the shareholders
of the Company on or prior to the Phase I Closing Date in connection with
the execution and delivery of this Agreement, the offer, issuance and sale
of the Purchased Securities, the Conversion Stock and the CVR Stock and in
connection with the consummation of the transactions contemplated by this
Agreement, have been duly and validly taken.
(i) Immediately upon giving effect to the Articles and the issuance
and sale of the Purchased Securities at the Phase I Closing pursuant to
this Agreement, the Company is authorized by its Articles of Incorporation
to issue 28,500,000 shares, of which 19,650,000 are designated common
shares, 2,396,800 are designated series A convertible preferred shares,
2,100,000 are designated as series B convertible preferred shares,
3,679,053 are designated series C convertible preferred shares and 674,147
are undesignated. Except for such Series A Preferred Shares, Series B
Preferred Shares, Series C Preferred Shares and such common shares, the
Company has no other authorized or outstanding series or class of capital
stock, and, to the knowledge of such counsel, there are no outstanding
securities convertible into common shares of the Company or outstanding
options, warrants or other rights to acquire securities of the Company,
other than (a) the Preferred Shares, and (b) options, warrants and
Convertible Securities disclosed in Schedule 5.13 to this Agreement. To
-------------
the knowledge of such counsel, there are no agreements or understandings on
the part of the Company with respect to the registration of any securities
of the Company under the Securities Act, other than those granted under
this Agreement and as otherwise disclosed in Schedule 5.21 to this
-------------
Agreement, and there are no obligations on the part of the Company to
purchase or redeem any outstanding shares of capital stock of the Company,
other than as set forth in the Articles and as otherwise disclosed in
Schedule 5.13 to this Agreement.
-------------
(j) No security holder of the Company is entitled to preemptive or,
to the best of such counsel's knowledge, similar rights to subscribe for or
to purchase any shares of capital stock of the Company except as otherwise
contemplated by this Agreement, the 1997 Stock Purchase Agreement and the
stock purchase warrants issued in connection with the Company's Senior
Subordinated Loan and Security Agreement dated as of October 31, 1997 and
the First Amendment thereto dated as of May 19, 1998, nor will any security
holder of the Company be entitled to any such rights as a result of the
execution or delivery of this Agreement or the issuance of the Purchased
Securities, the Conversion Stock or the CVR Stock.
21
<PAGE>
(k) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof and assuming that the limitations on the
manner of offering contained in Rule 502(c) of the Securities Act have been
complied with, the Company has obtained the approval or consent of all
governmental agencies or bodies required to be obtained by it for the legal
and valid execution and delivery of this Agreement and the legal and valid
offer, issuance and sale of the Purchased Securities, the offer of the
Conversion Stock to the Purchasers through conversion by them of the Series
C Preferred Shares and the offer of the CVR Stock to the Purchasers
issuable pursuant to the CVRs and for the performance of the obligations of
the Company under any provisions of this Agreement. To the best of such
counsel's knowledge, neither the Company nor any of its Subsidiaries is in
violation of any term, provision or condition of its Articles of
Incorporation or Bylaws; and the execution, delivery and performance of
this Agreement by the Company, the offer, issuance and sale of the
Purchased Securities, the Conversion Stock and the CVR Stock and the
consummation of the transactions contemplated by this Agreement by the
Company will not result in any breach or violation of the terms or
provisions of, or constitute a default under, the Articles of Incorporation
or the Bylaws of the Company or its Subsidiaries; or in violation of any
agreement listed on Schedule 5.15 attached to this Agreement or any
-------------
judgment, decree or order specifically directed to the Company or any
Subsidiary listed on Schedule 5.8 to this Agreement, or any statute, rule
------------
or regulation.
(l) Assuming the accuracy of the representations of the Purchasers
set forth in Section 6 hereof and assuming that the limitations on the
manner of offering contained in Rule 502(c) of the Securities Act have been
complied with, the offer, sale, issuance and delivery of the Purchased
Securities, the offer of the Conversion Stock to the Purchasers through
conversion by them of the Series C Preferred Shares and the offer of the
CVR Stock to the Purchasers issuable pursuant to the CVRs under the
circumstances contemplated by the CVRs, the Articles and this Agreement are
exempt from the registration and prospectus delivery requirements of the
Securities Act, and all registrations, qualifications, permits and
approvals required under applicable state securities laws for the lawful
offer, sale, issuance and delivery of the Purchased Securities, the
Conversion Stock and the CVR Stock have been obtained.
(m) Except as otherwise disclosed in Schedule 5.8 to this Agreement,
such counsel have no knowledge of any litigation, proceeding or
governmental investigation pending or threatened in writing against the
Company or its Subsidiaries, its key management employees, properties or
business which, if determined adversely to the Company or its Subsidiaries,
would have a Material Adverse Effect.
7.8 No Event of Default. There shall exist at the time of the Phase I
-------------------
Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or
22
<PAGE>
which, after notice or lapse of time or both, would constitute an Event of
Default.
7.9 Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws for the lawful execution and delivery of this Agreement and the offer,
sale, issuance and delivery of the Purchased Securities, the offer of the
Conversion Stock and the offer of the CVR Stock shall have been obtained.
7.10 Proceedings and Documents. All corporate and other proceedings
-------------------------
and actions taken in connection with the transactions contemplated hereby and
all certificates, opinions, agreements, instruments and documents mentioned
herein or incident to any such transaction shall be satisfactory in form and
substance to the Purchasers and their special counsel.
7.11 Stockholders' Agreement. Each of the Series A Shareholders (as
-----------------------
hereinafter defined), the Series B Shareholders (as hereinafter defined), the
Purchasers and Philip A. Roberts, Peter J. Mihajlov, Don W. Hays, David Roberts,
Barbara Marshall, Joseph Micatrotto, Joanne Roberts, Linda Hays, Martha
Mihajlov, the Mihajlov Family Limited Partnership, the Mihajlov Irrevocable
Grandchildren's Trust and the Hays Family Limited Partnership shall have entered
into the Stockholders' Agreement with the Purchasers substantially in the form
of Exhibit 2 hereto.
7.12 Transaction Fee. The Company shall have paid Centre Partners
---------------
Management LLC a transaction commitment fee of $75,000, and the Company shall
have paid to each other Purchaser a transaction fee of 1.5% of the portion of
the Purchase Price paid by such Purchaser at the Phase I Closing.
7.13 Expenses. The Company shall have paid, or reimbursed the
--------
Purchasers for, all costs and expenses provided in Section 22 to be borne by the
Company upon consummation of the transactions contemplated hereby.
8. Conditions of Each Centre Purchaser's Obligation at a Phase II
---------------------------------------------------------------
Closing. The obligation to purchase and pay for the Purchased Securities which
- -------
each Centre Purchaser has agreed to purchase at any Phase II Closing Date is
subject to the fulfillment prior to or on the Phase II Closing Date of the
following conditions (any or all of which may be waived by the Centre Purchasers
in whole or in part to the extent permitted by applicable law).
8.1 No Errors, Etc. The representations and warranties of the
--------------
Company under this Agreement shall be true in all material respects as of the
Phase II Closing Date with the same effect as though made on and as of the Phase
II Closing Date; provided, that the failure of any such representation and
warranty to be so true shall not be a condition to the Centre Purchasers
obligations if either (i) such failure was caused by or results from an action
approved by the Board of Directors of the Company with the Series C Preferred
Shares designee voting in favor of such action or (ii) all such failures, in the
aggregate, have not and could not reasonably be expected to have a Material
Adverse Effect.
23
<PAGE>
8.2 Compliance with Agreement. The Company shall have performed and
-------------------------
complied with all agreements or conditions required by this Agreement to be
performed and complied with by it prior to or as of the Phase II Closing Date.
8.3 Legal Proceedings. No legal actions, suits, arbitrations, claims
-----------------
or other legal, administrative or governmental proceedings shall have been
instituted or threatened or claim or demand made against the Company or the
Centre Purchasers seeking to restrain or prohibit or to obtain substantial
damages with respect to the consummation of the transactions contemplated hereby
and there shall not be in effect any order by a governmental body of competent
jurisdiction restraining, enjoining or otherwise prohibiting the consummation of
the transactions contemplated hereby.
8.4 Consents. The Company shall have obtained all required consents
--------
of third parties to the transactions contemplated hereby.
8.5 Certificate of Officers. The Company shall have delivered to the
-----------------------
Centre Purchasers a certificate, dated the Phase II Closing Date, executed by
the Chief Executive Officer and the senior financial officer of the Company and
certifying to the satisfaction of the conditions specified in Sections 8.1, 8.2,
8.3 and 8.7 hereof.
8.6 Opinion of Company's Counsel. The Company shall have delivered to
----------------------------
each of the Centre Purchasers an opinion or opinions of Faegre & Benson LLP,
counsel for the Company, dated the Phase II Closing Date, in substantially the
form as set forth in Section 7.7 hereof.
8.7 No Event of Default. There shall exist at the time of the Phase
-------------------
II Closing no condition or event which would constitute an Event of Default or
which, after notice or lapse of time or both, would constitute an Event of
Default.
8.8 Qualification Under State Securities Laws. All registrations,
-----------------------------------------
qualifications, permits and approvals required under applicable state securities
laws for the lawful offer, sale, issuance and delivery of the Purchased
Securities, the offer of the Conversion Stock and the offer of the CVR Stock
shall have been obtained.
8.9 Transaction Fee. The Company shall have paid Centre Partners
---------------
Management LLC a prorated portion of a transaction fee of $75,000 based on the
ratio that 975,610 bears to the number of Series C Preferred Shares purchased at
such Phase II Closing.
8.10 Expenses. The Company shall have paid, or reimbursed the Centre
--------
Purchasers for, all costs and expenses provided in Section 22 to be borne by the
Company upon consummation of the transactions contemplated hereby.
9. Affirmative Covenants. Subject to the provisions of Section 15 hereof,
---------------------
the Company covenants and agrees that:
24
<PAGE>
9.1 Corporate Existence. Except in the event of the merger or
-------------------
consolidation of a Subsidiary with another Subsidiary or into the Company, the
Company will maintain and cause each Subsidiary (as hereinafter defined) to
maintain its corporate existence in good standing and comply with all applicable
laws and regulations of the United States or of any state or states thereof or
of any political subdivision thereof and of any governmental authority where
failure to so comply would have a material adverse impact on the Company or its
business or operations.
9.2 Books of Account and Reserves. The Company will, and will cause
-----------------------------
each of its Subsidiaries to, keep books of record and account in which full,
true and correct entries are made of all of its and their respective dealings,
business and affairs, in accordance with GAAP consistently applied. The Company
will employ certified public accountants selected by the Board of Directors of
the Company who are "independent" within the meaning of the accounting
regulations of the Commission and who are either one of the so-called "Big Five"
accounting firms or an otherwise nationally recognized accounting firm, and have
annual audits made by such independent public accountants in the course of which
such accountants shall make such examinations, in accordance with generally
accepted auditing standards, as will enable them to give such reports or
opinions with respect to the financial statements of the Company and its
Subsidiaries as will satisfy the requirements of the Commission in effect at
such time with respect to certificates and opinions of accountants.
9.3 Furnishing of Financial Statements and Information. The Company
--------------------------------------------------
will deliver to each Purchaser and to each Preferred Shareholder that holds at
least five percent (5%) of any series of Preferred Shares:
(a) as soon as practicable, but in any event within 30 days after the
close of each month, unaudited consolidated balance sheets of the Company
and its Subsidiaries as of the end of such month, together with the related
consolidated statements of operations for such month, setting forth the
budgeted figures for such month prepared and submitted in connection with
the Company's annual plan as required under Section 9.5 hereof and in
comparative form figures for the corresponding month of the previous fiscal
year, all in reasonable detail and certified by an authorized accounting
officer of the Company, subject to year-end adjustments;
(b) as soon as practicable, but in any event within 120 days after
the end of each fiscal year, a consolidated balance sheet of the Company
and its Subsidiaries, as of the end of such fiscal year, together with the
related consolidated statements of operations, shareholders' equity and
cash flow for such fiscal year, setting forth in comparative form figures
for the previous fiscal year, all in reasonable detail and duly certified
by the Company's independent public accountants, which accountants shall
have given the Company an opinion, unqualified as to the scope of the
audit, regarding such statements;
25
<PAGE>
(c) within 120 days after the end of each fiscal year, written notice
of any change during the past fiscal year of the Conversion Price for the
Preferred Shares, including a brief statement indicating any adjustments
reasonably anticipated;
(d) concurrently with the delivery in each year of the financial
statements referred to in paragraph (b) of this Section 9.3, a statement
and report signed by the independent public accountants who certified such
financial statements to the effect that they have read this Agreement and
that in the course of the audit upon which their certificate was based they
became aware of no condition or event which constituted an Event of Default
or which, after notice or lapse of time or both, would constitute an Event
of Default or if such accountants did become aware of any such condition or
event, specifying the nature and period of existence thereof;
(e) promptly after the submission thereof to the Company, copies of
all reports and recommendations submitted by independent public accountants
in connection with any annual or interim audit of the accounts of the
Company or any of its Subsidiaries made by such accountants;
(f) promptly upon transmission thereof, copies of all reports, proxy
statements, registration statements and notifications filed by it with the
Commission pursuant to any act administered by the Commission or furnished
to stockholders of the Company or to any national securities exchange;
(g) with reasonable promptness, such other financial data relating to
the business, affairs and financial condition of the Company and any
Subsidiaries as is available to the Company and as from time to time the
Preferred Shareholders may reasonably request;
(h) promptly following the issuance of any Additional Shares of
Common Stock or of any Convertible Securities, or any options, warrants or
other rights to purchase Additional Shares of Common Stock or Convertible
Securities (other than the issuance of any such securities pursuant to key
employee and consultant benefit plans adopted by the Company's Board of
Directors), as these terms are hereinafter defined, written notice of the
amount of securities so issued and the total consideration received
therefor;
(i) at least 20 days prior to the earlier of (i) the execution of any
agreement relating to any merger or consolidation of the Company or any of
its Subsidiaries with another corporation, or a plan of exchange involving
the outstanding capital stock of the Company or any of its Subsidiaries, or
the sale, transfer or other disposition of all or substantially all of the
property, assets or business of the Company or any of its Subsidiaries to
another corporation, or (ii)
26
<PAGE>
the holding of any meeting of the shareholders of the Company for the
purpose of approving such action, written notice of the terms and
conditions of such proposed merger, consolidation, plan of exchange, sale,
transfer or other disposition;
(j) within 15 days after the Company learns in writing of the
commencement or threatened commencement of any material suit, legal or
equitable, or of any material administrative, arbitration or other
proceeding against the Company, any of its Subsidiaries or their respective
businesses, assets or properties, written notice of the nature and extent
of such suit or proceeding;
(k) as soon as reasonably practical after the written request of any
Preferred Shareholder that is an SBIC, confirm the use of the proceeds as
described in Section 5.27 hereof; and
(l) promptly furnish to each Preferred Shareholder that is an SBIC
all information necessary in order for such Preferred Shareholder to
prepare and file SBA Form 468 and other information requested or required
by any governmental authority asserting jurisdiction over such Preferred
Shareholder, such information to be provided within 20 days of such
Preferred Shareholder's request, but in no event shall such Preferred
Shareholder request any information that has previously been disclosed
pursuant to the reporting requirements set forth herein.
9.4 Inspection. The Company will permit each Preferred Shareholder
----------
and any of its partners, officers or employees, or any outside representatives
designated by such Preferred Shareholder and reasonably satisfactory to the
Company, to visit and inspect at such Preferred Shareholder's expense any of the
properties of the Company or its Subsidiaries, including their books and records
(and to make photocopies thereof or make extracts therefrom), and to discuss
their affairs, finances, and accounts with their officers, lawyers and
accountants, except with respect to trade secrets and similar confidential
information, all to such reasonable extent and at such reasonable times and
intervals as such Preferred Shareholder may reasonably request. Except as
otherwise required by laws or regulations applicable to a Preferred Shareholder,
the Preferred Shareholders shall maintain, and shall require their
representatives to maintain, all information obtained pursuant to Section 9.3
hereof, this Section 9.4 and Section 9.5 hereof on a confidential basis.
9.5 Preparation and Approval of Budgets. At least one month prior to
-----------------------------------
the beginning of each fiscal year of the Company, the Company shall prepare and
submit to its Board of Directors, for its review and approval, an annual plan
for such year (the "Annual Plan"), which shall include monthly capital and
-----------
operating expense budgets, cash flow statements and profit and loss projections
itemized in such detail as the Board of Directors may reasonably request. The
Annual Plan shall also include, without limitation, a development plan for
restaurants for the ensuing year including plans for market locations of such
restaurants, estimated timing of openings and a budget of expenses. Each Annual
Plan shall be modified as often as is necessary in the judgment of the Board of
Directors to reflect changes required as a result of operating results and other
events that occur, or may be reasonably expected to occur,
27
<PAGE>
during the year covered by the Annual Plan, and copies of each such modification
shall be submitted to the Board of Directors. Each Annual Plan, or modification
thereof, must be approved by at least 66-2/3% of the members of the Board of
Directors. The Company will, simultaneously with the submission thereof to the
Board of Directors, deliver a copy of each such annual plan and modification
thereof to each Preferred Shareholder. Each site for a new restaurant shall be
approved by a real estate site selection committee comprised of six members
selected by the Board of Directors in the same manner the Annual Plan is
approved from members of the Board of Directors and senior management, at least
one of which shall be the member of the Board of Directors elected by the
holders of the Series C Preferred Shares. Each new restaurant site shall be
approved by four of the six members of such committee; provided, however, that
each site so approved shall be in accordance with the Annual Plan then in
effect.
9.6 Payment of Taxes and Maintenance of Properties. The Company will,
----------------------------------------------
and will cause each Subsidiary to:
(a) pay and discharge promptly, or cause to be paid and discharged
promptly when due and payable, all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or upon any of its
properties, as well as all material claims of any kind (including claims
for labor, material and supplies) which, if unpaid, might by law become a
lien or charge upon its property; provided, however, that neither the
Company nor any Subsidiary shall be required to pay any such tax,
assessment, charge, levy or claim if the amount, applicability or validity
thereof shall currently be contested in good faith by appropriate
proceedings and if the Company or such Subsidiary as the case may be shall
have set aside on its books reserves (segregated to the extent required by
GAAP) deemed adequate by it with respect thereto; and
(b) maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition, and from time to
time make, or cause to be made, all repairs and renewals and replacements
which in the opinion of the Company are necessary and proper so that the
business carried on in connection therewith may be properly and
advantageously conducted at all times; the Company will maintain or cause
to be maintained back-up copies of all valuable papers and software.
9.7 Insurance. The Company will, and will cause each Subsidiary to,
---------
obtain and maintain in force such property damage, public liability, business
interruption, worker's compensation, indemnity bonds and other types of
insurance as the Company's executive officers, after consultation with an
accredited insurance broker, shall determine to be necessary or appropriate to
protect the Company from the insurable hazards or risks associated with the
conduct of the Company's business. In addition, the Company shall maintain
director and officer insurance in the amounts and substantially the terms set
forth in Schedule 5.17. The Company's executive officers shall periodically
-------------
report to the Board of Directors on the status of such insurance coverage.
28
<PAGE>
All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company or any Subsidiary may effect worker's compensation or similar insurance
in respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self-insurance which is in accord with
applicable laws.
9.8 Payment of Indebtedness and Discharge of Obligations. The Company
----------------------------------------------------
will, and will cause each Subsidiary to, pay or cause to be paid the principal
of and interest and premium, if any, on all Indebtedness for Borrowed Money
heretofore or hereafter incurred or assumed by it when and as the same shall
become due and payable, unless such Indebtedness for Borrowed Money is renewed
or extended. The Company will, and will cause each Subsidiary to, faithfully
observe, perform and discharge all of the material covenants, conditions and
obligations which are imposed on it by any and all indentures and other
agreements securing or evidencing such Indebtedness for Borrowed Money or
pursuant to which such Indebtedness for Borrowed Money is issued, and will not
permit the continuance of any act or omission which is or under the provisions
thereof may be declared to be a material default thereunder, unless such default
is waived pursuant to the provisions thereof. Neither the Company nor any
Subsidiary shall be required to make any payment or to take any other action by
reason of this Section 9.8 at any time while it shall be currently contesting in
good faith by appropriate proceedings its obligations to make such payment or to
take such action provided that the Company or such Subsidiary, as the case may
be, shall have set aside on its books reserves (segregated to the extent
required by GAAP) deemed adequate by it with respect thereto.
9.9 Directors' and Shareholders' Meetings; Board Committees. The
-------------------------------------------------------
Series A Preferred Shareholders shall have the right to elect two directors of
the Company (the "Series A Preferred Stock Directors") as set forth in the
----------------------------------
Articles. Each Series A Preferred Shareholder agrees to vote or execute written
consents in respect of such Series A Preferred Shareholder's respective shares
of Series A Preferred Stock now owned or hereafter acquired, at all regular,
special or adjourned meetings of the Series A Preferred Shareholders of the
Company at which such Series A Preferred Shareholders are entitled to vote such
shares in respect of the election of directors to be elected by the Series A
Preferred Shareholders, or in connection with any written action in lieu
thereof, for the following persons: (i) one person nominated by Norwest Equity
Partners V, or its successors or assigns; and (ii) one person nominated by
Consumer Venture Partners II, L.P.; provided, however, that upon such time as a
-------- -------
current Series A Preferred Shareholder, other than Norwest Equity Partners V,
holds, together with such Series A Preferred Shareholder's Affiliates, a number
of shares exceeding 130% of the number of shares held by Consumer Venture
Partners II, L.P. and its Affiliates, such Series A Preferred Shareholder shall
then make the nomination provided under clause (ii) of this section. Such
persons so nominated shall constitute both of the two Series A Preferred Stock
Directors.
The holders of the Series C Preferred Shares (the "Series C Preferred
------------------
Shareholders") shall have the right to elect one director of the Company (the
- ------------
"Series C Preferred Stock Director") as set forth in the Articles, which
---------------------------------
director shall serve on the real estate site
29
<PAGE>
selection and compensation committees of the Board of Directors, and in the
event the number of directors of the Company's Board of Directors shall be
increased above seven (7), then the Series C Preferred Shareholders shall have
the right to elect one or more additional directors so that the percentage of
directors elected by the Series C Preferred Shareholders shall not be less than
the percentage of the directors elected by the Series C Preferred Shareholders
as of the Phase I Closing (provided, that the first such additional director
--------
shall be elected jointly by the holders of the Series A Preferred Shares and the
Series C Preferred Shares, voting together as a class).
The Common Shareholders shall have the right to elect two directors of
the Company as provided in the Articles. The remaining two directors (the
"Remaining Directors") shall be elected by the Preferred Shareholders and the
-------------------
Common Shareholders as provided in the Articles. In electing the Remaining
Directors, the Company, the Preferred Shareholders and the Common Shareholders
agree that they shall cause to be nominated and shall vote or execute written
consents in respect of such Preferred Shareholder's respective Preferred Shares
now owned or hereafter acquired, at all regular, special or adjourned meetings
of the Preferred Shareholders of the Company at which such Preferred
Shareholders are entitled to vote such shares in respect of the election of
directors to be elected by the Preferred Shareholders, or in connection with any
written action in lieu thereof, for the following persons: (i) the incumbent
chief executive officer of the corporation, (ii) a person chosen jointly by the
Common Shareholders and the Preferred Shareholders, but in any case approved by
the holders of a majority of the Preferred Shares outstanding from time to time,
and (iii) upon expiration of any Remaining Director's term, persons nominated as
provided below. Except in the case of a directorship to be filled from time to
time by the incumbent chief executive officer of the Company, upon expiration of
the term of any Remaining Director then in office, or if any Remaining Director
shall cease to serve in such capacity for any other reason, the Remaining
Directors who shall thereafter be nominated and elected shall be individuals
approved by the holders of a majority of the Preferred Shares outstanding. Such
persons shall be nominated to serve as Remaining Directors by the affirmative
vote of a majority of the remaining members of the Board of Directors.
The Company shall reimburse such holders of Series A Preferred Shares
and Series C Preferred Shares for the reasonable out-of-pocket expenses incurred
by them or the directors elected by them pursuant to the Articles in connection
with the attending of meetings by their director designees or carrying out any
other duties by such director designees that may be specified by the Board of
Directors. The Company (i) shall pay the same director's fees to the Series A
Preferred Stock Directors and the Series C Preferred Stock Director as it pays
to directors who are not employees of the Company and (ii) shall grant the same
stock options to the Series A Preferred Stock Directors and the Series C Stock
Director as it grants to directors who are not employees of the Company under
the Company's policies now in effect; provided, that the Company, by vote of a
--------
majority of its directors, shall have the discretion and authority to grant
different or more substantial option packages to future directors who are not
employees of the Company or representatives or designees of stockholders of the
Company, and neither the Series A Preferred Stock Directors or the Series C
Stock Director shall have the right to require the Company to grant them similar
or the same option packages as such future directors. The Company shall
maintain as part of its Articles of Incorporation or Bylaws a provision for the
30
<PAGE>
indemnification of its directors to the full extent permitted by law.
So long as an officer or partner or employee of a Preferred
Shareholder or an Affiliate thereof is not a director of the Company, the
Company shall notify such Preferred Shareholder of all regular meetings and
special meetings of the Board of Directors of the Company at least two business
days in advance of such meetings, and afford any representative designated by
such Preferred Shareholder the right and opportunity to attend any such meeting.
Such right to attend the meetings of the Board of Directors shall extend only to
Preferred Shareholders who, together with any Affiliates thereof, hold at least
250,000 Series A Preferred Shares, 250,000 Series B Preferred Shares or 250,000
Series C Preferred shares. Such representative shall be entitled to receive all
written materials and other information given to directors of the Company in
connection with any such meeting at the time such materials or information are
given to such directors.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders on or approximately on the date provided in
its Bylaws.
9.10 Replacement of Certificates Representing Preferred Shares or
------------------------------------------------------------
Conversion Stock. Upon receipt of evidence reasonably satisfactory to the
- ----------------
Company of the loss, theft, destruction or mutilation of any certificates
representing Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares, CVRs or any shares of stock issued upon conversion thereof or
in exchange therefor, and, in the case of any such loss, theft or destruction,
upon delivery of a bond of indemnity satisfactory to the Company, or, in the
case of any such mutilation, upon surrender and cancellation of the certificates
representing Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares, CVRs or any shares of stock issued upon conversion thereof or
in exchange therefor, as the case may be, the Company will issue new
certificates representing such Preferred Shares or any shares of stock issued
upon conversion thereof or in exchange therefor, as the case may be, of like
tenor, in lieu of such lost, stolen, destroyed or mutilated certificates
representing such Preferred Shares or any shares of stock issued upon conversion
thereof or in exchange therefor, as the case may be.
9.11 Application of Proceeds. Unless otherwise approved by the
-----------------------
Preferred Shareholders, the net proceeds received by the Company from the sale
of the Purchased Securities shall be used substantially for development and
construction of additional restaurants, working capital and for general
corporate purposes. Pending use of the proceeds in the business, they shall be
deposited in a bank or banks having deposits of $125,000,000 or more, invested
in money market mutual funds having assets of $500,000,000 or more, or invested
in securities issued or guaranteed by the United States Government.
9.12 Retirement Plans. The Company will cause each retirement plan
----------------
of the Company or any of its Subsidiaries in which any employees of the Company
or of any of its Subsidiaries participate that is subject to the provisions of
ERISA and the documents and instruments governing each such plan to be conformed
to when necessary, and to be administered in a manner consistent with, those
provisions of ERISA which may, from time to time, become
31
<PAGE>
effective and operative with respect to such plans; if requested by the
Preferred Shareholders in writing from time to time, furnish to the Preferred
Shareholders a copy of any annual report with respect to each such plan that the
Company files with the Secretary of Labor pursuant to ERISA; and at such time as
such insurance shall be available at rates deemed commercially reasonable by the
Company, maintain insurance against the contingent liability imposed in respect
of each such plan by the provisions of ERISA.
9.13 Filing of Reports. The Company will, from and after such time
-----------------
as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to the
Securities Act, make timely filing of such reports as are required to be filed
by it with the Commission so that Rule 144 under the Securities Act or any
successor provision thereto will be available to the security holders of the
Company who are otherwise able to take advantage of the provisions of such Rule.
9.14 Patents and Other Intangible Rights. The Company will apply
-----------------------------------
for, or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessman operating in the industry in
which the Company is operating are desirable or necessary for the conduct and
protection of the business of the Company.
9.15 Insurance on Lives of Key Personnel. The Company will maintain
-----------------------------------
life insurance under the current policy (or a substantially equivalent policy)
on the life of Joseph Micatrotto so long as Mr. Micatrotto is an employee of the
Company. Such policy shall name the Company as the beneficiary thereunder, and
shall be in addition to any policy or policies maintained by the Company to fund
potential stock repurchase obligations of the Company.
9.16 Rights to Purchase Additional Securities. If the Company should
----------------------------------------
decide to issue and sell additional shares of any capital stock of the Company
or any warrants, securities convertible into capital stock of the Company or
other rights to subscribe for or to purchase any capital stock of the Company,
other than (a) shares of Common Stock sold to the public pursuant to a
registration statement filed under the Securities Act, if such offering is
underwritten on a firm commitment basis by an underwriter, or group of
underwriters represented by an underwriter or underwriters, which is a member of
the New York Stock Exchange, (b) (i) shares of Common Stock awarded or issued
upon the exercise of options granted pursuant to employee and consultant benefit
plans adopted by the Company, and the grant of such options themselves, provided
that the aggregate number of shares thus awarded and issued and issuable
pursuant to the exercise of all such options shall not be in excess of 1,500,000
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the Phase I
Closing Date), or (ii) up to 24,000 shares of Common Stock issued upon exercise
of an option granted to its Minneapolis landlord (appropriately adjusted in
accordance with the terms thereof), (c) shares of Common Stock issued upon
conversion of the Company's outstanding Series A Convertible Subordinated
Debentures (appropriately adjusted in accordance with the terms thereof), (d)
shares of Series A Preferred Shares issued upon exercise of warrants to Piper
Jaffray Inc. for 112,000 shares and to Michael L. Bochert for 44,800 shares (the
"1996 Warrants") or shares of Common Stock issued upon conversion of such Series
-------------
A Preferred
32
<PAGE>
Shares (appropriately adjusted in accordance with the terms thereof) (the "1996
----
Warrant Stock"), (e) shares of Common Stock issued upon conversion of the Series
- -------------
A Preferred Shares and the Series B Preferred Shares, (f) warrants to purchase
up to 50,000 shares of Series B Preferred Shares issued to Piper Jaffray at the
initial Closing of the 1997 Stock Purchase Agreement ("1997 Warrants"), any
-------------
shares of Series B Preferred Shares issued upon the exercise of such warrants,
and any shares of Common Stock issued upon conversion of such Series B Preferred
Shares (appropriately adjusted in accordance with the terms thereof) (the "1997
----
Warrant Stock"), (g) warrants to purchase up to 241,666 shares of Common Stock
- -------------
issued to Sirrom Capital Corporation and up to 132,917 shares of Common Stock
issued to Regent Capital Partners, L.P. and any shares of Common Stock issued
upon the exercise of such warrants (appropriately adjusted in accordance with
the terms thereof) (the "Financing Warrants"), (h) shares of Series C Preferred
------------------
Stock issued upon the consummation of any Phase II Closing, (i) warrants to
purchase 100,000 shares of Common Stock issued to the Series B Preferred
Shareholders as of October 31, 1997 and any shares of Common Stock issued upon
the exercise of such warrants (appropriately adjusted in accordance with the
terms thereof), (j) Series C Preferred Shares or Common Shares issued upon
conversion of the CVRs or (k) shares of Common Stock issued upon conversion of
the Series C Preferred Shares (all such capital stock, warrants, securities
convertible into capital stock and other rights, other than securities referred
to in (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) above, being
hereinafter sometimes collectively referred to as "Additional Securities"), the
---------------------
Company shall first offer to sell to each of the Preferred Shareholders, or an
Affiliate thereof, upon the same terms and conditions as the Company is
proposing to issue and sell such Additional Securities to others, such Preferred
Shareholder's pro rata share (as defined below) of such Additional Securities.
Such offer shall be made by written notice given to each such Preferred
Shareholder and specifying therein the amount of the Additional Securities being
offered, the purchase price and other terms of such offer. Such Preferred
Shareholder shall have a period of 30 days from and after the date of receipt by
it of such notice within which to accept such offer. If a Preferred Shareholder
elects to accept such offer in whole or in part, such Preferred Shareholder
shall so accept by written notice to the Company given within such 30-day
period. If a Preferred Shareholder fails to accept such offer in whole or in
part within such 30-day period, any of such Additional Securities not purchased
by such Preferred Shareholder pursuant to such offer may be offered for sale to
others by the Company for a period of 90 days from the last day of such 30-day
period, but only on the same terms and conditions as set forth in the initial
offer to such Preferred Shareholder, free and clear of the restrictions imposed
by this Section 9.16.
For purposes of the previous paragraph, a Preferred Shareholder's "pro
rata share" is the number of shares of Additional Securities (rounded to the
nearest whole share) as is equal to the product of (a)(i) the number of shares
of Common Stock issued, or issuable upon the exercise or conversion of rights,
options or Convertible Securities without the payment of any additional cash
consideration or with the payment of a nominal cash consideration, as the case
may be (collectively, "Fully Paid Securities"), to such Preferred Shareholder
---------------------
immediately prior to the issuance of the Additional Securities being offered
divided by (ii) the total number of Fully Paid Securities issued or issuable by
the Company immediately prior to the issuance of the Additional Securities,
multiplied by (b)(i) if so approved by the affirmative vote of the holders of
two-thirds of the shares of Purchased Stock (as hereinafter defined) held by
Preferred
33
<PAGE>
Shareholders entitled by this Section 9.16 to purchase a portion of such
Additional Securities, that portion of the offering of Additional Securities
that remains after considering binding commitments to purchase that have been
received from persons other than the Preferred Shareholders, or (ii) if not so
approved, the entire offering of Additional Securities.
9.17 Rule 144A. The Company agrees that, upon the request of any
---------
holder of Series A Preferred Shares, Series B Preferred Shares, Series C
Preferred Shares or shares issued upon conversion thereof or exchange therefor,
or any prospective purchaser of such shares, the Company shall promptly provide
(but in any case within 15 days of a request) to such holder or potential
purchaser the following information: (a) a brief statement of the nature of the
business of the Company and its Subsidiaries and the products and services they
offer; (b) the Company's most recent consolidated balance sheets and profit and
loss and retained earnings statements, and similar financial statements for such
part of the two preceding fiscal years prior to such request as the Company has
been in operation (such financial information shall be audited, to the extent
reasonably available); and (c) such other information about the Company, its
Subsidiaries and their business, financial condition and results of operations
as the requesting person shall request in order to comply with Rule 144A
promulgated under the Securities Act and the antifraud provisions of the federal
and state securities laws.
The Company hereby represents and warrants to any such requesting
person that the information provided by the Company pursuant to this Section
9.17 will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
9.18 Net Worth. The Company agrees that it will at all times
---------
maintain Consolidated Tangible Net Worth (as hereinafter define d) in an amount
(a) after the Phase I Closing of at least equal to $11,785,000 plus ninety
percent (90%) of the gross proceeds to the Company from the Phase I Closing, and
(b) after the Phase II Closing of at least $11,785,000 plus ninety percent (90%)
of the gross proceeds to the Company from the Phase I Closing and the Phase II
Closing, in each case excluding one-time charges attributable to any early
repayment of the Company's outstanding senior subordinated debt.
9.19 Best Efforts. In the event the Centre Purchasers shall initiate
------------
a Phase II Closing pursuant to Section 2(d) hereof, the Company agrees to use
its best efforts to satisfy all the conditions and covenants required hereunder
for the consummation of such Phase II Closing.
9.20 Management Rights. As of the date of this Agreement, the
-----------------
Company shall grant the following management rights to Centre Capital Tax-Exempt
Investors II, L.P. and the State Board of Administration of Florida so long as
such Purchasers own an equity interest in the Company:
(a) the right to receive the same information as is provided to
members of the Board of Directors of the Company;
(b) upon a reasonable request of either Centre Capital Tax-Exempt
34
<PAGE>
Investors II, L.P. or the State Board of Administration of Florida and at
reasonable times during normal business hours, to receive income
statements, balance sheets, budgets, business plans and other financial
information and to inspect books and records of the Company; and
(c) upon a reasonable request and at reasonable times during normal
business hours, to meet and consult with management with respect to the
business of the Company.
The above-mentioned rights are intended to satisfy the requirement of
management rights for purposes of qualifying such Purchaser's ownership of the
Company as a venture capital investment for purposes of the Department of Labor
"plan asset" regulations, 29 C.F.R. (S) 2510.3-101.
The Purchasers subject to this Section 9.20 hereby agree to hold in
confidence, and refrain from disclosing to any unaffiliated third party, any
confidential or secret information regarding the Company provided hereunder
unless compelled to so disclose by any governmental, judicial or regulatory
authority, and except to the extent that any such information (i) is or becomes
generally available to the public through no fault of such Purchaser or (ii) is
or becomes available to the Purchasers from a source not known to the Purchasers
to be bound by a confidentiality obligation to the Company.
10. Negative Covenants. Subject to the provisions of Section 14 hereof,
------------------
the Company will be limited and restricted as follows:
10.1 Dividends on or Redemption of Junior Stock. Without the prior
------------------------------------------
approval of the Preferred Shareholders, the Company will not declare or pay any
dividend or make any other distribution on any shares of Junior Stock (as
hereinafter defined), other than those payable solely in shares of Junior Stock,
or purchase, redeem or otherwise acquire for any consideration (other than in
exchange for or out of the net cash proceeds of the contemporaneous issue or
sale of other shares of Junior Stock or debt securities convertible into other
shares of Junior Stock), or set aside a sinking fund or other fund for the
redemption or repurchase of any shares of Junior Stock or any warrants, rights
or options to purchase shares of Junior Stock, except for (i) repurchases of
Common Stock required by the Redemption Agreement dated September 30, 1996
between the Company and Parasole Restaurant Holdings, Inc., (ii) repurchases of
Common Stock required under the Company's Employee Stock Ownership Plan, (iii)
repurchases under the Financing Warrants, (iv) repurchases in accordance with
and pursuant to the Stockholders' Agreement, or (v) repurchases of capital stock
pursuant to options and awards to key employees and consultants granted with the
approval of the Company's Board of Directors under plans or agreements adopted
by the Company, including without limitation, the Company's 1996 Stock Incentive
Plan and the Paisano Partnership Program.
10.2 Future Registration Rights. Except for any registration
--------------------------
expressly permitted by Section 13 hereof and pursuant to registration rights
previously granted and disclosed in Schedule 5.21, the Company will not, without
-------------
the prior approval of the Preferred
35
<PAGE>
Shareholders, agree with the holders of any securities issued or to be issued by
the Company to register such securities under the Securities Act nor will it
grant any incidental registration rights.
10.3 Other Restrictions. The Company, without the prior approval of
------------------
a majority of the Board of Directors or a duly appointed committee thereof,
which majority shall include the Series C Preferred Stock Director and one of
the Series A Preferred Stock Directors:
(a) guarantee, endorse or otherwise be or become contingently liable,
or permit any Subsidiary to guarantee, endorse or otherwise become
contingently liable, in connection with the obligations, securities or
dividends of any person, firm, association or corporation, other than the
Company or any of its Subsidiaries, except that the Company and any
Subsidiary may endorse negotiable instruments for collection in the
ordinary course of business; or
(b) make or permit any Subsidiary to make loans or advances to any
person (including without limitation to any officer, director or
shareholder of the Company or any Subsidiary), firm, association or
corporation, except loans and advances to the Company and its wholly-owned
Subsidiaries and advances to suppliers and employees made in the ordinary
course of business; or
(c) purchase or invest, or permit any Subsidiary to purchase or
invest, in the stock or obligations of any other person, firm or
corporation, other than a wholly-owned Subsidiary; or
(d) pay, or permit any Subsidiary to pay, compensation, whether by
way of salaries, bonuses, participations in pension or profit sharing
plans, options, warrants, fees under management contracts or for
professional services or fringe benefits to any officer in excess of
amounts fixed by the Board of Directors of the Company prior to any payment
to such officer; or
(e) make any material change in the nature of its business as carried
on at the date of this Agreement.
11. The Preferred Shares.
--------------------
11.1 Conversion of Preferred Shares. Any holder of any Preferred
------------------------------
Shares may, at its option, at any time and from time to time, convert such
Preferred Shares, or any thereof, into Common Stock at the rate and upon the
terms and conditions and subject to the adjustments set forth in the Articles.
11.2 Stock Fully Paid; Reservation of Shares. The Company covenants
---------------------------------------
and agrees that all Common Stock that may be issued upon conversion of the
Preferred Shares will, upon issuance in accordance with the terms of the
Articles, be fully paid and nonassessable, and that the issuance thereof shall
not give rise to any preemptive rights on the part of any person. The Company
further covenants and agrees that the Company will at all times have authorized
36
<PAGE>
and reserved a sufficient number of its Preferred Shares and Common Stock for
the purpose of issue upon the conversion of the CVRs and the Preferred Shares.
11.3 Adjustment of Number of Shares and Conversion Price. The number
---------------------------------------------------
of shares of Common Stock issuable upon conversion of the Preferred Shares and
the Conversion Price with respect thereto shall be subject to adjustment from
time to time as set forth in the Articles.
11.4 Mandatory Conversion of Preferred Shares. The Preferred Shares
----------------------------------------
shall automatically be converted into shares of Common Stock, without any act by
the Company or the holders of the Preferred Shares, concurrently with the
closing of a public offering by the Company of shares of Common Stock registered
under the Securities Act that meets the conditions set forth in the Articles for
such mandatory conversion of the Preferred Shares.
12. Redemption of Preferred Shares. The Company will redeem and
------------------------------
repurchase the Preferred Shares from the holders thereof at the times and upon
the terms and conditions set forth in the Articles to the extent funds are
legally available to do so. Optional redemptions of the Preferred Shares by the
Company shall not be permitted.
13. Registration of Stock.
---------------------
13.1 Required Registration. If the Company shall receive at any time
---------------------
after the earlier of (1) October 1, 1999, or (2) six (6) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or an SEC Rule 145 transaction), a
written request therefor from any record holder or holders of an aggregate of at
least 1,500,000 shares of Registrable Securities not theretofore registered
under the Securities Act and sold, the Company shall prepare and file a
registration statement under the Securities Act covering the Registrable
Securities which are the subject of such request and shall use its best efforts
to cause such registration statement to become effective. In addition, upon the
receipt of such request, the Company shall promptly give written notice to all
other record holders of Registrable Securities not theretofore registered under
the Securities Act and sold that such registration is to be effected. The
Company shall include in such registration statement such Registrable Securities
for which it has received written requests to register by such other record
holders within 30 days after the delivery of the Company's written notice to
such other record holders. The Company shall be obligated to prepare, file and
cause to become effective only three registration statements pursuant to this
Section 13.1, and to pay the expenses associated with such registration
statements. In the event that the holders of a majority of the Registrable
Securities for which registration has been requested pursuant to this Section
13.1 determine for any reason not to proceed with a registration at any time
before a registration statement has been declared effective by the Commission,
and such registration statement, if theretofore filed with the Commission, is
withdrawn with respect to the Registrable Securities covered thereby, and the
holders of such Registrable Securities agree to bear their own expenses incurred
in connection therewith and to reimburse the Company for the expenses incurred
by it attributable to the registration of such
37
<PAGE>
Registrable Securities, then the holders of such Registrable Securities shall
not be deemed to have exercised their right to require the Company to register
Registrable Securities pursuant to this Section 13.1.
If, at the time any written request for registration is received by
the Company pursuant to this Section 13.1, the Company has determined to proceed
with the actual preparation and filing of a registration statement under the
Securities Act in connection with the proposed offer and sale for cash of any of
its securities by it or any of its security holders, such written request shall
be deemed to have been given pursuant to Section 13.2 hereof rather than this
Section 13.1, and the rights of the holders of Registrable Securities covered by
such written request shall be governed by Section 13.2 hereof.
Without the written consent of the holders of a majority of the
Registrable Securities for which registration has been requested pursuant to
this Section 13.1, neither the Company nor any other holder of securities of the
Company may include securities in such registration if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
such securities would interfere with the successful marketing of the Registrable
Securities or require the exclusion of any portion of the Registrable Securities
to be registered.
Notwithstanding any of the foregoing, if the Company shall furnish to
holders requesting a registration statement pursuant to this Section 13.1, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors, it would be seriously detrimental to
the Company and its shareholders to proceed with such registration and it is
therefor essential to defer such registration, the Company shall have the right
to defer action under this Section 13.1 for a period of not more than 90 days
after receipt of the request of the holders; provided, however, that the Company
-------- -------
may not utilize this right more than once in any 12 month period. During the
period of deferral, the Company shall not file any other registration statement
under the Securities Act.
13.2 Incidental Registration. Each time the Company shall determine
-----------------------
to proceed with the actual preparation and filing of a registration statement
under the Securities Act in connection with the proposed offer and sale for cash
of any of its securities by it or any of its security holders (other than a
registration statement on a form that does not permit the inclusion of shares by
its security holders), the Company will give written notice of its determination
to all record holders of Registrable Securities not theretofore registered under
the Securities Act and sold. Upon the written request of a record holder of any
Registrable Securities given within 30 days after receipt of any such notice
from the Company, the Company will, except as herein provided, cause all such
Preferred Shares, the record holders of which have so requested registration
thereof, to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the prospective seller or
sellers of the Registrable Securities to be so registered; provided, however,
-------- -------
that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it; provided further, however, that
---------------- -------
if the Company determines not to proceed with a registration after the
registration statement has been filed with the Commission and the Company's
decision not to proceed is primarily based upon the anticipated public offering
price of the securities to be sold by the
38
<PAGE>
Company, the Company shall promptly complete the registration for the benefit of
those selling security holders who wish to proceed with a public offering of
their securities and who bear all expenses for such registration incurred after
the Company has decided not to proceed. If any registration pursuant to this
Section 13.2 shall be underwritten in whole or in part, the Company may require
that the Registrable Securities requested for inclusion pursuant to this Section
13.2 be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that the
Registrable Securities requested for inclusion pursuant to this Section 13.2
would, in the good faith judgment of the managing underwriter of such public
offering, reduce the number of shares to be offered by the Company or interfere
with the successful marketing of the shares of stock offered thereby, the number
of Registrable Securities otherwise to be included in the underwritten public
offering may be reduced, first by excluding pro rata (by number of shares held)
the Contingent Warrants and Contingent Warrant Stock, and then, if necessary,
pro rata (by number of shares held) the 1996 Warrants, the 1997 Warrant, the
1996 Warrant Stock and the 1997 Warrant Stock, and then, if necessary, pro rata
(by number of shares held) among the holders of other Registrable Securities
requesting such registration, but in either case only after exclusion of all
other shares proposed to be sold by other selling securityholders. The holders
of the Registrable Securities shall agree upon request to withhold from the
market any and all Registrable Securities and Common Stock held by such holders
for a period, not to exceed 90 days, which the managing underwriter reasonably
determines is necessary in order to effect any underwritten public offering.
13.3 Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of Section 13.1 or 13.2 hereof to effect the
registration of Registrable Securities under the Securities Act, the Company
will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for such period as
may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein
as may be necessary to keep such registration statement effective for such
period as may be reasonably necessary to effect the sale of such
securities, not to exceed nine months;
(c) furnish to the securityholders participating in such
registration and to the underwriters of the securities being registered
such reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters
may reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state securities or blue
sky laws of such jurisdictions as such participating holders may reasonably
request in writing
39
<PAGE>
within 20 days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
(e) notify the securityholders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the Commission for
the amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the Commission, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders
(and concurred in by counsel for the Company), is required under the
Securities Act or the rules and regulations thereunder in connection with
the distribution of the Registrable Securities by such holder;
(h) prepare and promptly file with the Commission and promptly notify
such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Securities Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading;
(i) advise such holders, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of such registration statement or
the initiation or threatening of any proceeding for that purpose and
promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of such holders
shall have reasonably objected on the grounds that such amendment or
supplement does not comply in all material respects with the requirements
of the Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior to the
filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is
40
<PAGE>
reasonably necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate applicable
law; and
(k) at the request of any such holder, furnish: (i) an opinion, dated
as of the closing date, of the counsel representing the Company for the
purposes of such registration, addressed to the underwriters, if any, and
to the holder or holders making such request, covering such matters as such
underwriters and holder or holders may reasonably request; and (ii) letters
dated as of the effective date of the registration statement and as of the
closing date, from the independent certified public accountants of the
Company, addressed to the underwriters, if any, and to the holder or
holders making such request, covering such matters as such underwriters and
holder or holders may reasonably request.
13.4 Expenses. With respect to each registration requested pursuant
--------
to Section 13.1 hereof (except as otherwise provided in such Section with
respect to registrations voluntarily terminated at the request of the requesting
security holders) and with respect to each inclusion of Registrable Securities
in a registration statement pursuant to Section 13.2 hereof (except as otherwise
provided in Section 13.2 with respect to registrations initiated by the Company
but with respect to which the Company has determined not to proceed), the
Company shall bear the following fees, costs and expenses: all registration,
filing and NASD fees, printing expenses, fees and disbursements of counsel and
accountants for the Company, fees and disbursements of counsel for the
underwriter or underwriters of such securities (if the Company and/or selling
securityholders are required to bear such fees and disbursements), all internal
Company expenses, all legal fees and disbursements and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the securities to be offered are to be registered or qualified, and the premiums
and other costs of policies of insurance against liability (if any) arising out
of such public offering. Fees and disbursements of counsel and accountants for
the selling securityholders, underwriting discounts and commissions and transfer
taxes relating to the shares included in the offering by the selling
securityholders, and any other expenses incurred by the selling securityholders
not expressly included above, shall be borne by the selling securityholders.
13.5 Indemnification. (a) In the event that any Registrable
---------------
Securities are included in a registration statement under Section 13.1 or 13.2
hereof:
(1) The Company will indemnify and hold harmless each holder of
shares of Registrable Securities which are included in a registration
statement pursuant to the provisions of this Section 13, its
directors, officers, employees, agents, successors and assigns, and
each person, if any, who controls such holder (collectively, the
"Purchaser Indemnified Parties") and any underwriter (as defined in
-----------------------------
the Securities Act) for such holder and each person, if any, who
controls such underwriter within the meaning of the Securities Act,
from and against, and will reimburse the Purchaser Indemnified Parties
and each such underwriter and controlling person with respect to, any
and all loss,
41
<PAGE>
damage, liability, cost, obligation and expense to which the Purchaser
Indemnified Parties or any such underwriter or controlling person may
become subject under the Securities Act or otherwise (collectively,
"Losses"), insofar as such Losses are caused by any
------
untrue statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be
-------- -------
liable in any such case to the extent that any such Loss arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by such holder, such underwriter or such controlling person
in writing specifically for use in the preparation thereof.
(2) Each holder of shares of Registrable Securities which are
included in a registration pursuant to the provisions of this Section
13 will indemnify and hold harmless the Company, its directors and
officers, any controlling person and any underwriter from and against,
and will reimburse the Company, its directors and officers, any
controlling person and any underwriter with respect to, any and all
Losses to which the Company or any controlling person and/or any
underwriter may become subject under the Securities Act or otherwise,
insofar as such Losses are caused by any untrue or alleged untrue
statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading, in each
case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so
made in reliance upon and in strict conformity with written
information furnished by such holder specifically for use in the
preparation thereof. The liability of holders of shares of Registrable
Securities under this Section 13.5(a)(2) shall not exceed, in
aggregate, the proceeds of the offering through which the Registrable
Securities were acquired from the Company.
(b) The Company hereby agrees to indemnify and hold each Purchaser,
and their respective officers, directors, employees, agents, successors and
assigns, harmless from and against:
(1) any and all loss, damage, liability, cost, obligation and
expense
42
<PAGE>
based upon, attributable to or resulting from the failure of
any representation or warranty of the Company set forth in Sections
5.4 or 5.5 (to the extent relating to federal and state income taxes)
to be true and correct in all material respects; and
(2) any and all notices, actions, suits, proceedings, claims,
demands, assessments, judgments, costs, penalties and expenses,
including attorneys' and other professionals' fees and disbursements
(collectively, "Expenses") incident to any Losses, with respect to
which indemnification is provided hereunder.
13.6 Indemnification Procedures. Promptly after receipt by an
--------------------------
indemnified party pursuant to the provisions of paragraph (a) or (b) of Section
13.5 of notice of the commencement of any action involving the subject matter of
the foregoing indemnity provisions such indemnified party will, if a claim
thereof is to be made against the indemnifying party pursuant to the provisions
of said paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party, provided, however, if the defendants in any action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or additional to those
available to the indemnifying party, or if there is a conflict of interest which
would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
43
<PAGE>
14. Default
-------
14.1 Events of Default. Each of the following events shall be an
-----------------
event of default (an "Event of Default") for purposes of this Agreement:
----------------
(a) if the Company or any Subsidiary makes an assignment for the
benefit of creditors, or ceases doing business as a going concern, or the
Company or any Subsidiary applies for or consents to the appointment of a
trustee or receiver for the Company or any Subsidiary, or for the major
part of the property of either; provided, however, that this subparagraph
(a) shall not apply to any Subsidiary (i) that ceases to do business due to
the closure of one or more restaurants or any merger with another
Subsidiary or the Company with the approval of the majority of the Board of
Directors of the Company or (ii) that is not a Significant Subsidiary
within the meaning of Rule 405 of Regulation C under the Securities Act of
1933; or
(b) if a trustee or receiver is appointed for the Company or any
Subsidiary or for the major part of the property of either and the order of
such appointment is not discharged, vacated or stayed within 30 days after
such appointment; or
(c) if an order for relief shall be entered in any Federal
bankruptcy proceeding in which the Company or any Subsidiary is the debtor;
or if bankruptcy, reorganization, arrangement, insolvency, or liquidation
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or against
the Company or any Subsidiary and, if instituted against the Company or any
Subsidiary, are consented to or, if contested by the Company or the
Subsidiary, are not dismissed by the adverse parties or by an order, decree
or judgment within 30 days after such institution; or
(d) if any representation or warranty made by or on behalf of the
Company in this Agreement or in any certificate, report or other instrument
delivered under or pursuant to any term hereof or thereof shall prove to
have been untrue or incorrect in any material respect as of the date of
this Agreement or as of the Phase I Closing Date; or
(e) if an Event of Default (for purposes of this Section 14.1(e),
as such term is defined in the 1997 Stock Purchase Agreement) shall have
occurred under Section 13(d) of the 1997 Stock Purchase Agreement; or
(f) if default shall be made in the Company's obligation to
redeem the Preferred Shares, as required by the Articles, whether or not
funds are legally available therefor; or
44
<PAGE>
(g) if either of the Series C Preferred Stock Director or the
Series A Preferred Stock Directors shall fail to be elected to the Board of
Directors in the manner and under the terms and conditions set forth in
Section 9.9 hereof; provided, however, that there shall be no event of
default if such failure to elect the Series C Preferred Stock Director or
the Series A Preferred Stock Directors is due to the act of the Preferred
Shareholders; or
(h) if default shall be made in the due and punctual performance
or observance of any of the terms contained in Section 9.5, Section 9.18,
Section 10.1, Section 10.2, or Section 10.3 hereof, and such default shall
have continued for a period of 30 days after written notice thereof to the
Company by the holder of any Preferred Shares which period shall be
extended, not to exceed a total of 90 days, if the Company reasonably
demonstrates to the Preferred Shareholders diligent and good faith efforts
to cure the default; or
(i) if Joseph Micatrotto shall not be employed as President and
Chief Executive Officer of the Company, and the Company shall have failed
to employ within 60 days of such termination of employment a successor to
Mr. Micatrotto approved by a majority of the Board of Directors of the
Company, which majority shall include the Series C Preferred Stock Director
and the Series A Preferred Stock Director designated by Norwest Equity
Partners V. Such 60 day period shall be extended, to not exceed a total of
180 days, if the Company reasonably demonstrates good faith and diligent
efforts to retain a qualified successor.
14.2 Remedies Upon Events of Default. Upon the occurrence of an
-------------------------------
Event of Default as herein defined, except for an Event of Default under Section
14.1(d) hereof, and so long as such Event of Default continues unremedied, then,
unless such Event of Default shall have been waived by the holders of two-thirds
of the Preferred Shares then outstanding, (a) the holders of two-thirds of the
Preferred Shares then outstanding shall be entitled to designate a majority of
the Board of Directors of the Company as provided in the Articles and (b) the
holders of two-thirds of the Preferred Shares then outstanding may require the
Company immediately to redeem, at $3.75 per Series A Preferred Share, $4.50 per
Series B Preferred Share and $5.125 per Series C Preferred Share (appropriately
adjusted to reflect stock splits, stock dividends, reorganizations,
consolidations and similar changes hereafter effected) plus all dividends unpaid
and accumulated or accrued thereon, if any, to the date of such redemption,
including in the case of the Series C Preferred Shares, all Series A Preferred
Shares, Series B Preferred Shares and Series C Preferred Shares then
outstanding, and thereupon the Company shall be obligated to redeem all Series A
Preferred Shares, Series B Preferred Shares and Series C Preferred Shares then
outstanding.
Upon the occurrence of an Event of Default under Section 14.1(d) hereof,
and so long as such Event of Default continues unremedied, then, unless such
Event of Default shall have been waived by the holders of two-thirds of the
Series C Preferred Shares then outstanding, (a) the holders of two-thirds of the
Preferred Shares then outstanding shall be entitled to designate a majority of
the Board of Directors of the Company as provided in the Articles and (b) the
holders
45
<PAGE>
of two-thirds of the Series C Preferred Shares then outstanding may require the
Company immediately to redeem, at $5.125 per Series C Preferred Share
(appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes hereafter effected) plus all
dividends unpaid and accumulated or accrued thereon, if any, to the date of such
redemption, including, in the case of the Series C Preferred Shares, all Series
C Preferred Shares then outstanding, and thereupon the Company shall be
obligated to redeem all Series C Preferred Shares then outstanding.
14.3 Notice of Defaults. When, to its knowledge, any Event of
------------------
Default has occurred or exists, the Company agrees to give written notice within
three Business Days of such Event of Default to the holders of all outstanding
Preferred Shares. If the holder of any Preferred Shares shall give any notice or
take any other actions in respect of a claimed Event of Default, the Company
will forthwith give written notice thereof to all other holders of Preferred
Shares at the time outstanding, describing such notice or action and the nature
of the claimed Event of Default.
14.4 Suits for Enforcement. In case any one or more Events of
---------------------
Default shall have occurred and be continuing, unless such Events of Default
shall have been waived in the manner provided in Section 14.2 hereof, the
holders of two-thirds of the Preferred Shares may proceed to protect and enforce
their rights under this Section 14 by suit in equity or action at law. It is
agreed that in the event of such action such holders of Preferred Shares shall
be entitled to receive all reasonable fees, costs and expenses incurred,
including without limitation such reasonable fees and expenses of attorneys
(whether or not litigation is commenced) and reasonable fees, costs and expenses
of appeals.
14.5 Remedies Cumulative. No right, power or remedy conferred
-------------------
upon any holder of Preferred Shares shall be exclusive, and each such right,
power or remedy shall be cumulative and in addition to every other right, power
or remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
14.6 Remedies not Waived. No course of dealing between the
-------------------
Company and any Preferred Shareholder, and no delay in exercising any right,
power or remedy conferred hereby or by any such security or now or hereafter
existing at law or in equity or by statute or otherwise, shall operate as a
waiver of or otherwise prejudice any such right, power or remedy; provided,
however, that this Section 14.6 shall not be construed or applied so as to
negate the provisions and intent of any statute which is otherwise applicable.
46
<PAGE>
15. Termination of Certain Covenants. The obligations of the Company
--------------------------------
under Sections 9 and 10 hereof, other than its obligations under Sections 9.10
and 9.13 hereof, shall, notwithstanding any provisions hereof apparently to the
contrary, terminate and shall be of no further force or effect from and after
the earlier to occur of (i) the date on which less than 25% of the Series A
Preferred Shares are outstanding, less than 25% of the Series B Preferred Shares
are outstanding and less than 25% of the Series C Preferred Shares are
outstanding and (ii) the date on which all of the Preferred Shareholders hold,
in the aggregate, less than 5% of the Fully Paid Securities of the Company.
16. Documents to be Delivered at the Phase I Closing.
------------------------------------------------
16.1 Deliveries by the Company to the Purchasers. At the Phase I
-------------------------------------------
Closing, the Company shall deliver, or shall cause to be delivered, to the
Purchasers the following:
(a) certificates (dated the Phase I Closing Date and in form and
substance reasonably satisfactory to the Purchasers) executed on behalf of
the Company pursuant to Section 7.6 hereof;
(b) certificates representing 100% of the Series C Preferred
Shares and the CVRs purchased at the Phase I Closing shall have been, or
shall at the Phase I Closing be, validly delivered and transferred to the
Purchasers, free and clear of any and all pledges, liens, restrictions and
encumbrances;
(c) all consents and waivers referred to in Section 7.5 hereof,
in a form reasonably satisfactory to the Purchasers, with respect to the
transactions contemplated by this Agreement;
(d) an affidavit, in a form reasonably satisfactory to the
Purchasers, of the Company stating under penalties of perjury the Company's
United States taxpayer identification number and that the Company is not a
foreign person within the meaning of Section 1445(b)(2) of the Code;
(e) a filed copy of the Articles of Incorporation, as amended by
the Articles, certified by the Secretary of State of the State of
Minnesota;
(f) the Stockholders' Agreement substantially in the form
attached hereto as Exhibit 2, duly executed by the Company and each of the
parties thereto (other than the Purchasers);
(g) the opinion of Faegre & Benson LLP, counsel for the Company,
dated the Phase I Closing Date pursuant to Section 7.7 hereof;
(h) a receipt for the purchase price paid at the Phase I
Closing;
(i) a certificate of the Secretary of the Company, certifying as
to (i)
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<PAGE>
the Company's By-laws, (ii) the incumbency of those officers of the Company
who shall be executing and delivering this Agreement and (iii) the adoption
by the Board of Directors of the Company and its shareholders of
appropriate corporate resolutions authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
and thereby;
(j) certificates of good standing with respect to the Company
and each Subsidiary, issued by the Secretary of the State of the state of
incorporation and for each state in which the Company and each Subsidiary
are qualified to do business as a foreign corporation dated as soon as
practicable prior to the Phase I Closing Date; and
(k) evidence acceptable to the Purchasers reflecting the
recomposition of the Board of Directors of the Company as set forth in
Section 9.9 hereof.
16.2 Deliveries by the Purchasers to the Company. At the Phase I
-------------------------------------------
Closing, the Purchasers shall have delivered to the Company the following:
(a) the purchase price payable at the Phase I Closing; and
(b) the Stockholders' Agreement substantially in the form
attached hereto as Exhibit 2, duly executed by the Purchasers.
17. Documents to be Delivered at the Phase II Closing.
-------------------------------------------------
17.1 Deliveries by the Company to the Centre Purchasers. At a
--------------------------------------------------
Phase II Closing, the Company shall deliver, or shall cause to be delivered, to
the Centre Purchasers the following:
(a) certificates (dated the Phase II Closing Date and in form
and substance reasonably satisfactory to the Centre Purchasers) executed on
behalf of the Company pursuant to Section 8.5 hereof;
(b) certificates representing 100% of the Series C Preferred
Shares and the CVRs purchased at such Phase II Closing shall have been, or
shall at such Phase II Closing be, validly delivered and transferred to the
Centre Purchasers, free and clear of any and all pledges, liens,
restrictions and encumbrances;
(c) all consents and waivers referred to in Section 8.4 hereof,
in a form reasonably satisfactory to the Centre Purchasers, with respect to
the transactions contemplated by this Agreement;
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<PAGE>
(d) the opinion of Faegre & Benson LLP, counsel for the Company,
dated the Phase II Closing Date pursuant to Section 8.6 hereof;
(e) a receipt for the purchase price paid at the Phase II
Closing;
(f) a certificate of the Secretary of the Company, certifying as
to (i) the Company's By-laws, (ii) that the resolutions adopted by the
Company's Board of Directors and its shareholders on or before the Phase I
Closing Date remain in full force and effect and (iii) that the incumbency
of those officers of the Company certified to on or before the Phase I
Closing Date remains in full force and effect; and
(g) certificates of good standing with respect to the Company
and each Subsidiary, issued by the Secretary of the State of the state of
incorporation and for each state in which the Company and each Subsidiary
are qualified to do business as a foreign corporation dated as soon as
practicable prior to the Phase II Closing Date.
17.2 Deliveries by the Centre Purchasers to the Company. At a
--------------------------------------------------
Phase II Closing, the Centre Purchasers shall have delivered to the Company the
purchase price payable at a Phase II Closing.
18. Definitions. Unless the context otherwise requires, the terms
-----------
defined in this Section 18 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms herein defined. All accounting terms defined below shall,
except as otherwise expressly provided, be determined by reference to the
Company's books of account and in conformity with GAAP consistently applied as
applied to such books of account in the opinion of the independent certified
public accountants selected by the Board of Directors of the Company as required
under the provisions of Section 9.3 hereof.
18.1 "Additional Shares of Common Stock" shall mean all shares of
Common Stock of the Company issued by the Company on or after the Phase I
Closing Date or any Phase II Closing Date, except the Common Stock issued upon
conversion of Preferred Shares.
18.2 "Annual Plan" shall have the meaning set forth in Section
9.5 hereof.
18.3 "Articles" shall have the meaning set forth in Section 1
hereof.
18.4 "Articles of Incorporation" shall have the meaning set forth
in Section 1 hereof.
18.5 "Balance Sheet Date" shall have the meaning set forth in
Section 5.3 hereof.
49
<PAGE>
18.6 "Business Day" shall mean any day of the year on which
national banking institutions in New York are open to the public for conducting
business and are not required or authorized to close.
18.7 "Closing" shall have the meaning set forth in Section 3(b)
hereof.
18.8 "Commission" shall have the meaning set forth in Section
6.1 hereof.
18.9 "Common Shareholders" shall have the meaning set forth in
Section 7.5 hereof.
18.10 "Common Stock" shall mean the Company's authorized common
shares, any additional common shares which may be authorized in the future by
the Company, and any stock into which such common shares may hereafter be
changed, and shall also include stock of the Company of any other class which is
not preferred as to dividends or as to distributions of assets on liquidation,
dissolution or winding up of the Company over any other class of stock of the
Company, and which is not subject to redemption.
18.11 "Company" shall have the meaning set forth in the recital
hereof.
18.12 "Consolidated Tangible Net Worth" shall mean the aggregate
amount of shareholder's equity of the Company and its Subsidiaries on a
consolidated basis determined in accordance with GAAP consistent with those
followed in preparation of the Financial Statements, plus the aggregate
principal amount of the outstanding Convertible Debentures, less the purchase
price of acquired businesses in excess of the fair market value of tangible net
assets, other items of goodwill, patents, trademarks, trade names, copyrights,
organization expense, treasury stock, unamortized debt discount and expense, any
write-up of the value of any asset, and other like intangibles (but excluding
the book value of capitalized pre-opening expenses), all determined on a
consolidated basis in accordance with GAAP consistent with those followed in the
preparation of the Financial Statements.
18.13 "Contingent Warrants" shall mean the warrants dated October
31, 1997, issued to the holders of the Series B Preferred Shares.
18.14 "Contingent Warrant Stock" shall mean the shares of Common
Stock issuable upon exercise of the Contingent Warrants and all securities
issued in substitution or exchange therefore.
18.15 "Conversion Price" shall mean such price at which the
Preferred Shares are convertible into Common Stock pursuant to the Articles.
18.16 "Conversion Stock" shall have the meaning set forth in
Section 1 hereof.
18.17 "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are at any time directly
or indirectly convertible into or
50
<PAGE>
exchangeable for Additional Shares of Common Stock.
18.18 "CVR Stock" shall have the meaning set forth in Section 1
hereof.
18.19 "Employee Benefit Plan" means any (a) nonqualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) tax-qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) tax-qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit plan or program.
18.20 "Event of Default" shall have the meaning set forth in Section
14.1 hereof.
18.21 "Expenses" shall have the meaning set forth in Section
13.5(b)(2) hereof.
18.22 "Financial Statements" shall have the meaning set forth in
Section 5.3 hereof.
18.23 "Financing Warrants" shall have the meaning set forth in
Section 9.16 hereof.
18.24 "Fully Paid Securities" shall have the meaning set forth in
Section 9.16 hereof.
18.25 "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.
18.26 "Junior Stock" shall mean Common Stock and all other shares of
stock of any other class of the Company at any time created and issued ranking
junior to the Series A Preferred Shares, the Series B Preferred Shares or the
Series C Preferred Shares with respect to the right to receive dividends and/or
the right to the distribution of assets upon liquidation, dissolution or winding
up of the Company.
18.27 "Losses" shall have the meaning set forth in Section 13.5(a)(1)
hereof.
18.28 Any reference to any event, change, condition or effect being
"material" with respect to any entity or group of entities shall mean any
material event, change, condition or effect related to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, prospects, operations or results of operations of the Company and its
Subsidiaries, taken as a whole.
51
<PAGE>
18.29 "Material Adverse Effect" shall mean any event, change or
effect that is materially adverse to (i) the condition (financial or otherwise),
properties, assets, liabilities, business, prospects, operations or results of
operations of the Company and its Subsidiaries, taken as a whole, (ii) the
ability of the Company to perform its obligations under this Agreement, or (iii)
the ability of the Company and its Subsidiaries to conduct their respective
businesses after the Phase I Closing Date substantially as such businesses are
being conducted as of the date hereof.
18.30 "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; (b) capitalized leases and purchase money liens; and
(c) liens in respect of pledges or deposits under worker's compensation laws or
similar legislation, carriers', warehousemen's, mechanics', laborers' and
materialmen's, landlord's and statutory and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith, and liens and encumbrances incidental to the conduct of the business of
the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
18.31 "Phase I Closing" shall have the meaning set forth in Section
3(a) hereof.
18.32 "Phase I Closing Date" shall have the meaning set forth in
Section 3(a) hereof.
18.33 "Phase II Closing" shall have the meaning set forth in Section
3(b) hereof.
18.34 "Phase II Closing Date" shall have the meaning set forth in
Section 3(b) hereof.
18.35 "Preferred Shareholders" shall mean the Purchasers under this
Agreement, the 1997 Stock Purchase Agreement and the 1996 Stock Purchase
Agreement.
18.36 "Purchased Stock" shall mean the Series C Preferred Shares, the
Conversion Stock, the CVR Stock and the stock or other securities of the Company
issued in a stock split or reclassification of, or a stock dividend or other
distribution on or in substitution or exchange for, or otherwise in connection
with, the foregoing securities, or in a merger or consolidation involving the
Company or a sale of all or substantially all of the Company's assets.
18.37 "Purchase Price" shall have the meaning set forth in Section
2(c) hereof.
18.38 "Purchaser Indemnified Parties" shall have the meaning set
forth in Section 13.5(a)(1) hereof.
18.39 "Registrable Securities" shall mean the Series A Preferred
Shares, the
52
<PAGE>
Series B Preferred Shares, the Series C Preferred Shares and all shares of
Common Stock of the Company issued in exchange or substitution therefor (and all
shares of Common Stock issued pursuant to the CVRs), and the stock or other
securities of the Company issued in a stock split or reclassification of, or a
stock dividend or other distribution on or in substitution or exchange for, or
otherwise in connection with, any of the foregoing securities, or in a merger or
consolidation involving the Company or a sale of all or substantially all of the
Company's assets. Solely for the purpose of Section 13, the term Registrable
Securities shall also include the 1996 Warrants, the 1997 Warrants, the
Contingent Warrants, the 1996 Warrant Stock, the 1997 Warrant Stock and the
Contingent Warrant Stock. Nothing in this Section 18.39 shall be deemed to
require the Company to register any Preferred Shares, the 1996 Warrants, the
1997 Warrants or the Contingent Warrants, it being understood that the
registration rights granted by Section 13 hereof relate only to shares of Common
Stock and securities issued in substitution or exchange therefor.
18.40 "Remaining Directors" shall have the meaning set forth in
Section 9.9 hereof.
18.41 "Securities Act" shall have the meaning set forth in Section
4.1 hereof.
18.42 "Senior Indebtedness" shall mean (a) the principal of all
Indebtedness for Borrowed Money of the Company and its Subsidiaries to banks,
insurance companies or other financial institutions, (b) the present value of
net minimum lease payments of all leases under which the Company or any of its
Subsidiaries is the lessee and which are required to be capitalized under GAAP,
(c) the principal of all indebtedness of the Company or any of its Subsidiaries
under installment purchase agreements, and (d) the principal of all indebtedness
of the Company or any of its Subsidiaries to the owners of any real property
leased by the Company for leasehold improvements financed by such owners.
18.43 "Series A Preferred Shareholders" shall have the meaning set
forth in Section 7.5 hereof.
18.44 "Series A Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.45 "Series A Preferred Stock Directors" shall have the meaning set
forth in Section 9.9 hereof.
18.46 "Series B Preferred Shareholders" shall have the meaning set
forth in Section 7.5 hereof.
18.47 "Series B Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.48 "Series C Preferred Shareholders" shall have the meaning set
forth in Section 9.9 hereof.
53
<PAGE>
18.49 "Series C Preferred Shares" shall have the meaning set forth in
Section 1 hereof.
18.50 "Series C Preferred Stock Director" shall have the meaning set
forth in Section 9.9 hereof.
18.51 "Stockholders' Agreement" shall have the meaning set forth in
Section 2 hereof.
18.52 "1996 Stock Purchase Agreement" shall have the meaning set
forth in Section 1 hereof.
18.53 "1997 Stock Purchase Agreement" shall have the meaning set
forth in Section 1 hereof.
18.54 "Subsidiary" shall mean any corporation, association or other
business entity more than a majority (by number of votes) of the voting stock of
which is owned or controlled, directly or indirectly, by the Company or by one
or more of its Subsidiaries or both.
18.55 "1996 Warrants" shall have the meaning set forth in Section
9.16 hereof.
18.56 "1997 Warrants" shall have the meaning set forth in Section
9.16 hereof.
18.57 "1996 Warrant Stock" shall have the meaning set forth in
Section 9.16 hereof.
18.58 "1997 Warrant Stock" shall have the meaning set forth in
Section 9.16 hereof.
19. Understanding Among Purchasers. The determination by each of the
------------------------------
Purchasers to purchase the Purchased Securities pursuant to this Agreement has
been made by such Purchaser independent of the other Purchasers, and independent
of any statements or opinions as to the advisability of such purchase or as to
the properties, business, prospects or condition (financial or otherwise) of the
Company which may have been made or given by the other Purchasers or by any
agent or employee of the other Purchasers. In addition, it is acknowledged by
each of the Purchasers that the other Purchasers have not acted as such
Purchaser's agent in connection with making its investment hereunder and that
the other Purchasers will not be acting as such Purchaser's agent in connection
with monitoring such Purchaser's investment hereunder.
20. Consents; Waivers and Amendments. Except as otherwise specifically
--------------------------------
provided herein, in each case in which approval of the Preferred Shareholders is
required by the terms of this Agreement, such requirement shall be satisfied by
a vote or the written consent of such holders owning at least two-thirds of the
Preferred Shares then owned by the Preferred Shareholders (for purposes of this
Section 20, the Preferred Shares shall have a number of votes equal to the
number of shares of Common Stock into which the Preferred Shares are
convertible).
54
<PAGE>
With the written consent of holders owning at least two-thirds of the Purchased
Stock then owned by the Series C Preferred Shareholders, the obligations of the
Company under this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), and with the same approval
the Company may enter into a supplementary agreement for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of any supplemental agreement or modifying in any manner
the rights and obligations of the holders of the Purchased Stock and of the
Company; provided, however, that no such waiver or supplemental agreement shall
-------- -------
(a) amend the terms of the Series C Preferred Shares as set forth in the
Articles (any such amendment to the terms of the Series C Preferred Shares shall
require the vote of the holders of the Series C Preferred Shares called for by
the Articles), or (b) reduce the aforesaid percentage of Purchased Stock, the
holders of which are required to consent to any waiver or supplemental
agreement, without the consent of all of the record holders of shares whose
rights would be affected by such reduction. Written notice of any such waiver,
consent or agreement of amendment, modification or supplement shall be given to
the record holders of the Purchased Stock who have not previously consented
thereto in writing. Notwithstanding the foregoing, following the Phase I
Closing, no provision of Sections 9,10,11,12,13,14 or 20 shall be amended,
waived or modified unless consented to by holders of a majority of the Preferred
Shares.
21. Changes, Waivers, Etc. Neither this Agreement nor any provision hereof
---------------------
may be changed, waived, discharged or terminated orally, but only by a statement
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought, except to the extent provided in Section 20
hereof.
22. Payment of Fees and Expenses of Purchasers. Upon the consummation of
------------------------------------------
the sale of the Purchased Securities anticipated by this Agreement (at either of
the Phase I Closing or a Phase II Closing) or upon failure by the Company to
consummate such sales, the Company will pay the reasonable out-of-pocket
expenses incurred by the Purchasers (including amounts owed to third parties) in
connection with the transactions herein contemplated, including without
limitation the reasonable fees and out-of-pocket expenses of Weil, Gotshal and
Manges LLP for their services as special counsel to the Purchasers in connection
with the transactions herein contemplated. The Company will also pay (a) all
fees and expenses incurred by the Purchasers with respect to any amendments or
waivers requested by the Company (whether or not the same become effective)
under or in respect of this Agreement or the agreements contemplated hereby, and
(b) all fees and expenses incurred by the Purchasers with respect to the
enforcement of the rights granted under this Agreement or the agreements
contemplated hereby.
23. Notices. All notices, requests, consents and other communications
-------
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail,
(a) if to any holder of any Purchased Stock, addressed to such holder
at its address as shown on the books of the Company, or at such other
address as such holder may specify by written notice to the Company, or
55
<PAGE>
(b) if to the Company, addressed to the Company, 1422 West Lake
Street, Suite 220, Minneapolis, Minnesota 55408, attention President, or to
such other address as the Company may specify by written notice to the
Purchasers,
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
24. Survival of Representations and Warranties, Etc. All representations
-----------------------------------------------
and warranties contained herein shall survive the execution and delivery of this
Agreement, any investigation at any time made by the Purchasers or on their
behalf, and the sale and purchase of the Purchased Securities and payment
therefor. All statements contained in any certificate, instrument or other
writing delivered by or on behalf of the Company pursuant hereto or in
connection with or contemplation of the transactions herein contemplated (other
than legal opinions) shall constitute representations and warranties by the
Company hereunder.
25. Parties in Interest. All the terms and provisions of this Agreement
-------------------
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed or
not, and, in particular, shall inure to the benefit of and be enforceable by the
holder or holders at the time of any of the Purchased Stock.
26. Headings. The headings of the Sections and paragraphs of this
--------
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
27. Choice of Law. It is the intention of the parties that the laws of
-------------
Minnesota, without giving regard to the conflicts of laws provisions thereof,
shall govern the validity of this Agreement, the construction of its terms and
the interpretation of the rights and duties of the parties.
28. Counterparts. This Agreement may be executed concurrently in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
29. 1997 Stock Purchase Agreement. After the Phase I Closing of the sale
-----------------------------
of Purchased Securities hereunder, this Agreement shall supersede the 1997 Stock
Purchase Agreement with respect to Sections 8, 9, 10, 11, 12 (except for Section
12.5), 13 (except Section 13.1(d) and the remedy provided therefor in Section
13.2) and 14 thereof (and applicable definitions), and those same sections of
the 1997 Stock Purchase Agreement shall be of no further force and effect.
56
<PAGE>
If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart of this letter and return the same to the
undersigned, whereupon this letter shall become a binding contract among you and
the undersigned.
Very truly yours,
BUCA, INC.
By: /s/ Greg A. Gadel
--------------------
Name: Greg A. Gadel
Title: CFO
57
<PAGE>
The foregoing Agreement is hereby
accepted as of the date first above written.
THE PURCHASERS:
--------------
CENTRE CAPITAL INVESTORS II, L.P.
CENTRE CAPITAL TAX-EXEMPT INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE INVESTORS II, L.P.
By: Centre Partners II, L.P.
General Partner
By: Centre Partners Management LLC
Attorney-in-fact
By: /s/ Paul Zepf
-----------------------------
Paul Zepf
Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Centre Parallel Management Partners, L.P.
Manager
By: Centre Partners Management LLC
Attorney-in-fact
By: /s/ Paul Zepf
-----------------------------
Paul Zepf
Managing Director
CENTRE PARALLEL MANAGEMENT PARTNERS, L.P.
CENTRE PARTNERS COINVESTMENT, L.P.
By: Centre Partners II LLC
General Partner
By: /s/ Paul Zepf
--------------------------------
Paul Zepf
Managing Director
58
<PAGE>
THE PURCHASERS:
--------------
NORWEST EQUITY PARTNERS V,
A MINNESOTA LIMITED PARTNERSHIP
By: Itasca Partners V, L.L.P., General Partner
By: /s/ John P. Whaley
----------------------
Partner
NORTHWOOD CAPITAL PARTNERS LLC
By: /s/ Henry T. Wilson
-----------------------
Managing Director
NORTHWOOD VENTURES
By: /s/ Henry T. Wilson
----------------------
Managing Director
REGENT CAPITAL PARTNERS, L.P.
By: Regent Capital Holdings, L.P., General Partner
By: Regent Capital Holdings, Inc., General Partner
By: /s/ J. Oliver Maggard
-------------------------
WALDEN-SBIC, L.P.
By: /s/ Arthur Berliner
------------------------
WALDEN TECHNOLOGY VENTURES II, L.P.
By: /s/ Arthur Berliner
-----------------------
59
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
No. of
Series C No. of Purchase
Preferred Shares CVRs Price
---------------- ---- -----
<S> <C> <C> <C>
CENTRE CAPITAL INVESTORS II, L.P. 300,515 300,515 $1,540,140.00
CENTRE CAPITAL TAX-EXEMPT 97,793 97,793 $ 501,190.00
INVESTORS II, L.P.
CENTRE CAPITAL OFFSHORE 65,390 65,390 $ 335,125.00
INVESTORS II, L.P.
CENTRE PARALLEL MANAGEMENT 4,607 4,607 $ 23,612.00
PARTNERS, L.P.
CENTRE PARTNERS 50,944 50,944 $ 261,090.00
COINVESTMENT, L.P.
STATE BOARD OF ADMINISTRATION 456,360 456,360 $2,338,843.00
OF FLORIDA
NORWEST EQUITY PARTNERS V, L.P. 424,203 424,203 $2,174,040.38
NORTHWOOD CAPITAL PARTNERS LLC 9,756 9,756 $ 49,999.50
NORTHWOOD VENTURES 87,805 87,805 $ 450,000.63
REGENT CAPITAL PARTNERS, L.P. 72,659 72,659 $ 372,377.38
WALDEN-SBIC, L.P. 59,170 59,170 $ 303,246.25
WALDEN TECHNOLOGY VENTURES II, L.P. 9,823 9,823 $ 50,342.88
--------- --------- -------------
TOTAL: 1,639,025 1,639,025 $8,400,007.02
</TABLE>
60
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Authorization of Securities..................................... 1
2. Sale and Purchase of Securities................................. 2
3. Closings........................................................ 3
4. Restriction on Transfer of Securities........................... 4
4.1 Restrictions........................................... 4
4.2 (a) Legend............................................ 4
(b) Stop Transfer Order............................... 5
4.3 Removal of Legend...................................... 5
4.4 Register of Securities................................. 5
5. Representations and Warranties by Company....................... 5
5.1 Organization, Standing, Etc............................ 5
5.2 Qualification.......................................... 6
5.3 Financial Statements................................... 6
5.4 Tax Returns and Audits................................. 6
5.5 No Undisclosed Liabilities............................. 7
5.6 Absence of Certain Developments........................ 7
5.7 Title to Properties and Encumbrances................... 8
5.8 Litigation; Governmental Proceedings................... 8
5.9 Compliance with Applicable Laws and Other Instruments.. 8
5.10 Purchased Securities, Conversion Stock and CVR Stock... 9
5.11 Securities Laws........................................ 9
5.12 Patents and Other Intangible Rights.................... 9
5.13 Capital Stock.......................................... 10
5.14 Outstanding Debt....................................... 11
5.15 Schedule of Assets and Contracts....................... 11
5.16 Corporate Acts and Proceedings......................... 13
5.17 Insurance Coverage..................................... 13
5.18 No Brokers or Finders.................................. 13
5.19 Conflicts of Interest.................................. 13
5.20 Licenses............................................... 14
5.21 Registration Rights.................................... 14
5.22 Employee Benefit Plans................................. 14
5.23 Environmental and Safety Laws.......................... 16
5.24 Employees.............................................. 16
5.25 Small Business Concern................................. 16
5.26 Absence of Restrictive Agreements...................... 17
5.27 Application of Proceeds................................ 17
</TABLE>
<PAGE>
<TABLE>
<S> <C>
5.28 Disclosure.................................................................. 17
5.29 Payables.................................................................... 17
5.30 Year 2000................................................................... 17
6. Representations and Warranties of Purchasers......................................... 18
6.1 Investment Intent........................................................... 18
6.2 Location of Principal Office and Qualification as Accredited Investor....... 18
6.3 Acts and Proceedings........................................................ 18
6.4 No Brokers or Finders....................................................... 18
7. Conditions of Each Purchaser's Obligation at the Phase I Closing..................... 19
7.1 No Errors, Etc.............................................................. 19
7.2 Compliance with Agreement................................................... 19
7.3 Material Adverse Change..................................................... 19
7.4 Legal Proceedings........................................................... 19
7.5 Consents.................................................................... 19
7.6 Certificate of Officers..................................................... 19
7.7 Opinion of Company's Counsel................................................ 20
7.8 No Event of Default......................................................... 22
7.9 Qualification Under State Securities Laws................................... 23
7.10 Proceedings and Documents................................................... 23
7.11 Stockholders' Agreement..................................................... 23
7.12 Transaction Fee............................................................. 23
7.13 Expenses.................................................................... 23
8. Conditions of Each Purchaser's Obligation at a Phase II Closing...................... 23
8.1 No Errors, Etc.............................................................. 23
8.2 Compliance with Agreement................................................... 24
8.3 Legal Proceedings........................................................... 24
8.4 Consents.................................................................... 24
8.5 Certificate of Officers..................................................... 24
8.6 Opinion of Company's Counsel................................................ 24
8.7 No Event of Default......................................................... 24
8.8 Qualification Under State Securities Laws................................... 24
8.9 Transaction Fee............................................................. 24
8.10 Expenses.................................................................... 24
9. Affirmative Covenants................................................................ 24
9.1 Corporate Existence......................................................... 25
9.2 Books of Account and Reserves............................................... 25
9.3 Furnishing of Financial Statements and Information.......................... 25
9.4 Inspection.................................................................. 27
9.5 Preparation and Approval of Budgets......................................... 27
9.6 Payment of Taxes and Maintenance of Properties.............................. 28
9.7 Insurance................................................................... 28
</TABLE>
<PAGE>
<TABLE>
<S> <C>
9.8 Payment of Indebtedness and Discharge of Obligations..................................... 29
9.9 Directors' and Shareholders' Meetings; Board Committees.................................. 29
9.10 Replacement of Certificates Representing Preferred Shares or Conversion Stock............ 31
9.11 Application of Proceeds.................................................................. 31
9.12 Retirement Plans......................................................................... 31
9.13 Filing of Reports........................................................................ 32
9.14 Patents and Other Intangible Rights...................................................... 32
9.15 Insurance on Lives of Key Personnel...................................................... 32
9.16 Rights to Purchase Additional Securities................................................. 32
9.17 Rule 144A................................................................................ 34
9.18 Net Worth................................................................................ 34
9.19 Best Efforts............................................................................. 34
9.20 Management Rights........................................................................ 34
10. Negative Covenants................................................................................ 35
10.1 Dividends on or Redemption of Junior Stock............................................... 35
10.2 Future Registration Rights............................................................... 35
10.3 Other Restrictions....................................................................... 36
11. The Preferred Shares.............................................................................. 36
11.1 Conversion of Preferred Shares........................................................... 36
11.2 Stock Fully Paid; Reservation of Shares.................................................. 36
11.3 Adjustment of Number of Shares and Conversion Price...................................... 37
11.4 Mandatory Conversion of Preferred Shares................................................. 37
12. Redemption of Preferred Shares.................................................................... 37
13. Registration of Stock............................................................................. 37
13.1 Required Registration.................................................................... 37
13.2 Incidental Registration.................................................................. 38
13.3 Registration Procedures.................................................................. 39
13.4 Expenses................................................................................. 41
13.5 Indemnification.......................................................................... 41
13.6 Indemnification Procedures............................................................... 43
14. Default........................................................................................... 44
14.1 Events of Default........................................................................ 44
14.2 Remedies Upon Events of Default.......................................................... 45
14.3 Notice of Defaults....................................................................... 46
14.4 Suits for Enforcement.................................................................... 46
14.5 Remedies Cumulative...................................................................... 46
14.6 Remedies not Waived...................................................................... 46
</TABLE>
<PAGE>
<TABLE>
<S> <C>
15. Termination of Certain Covenants.................................. 47
16. Documents to be Delivered at the Phase I Closing.................. 47
16.1 Deliveries by the Company to the Purchasers.............. 47
16.2 Deliveries by the Purchasers to the Company.............. 48
17. Documents to be Delivered at the Phase II Closing................. 48
17.1 Deliveries by the Company to the Purchasers.............. 48
17.2 Deliveries by the Purchasers to the Company.............. 49
18. Definitions....................................................... 49
19. Understanding Among Purchasers.................................... 54
20. Consents; Waivers and Amendments.................................. 54
21. Changes, Waivers, Etc............................................. 55
22. Payment of Fees and Expenses of Purchasers........................ 55
23. Notices........................................................... 55
24. Survival of Representations and Warranties, Etc................... 56
25. Parties in Interest............................................... 56
26. Headings.......................................................... 56
27. Choice of Law..................................................... 56
28. Counterparts...................................................... 56
29. 1997 Stock Purchase Agreement..................................... 56
</TABLE>
<PAGE>
SCHEDULES AND EXHIBITS
Exhibits:
- --------
Exhibit 1 - Articles
Exhibit 2 - Amended and Restated Shareholder Agreement
Exhibit 3 - Form of Contingent Value Rights
Schedules:
- ---------
Schedule A - Purchasers
Schedule 5.1 - Organization
Schedule 5.2 - Qualifications
Schedule 5.3 - Financial Statements
Schedule 5.4 - Tax
Schedule 5.5 - No Undisclosed Liabilities
Schedule 5.6 - Certain Developments
Schedule 5.7 - Title to Properties and Encumbrances
Schedule 5.8 - Litigation
Schedule 5.9 - Compliance with Applicable Law and Other Instruments
Schedule 5.11 - Securities Laws
Schedule 5.12 - Intellectual Property
Schedule 5.13 - Capital Stock
Schedule 5.15 - Material Contracts and Assets
Schedule 5.17 - Insurance Coverage
Schedule 5.18 - Brokers or Finders
Schedule 5.19 - Conflicts
Schedule 5.20 - Licenses
Schedule 5.21 - Registration Rights
Schedule 5.22 - Retirement Plans
Schedule 5.23 - Environmental
Schedule 5.24 - Employees
Schedule 5.28 - Payables
Schedule 5.29 - Year 2000
Schedule 9.15 - Key Man Life Insurance
<PAGE>
EXHIBIT 10.18
REDEMPTION AGREEMENT
--------------------
FOR THE
-------
COMMON STOCK
------------
OF
--
PARASOLE RESTAURANT HOLDINGS, INC. AND BUCA, INC.
-------------------------------------------------
AGREEMENT made as of the 30 day of September, 1996, by and between PARASOLE
--
RESTAURANT HOLDINGS, INC. ("Parasole"), a corporation created and existing under
the laws of the State of Minnesota with its principal place of business at 3001
Hennepin Avenue South, Suite 301A, Minneapolis, Minnesota 55408, and BUCA, INC.
("BUCA"), a corporation created and existing under the laws of the State of
Minnesota with its principal place of business at 1422 Lake Street, Suite 220,
Minneapolis, Minnesota 55408.
WITNESSETH:
WHEREAS, Parasole maintains an employee stock ownership plan ("ESOP") for
the benefit of its employees and BUCA intends to maintain an ESOP after BUCA is
spun off from Parasole;
WHEREAS, after BUCA is spun off, the parties' ESOPs will hold shares of
common stock of both Parasole and BUCA which are allocated to the accounts of
employees;
WHEREAS, the parties believe it is financially equitable, and in their
mutual best interests and in the interests of their employees, to provide a
market for allocated ESOP stock and to provide that each corporation shall be
primarily responsible for redeeming its own stock regardless from which ESOP it
is distributed or sold; and
WHEREAS, each party wishes that, in the event the common stock of the other
party is not publicly traded or is subject to restrictions on transfer at the
time a distribution is to be made from its ESOP, the other party shall be
obligated to redeem such common stock from the party itself, its ESOP, or from
the individual who receives the distribution;
NOW, THEREFORE, in consideration of their respective promises, agreements,
and covenants herein, and for other valuable consideration, the receipt of which
is hereby acknowledged, the parties agree as follows:
1. Definitions.
-----------
(A) "BUCA ESOP" means the employee stock ownership plan which is to be
sponsored by BUCA and created in connection with the spin-off of BUCA from
Parasole. The BUCA ESOP will hold the assets currently in the Parasole ESOP
attributable to the accounts of
<PAGE>
employees of BUCA, employees of its subsidiaries, and their beneficiaries. The
BUCA ESOP assets will include shares of stock of BUCA and Parasole after said
spin-off.
(B) "Parasole ESOP" means the employee stock ownership plan which is
maintained by Parasole for its employees and the employees of its subsidiaries
(including at the time of this agreement, the employees of BUCA). After the
spin-off of BUCA, the Parasole ESOP will have accounts for its participants and
their beneficiaries that are expected t included shares of stock of BUCA and
Parasole.
(C) The "Purchase Price" of any shares of stock shall be the most recent
fair market value as determined by an independent appraiser pursuant to the
terms of the ESOP which holds or has distributed the stock. If, however, one of
the parties should become a disqualified person (within the meaning of Section
4975(e)(2) of the Internal Revenue Code) with respect to the other party's ESOP
and is purchasing stock directly from such ESOP, the Purchase Price shall be
determined as of the date of the purchase, and the price given in the notice
required under paragraph 4 shall be a good faith estimate of the current fair
market value of the stock.
(D) "Qualifying BUCA ESOP Distribution" means any distribution from the
BUCA ESOP of the vested portion of an account which includes shares of Parasole
stock to a participant or beneficiary at a time when the Parasole stock of the
class held in said account either is not readily tradable on an established
market, or, if so tradable, is subject to restrictions on transfer at the time
of the distribution.
(E) "Qualifying Parasole ESOP Distribution" means any distribution from
the Parasole ESOP of the vested portion of an account which includes shares of
BUCA stock to a participant or beneficiary at a time when the BUCA stock of the
class held in said account either is not readily tradable on an established
market, or, if so tradable, is subject to restrictions on transfer at the time
of the distribution.
2. BUCA Redemptions. In the event a Qualifying Parasole ESOP
----------------
Distribution is to be made, BUCA shall facilitate said distribution by redeeming
the shares of BUCA stock in the relevant account at the Purchase Price from the
party designated by Parasole, whether from the Parasole ESOP, Parasole, or the
participant or beneficiary. No redemption will be required, however, from the
Parasole ESOP if the redemption would constitute a prohibited transaction under
ERISA or the Internal Revenue Code for which there is no available exemption.
The redemption shall be made at the time requested by Parasole, but shall not be
sooner than 10 days after notice from Parasole to BUCA.
3. Parasole Redemptions. In the event a Qualifying BUCA ESOP
--------------------
Distribution is to be made, Parasole shall facilitate said distribution by
redeeming the shares of Parasole stock in the relevant account at the Purchase
Price from the party designated by BUCA, whether from the BUCA ESOP, BUCA, or
the participant or beneficiary. No redemption will be required, however, from
the BUCA ESOP if the redemption would constitute a prohibited transaction under
ERISA or the Internal Revenue Code for which there is no available exemption.
The redemption shall be made at the time requested by BUCA, but shall not be
sooner than 10 days after notice from BUCA to Parasole.
-2-
<PAGE>
4. Notice and Payment. As a condition of a party's obligation to
------------------
purchase its stock under paragraph 2 or 3, the other party shall give at least
10 business days notice of the number of shares, the Purchase Price, and the
date when the stock shall be purchased. All notices and other communications
hereunder shall be in writing and shall be deemed given to the other party when
hand delivered or mailed by certified mail, postage prepaid, addressed to the
other party's principal place of business.
5. Termination. This Agreement shall terminate upon the occurrence of
-----------
(a) the bankruptcy, receivership or dissolution of either of the parties, or (b)
a change in ownership which causes the parties to become members of the same
controlled group of corporations within the meaning o Section 414(b) of the
Internal Revenue Code.
6. Miscellaneous Terms. This Agreement shall be binding on the parties
-------------------
hereto, their successors and assigns. This Agreement shall be governed by the
laws of the State of Minnesota. Nothing in this Agreement shall be construed to
alter a participant's rights or a party's obligations under Section 409(h) of
the Internal Revenue Code.
7. Arbitration. If any controversy or claim arising out of the
-----------
interpretation of this Agreement cannot be settled by the parties, such
controversy or claim shall be settled by arbitration at Minneapolis, Minnesota,
in accordance with the then current rules of the American Arbitration
Association, and judgement upon the award may be entered in any court having
jurisdiction thereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
PARASOLE RESTAURANT
HOLDINGS, INC.
By /s/ Don W. Hays
-----------------------------------------------
Its CEO
--------------------------------------------
BUCA, INC.
By /s/ Philip A. Roberts
-----------------------------------------------
Its CEO
--------------------------------------------
-3-
<PAGE>
Exhibit 10.19
CONTINGENT VALUE RIGHTS
As of October 13, 1998, BUCA, Inc. ("BUCA") sold to Centre Capital
Investors II, L.P. contingent value rights to receive shares of BUCA's capital
stock in accordance with the terms of the attached contingent value rights
agreement. BUCA also sold contingent value rights to the Purchasers listed
below. Their agreements are substantially identical to the attached copy, except
for the material details set forth in the following Schedule.
SCHEDULE OF DIFFERENCES
BETWEEN ATTACHED COPY AND SUBSTANTIALLY IDENTICAL COPIES
<TABLE>
<CAPTION>
CVR Number of
Purchaser No. CVRs Date CVRs Granted
<S> <C> <C> <C> <C>
Attached Copy: Centre Capital Investors II, L.P. 1 300,515 October 13, 1998
Sub. Iden. Copy: Centre Capital Tax-Exempt Investors II, 2 97,793 October 13, 1998
L.P.
Sub. Iden. Copy: Centre Capital Offshore Investors II, L.P. 3 65,390 October 13, 1998
Sub. Iden. Copy: Centre Parallel Management Partners, L.P. 4 4,607 October 13, 1998
Sub. Iden. Copy: Centre Partners Coinvestment, L.P. 5 50,944 October 13, 1998
Sub. Iden. Copy: State Board of Administration of Florida 6 456,360 October 13, 1998
Sub. Iden. Copy: Norwest Equity Partners V, L.P. 7 424,203 October 13, 1998
Sub. Iden. Copy: Northwood Capital Partners LLC 8 9,756 October 13, 1998
Sub. Iden. Copy: Northwood Ventures 9 87,805 October 13, 1998
Sub. Iden. Copy: Regent Capital Equity Partners, L.P. 10 72,659 October 13, 1998
Sub. Iden. Copy: Walden-SBIC, L.P. 11 59,170 October 13, 1998
Sub. Iden. Copy: Walden Technology Ventures II, L.P. 12 9,823 October 13, 1998
Sub. Iden. Copy: Centre Capital Investors II, L.P. 13 300,515 December 23, 1998
Sub. Iden. Copy: Centre Capital Tax-Exempt Investors II, 14 97,793 December 23, 1998
L.P.
Sub. Iden. Copy: Centre Capital Offshore Investors II, L.P. 15 65,390 December 23, 1998
Sub. Iden. Copy: Centre Parallel Management Partners, L.P. 16 4,607 December 23, 1998
Sub. Iden. Copy: Centre Partners Coinvestment, L.P. 17 50,944 December 23, 1998
Sub. Iden. Copy: State Board of Administration of Florida 18 456,360 December 23, 1998
</TABLE>
<PAGE>
Exhibit 10.19
VOID AFTER 5:00 P.M. MINNEAPOLIS TIME, ON OCTOBER 12, 2005
CVR No. 1 300,515 CVRs
BUCA, INC.
CONTINGENT VALUE RIGHTS TO RECEIVE SHARES OF CAPITAL STOCK
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (i) THE OPINION
OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE
LAWFULLY MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND
ALL APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
THIS CERTIFIES THAT, FOR VALUE RECEIVED, Centre Capital Investors II, L.P.,
or registered assigns, is the registered holder of the number of Contingent
Value Rights ("CVRs") set forth above. Each CVR entitles the holder thereof to
receive from BUCA, Inc., a Minnesota corporation ("BUCA" or the "Company"),
subject to the terms and conditions set forth hereinafter, shares of BUCA's
Series C Preferred Stock, par value $.01 per share ("Series C Preferred Stock")
or shares of BUCA's Common Stock, par value $.01 per share ("Common Stock") as
follows:
In the event that on or prior to October 12, 2001, BUCA has not either
effected a Qualified Public Offering (as defined in the Articles of
Incorporation described in the Securities Purchase Agreement referred to below)
or had a Publicly Traded Security (as defined in the Articles of Incorporation)
with an average closing price on the principal securities exchange or market on
which such security is traded (hereinafter, the "Closing Price") of at least
$12.00 per share for a period of at least 120 consecutive trading days, then,
the holder of this CVR Certificate shall be entitled to receive on October 12,
2001 (the "Payment Date"), the cumulative Settlement Amounts of additional
Series C Preferred Shares obtained by the following formula which will be
computed as of the last day of each March, June, September and December,
commencing December 31, 1998 (each a "Quarterly End Date") for the period
commencing on October 13, 1998, where:
(i) X represents the number of shares of Series C Preferred Stock or
Common Stock issued upon conversion thereof ("Conversion Stock") held
by the holder (including any Series C Preferred Stock, Conversion
Stock or Common Stock issuable in respect of any prior Quarterly End
Date(s)), and
1
<PAGE>
(ii) Y represents the result obtained by dividing $12.00 by the Market
Value, as hereinafter defined, and
(iii) the Settlement Amount, is determined as follows:
(X multiplied by (Y multiplied by .25)) minus (X multiplied by .25).
However, in no event shall the Settlement Amount for any quarter
exceed 1.25% of X and the Settlement Amount for any partial quarter
shall be proportionately reduced.
For purposes of computing the Settlement Amount, if the Common Stock
is publicly traded, "Market Value" shall be the average Closing Price
for the 120 trading days immediately preceding the date of
determination of Market Value (or such lesser number of days that the
Common Stock shall have been publicly traded). In the absence of a
publicly traded market, the amount "Y" in (ii) above shall be obtained
by dividing $18.00 by the Market Value, provided that in such case
"Market Value" will equal the per share price of the most recent
issuance of preferred stock of BUCA in an arms-length transaction for
aggregate consideration of at least $5,000,000); provided, however,
that, in the absence of a publicly traded market, in no event shall
the Market Value be at a price per share that is less than the per
share price of the most recent issuance of Common Stock of BUCA in an
arms-length transaction for aggregate consideration of at least
$5,000,000.
Additionally, from and after October 13, 2001 and until October 12, 2005,
such holder will continue to be entitled to receive a Settlement Amount on a
quarterly basis on each subsequent Quarterly End Date, until the second
Quarterly End Date following the earlier of the date a Qualified Public Offering
has been effected or BUCA has a Publicly Traded Security with an average Closing
Price of at least $12.00 per share for at least 120 consecutive trading days.
Notwithstanding the foregoing, in the event that as of the Payment Date or
any Quarterly End Date, the Common Stock is traded on a national securities
exchange, the NASDAQ National Market or the NASDAQ Small Cap Market, then in
lieu of shares of Series C Preferred Stock on the applicable payment date, at
the option of BUCA, BUCA shall issue an equivalent number of shares of Common
Stock.
In the event that on or prior to October 12, 2001 BUCA shall sell, lease,
license or otherwise dispose of all or substantially all of its assets, or any
asset or assets which have a material effect upon the business or financial
condition of the corporation, or shall consolidate with or merge into any other
corporation or entity, or permit any other corporation or entity to
2
<PAGE>
consolidate or merge into BUCA, or enter into a plan of exchange with any other
corporation or entity (except for a merger or consolidation of any wholly-owned
subsidiary with or into BUCA), then the CVRs granted hereby shall be cancelled.
In the event of any stock dividend payable in shares of Common Stock, any
increase in the number of shares of Common Stock by a subdivision or split-up of
shares of Common Stock or any decrease in the number of shares of Common Stock
by a combination of the outstanding shares of Common Stock or any capital
reorganization or reclassification of the Common Stock, the provisions hereof
with respect to the computation of the Settlement Amount and the number of
shares of capital stock issuable hereunder, shall be subject to equitable
adjustment to effectuate the purposes hereof.
REFERENCE IS MADE TO THE PROVISIONS OF THIS CVR CERTIFICATE SET FORTH ON
THE REVERSE SIDE HEREOF, AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE.
This CVR Certificate shall be governed by and construed in accordance with
the laws of the State of Minnesota.
This CVR Certificate is being issued pursuant to the terms of and is
entitled to the benefits of the Securities Purchase Agreement dated as of
October 13, 1998, as amended (the "Securities Purchase Agreement") among BUCA
and the Purchasers party thereto.
IN WITNESS WHEREOF, BUCA has caused this CVR Certificate to be executed by
its duly authorized officer.
BUCA, INC.
By /s/ Greg A. Gadel
---------------------------
Title CFO
-----------------------
Dated: December 23, 1998
3
<PAGE>
[REVERSE SIDE]
The holder of this CVR Certificate shall not, by virtue hereof, be entitled
to any of the rights of a stockholder of BUCA, either at law or in equity, and
the rights of the holder are limited to those expressed herein.
Every holder of this CVR Certificate, by accepting the same, consents and
agrees with BUCA and with every other holder of a CVR Certificate that:
(a) This CVR Certificate is transferable on the registry books of BUCA
only upon the terms and conditions set forth herein;
(b) BUCA may deem and treat the person in whose name this CVR
Certificate is registered as the absolute owner hereof (notwithstanding any
notation of ownership or other writing hereon made by anyone other than
BUCA) for all purposes whatsoever and BUCA shall not be affected by any
notice to the contrary; and
(c) this CVR Certificate and the CVRs, and the obligations of BUCA
hereunder, may be waived, amended, modified, supplemented or released, in
whole or in part, with the consent of BUCA and the holders of not less than
66 2/3% of the then outstanding CVRs.
BUCA shall maintain books for the registration and registration of transfer
of the CVR Certificates.
No fractional shares of Series C Preferred Stock or Common Stock shall be
issued to any holder of CVRs in respect of the CVRs. Instead of any fractional
shares of Series C Preferred Stock or Common Stock that would otherwise be
issuable to any such holder, BUCA will pay to such holder a cash adjustment in
respect of such fractional interest in an amount equal to the fair market value
thereof as determined by two-thirds of the members of the Board of Directors of
BUCA.
BUCA will pay all documentary stamp taxes attributable to the original
issuance of the CVRs and shares of capital stock of BUCA ("BUCA Shares")
issuable hereunder; provided, however, that BUCA shall not be required to (a)
pay any tax which may be payable in respect of any transfer involving any
transfer and delivery of CVR Certificates or the issuance or delivery of
certificates for BUCA Shares in a name other than that of the registered holder
of the CVR Certificate as of the applicable payment date, or (b) issue or
deliver any certificate for BUCA Shares upon any applicable payment date until
any such tax required to be paid under clause (a) shall have been paid, all such
tax being payable by the holder of such CVR at the time
4
<PAGE>
of surrender.
In case any CVR Certificate shall be mutilated, lost, stolen or destroyed,
BUCA shall issue a new CVR Certificate of like tenor and evidencing the number
of CVRs evidenced by the CVR Certificate so mutilated, lost, stolen or
destroyed, but only upon receipt of evidence satisfactory to BUCA of such
mutilation, loss, theft or destruction of such CVR Certificate and indemnity, if
requested, also satisfactory to it.
BUCA shall at all times reserve for issuance and delivery pursuant to the
CVRs such number of BUCA Shares from time to time issuable pursuant to the CVRs.
All such shares shall be duly authorized and, when issued, shall be validly
issued, fully paid and nonassessable, free and clear of all liens, security
interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights.
CVRs may be exchanged or transferred, at the option of the holder, upon
surrender of CVR Certificates to BUCA or its transfer agent for other CVR
Certificates of different denominations, entitling the holder or holders thereof
to receive in the aggregate the same payments. Subject to the preceding
sentence, a CVR Certificate may be divided or combined with other CVR
Certificates that carry the same rights upon presentation thereof at the office
of BUCA or its transfer agent, together with written notice specifying the names
and denominations in which new CVR Certificates are to be issued and signed by
the holder thereof.
CVRs may be assigned or transferred, at the option of the holder, upon
surrender of CVR Certificates to BUCA or its transfer agent, accompanied (if so
required by BUCA) by a written instrument or instruments of transfer in form
satisfactory to BUCA, duly executed by the registered holder or by a duly
authorized representative or attorney. Upon any such registration of transfer, a
new CVR Certificate shall be issued to the transferee of the surrendered CVR
Certificate.
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (i) THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY
BE LAWFULLY MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
Any transfer, exchange or assignment of CVRs shall be without charge (other
than the cost of any transfer tax) to the holder and any new CVR Certificate
issued pursuant hereto shall be dated the date of such transfer, exchange or
assignment.
All covenants and provisions of this Agreement by or for the benefit of
BUCA or the holders of the CVRs shall bind and inure to the benefit of their
respective successors, assigns,
5
<PAGE>
heirs and personal representatives.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint with right of survivorship and not as
tenants in common
COM PROP as community property
UNIF GIFT MIN ACT Custodian
----------------- -----------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------------------------
(State)
Additional abbreviations may also be used though not in the above list.
6
<PAGE>
Exhibit 21.1
SUBSIDIARIES OF BUCA, INC.
1. BUCA (DT Minneapolis), Inc., a Minnesota corporation
2. BUCA (Eden Prairie), Inc., a Minnesota corporation
3. BUCA (Gannon Road), Inc., a Minnesota corporation
4. BUCA (DT Milwaukee), Inc., a Minnesota corporation
5. BUCA (Lakeview Chicago), Inc., a Minnesota corporation
6. BUCA (Wheeling), Inc., a Minnesota corporation
7. BUCA (Indianapolis), Inc., a Minnesota corporation
8. BUCA (Encino), Inc., a Minnesota corporation
9. BUCA (Pasadena), Inc., a Minnesota corporation
10. BEPPO (DT San Francisco), Inc., a Minnesota corporation
11. UNA FAMIGLIA (Palo Alto), Inc., a Minnesota corporation
12. BUCA (Campbell), Inc., a Minnesota corporation
13. UNA FAMIGLIA (DT Seattle), Inc., a Minnesota corporation
14. BUCA (Lynnwood), Inc., a Minnesota corporation
15. BUCA (Portland), Inc., a Minnesota corporation
16. BUCA (Kansas), Inc., a Kansas corporation
17. BUCA (Nevada), Inc., a Nevada corporation
18. BUCA (Kentucky), Inc., a Kentucky corporation
The name under which each of the subsidiaries of BUCA, Inc. does business
is "BUCA di BEPPO."
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
Minneapolis, Minnesota, ARTHUR ANDERSEN LLP
February 18, 1999
/s/ Arthur Andersen LLP
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the use in the Registration Statement of BUCA, Inc. and
Subsidiaries on Form S-1 of our report dated February 17, 1999 appearing in the
Prospectus, which is part of this Registration Statement.
We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
Minneapolis, Minnesota
February 17, 1999
/s/ Deloitte & Touche LLP
<PAGE>
Exhibit 24.1
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 15th day of February, 1999.
/s/ Joseph P. Micatrotto
------------------------------------
Joseph P. Micatrotto
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 10th day of February, 1999.
/s/ Don W. Hays
------------------------------------
Don W. Hays
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 17th day of February, 1999.
/s/ Greg A. Gadel
------------------------------------
Greg A. Gadel
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 17th day of February, 1999.
/s/ Peter J. Mihajlov
------------------------------------
Peter J. Mihajlov
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 17th day of February, 1999.
/s/ Philip A. Roberts
------------------------------------
Philip A. Roberts
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 15th day of February, 1999.
/s/ John P. Whaley
------------------------------------
John P. Whaley
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 16th day of February, 1999.
/s/ David Yarnell
------------------------------------
David Yarnell
<PAGE>
BUCA, INC.
Power of Attorney
of Director and/or Officer
The undersigned director and/or officer of BUCA, INC., a Minnesota
corporation, does hereby make, constitute, and appoint Joseph P. Micatrotto and
Greg A. Gadel, and each or any of them, the undersigned's true and lawful
attorneys-in-fact and agent, with full power of substitution and resubstitution,
for the undersigned and in the undersigned's name, place, and stead, to sign and
affix the undersigned's name as such director and/or officer of said Corporation
to a Registration Statement on Form S-1 or other applicable form, and any or all
amendments, including post-effective amendments, thereto, and all registration
statements for the same offering that are to be effective upon filing pursuant
to Rule 462(b) under the Securities Act of 1933, as amended (the "Act"), to be
filed by said Corporation with the Securities and Exchange Commission,
Washington, D.C. in connection with the registration under the Act of equity
securities proposed to be sold by said Corporation, and file the same, with all
exhibits thereto and other supporting documents pertaining to the registration
of the securities covered thereby, with said Commission, granting unto said
attorneys-in-fact and agents, and each or any of them, full power and authority
to do and perform each and every act and thing requisite and necessary or
incidental to the performance and execution of the powers herein expressly
granted, to be done in and about the premises, as fully to all intents and
purposes as the undersigned might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either or any of them,
or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 10th day of February, 1999.
/s/ Paul Zepf
------------------------------------
Paul Zepf
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BACA, INC
AND SUBSIDIARIES FOR THE FISCAL YEAR ENDED DECEMBER 27, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> DEC-27-1998
<CASH> 6,576
<SECURITIES> 0
<RECEIVABLES> 1,160
<ALLOWANCES> 0
<INVENTORY> 935
<CURRENT-ASSETS> 9,256
<PP&E> 27,697
<DEPRECIATION> 1,617
<TOTAL-ASSETS> 37,560
<CURRENT-LIABILITIES> 6,100
<BONDS> 7,661
36,973
0
<COMMON> 19
<OTHER-SE> (13,559)
<TOTAL-LIABILITY-AND-EQUITY> 37,560
<SALES> 38,483
<TOTAL-REVENUES> 38,483
<CGS> 40,376
<TOTAL-COSTS> 40,376
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,036
<INCOME-PRETAX> (2,929)
<INCOME-TAX> 17
<INCOME-CONTINUING> (2,946)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,946)
<EPS-PRIMARY> (2.04)
<EPS-DILUTED> (2.04)
</TABLE>
