<PAGE>
As filed with the Securities and Exchange Commission on April 11, 2000
Registration No. 333-32794
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Amendment No. 2 to
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
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 Industrial Identification No.)
of incorporation or Classification Code
organization) Number)
1300 Nicollet Mall, Suite 5003
Minneapolis, Minnesota 55403
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
Joseph P. Micatrotto
Chairman, President and Chief Executive Officer
BUCA, Inc.
1300 Nicollet Mall, Suite 5003
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
---------------
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>
[PHOTO OF DINERS]
"ONE OF
THE BEST
NEW RESTAURANTS
IN AMERICA"
Bon Appetit
"Packed
Like a Ravioli"
Indianapolis Star/News
"So much
FUN
you won't know
what hit you"
Seattle Post-Intelligencer
<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 April 11,
2000
3,033,699 Shares
BUCA, INC.
Common Stock
$ per share
-------------------------------------------------------
. BUCA, Inc. is offering . On March 14, 2000, the last reported sale price
3,000,000 shares and of our common stock was $15.00 per share.
selling shareholders
are offering
33,699 shares.
. Trading symbol: Nasdaq National Market--BUCA.
----------
This investment involves risk. You should carefully consider the "Risk Factors"
beginning on page 7.
-------------------------------------------------------
-------------------------------------------------------
<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 455,054 additional
shares of common stock from us and selling shareholders 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.
U.S. Bancorp Piper Jaffray
Banc of America Securities LLC
Robertson Stephens
The date of this prospectus is , 2000.
<PAGE>
[PHOTO OF GENTLEMEN WITH SUITCASES]
"BEST PIZZA FOR SHARING"
Chicago
"Astonishingly good, in any dialect"
The Detroit News
"Exudes the excessive, exuberant, voluptuous Neapolitan spirit"
San Francisco Chronicle
"Vital, vibrant and powerfully flavored"
San Jose Mercury News
"BEST NEW RESTAURANT"
Louisville Magazine
Readers' Poll
BUCA (R) and BUCA di BEPPO(R), as well as additional names and logos appearing
in this prospectus, are registered trademarks of BUCA, Inc. This prospectus
also includes names and trademarks of other companies. The individual
restaurant reviews quoted in this prospectus are not intended to suggest or
imply an endorsement by the reviewers or their publishers of the contents of
this prospectus or an investment in the common stock.
<PAGE>
[PHOTO OF SERVER WITH SALAD]
[PHOTO OF DINERS]
"JUST TRY
NOT TO SING
ALONG"
Los Angeles Times
"Particularly
FLAVORFUL
and FRESH"
Washington Times
"Boisterously
BIG
in every way"
Seattle Post-Intelligencer
"OUT-AND-OUT
GOOD"
The Courier-Journal
Louisville
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Summary............................................................... 4
Risk Factors.......................................................... 7
Special Note Regarding Forward-Looking Statements..................... 12
Use of Proceeds....................................................... 12
Price Range of Common Stock........................................... 12
Dividend Policy....................................................... 13
Capitalization........................................................ 14
Selected Consolidated Financial Data.................................. 15
Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................ 17
Business.............................................................. 23
Management............................................................ 33
Certain Relationships and Related Transactions........................ 40
Principal Shareholders................................................ 42
Selling Shareholders.................................................. 44
Description of Capital Stock.......................................... 46
Underwriting.......................................................... 49
Legal Matters......................................................... 51
Experts............................................................... 51
Where You Can Find More Information................................... 51
Index to Consolidated Financial Statements............................ F-1
</TABLE>
---------------
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.
---------------
This prospectus contains forward-looking statements that involve risks and
uncertainties. 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 in the section entitled "Risk Factors" and elsewhere in this
prospectus.
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 40 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. We believe that the generous portions,
combined with an average check per guest in fiscal 1999 of approximately
$20.00, including beverages, offer our guests exceptional value.
BUCA di BEPPO restaurants irreverently exaggerate the cliches of post-War
Italian/American restaurants found in Italian neighborhoods of large U.S.
cities. We design each of our restaurants to be a fun, high-energy destination.
Each BUCA di BEPPO restaurant in a market is unique, which reinforces our image
as a collection of neighborhood restaurants. Restaurant interiors are covered
with hundreds of vintage photos and icons of Italian heritage, and feature
lively music from classic artists such as Frank Sinatra and Dean Martin.
Restaurant exteriors feature flashing bare bulb signage, statuary and humorous
neon signs. 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 innovative concept has attracted
national attention as evidenced by 17 "best of" designations in a variety of
readers' polls across the U.S., a 1999 write-up in Gourmet Magazine, a 1998
"Hot Concepts!" award from Nation's Restaurant News, and numerous awards in our
local markets.
We believe that our restaurants provide superior unit level economics. For
fiscal 1999, our restaurants with at least two full years of operating history
generated average restaurant sales of approximately $3.2 million and average
cash flow of approximately $785,000, or 24.5% of restaurant sales. We believe
that our Paisano Partners program, in which our restaurant general managers,
known as Paisano Partners, 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.
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 intend to continue our expansion throughout the United
States. We plan to open 17 restaurants in fiscal 2000, of which six have
already opened, nine are under construction and the remaining two have signed
leases. By the end of fiscal 2000, we plan to have 51 restaurants open in 29
markets. To continue our expansion, we will need to select appropriate
restaurant sites, effectively manage development risks, recruit qualified
personnel and raise additional capital as necessary.
4
<PAGE>
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.
Our website is www.BUCAdiBeppo.com The information on our website is not
intended to be part of this prospectus, and you should not rely on any of the
information provided there in making your decision to invest in our common
stock.
The Offering
Common stock offered:
<TABLE>
<S> <C>
By BUCA, Inc........................... 3,000,000 shares
By selling shareholders................ 33,699 shares
Total.............................. 3,033,699 shares
Common stock outstanding after the offering.... 13,891.437 shares
Offering price................................. $ per share
Use of proceeds................................ To fund restaurant development,
repay existing bank debt and
for general corporate purposes.
Nasdaq National Market symbol.................. BUCA
</TABLE>
The number of shares to be outstanding after the offering excludes:
. 1,296,498 shares of common stock issuable upon exercise of options
outstanding as of the date of this prospectus at a weighted average exercise
price of $8.13 per share,
. 69,441 shares of common stock issuable upon conversion of convertible
subordinated debt outstanding as of the date of this prospectus and
. 511,018 additional shares of common stock reserved for issuance under our
employee stock plans.
The number of shares to be outstanding after the offering includes 13,699
shares to be issued in connection with this offering upon the exercise of
options by selling shareholders.
Except as otherwise noted, all information in this prospectus assumes:
. no exercise of the underwriters' over-allotment option and
. no exercise of outstanding options to purchase shares of common stock or the
conversion of the outstanding convertible subordinated debt into shares of
common stock.
5
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share and operating data)
The as adjusted information below gives effect as of December 26, 1999 to our
receipt of the estimated net proceeds of $41,908,000 from the sale of 3,000,000
shares of common stock offered by us, our receipt of $97,000 upon exercise of
13,699 outstanding options by selling shareholders in connection with this
offering.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Consolidated Statements of Operations
Data:
Restaurant sales....................... $19,030 $38,483 $71,528
Operating (loss) income................ (2,399) (1,893) 1,492
Net (loss) income...................... (3,319) (2,946) 1,424
Net (loss) income applicable to common
stock................................. (5,305) (5,135) 680
Net (loss) income per common share--
basic................................. $ (2.13) $ (2.04) $ 0.08
Net (loss) income per common share--
diluted............................... $ (2.13) $ (2.04) $ 0.08
Weighted average common shares
outstanding--basic.................... 2,490 2,512 8,111
Weighted average common shares
outstanding--diluted.................. 2,490 2,512 8,655
Operating Data:
Comparable restaurant sales
increase(/1/)......................... 8.9% 13.3% 9.6%
Average weekly restaurant sales........ $47,579 $52,727 $54,229
Restaurants open at end of period...... 11 19 34
</TABLE>
<TABLE>
<CAPTION>
December 26,
1999
----------------
As
Actual Adjusted
------- --------
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents..................................... $ 1,726 $ 43,731
Total assets.................................................. 75,945 117,950
Total debt, including current portion......................... 1,738 1,738
Common shareholders' equity................................... 61,709 103,714
</TABLE>
- ---------------
(/1/)The calculation of comparable restaurant sales increase includes
restaurants open for 12 full calendar months, as adjusted to provide
comparable 52-week fiscal years.
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.
We May Be Unable to Sustain Profitability
Since we were formed, we have incurred net losses of approximately $6.1 million
through December 26, 1999, primarily due to new restaurant opening expenses 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. Failure to achieve these objectives may cause
our stock price to decline and make it difficult to raise additional capital.
See "Selected Consolidated Financial Data" and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" for information on
the history of our losses.
Our Business Could Be Materially Adversely Affected if We Are Unable to Expand
in a Timely and Profitable Manner
To continue to grow, we must open new BUCA di BEPPO restaurants on a timely and
profitable basis. 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. We expanded from 11 restaurants at
the end of fiscal 1997 to 34 restaurants at the end of fiscal 1999. We expect
to open an additional 17 restaurants during fiscal 2000, six of which are
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 of required governmental approvals and permits;
.recruitment of qualified operating personnel, particularly Paisano
Partners and kitchen managers;
.competition in new markets; and
.general economic conditions.
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 patterns
than our existing markets, which may cause our new restaurants to be less
successful in these new markets than in our existing markets. Furthermore, a
history of operating losses at a restaurant could result in a charge for
impairment of assets. See note 1 to our audited consolidated financial
statements for a discussion of the asset impairment criteria.
7
<PAGE>
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 seek to acquire the operations of other restaurants. 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 completing 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.
Fluctuations in Our Operating Results May Result in Decreases in Our Stock
Price
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. As a result, our operating results may fall below the expectations
of public market analysts and investors. In that event, the price of our common
stock would likely decrease.
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. 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. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for a discussion of our historical
operating results.
Because of Our Small Restaurant Base, Our Operating Results Could Be Materially
Adversely Affected By the Negative Performance of a Small Number of Restaurants
We currently operate 40 restaurants, 20 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.
Increased Food Costs Could Materially Adversely Affect Our Operating Results
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.
8
<PAGE>
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 May Be Unable to Compete With Larger, Better Established Competitors
The restaurant industry is highly competitive. Due to our limited financial
resources and operating history, we may be unable to compete effectively with
our larger, better established competitors, which have substantially greater
financial resources and operating histories than we do. We will likely face
direct competition with these competitors in each of the markets we enter. See
"Business--Competition" for a discussion of the competition we face.
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.
Our Operations Depend on Governmental Licenses and We May Face Liability Under
Dram Shop Statutes
Our business depends on obtaining and maintaining required food service and
liquor licenses for each of our restaurants. If we fail to hold all necessary
licenses, we may be forced to delay or cancel new restaurant openings and close
or reduce operations at existing locations. In addition, our sale of alcoholic
beverages subjects us to "dram shop" statutes in some states. These statutes
allow an injured person to recover damages from an establishment that served
alcoholic beverages to an intoxicated person. If we receive a judgment
substantially in excess of our insurance coverage, or if we fail to maintain
our insurance coverage, our business, financial condition, operating results or
cash flows could be materially and adversely affected. See "Business--
Government Regulation" for a discussion of the regulations we must comply with.
Complaints or Litigation From Guests May Materially Adversely Affect Us
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. These claims may divert our financial and management
resources that would otherwise be used to benefit the future performance of our
operations.
We May be Unable to Fund Our Significant Future Capital Needs and We May Need
Additional Funding Sooner Than Anticipated
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 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.
9
<PAGE>
We estimate that capital expenditures during fiscal 2000 will be approximately
$27.0 million and that capital expenditures during future years will exceed
this amount. In addition, we experienced negative cash flow from operations of
approximately $1.5 million in fiscal 1997, while experiencing a positive cash
flow from operations of approximately $338,000 in fiscal 1998 and approximately
$8.6 million in fiscal 1999. Although we expect that the net proceeds of this
offering, combined with other resources, will be sufficient to fund our capital
requirements at least through fiscal 2001, 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;
.we are required to reduce prices to respond to competitive pressures;
or
.we are able to secure a greater number of attractive development sites
than currently anticipated.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for a discussion of our historical
and anticipated capital needs.
Our Existing Shareholders Will Retain Significant Control Which Could Reduce
Your Ability to Receive a Premium for Your Shares Through a Change in Control
Upon completion of this offering, our executive officers, directors and
principal shareholders and their affiliates will own approximately 37.4% of the
outstanding shares of common stock, or 34.4% 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. This could depress the
price of our common stock. See "Management" and "Principal Shareholders" for
information about these shareholders and the number of shares they will
control.
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, these fluctuations could adversely affect our ability to raise
capital through future equity financings.
Provisions of Our Articles of Incorporation, Our By-Laws and Minnesota Law
Could Discourage Potential Acquisition Proposals and Delay or Prevent a Change
in Control
Anti-takeover provisions of our Articles of Incorporation, By-Laws and
Minnesota law could diminish the opportunity for shareholders to participate in
acquisition proposals at a price above the then current market price of our
common stock. The provisions may also inhibit increases in the market price of
our stock that could result from takeover attempts. For example, while we have
no present plans to issue any preferred stock, our board of directors, without
further shareholder approval, may issue preferred stock that could have the
10
<PAGE>
effect of delaying, deterring or preventing a change in control. The issuance
of preferred stock could adversely affect the voting power of your shares. In
addition, our Articles of Incorporation provide for a classified board of
directors consisting of three classes as well as require a 75% supermajority
vote for removal of directors. These classified board and supermajority removal
provisions could also have the effect of delaying, deterring or preventing a
change in control. See "Management--Board of Directors; Committees" and
"Description of Capital Stock" for a discussion of these provisions.
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.
11
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus, all of which are
subject to risks and uncertainties. Forward-looking statements include
information concerning our possible or assumed future results of operations.
Also, when we use words such as "believe," "expect," "anticipate" or similar
expressions, we are making forward-looking statements. You should note that an
investment in our common stock involves certain risks and uncertainties that
could affect our future financial results. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth in "Risk Factors" and
elsewhere in this prospectus.
We believe it is important to communicate our expectations to our investors.
However, there may be events in the future that we are not able to predict
accurately or over which we have no control. The risk factors described in the
preceding pages, as well as any cautionary language in this prospectus, provide
examples of risks, uncertainties and events that may cause our actual results
to differ materially from the expectations we describe in our forward-looking
statements. Before you invest in our common stock, you should be aware that the
occurrence of the events described in these risk factors and elsewhere in this
prospectus could materially and adversely affect our business, operating
results and financial condition.
USE OF PROCEEDS
The net proceeds to us from the sale of the 3,000,000 shares of common stock
offered by us at an assumed public offering price of $15.00 per share are
estimated to be approximately $41,908,000, after deducting the underwriting
discount and estimated offering expenses (approximately $42,690,000 if the
over-allotment option granted by us is exercised in full). Except for receipt
of $97,000 (or approximately $344,000 if the over-allotment options granted by
selling shareholders are exercised in full) upon exercise of outstanding
options by selling shareholders in connection with this offering, we will not
receive any of the proceeds from the sale of shares of common stock by selling
shareholders.
We intend to use the net proceeds of this offering to finance the development
of new BUCA di BEPPO restaurants, to retire existing bank debt and for general
corporate purposes. Our $15.0 million line of credit bears interest at the lead
lender's prevailing reference rate or LIBOR plus 1.875% to 2.375%, based upon
certain financial ratios, and expires on September 27, 2001. As of April 10,
2000, we had borrowings of $12.0 million outstanding under our revolving line
of credit. We anticipate that prior to the completion of the offering we will
borrow additional amounts from our revolving line of credit to fund a portion
of our new restaurant development. We plan to repay these outstanding amounts
with the net proceeds from this offering.
We may also use a portion of the net proceeds for the acquisition of other
restaurant operations. 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
investment-grade, interest-bearing securities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" for additional information regarding our sources and uses of
capital.
PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the Nasdaq National Market under the symbol
"BUCA." Public trading of our common stock commenced on April 21, 1999. The
high and low closing prices of our common stock on the Nasdaq National Market,
as reported by the Nasdaq National Market, for the second quarter of 1999 were
$20.125 and $15.875, for the third quarter of 1999 were $18.625 and $10.250 and
for the fourth quarter of 1999 were $14.125 and $8.875. The high and low
closing prices in the first quarter of 2000 were $15.063 and $8.500 and for the
second quarter of 2000 (through April 10, 2000) were $13.375 and $12.000.
As of March 14, 2000, there were approximately 170 holders of record of common
stock. On March 14, 2000, the last sale price reported on the Nasdaq National
Market for our common stock was $15.00 per share.
12
<PAGE>
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 of directors 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 prohibits us
from paying any cash dividends without our lender's consent.
13
<PAGE>
CAPITALIZATION
The following table sets forth, at December 26, 1999, our consolidated cash and
cash equivalents and capitalization on an actual basis and as adjusted to
reflect the sale of the shares of common stock offered by us by this prospectus
at an assumed public offering price of $15.00 per share, and after giving
effect to the proceeds of $97,000 to be received by us upon exercise of 13,699
outstanding options by selling shareholders in connection with this offering.
See "Use of Proceeds" for a discussion of how we intend to use the proceeds.
This table should be read in conjunction with the consolidated financial
statements and their notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
December 26, 1999
---------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C> <C>
Cash and cash equivalents............................ $ 1,726 $ 43,731
======== ========
Long-term debt, including current portion............ $ 1,738 $ 1,738
Common stock: $.01 par value;
20,000,000 shares authorized, 10,810,295 shares
issued and outstanding, actual; 13,823,994 shares
issued and outstanding, as adjusted(/1/)............ 108 138
Additional paid-in capital........................... 76,547 118,522
Accumulated deficit.................................. (14,413) (14,413)
-------- --------
62,242 104,247
Notes receivable from shareholders................... (533) (533)
Total common shareholders' equity.................. 61,709 103,714
-------- --------
Total capitalization............................... $ 63,447 $105,452
======== ========
</TABLE>
- ---------------
(/1/Excludes)(1) 1,296,498 shares of common stock issuable upon exercise of
options outstanding as of the date of this prospectus at a weighted average
exercise price of $8.13 per share, (2) 69,441 shares of common stock
issuable upon conversion of convertible subordinated debt outstanding as of
the date of this prospectus, (3) 511,018 additional shares of common stock
reserved under our employee stock plans and (4) 67,443 shares of common
stock issued since December 26, 1999.
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except share, per share and operating data)
The following selected consolidated statements of operations and balance sheet
data for the five fiscal years ended December 26, 1999 are derived from our
audited consolidated financial statements. The consolidated financial
statements and their notes for each of the three fiscal years ended December
26, 1999, and the report 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 their notes, "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
-----------------------------------------------------
Dec. 31, Dec. 31, Dec. 28, Dec. 27, Dec. 26,
1995 1996 1997 1998 1999
--------- --------- --------- --------- ---------
Consolidated Statements
of
Operations Data:
<S> <C> <C> <C> <C> <C>
Restaurant sales........ $ 7,142 $ 11,316 $ 19,030 $ 38,483 $ 71,528
Restaurant costs:
Product................ 2,303 3,471 5,520 10,876 19,723
Labor.................. 2,258 3,723 6,478 12,342 23,069
Direct and occupancy... 1,270 2,242 3,750 8,078 14,551
Depreciation and
amortization........... 173 381 781 1,617 3,169
--------- --------- --------- --------- ---------
Total restaurant
costs................ 6,004 9,817 16,529 32,902 60,512
General and
administrative
expenses............... 656 1,988 3,760 5,579 5,924
Preopening costs........ 183 430 1,140 1,895 3,600
--------- --------- --------- --------- ---------
Operating income
(loss)................. 299 (919) (2,399) (1,893) 1,492
Interest income......... 55 79 158 152 495
Interest expense........ (274) (374) (655) (1,188) (499)
Subordinated debt
conversion costs....... -- -- -- -- (954)
--------- --------- --------- --------- ---------
Income (loss) before
income taxes,
cumulative effect of
change in accounting
principle and
extraordinary items.... 80 (1,214) (2,896) (2,929) 534
Provision (benefit) for
income taxes........... 43 (101) 72 17 (1,817)
--------- --------- --------- --------- ---------
Income (loss) before
cumulative effect of
change in accounting
principle and
extraordinary items.... 37 (1,113) (2,968) (2,946) 2,351
Cumulative effect of
change in accounting
principle related to
preopening costs....... -- -- (351) -- --
Extraordinary loss on
extinguishment of
debt................... -- -- -- -- (927)
--------- --------- --------- --------- ---------
Net income (loss)....... $ 37 $ (1,113) $ (3,319) $ (2,946) $ 1,424
========= ========= ========= ========= =========
Cumulative preferred
stock dividends,
accretion of preferred
stock to redemption
value, and change in
redeemable common
stock.................. -- (3,687) (1,986) (2,189) (744)
--------- --------- --------- --------- ---------
Net income (loss)
applicable to common
stock.................. $ 37 $ (4,800) $ (5,305) $ (5,135) $ 680
========= ========= ========= ========= =========
Net income (loss) per
share--basic........... $ .02 $ (1.96) $ (2.13) $ (2.04) $ .08
========= ========= ========= ========= =========
Net income (loss) per
share--diluted......... $ .02 $ (1.96) $ (2.13) $ (2.04) $ .08
========= ========= ========= ========= =========
Weighted average common
shares outstanding--
basic.................. 2,444,666 2,444,666 2,490,136 2,512,309 8,110,807
========= ========= ========= ========= =========
Weighted average common
shares outstanding--
diluted................ 2,444,666 2,444,666 2,490,136 2,512,309 8,654,536
========= ========= ========= ========= =========
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Operating Data:
Comparable restaurant sales in-
crease(/1/)........................... 8.9% 13.3% 9.6%
Average weekly restaurant sales........ $47,579 $52,727 $54,229
Restaurants open at end of period...... 11 19 34
</TABLE>
<TABLE>
<CAPTION>
As of
-----------------------------------------------
Dec. 31, Dec. 31, Dec. 28, Dec. 27, Dec. 26,
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Cash and cash equivalents..... $ 805 $ 5,750 $ 6,099 $ 6,576 $ 1,726
Total assets.................. 4,477 12,771 21,288 37,560 75,945
Total debt, including current
portion...................... 3,011 3,940 5,460 7,866 1,738
Shareholders' (deficit) equi-
ty........................... (148) (4,942) (9,284) (13,540) 61,709
</TABLE>
- ---------------
(/1/)The calculation of comparable restaurant sales increase includes
restaurants open for 12 full calendar months, as adjusted to provide
comparable 52-week fiscal years.
16
<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
their notes appearing elsewhere in this prospectus.
This prospectus, including the discussion below, contains statements of a
forward-looking nature relating to future events or our future financial
performance. You are cautioned that these statements are only predictions,
involve risks and uncertainties, and that actual events or results may differ
materially. In evaluating these statements, you should specifically consider
the various risk factors identified in this prospectus, including the matters
set forth under "Risk Factors," which would cause actual results to differ
materially from those indicated by the forward-looking statements.
Overview
At December 26, 1999, we owned and operated 34 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. Since late
1996, we have pursued a rapid but disciplined expansion strategy, opening two
restaurants in 1996, five in 1997, eight in 1998, and 15 in 1999. We intend to
open 17 new restaurants in fiscal 2000, of which six have opened through April
10, 2000 and the remaining eleven have leases signed, of which nine are under
construction.
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 twelve months after opening,
with significant comparable restaurant sales growth in the second year of
operation. 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 that 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
increase of 8.9% in fiscal 1997, 13.3% in fiscal 1998 and 9.6% in fiscal 1999.
After two years of operation, our restaurants typically experience lower
comparable restaurant sales increases than those experienced in prior periods.
We expect this sales growth trend for new restaurants to generally continue in
the future; however, we also anticipate that in some markets, particularly as
we continue to develop additional restaurants in existing markets, this
discovery growth pattern could compress. In addition, as we continue to grow,
we expect that the impact of new restaurant openings on total comparable
restaurant sales will decrease as our mature restaurant base continues to
increase.
We have expanded the use of daily specials and begun other measures to build
sales in existing restaurants and reduce our product costs as a percentage of
restaurant sales. Every day, every restaurant offers from two to four specials.
These daily specials are selected from a list of approximately 75 recipes.
These daily specials typically are priced higher than normal menu items and
generate higher margins. We have increased sales of specials to approximately
16% of restaurant sales for fiscal 1999 from approximately 15% of restaurant
sales for 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 and fiscal 1999.
We implemented a price increase on December 27, 1999, the first day of our 2000
fiscal year. The price increase impacted selected menu items and certain
specials. We anticipate that the net effect of this price change will be less
than 2%. This price increase is expected to cause product cost and labor cost
to decrease as a percentage of sales in fiscal 2000 compared with fiscal 1999.
In addition, the number of our restaurants operating in states with tip credit
is expected to continue to increase during fiscal 2000. In states with tip
credit, we are able to reduce tipped employees' wages up to a maximum of 50% of
minimum wage based upon reported tips. By the end of fiscal 2000, we expect
that 60% of our restaurants will be operating in states with tip credit.
17
<PAGE>
Our restaurant sales are comprised almost entirely of the sales of food and
beverages. For fiscal 1999, alcohol sales accounted for approximately 26% of
total restaurant sales from our restaurants with at least one full year of
operating history. 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
include depreciation on capital expenditures for restaurants. General and
administrative expenses are comprised 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. 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. Interest expense includes the cost of
interest expense on debt and interest income includes the interest income on
invested assets.
Results of Operations
Our operating results for fiscal years 1997, 1998, and 1999 expressed as a
percentage of restaurant sales were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 28, December 27, December 26,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Restaurant sales....................... 100.0% 100.0% 100.0%
Restaurant costs
Product.............................. 29.0 28.3 27.6
Labor................................ 34.0 32.1 32.3
Direct and occupancy................. 19.7 21.0 20.3
Depreciation and amortization........ 4.1 4.2 4.4
----- ----- -----
Total restaurant costs............. 86.8 85.5 84.6
General and administrative expenses.... 19.8 14.5 8.3
Preopening costs....................... 6.0 4.9 5.0
----- ----- -----
Operating (loss) income................ (12.6) (4.9) 2.1
Interest income........................ (0.8) (0.4) (0.7)
Interest expense....................... 3.4 3.1 0.7
----- ----- -----
(Loss) income before income taxes and
other................................. (15.2)% (7.6)% 2.1%
===== ===== =====
</TABLE>
Fiscal Year Ended December 26, 1999 Compared to Fiscal Year Ended December 27,
1998
Restaurant Sales. Restaurant sales increased by $33.0 million, or 85.9% to
$71.5 million in fiscal 1999 from $38.5 million in fiscal 1998. The increase
was attributable to restaurant sales of $16.5 million at new restaurants opened
in fiscal 1999 and to increased sales at restaurants open prior to fiscal 1999.
Comparable restaurant sales increased by 9.6% in fiscal 1999, primarily as a
result of an increase in guest visits of approximately 7.7% and a price
increase of approximately 3% in July 1998. The average check per guest remained
constant in fiscal 1998 and 1999 at $20.00. We expect the average check to
increase during fiscal 2000 due to the impact of the price increase implemented
on December 27, 1999 and the addition to the regular menu of three of our more
popular daily specials (Mozzarella Caprese, Prosciutto Rollato and Tortoni),
which are priced higher than other menu items in their categories.
Product. Product costs increased by $8.8 million to $19.7 million in fiscal
1999 from $10.9 million in fiscal 1998. Product costs as a percentage of
restaurant sales decreased to 27.6% in fiscal 1999 from 28.3% in fiscal 1998.
This reduction was a result of management's efforts to reduce the cost of food
products and improve
18
<PAGE>
margins, particularly at new restaurants. We expect product costs to decrease
as a percentage of sales in fiscal 2000 compared with fiscal 1999 due to
management's continued efforts to reduce the cost of food products and due to
the price increase implemented on December 27, 1999.
Labor. Labor costs increased by $10.7 million to $23.1 million in fiscal 1999
from $12.4 million in fiscal 1998. Labor increased as a percentage of sales to
32.3% in fiscal 1999 from 32.1% in fiscal 1998. This increase resulted from the
impact of the new restaurant openings. Labor costs at new restaurants are
typically higher as a percentage of restaurant sales than labor costs at mature
restaurants. During 1999, 27% of the sales weeks came from restaurants open
less than six months, compared with only 24% in 1998. We expect labor costs to
decrease as a percentage of sales in fiscal 2000 compared with fiscal 1999 due
to management's continued efforts to reduce labor costs as a percentage of
sales, the price increase implemented on December 27, 1999 and the increased
percentage of our restaurants operating in states with tip credit.
Direct and Occupancy. Direct and occupancy costs increased by $6.5 million to
$14.6 million in fiscal 1999 from $8.1 million in fiscal 1998. Direct and
occupancy costs decreased as a percentage of sales to 20.3% in fiscal 1999 from
21.0% in fiscal 1998. This reduction in direct and occupancy costs is due
mainly to the increase in comparable restaurant sales, which leverages the
fixed component of direct and occupancy costs, principally fixed rent, real
estate taxes and utilities. We expect direct and occupancy costs as a
percentage of sales to remain fairly constant in fiscal 2000 compared with
fiscal 1999 as the impact of the price increase will be offset by annual cost
of living increases in minimum rent.
Depreciation and Amortization. Depreciation and amortization expenses increased
by $1.6 million to $3.2 million in fiscal 1999 from $1.6 million in fiscal
1998. This increase was the result of depreciation recognized on capital
expenditures for new restaurants.
General and Administrative. General and administrative expenses increased by
$356,000 to $5,924,000 in fiscal 1999 from $5,568,000 in fiscal 1998. General
and administrative expenses decreased as a percentage of sales to 8.3% in
fiscal 1999 from 14.5% in fiscal 1998. We expect that general and
administrative expenses will continue to increase in dollars in the future, but
continue to decrease as a percentage of sales because our expansion plans will
require proportionately smaller incremental increases in general and
administrative expenses.
Preopening Costs. Preopening costs increased by $1.7 million to $3.6 million in
fiscal 1999 from $1.9 million in fiscal 1998. Preopening costs increased as a
percentage of sales to 5.0% in fiscal 1999 from 4.9% in fiscal 1998. This
increase was primarily a result of opening 15 restaurants in fiscal 1999 and
five in the first quarter of fiscal 2000 compared with 13 restaurants in fiscal
1998, with only one restaurant opened in the first quarter of fiscal 1999.
Since all preopening costs are expensed as incurred, a significant portion of a
new restaurant's preopening costs are expensed in the three months prior to
opening.
Interest (Income) Expense. Net interest expense decreased by $1,032,000 to
$4,000 in fiscal 1999 from $1,036,000 in fiscal 1998. This reduction in net
interest expense was due to the interest income that we earned on the
investment of our initial public offering proceeds in April, 1999 and the
repayment at that time of our $7.0 million term loan and $2.0 million line of
credit borrowings.
Provision/Benefit for Income Taxes. The benefit for income taxes of $2,435,000
was recorded as a $1,817,000 benefit to income taxes and as a $618,000
reduction to the extraordinary loss on extinguishment of debt to record this
item net of tax. We recorded the tax benefit for fiscal 1999 as the utilization
of the tax loss carry-forwards from prior years was deemed more likely than
not. These net operating loss carry-forwards begin to expire in fiscal 2003.
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
19
<PAGE>
opened in fiscal 1998 and to increased sales at restaurants open prior to
fiscal 1998. Comparable restaurant sales increased by 13.3% in fiscal 1998,
primarily as a result of an increase in guest visits of approximately 7%, a
price increase of approximately 3% in July of 1998 and increased sales of daily
specials. 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 cost increased by $5.4 million to $10.9 million in fiscal 1998
from $5.5 million in fiscal 1997. Product cost as a percentage of 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 increased by $5.9 million to $12.4 million in fiscal 1998
from $6.5 million in fiscal 1997. Labor costs decreased as a percentage of
sales to 32.1% in fiscal 1998 from 34.0% in fiscal 1997. This decrease resulted
from a reduction in hourly labor to 18.3% of restaurant sales in fiscal 1998
from 19.0% in fiscal 1997. This decrease in hourly labor resulted from lower
average wage cost due to the opening of new restaurants in states that allow
tip credit toward minimum wage requirements. The decrease in labor as a
percentage of sales from fiscal 1997 to fiscal 1998 also resulted from improved
management of hourly staff levels, particularly during new restaurant openings.
Direct and Occupancy. Direct and occupancy costs increased by $4.3 million to
$8.1 million in fiscal 1998 from $3.8 million in fiscal 1997. Direct and
occupancy costs increased as a percentage of sales to 21.0% 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.
Depreciation and Amortization. Depreciation and amortization expenses increased
by $836,000 to $1,617,000 in fiscal 1998 from $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 by
$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 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,
$300,000 of additional travel expenses and an increase in legal fees of
$600,000.
Preopening Costs. Preopening costs increased by $400,000 to $1.9 million in
fiscal 1998 from $1.5 million in fiscal 1997, including the cumulative effect
of the change in accounting principle related to preopening expenses, due to
the greater number of restaurants that were opened or under development in
fiscal 1998 compared to fiscal 1997.
Interest (Income) Expense. Net interest expense increased by $539,000 to
$1,036,000 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 upon 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 not deemed more likely than not. 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.
20
<PAGE>
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 in
the three months prior to its opening. 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.
Liquidity and Capital Resources
Prior to fiscal 1999, we had incurred significant net losses, primarily due to
restaurant development and the costs of hiring senior management to develop and
implement our expansion strategy. In the past, we generated income from our
restaurant operations, but incurred aggregate net losses of $6.1 million
through December 26, 1999. We have funded our capital requirements through
sales of equity securities, debt financing and sale-leaseback arrangements. Net
cash provided by operating activities was $8.6 million in fiscal 1999 versus
$338,000 in fiscal 1998. We expect to continue to generate cash from operating
activities in future periods.
We use cash primarily to fund the development and construction of new
restaurants. Capital expenditures were $39.1 million in fiscal 1999 compared
with $17.9 million in fiscal 1998. We opened 15 restaurants in fiscal 1999 and
eight restaurants in fiscal 1998. 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. To
date, the majority of our restaurants have been renovations of existing
facilities ranging in size from 4,500 to 10,400 square feet. We anticipate that
future restaurants will typically range in size from 7,000 to 9,000 square
feet. In 1999, we built six restaurants based upon our prototype designs. These
designs are expected to require between $1,500,000 and $2,000,000 in total cash
investment per restaurant. This investment represents an incremental $500,000
increase over the historical cash investment for remodeled restaurants.
However, the rental cost on these restaurants is also significantly lower than
on remodeled restaurants as our lease costs relate to the land only and not the
building. We have in the past and we may in the future acquire the land for our
restaurants. The cost of any land purchases is not included in the cash
investment amounts above. In the future we may 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 $28.2 million in fiscal 1999
compared with $15.8 million in fiscal 1998. Financing activities in fiscal 1998
and 1999 consisted primarily of sales of equity securities and debt financing.
Upon completion of our initial public offering in April 1999, we obtained
approximately $34.3 million in net proceeds. A portion of the proceeds was used
to repay our $7.0 million term loan and $2.0 million in line of credit
borrowings. The remaining proceeds were used to fund operations, additional
restaurants and other corporate purposes.
We have a $15 million line of credit with US Bank, Bank of America and Fleet
National Bank. As of April 10, 2000, we had $12.0 million in outstanding
borrowings on our line. The line of credit expires in September 2001. The
borrowing rate on the line of credit is the lower of US Bank's reference rate
or LIBOR plus 1.875% to 2.375% (8.0% to 8.5%), dependent upon our meeting
certain financial ratios. We are required to pay 0.25% to 0.5% on all unused
line of credit funds. The credit agreement contains covenants that place
21
<PAGE>
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 are
currently negotiating with our lenders to increase the amount of our line of
credit to $20 million. We cannot predict whether our existing lenders will
ultimately agree to an increase.
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 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 flows from
operations together with the net proceeds from this offering and our available
borrowings will be sufficient to fund our capital requirements through at least
the year 2001. To fund future operations, we will need to raise additional
capital through public or private equity or debt financing to continue our
growth. In addition, we may from time to time consider acquiring the operations
of other restaurants. The sale of additional equity or debt securities could
result in additional dilution to our shareholders. We cannot predict whether
additional capital will be available on favorable terms, if at all.
Inflation
The primary 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 affect our labor
costs. To date, inflation has not had a material impact on our operating
results. See""Business--Government Regulation" for a discussion of the effects
of changes in applicable minimum wage requirements.
Quantitative and Qualitative Disclosure about Market Risk
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
lower of the lending bank's reference rate or LIBOR plus 1.875% to 2.375%.
Because we do not believe that changes in interest rates from the maximum
available borrowings under the revolving line of credit are material, we do not
believe this risk will be material. As of April 10, 2000, we had $12.0 million
in borrowings outstanding on our revolving line of credit.
We have no derivative financial instruments or derivative commodity instruments
in our cash and cash equivalents and marketable securities. We invest our cash
and cash equivalents and marketable securities in investment grade, highly
liquid investments, consisting of money market instruments, bank certificates
of deposit, overnight investments in commercial paper, and short term
government and corporate bonds.
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 our average price increase of 2% in fiscal 2000, 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 40 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 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 and
is attractive for a wide variety of dining occasions, including weekend
evenings, business occasions, family celebrations as well as regular weeknight
dining.
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 in fiscal 1999 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 1999, our restaurants with
at least two full years of operating history generated average restaurant sales
of approximately $3.2 million and average cash flow of approximately $785,000,
or 24.5% 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 experienced and high caliber managers. 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 17 new restaurants in fiscal 2000, of which six are
already open, nine are under construction and the remaining two 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
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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 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. The innovation of this concept has attracted
national attention as evidenced by 17 "best of" designations in variety of
readers' polls across the U.S., a 1999 write-up in Gourmet Magazine, a 1998
"Hot Concepts!" award from Nation's Restaurant News, and numerous awards in 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 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." 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 1999, daily specials accounted for approximately 16% of restaurant
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 in fiscal 1999 was approximately $20.00, including beverages. In
fiscal 1999, alcoholic beverages, primarily table wine, accounted for
approximately 26% of total restaurant sales from restaurants with at least one
full year of operating history. Alcoholic beverage sales as a percentage of
total restaurant sales from restaurants open at least two years increased to
27.5% in fiscal 1999 from 27.2% in fiscal 1998.
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
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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 also believe that our family-style portions are well suited for carry-out
service. Our recently opened restaurants have, and we expect that future
restaurants will have, dedicated carry-out facilities, which we consider to be
an additional feature of our restaurants rather than a primary focus. We do not
actively promote this feature and carry-out sales represented less than 2% of
total sales during fiscal 1999.
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 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
For fiscal 1999, our restaurants with at least two full years of operating
history generated average restaurant sales of approximately $3.2 million. For
fiscal 1999, these mature restaurants generated average cash flow of
approximately $785,000, or 24.5% of restaurant sales, and average restaurant
operating income of
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approximately $680,000, or 21.2% of restaurant sales. We currently lease the
land and building at 31 of our restaurant locations and plan to lease most of
our future restaurant sites. Of our remaining restaurant locations, we lease
the land and own the building at six and own the land and building at three.
For fiscal 1999, our cash investment per restaurant averaged approximately $190
per square foot on an average of 8,400 square feet and for the five restaurants
we have opened to date in 2000, our cash investment per restaurant averaged
approximately $175 per square foot on an average of 8,200 square feet. The
computation of our cash investment per restaurant excludes preopening costs,
building costs and land purchase costs to provide for an evaluation of
individual unit investment costs without the variability introduced by
different forms of financing and ownership (i.e. purchased and financed versus
leased). During fiscal 1999, preopening costs averaged approximately $225,000
per restaurant and for the five restaurants opened to date in fiscal 2000 our
preopening costs averaged approximately $185,000 per restaurant. For the nine
restaurants at which we own the building, our estimated average building costs
were approximately $400,000, and for the three restaurants for which we own the
land, our average land purchase costs were approximately $900,000. Individual
unit investment costs in the future 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 10,400 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.
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Current Restaurant Locations
We currently own and operate the following 40 restaurants, located in 24
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 (Minneapolis), Minnesota......... June 1995 8,025 230
Milwaukee, Wisconsin.......................... November 1995 9,210 293
Palo Alto, California......................... July 1996 5,192 197
Seattle, Washington........................... November 1996 8,213 328
Chicago, Illinois............................. May 1997 5,340 185
Wheeling (Chicago), Illinois.................. May 1997 6,426 225
San Francisco, California..................... August 1997 6,393 202
Lynnwood (Seattle), Washington................ November 1997 6,890 262
Pasadena, California.......................... December 1997 6,739 250
Indianapolis, Indiana......................... February 1998 7,678 326
Encino (Los Angeles), California.............. March 1998 6,080 248
Redondo Beach (Los Angeles), California....... June 1998 6,152 272
Lombard (Chicago), Illinois................... July 1998 8,278 328
Scottsdale, Arizona........................... October 1998 8,230 298
Burnsville (Minneapolis), Minnesota........... November 1998 7,340 312
Westlake (Cleveland), Ohio.................... November 1998 9,430 256
Lenexa (Kansas City), Kansas.................. December 1998 7,494 298
Louisville, Kentucky.......................... January 1999 8,315 244
Claremont (Los Angeles), California........... April 1999 10,174 330
Cheektowaga (Buffalo), New York............... May 1999 8,025 252
Columbus, Ohio................................ May 1999 8,357 252
Washington, D.C. ............................. May 1999 9,050 306
Livonia (Detroit), Michigan................... June 1999 7,713 246
Daytona Beach, Florida........................ July 1999 7,621 246
Des Moines, Iowa.............................. July 1999 7,655 246
Campbell (San Jose), California............... September 1999 7,909 266
Sacramento, California........................ September 1999 8,279 289
Castleton (Indianapolis), Indiana............. September 1999 7,880 272
Jenkintown (Philadelphia), Pennsylvania....... October 1999 8,145 256
Denver, Colorado.............................. October 1999 10,050 246
Brea (Los Angeles), California................ November 1999 7,594 248
Chandler (Phoenix), Arizona................... December 1999 7,500 257
Summerlin (Las Vegas), Nevada................. January 2000 7,875 254
Maitland (Orlando), Florida................... January 2000 7,934 249
Tampa, Florida................................ February 2000 8,610 282
Albany, New York.............................. February 2000 10,365 250
Ft. Lauderdale, Florida....................... March 2000 7,570 242
Universal Studios (Los Angeles), California... April 2000 10,002 328
</TABLE>
We expect that eleven additional restaurants will open during the remainder of
fiscal 2000. Construction has commenced on nine of these sites, one each at Las
Vegas, Nevada; Philadelphia, Pennsylvania; San Diego, California; Chicago,
Illinois; Miami, Florida; Pittsburgh, Pennsylvania; Dallas, Texas; Houston,
Texas; and Cincinnatti, Ohio. In addition, we have 17 signed leases for future
sites, including two sites we expect to open in fiscal 2000. We are currently
negotiating additional leases for potential future locations.
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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 17 new restaurants in fiscal 2000, of which six are already
open, nine are under construction and the remaining two have signed leases. By
the end of fiscal 2000, we plan to have 51 restaurants open in 29 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. However, we believe that our
experience in our Des Moines, Iowa, restaurant indicates our ability also to
expand into smaller markets. We believe that the majority of our future growth
will come from opening new restaurants. We will, however, evaluate
opportunities to acquire other restaurant operations, 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.
We believe that our concept is extremely flexible and can be successfully
operated in a number of different settings. 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 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, the majority 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. We opened
six restaurants using these prototype designs in six different markets in
fiscal 1999. In future years, we expect to open a mix of prototype restaurants
and renovations that is comparable to the mix in fiscal 1999.
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 three outside directors, our CEO, CFO, COO,
Vice President of Marketing 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 six Divisional Vice Presidents of Operations who report directly
to the Chief Operations Officer. Each Divisional Vice President 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 experience and high caliber of our Paisano Partners. In addition, because
we are a dinner-only concept, the number of meal shifts that the Paisano
Partner and,
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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
participates in a 12-week training program All management employees receive
kitchen training. Beginning in the summer of 1999, all field management
employees complete a minimum of one week of training at "Buca University." Buca
University is a training program held in Minneapolis, Minnesota. This program
combines hands-on training conducted in the four restaurants in the Minneapolis
market with classroom instruction from each of the various home office
departments. In addition to the formal training 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 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 management 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 10:00 p.m. on weekdays and 11:00 p.m. on
weekends. Additionally, our restaurants serve dinner all day on Sunday
beginning at noon.
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 1999, we spent an aggregate
of
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2.4% 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.
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. We compete on the basis of
taste, quality, and price of food offered, guest service, location, ambiance
and overall dining experience. 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. Their resources and market presence may provide advantages in
marketing, purchasing and negotiating leases. 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.
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Our History
The BUCA di BEPPO concept was created in Minneapolis in 1993 by our founder,
Philip A Roberts, and originally operated by a company owned by Mr. Roberts,
Don W. Hays and Peter J. Mihajlov. On December 31, 1994, this company was
acquired by Parasole Restaurant Holdings, Inc., a diversified restaurant
company operating in the Minneapolis/St. Paul metropolitan area. Mr. Roberts,
Mr. Hays and Mr. Mihajlov are the principle shareholders of Parasole. From
January 1995 through September 1996, BUCA operated as a wholly owned subsidiary
of Parasole. On September 30, 1996, we were spun-off from Parasole through a
share dividend of our common stock pro rata among the Parasole shareholders to
create a better vehicle for obtaining financing for our expansion plans. See
"Certain Relationships and Related Transactions" for a discussion of the
relationship between us and Parasole and with Mr. Roberts, Mr. Hays and Mr.
Mihajlov.
Properties
We currently lease the land and building at all but nine of our restaurant
locations. Of those nine, we lease the land and own the building at six and own
the land and building at three. Current restaurant leases have expiration dates
ranging from 2003 to 2018, with all of the leases providing for an option to
renew for a minimum of one additional five-year term.
Employees
At December 26, 1999, we had 2,500 employees. 50 served in administrative or
executive capacities, 155 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," "BEPPO" 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 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
31
<PAGE>
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.
32
<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/) 48 President, Chief Executive Officer and Chairman of the Board
Greg A. Gadel 40 Chief Financial Officer, Treasurer and Secretary
Leonard A. Ghilani 38 Chief Operations Officer
Philip A. Rob-
erts(/1/)(/2/) 60 Director
Peter J. Mihajlov(/3/) 60 Director
Don W. Hays(/2/) 57 Director
John P. Wha-
ley(/2/)(/3/) 46 Director
David
Yarnell(/1/)(/3/) 44 Director
Paul Zepf(/2/) 35 Director
James Cowler 42 Divisional Vice President
Daniel E. Durenberger 32 Divisional Vice President
Joseph J. Kohaut 35 Divisional Vice President
John Mihajlov 30 Divisional Vice President
Anthony Penn 41 Divisional Vice President
Joseph J. Talarico 44 Divisional Vice President
John J. Motschenbacher 37 Vice President of Finance and Purchasing
Robert R. Parent 51 Vice President of Development
Jennifer Percival 40 Vice President of Family Relations
Vittorio Renda 44 Executive Vice President of Food and Beverage
Lane Schmiesing 43 Vice President of Marketing
</TABLE>
- --------
(/1/)Member of executive committee.
(/2/)Member of compensation committee.
(/3/)Member of audit committee.
Joseph P. Micatrotto joined BUCA in 1996 as our President and Chief Executive
Officer, and as a director and in July 1999 became Chairman of the Board. Mr.
Micatrotto's twenty-six 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 currently serves on the board of directors of the
National Restaurant Association and the American Beverage Institute.
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 Marriott, McDonald's and the Deloitte &
Touche LLP accounting firm, and has over 16 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. He has been a director since 1993
and served as Chairman of our board of directors until July 1999. Mr. Roberts
is also a principal of Parasole Restaurant Holdings, Inc., which
33
<PAGE>
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.
Peter J. Mihajlov co-founded BUCA in 1993 and has served as a director since
1993. 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 has served as a director since 1993.
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 Firearms Training Systems, Inc., and Nationwide
Credit, Inc.
James Cowler joined BUCA in 1999 as Divisional Vice President of the Northeast
division. Prior to joining BUCA, Mr. Cowler held the position of Director of
Operations of Rain Forest Cafe from 1998 to 1999. From 1993 to 1998, Mr. Cowler
held the position of Vice President of Operations--Midwest for Boston Market
where he was responsible for all facets of operations. Mr. Cowler has more than
20 years of restaurant industry experience.
Anthony Penn joined BUCA in 1997 as Paisano of Encino, California, and was
promoted to his current position of Divisional Vice President of Southern
California in 1999. From 1994 to 1997, Mr. Penn was a Managing Partner with
Outback Steak House in San Diego, California, where he was responsible for
opening the first Outback in the San Diego area. He brings to BUCA more than 20
years of restaurant industry experience.
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.
John Mihajlov joined BUCA in 1995 as an Assistant Manager in our St. Paul,
Minnesota restaurant, and was promoted to Paisano in 1995. In 1999 Mr. Mihajlov
was promoted to Divisional Vice President of the Southeast division. Prior to
joining BUCA, Mr. Mihajlov held various restaurant management positions and
possesses over 15 years of restaurant industry experience.
34
<PAGE>
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 18 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 specialty
concepts, where she served as Vice President of Human Resources for the United
States. 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 more than 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 of directors consists of seven members. In accordance with our
Articles of Incorporation, the board is divided into three classes with
staggered three-year terms. One class consists of Mr. Yarnell and Mr. Hays,
whose terms expire at the annual shareholders' meeting in 2000. A second class
consists of Mr. Mihajlov and Mr. Zepf, whose terms expire at the annual
shareholders' meeting in 2001. A third class consists of Mr. Micatrotto, Mr.
Roberts and Mr. Whaley, whose terms expire at the annual shareholders' meeting
in 2002. At each annual meeting of shareholders, the successors to directors
whose terms then expire will be elected to serve for a full term of three
years. This classification of the board may delay or prevent changes in our
control or in our management. 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.
35
<PAGE>
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, the
Stock Option Plan for Non-employee Directors and our Employee Stock Purchase
Plan. See "Stock Incentive Plan and Stock Options" for a discussion of this
plan.
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 us 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 our employees receive no
remuneration for services as members of the board of directors or any board
committee. Directors who are not employed by us have received certain grants of
stock options. See "Stock Incentive Plans and Stock Options" for a discussion
of grants previously made to our directors.
Executive Compensation
Summary Compensation Table. The following table contains information concerning
compensation for fiscal 1999 earned by our Chairman, President and Chief
Executive Officer, our Chief Financial Officer and our Chief Operations
Officer.
Fiscal 1999 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................ 309,615 100,000 -- 126,666
Chairman, President and Chief
Executive Officer
Greg A. Gadel....................... 143,544 70,000 -- 20,000
Chief Financial Officer
Leonard A. Ghilani.................. 137,461 75,800 -- 20,000
Chief Operations Officer
</TABLE>
36
<PAGE>
Stock Option Grants Table. The following table sets forth certain information
concerning all stock options granted during fiscal 1999 to the named executive
officers. We did not grant any stock appreciation rights or restricted stock
awards during fiscal 1999.
<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 1999 ($/Share)(/1/) Date 5% ($) 10% ($)
---- ---------- ------------- -------------- ----------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Micatrotto.... 126,666(/3/) 24.61 11.25 February 15, 2009 406,147 1,490,791
Greg A. Gadel........... 20,000(/4/) 3.89 10.69 December 16, 2009 64,129 235,389
Leonard A. Ghilani...... 20,000(/4/) 3.89 10.69 December 16, 2009 64,129 235,389
</TABLE>
Fiscal 1999 Stock Option Grants
- ---------------
(/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/)Options to purchase 6,666 shares vested or vest on each of December 31,
1999, 2000 and 2001, and 53,334 shares vest on each of December 31, 2002
and 2003.
(/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
1999. See "Employment Agreements" for a discussion of Mr. Micatrotto's
employment agreement.
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 1999 year-end.
Aggregate 1999 Fiscal Year-End Option Value Table
<TABLE>
<CAPTION>
Number of Shares Value of
Underlying Unexercised In-the-Money
Options at Options at
December 26, 1999 December 26, 1999(/1/)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Joseph P. Micatrotto........ 184,851 213,330 $873,542 $303,329
Greg A. Gadel............... 17,999 78,662 43,283 135,422
Leonard A. Ghilani.......... 5,333 41,332 6,373 25,492
</TABLE>
- ---------------
(/1/)Based on a closing sale price of our common stock of $8.875 per share at
December 23, 1999, the last trading day of our 1999 fiscal year.
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 Chairman,
President and Chief Executive Officer for a term expiring on December 31, 2003.
The agreement provides that Mr. Micatrotto's annual salary will be $335,000 for
the current year, $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 of
directors, but not less than the prior year's amount. Mr. Micatrotto is
eligible to
37
<PAGE>
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 vested or 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,
including relocation expenses. Mr. Micatrotto is entitled to the following
termination benefits:
. If Mr. Micatrotto is terminated by us for cause 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,
because his duties are substantially reduced or negatively altered
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 fringe benefits, confidentiality and non-
competition provisions.
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 of directors. 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. In
addition, our board has approved an increase of 300,000 in the number of
reserved shares under the plan, subject to shareholder approval at our annual
meeting to be held on April 28, 2000.
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 of directors. Prior to its termination in February
38
<PAGE>
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 our six
non-employee directors 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. Non-employee directors will continue to be eligible for
option grants under the 1996 Stock Incentive Plan.
Employee Stock Purchase Plan. The BUCA, Inc. Employee Stock Purchase Plan was
adopted by our board in February 1999, by our shareholders in March 1999 and
commenced on July 1, 1999. The plan is designed to allow our eligible employees
to purchase shares of common stock, at monthly intervals, through periodic
payroll deductions. We have reserved 500,000 shares for issuance under the
plan. Employees whose customary employment is at least 20 hours per week and
who have been employed by us for at least one year on the first day of the
purchase period are eligible to participate in the plan. The eligible employees
may purchase shares of stock during each monthly purchase period at a price per
share equal to 85% of the lower of the fair market value of the common stock on
the first day of the purchase period or the fair market value of the common
stock on the last day of the purchase period. No participant may purchase more
than 500 shares of stock in any given purchase period or more than $25,000
worth of shares under the plan in any calendar year. The plan will terminate
when all of the shares reserved under the plan have been purchased or at any
earlier dated determined by our board of directors. The board may at any time
amend or discontinue the plan. Some amendments, however, may require
shareholder approval.
Paisano Partners Program. We have established the Paisano Partners program for
our general managers, kitchen managers and assistant managers. The 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. 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, each a director,
are members of the compensation committee of the board of directors.
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 and owners of more than 5% of a class of our capital 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, 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, or $6.75 per common share. Upon completion of our initial
public offering in April 1999, all shares of our outstanding Series B
convertible preferred stock automatically converted 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 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, 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 limited non-detachable rights for an aggregate purchase
price of $5,000,000, or $7.84 per common share. The contingent value rights
entitled the holders to receive, in the aggregate, up to 610,000 shares
(approximately 21,800 per quarter through October 2005) of common stock if
certain events regarding our common stock did not occur prior to October 2001.
Upon completion of our initial public offering in April 1999, all shares of our
outstanding Series C convertible preferred stock automatically converted into
shares of common stock and the related contingent value rights terminated. In
connection with such conversion and termination, an aggregate of 40,195
additional shares of common stock were issued to the holders of the Series C
convertible preferred stock.
40
<PAGE>
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 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 was at the time 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.
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 1997 was $332,500, in fiscal 1998 was $348,000 and in
fiscal 1999 was $222,500.
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 1997 was $180,000, in fiscal 1998 was $169,000 and in fiscal 1999 was
$181,000. We believe the terms of the supply arrangement are at least as
favorable as we could obtain from unrelated parties.
Agreement with Steven Roberts. 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 and in fiscal 1999 was $260,100. We believe the terms of the letter
agreement are at least as favorable as we could obtain from unrelated parties.
41
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth 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 3,000,000 shares of common stock offered by us by this
prospectus and the exercise of 13,699 options by selling shareholders in
connection with this offering by:
. each shareholder known by us to beneficially own more than five percent of
any class of our capital stock,
. each of our directors,
. the named executive officers, and
. all of our directors and executive officers as a group.
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.
<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/)..................... 1,423,897 13.1 -- 1,423,897 10.2
Centre Capital Investors II,
L.P.(/3/)..................... 1,446,567 13.3 -- 1,446,567 10.4
Arbor Capital Management,
LLC(/4/)...................... 712,800 6.6 -- 712,800 5.1
Lord, Abbett & Co.(/5/)........ 702,730 6.5 -- 702,730 5.1
Philip A. Roberts(/6/)......... 1,039,079 9.5 * 1,039,079 7.5
Don W. Hays(/7/)............... 965,104 8.9 * 965,104 6.9
Peter J. Mihajlov(/8/)......... 952,570 8.8 * 952,570 6.9
John P. Whaley(/9/)............ 1,423,897 13.1 -- 1,423,897 10.2
David Yarnell(/10/)............ 439,565 4.0 -- 439,565 3.2
Paul Zepf(/11/)................ 1,446,567 13.3 -- 1,446,567 10.4
Joseph P. Micatrotto(/12/)..... 288,743 2.6 * 288,743 2.1
Greg A. Gadel(/13/)............ 122,841 1.1 * 122,841 1.0
Leonard A. Ghilani(/14/)....... 5,333 -- * 5,333 --
All directors and executive
officers as a group
(9 persons)................... 5,489,375 49.2 * 5,489,375 38.7
</TABLE>
- --------
* Each of Messrs. Roberts, Hays (together with his spouse's revocable trust
and family partnership) and Mihajlov (together with his spouse and family
partnership) have granted to the underwriters an option to purchase up to an
additional 100,000 shares, Mr. Micatrotto has granted to the underwriters an
option to purchase up to an additional 70,000 shares, Mr. Gadel has granted
to the underwriters an option to purchase up to an additional 24,665 shares
and Mr. Ghilani has granted the underwriters an option to purchase an
additional 5,333 shares, in each case as part of their option to cover over-
allotments, if any. These options will be exercised on a pro rata basis with
the option granted by us.
(/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 10,877,738 shares and 13,891,437 shares,
respectively, of common stock outstanding.
(/2/)Includes options for the purchase of 10,665 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.
42
<PAGE>
(/3/)Includes (1) 672,298 shares owned by State Board of Administration of
Florida; (2) 144,066 shares owned by Centre Capital Tax-Exempt Investors
II, L.P.; (3) 96,330 shares owned by Centre Capital Offshore Investors II,
L.P.; (4) 75,048 shares owned by Centre Partners Coinvestment, L.P.; (5)
6,783 shares owned by Centre Parallel Management Partners, L.P.; and (6)
options for the purchase of 9,333 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.
(/4/)Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 9, 2000. The address for Arbor is One Financial Plaza, 120
South Sixth Street, Suite 1000, Minneapolis, Minnesota 55402.
(/5/)Based on a Schedule 13G filed with the Securities and Exchange Commission
on February 2, 2000. The address for Lord, Abbett is 90 Hudson Street,
Jersey City, New Jersey 07302.
(/6/)Includes (1) 113,333 shares owned by the Roberts Family Limited
Partnership II; (2) 111,666 shares owned by Mr. Roberts' wife; (3) options
for the purchase of 8,000 shares of common stock exercisable within 60
days granted to Mr. Roberts; (4) options for the purchase of 216 shares of
common stock exercisable within 60 days granted to Mr. Robert's wife; (5)
499,936 shares of common stock held by the Parasole ESOT, of which Mr.
Roberts is a co-trustee; and (6) 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.
(/7/)Includes (1) 133,333 shares owned by the Hays Family Limited Partnership;
(2) 100,133 shares owned by the Linda Hays Revocable Trust; (3) options
for the purchase of 8,000 shares of common stock exercisable within 60
days granted to Mr. Hays; and (4) 499,936 shares of common stock held by
the Parasole ESOT, of which Mr. Hays is a co-trustee. The address for Mr.
Hays is 2908 Hennepin Avenue South, Minneapolis, Minnesota 55408.
(/8/)Includes (1) 166,666 shares owned by the Mihajlov Family Limited
Partnership; (2) 106,666 shares owned by Mr. Mihajlov's wife; (3) options
for the purchase of 8,000 shares of common stock exercisable within 60
days granted to Mr. Mihajlov; (4) 499,936 shares of common stock held by
the Parasole ESOT, of which Mr. Mihajlov is a co-trustee; and (5) 2,000
shares owned by Mr. Mihajlov's children. The address for Mr. Mihajlov is
2908 Hennepin Avenue South, Minneapolis, Minnesota 55408.
(/9/)Consists of options for the purchase of 10,665 shares of common stock
exercisable within 60 days granted to Mr. Whaley and 1,413,232 shares of
common stock beneficially owned by Norwest Equity Partners V, L.P. Mr.
Whaley disclaims beneficial ownership of the 1,413,232 shares of common
stock owned by Norwest Equity Partners V, L.P. The address for Mr. Whaley
is 222 South Ninth Street, Minneapolis, Minnesota 55402.
(/10/)Consists of (1) options for the purchase of 9,999 shares of common stock
exercisable within 60 days granted to Mr. Yarnell; and (2) 429,566 shares
of common stock beneficially owned by Consumer Venture Partners II, L.P.
(/11/)Consists of (1) options to purchase 9,333 shares of common stock
exercisable within 60 days granted to Mr. Zepf; and (2) 1,437,234 shares
of common stock beneficially owned by Centre Capital Investors II, L.P.
The address for Mr. Zepf is 30 Rockefeller Plaza, New York, New York
10020.
(/12/)Consists of (1) options for the purchase of 191,517 shares of common
stock exercisable within 60 days granted to Mr. Micatrotto; and (2)
97,226 shares of common stock held by the BUCA Employee Stock Ownership
Plan, of which Mr. Micatrotto is a co-trustee.
(/13/)Includes (1) options for the purchase of 24,665 shares of common stock
exercisable within 60 days granted to Mr. Gadel; and (2) 97,226 shares of
common stock held by the BUCA Employee Stock Ownership Plan, of which Mr.
Gadel is a co-trustee.
(/14/)Consists of options to purchase 5,333 shares of common stock exercisable
within 60 days granted to Mr. Ghilani.
43
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth 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 3,033,699 shares of common stock offered by us and by
each shareholder selling in this offering. 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.
<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>
Jennifer A. Roberts(/2/).... 21,133 -- 10,000 11,133 --
Steven Roberts(/3/)......... 15,833 -- 10,000 5,833 --
John J.
Motschenbacher(/4/)........ 4,321 -- 3,833 488 --
Lane Schmiesing(/5/)........ 9,866 -- 9,866 -- --
Philip A. Roberts(/6/)...... 1,039,079 9.5 * 1,039,079 7.5
Don W. Hays(/7/)............ 965,104 8.9 * 965,104 6.9
Linda Hays Trust(/7/)....... 965,104 8.9 * 965,104 6.9
Hays Family Limited
Partnership(/7/)........... 965,104 8.9 * 965,104 6.9
Peter J. Mihajlov(/8/)...... 952,570 8.8 * 952,570 6.9
Martha A. Mihajlov(/8/)..... 952,570 8.8 * 952,570 6.9
Mihajlov Family Limited
Partnership(/8/)........... 952,570 8.8 * 952,570 6.9
Joseph P. Micatrotto(/9/)... 288,743 2.6 * 288,743 2.1
Greg A. Gadel(/10/)......... 122,841 1.1 * 122,841 1.0
Leonard A. Ghilani(/11/).... 5,333 -- * 5,333 --
</TABLE>
- --------
* Mr. Roberts has granted to the underwriters an option to purchase up to an
additional 100,000 shares, Mr. Hays has granted to the underwriters an
option to purchase up to an additional 60,000 shares, the Linda Hays Trust
has granted to the underwriters an option to purchase up to an additional
20,000 shares, the Hays Family Limited Partnership has granted to the
underwriters an option to purchase up to an additional 20,000 shares, Mr.
Mihajlov has granted to the underwriters an option to purchase up to an
additional 50,000 shares, Martha A. Mihajlov has granted to the underwriters
an option to purchase up to an additional 25,000 shares, the Mihajlov Family
Limited Partnership has granted to the underwriters an option to purchase up
to an additional 25,000 shares, Mr. Micatrotto has granted to the
underwriters an option to purchase up to an additional 70,000 shares, Mr.
Gadel has granted to the underwriters an option to purchase up to an
additional 24,665 shares and Mr. Ghilani has granted the underwriters an
option to purchase an additional 5,333 shares, in each case as part of their
option to cover over-allotments, if any. These options will be exercised on
a pro rata basis with the options granted by us.
(/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 10,877,738 shares and 13,891,437 shares,
respectively, of common stock outstanding.
(/2/)Includes options for the purchase of 10,133 shares of common stock
exercisable within 60 days granted to Ms. Roberts. Ms. Roberts is the
daughter of Philip A. Roberts and is one of our employees.
(/3/)Includes options for the purchase of 5,833 shares of common stock
exercisable within 60 days granted to Mr. Roberts. Mr. Roberts is the son
of Philip A. Roberts and has from time to time provided advertising and
marketing services for us.
44
<PAGE>
(/4/)Includes options for the purchase of 3,833 shares of common stock
exercisable within 60 days granted to Mr. Motschenbacher. Mr.
Motschenbacher is our Vice President of Finance and Purchasing.
(/5/)Consists of options for the purchase of 9,866 shares of common stock
exercisable within 60 days granted to Mr. Schmiesing. Mr. Schmiesing is
our Vice President of Marketing.
(/6/)Includes (1) 113,333 shares owned by the Roberts Family Limited
Partnership II; (2) 111,666 shares owned by Mr. Robert's wife; (3) options
for the purchase of 8,000 shares of common stock exercisable within 60
days granted to Mr. Roberts; (4) options for the purchase of 219 shares of
common stock exercisable within 60 days granted to Mr. Roberts's wife; (5)
499,936 shares of common stock held by the Parasole ESOT, of which
Mr. Roberts is a co-trustee; and (6) 97,226 shares of common stock held by
the BUCA Employee Stock Ownership Plan, of which Mr. Roberts is a co-
trustee.
(/7/)Consists of (1) 133,333 shares owned by the Hays Family Limited
Partnership; (2) 100,133 shares owned by the Linda Hays Revocable Trust;
(3) options for the purchase of 8,000 shares of common stock exercisable
within 60 days granted to Mr. Hays; (4) 223,702 shares owned by Mr. Hays;
and (5) 499,936 shares of common stock held by the Parasole ESOT, of which
Mr. Hays is a co-trustee. Mr. Hays is a co-trustee of the Linda Hays Trust
and a co-general partner of the Hays Family Limited Partnership.
(/8/)Consists of (1) 166,666 shares owned by the Mihajlov Family Limited
Partnership; (2) 106,666 shares owned by Mr. Mihajlov's wife; (3) options
for the purchase of 8,000 shares of common stock exercisable within 60
days granted to Mr. Mihajlov; (4) 247,302 shares owned by Mr. Mihajlov;
(5) 499,936 shares of common stock held by the Parasole ESOT, of which
Mr. Mihajlov is a co-trustee; and (6) 2,000 shares owned by Mr. Mihajlov's
children. Mr. Mihajlov is a co-general partner of the Mihajlov Family
Limited Partnership. Mrs. Mihajlov is the spouse of Mr. Mihajlov.
(/9/)Consists of (1) options for the purchase of 191,517 shares of common stock
exercisable within 60 days granted to Mr. Micatrotto; and (2) 97,226
shares of common stock held by the BUCA Employee Stock Ownership Plan, of
which Mr. Micatrotto is a co-trustee. Mr. Micatrotto is our Chairman,
President and Chief Executive Officer.
(/10/)Includes (1) options for the purchase of 24,665 shares of common stock
exercisable within 60 days granted to Mr. Gadel; and (2) 97,226 shares of
common stock held by the BUCA Employee Stock Ownership Plan, of which Mr.
Gadel is a co-trustee. Mr. Gadel is our Chief Financial Officer,
Treasurer and Secretary.
(/11/)Consists of options to purchase 5,333 shares of common stock exercisable
within 60 days granted to Mr. Ghilani. Mr. Gilani is our Chief Operations
Officer.
45
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 20,000,000 shares of common stock, par
value $.01 per share, and 5,000,000 undesignated shares.
Common Stock
As of April 10, 2000, there were 10,877,738 shares of common stock outstanding.
These shares are held of record by approximately 170 persons.
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.
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 of directors out of funds legally available for dividends. 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.
Upon a liquidation of BUCA, creditors and holders of our preferred stock with
preferential liquidation rights will be paid before any distribution to holders
of our common stock. The holders of common stock would be entitled to receive a
pro rata distribution per share of any excess amount.
Our common stock is listed on the Nasdaq National Market under the symbol
"BUCA".
Preferred Stock
We currently have no shares of preferred stock outstanding. Our Articles of
Incorporation empower the board of directors to issue the undesignated stock
from time to time in one or more series. The board also may 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. Terms selected 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 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 $500,000 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 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 of the debentures have the right, until April 20, 2000, to
convert the entire principal amount of their debentures into shares of our
common stock at $7.20 per share. 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.
46
<PAGE>
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.
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 stock 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. Under the terms of the Securities
Purchase Agreement, the holders have the right to require us to register their
shares at our expense under the circumstances described in that agreement. 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 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 holders
participating in an offering against civil liabilities under the Securities
Act. Approximately 3,424,643 shares of outstanding common stock are entitled to
these registration rights.
We also granted piggyback registration rights under the warrants to purchase
shares of our common stock granted to the lenders in our subordinated debt
transactions. As of March 14, 2000, 66,661 shares issuable pursuant to these
warrants are subject to these rights. See "Certain Relationships and Related
Transactions--Subordinated Debt Transactions" for a discussion of these
subordinated debt transactions. The rights are subject to the right of an
underwriter to limit the number of the holders' shares to be included in the
registration.
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 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 civil liabilities under the Securities Act.
Potential Anti-Takeover Effect of Provisions of Charter Documents and Minnesota
Law
Provisions of our Articles of Incorporation and By-Laws and 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 attempts to acquire us which could deprive our
shareholders of opportunities to sell their shares of common stock at prices
higher than prevailing market prices.
Under the Articles, the board of directors is classified into three classes of
directors, and directors may be removed by shareholders only by a vote of
holders of at least 75% of the voting power. For the shareholders to call a
meeting to take action concerning a business combination, the By-Laws require
that holders of at least 25% of the voting power must join in the request. The
By-Laws establish procedures, including advance notice procedures, with regard
to shareholder proposals and the nomination of candidates for election as
directors.
47
<PAGE>
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 is the transfer agent and
registrar for our common stock.
48
<PAGE>
UNDERWRITING
The underwriters named below, for whom U.S. Bancorp Piper Jaffray Inc., Banc of
America Securities LLC and FleetBoston Robertson Stephens Inc. are acting as
representatives, 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>
U.S. Bancorp Piper Jaffray Inc. ............................
Banc of America Securities LLC..............................
FleetBoston Robertson Stephens Inc. ........................
---------
Total................................................... 3,033,699
=========
</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
representatives.
We and some selling shareholders have granted to the underwriters an option to
purchase up to an additional 455,054 shares of common stock at the same price
to the public, and with the same underwriting discount, as set forth in the
table on the cover page of this prospectus. 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 a portion of the net proceeds from the sale of the shares
offered by us by this prospectus to repay indebtedness owed to our lenders,
including U.S. Bank, Bank of America and Fleet National Bank. U.S. Bancorp is
an affiliate of U.S. Bancorp Piper Jaffray, Bank of America is an affiliate of
Banc of America Securities LLC and Fleet National Bank is an affiliate of
FleetBoston Robertson Stephens Inc.
49
<PAGE>
The following table shows the per share and total underwriting discount to be
paid by us and the selling shareholders 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 Exercise Full Exercise
----------- -------------
<S> <C> <C>
Payable by BUCA
Per Share..................................... $ $
Total......................................... $ $
Payable by the selling shareholders
Per Share..................................... $ $
Total......................................... $ $
</TABLE>
U.S. Bancorp 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 U.S. Bancorp Piper Jaffray for its services as
placement agent. These warrants became exercisable in May 1997 and have been
converted into 51,317 shares of our common stock. We paid U.S. Bancorp Piper
Jaffray $421,000 for its services as placement agent. U.S. Bancorp 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.
U.S. Bancorp 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 U.S. Bancorp Piper Jaffray for its services
as placement agent. These warrants became exercisable on October 31, 1997 and
have been converted into 20,824 shares of our common stock. We paid U.S.
Bancorp Piper Jaffray $75,000 for its services as placement agent.
Standby Fund 1997, an entity controlled by affiliates of U.S. Bancorp Piper
Jaffray, and U.S. Bancorp 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 convertible 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, which it has exercised.
U.S. Bancorp Piper Jaffray and Banc of America Securities LLC acted as managing
underwriters in our initial public offering in April 1999 and received
customary fees for providing such services.
U.S. Bancorp Piper Jaffray has provided investment banking services to us in
1999 and received fees in the amount of $25,000 for such services.
We and the selling shareholders have agreed to indemnify the underwriters
against liabilities, including 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 other underwriter
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 written approval of the customer
specifically relating to the shares offered in this prospectus.
50
<PAGE>
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 of our
shareholders and the selling shareholders have agreed to restrictions on our
ability to sell additional shares of our common stock for a period of 90 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 U.S. Bancorp Piper Jaffray. The agreements
provide exceptions for sales to underwriters pursuant to the purchase agreement
and our sales in connection with the exercise of options granted and the
granting of options to purchase shares under our existing stock plans.
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.
In connection with this offering some underwriters may also engage in passive
market making transactions in the common stock on the Nasdaq National Market.
Passive market making consists of displaying bids on the Nasdaq National Market
limited by the prices of independent market makers and effecting purchases
limited by those prices in response to order flow. Rule 103 of Regulation M
issued by the SEC limits the amount of net purchases that each passive market
maker may make and the displayed size of each bid. Passive market making may
stabilize the market price of the common stock at a level above that which
might otherwise prevail in the open market and, if commenced, may be
discountinued at any time.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus and 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 26, 1999 and December 27,
1998 and for each of the three fiscal years in the period ended December 26,
1999, 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.
51
<PAGE>
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. We
also 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.
52
<PAGE>
BUCA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report......................................... F-2
Consolidated Balance Sheets as of December 27, 1998 and December 26,
1999................................................................ F-3
Consolidated Statements of Operations for the fiscal years ended
December 28, 1997, December 27, 1998 and December 26, 1999.......... F-4
Consolidated Statements of Shareholders' (Deficit) Equity for the
fiscal years
ended December 28, 1997, December 27, 1998 and December 26, 1999.... F-5
Consolidated Statements of Cash Flows for the fiscal years ended
December 28, 1997, December 27, 1998 and December 26, 1999.......... F-6
Notes to Consolidated Financial Statements........................... F-7
</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 27, 1998 and December 26, 1999, and
the related consolidated statements of operations, shareholders' (deficit)
equity, and cash flows for each of the three fiscal years (each consisting of
52 weeks) in the period ended December 26, 1999. 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.
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 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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BUCA,
Inc. and Subsidiaries as of December 27, 1998 and December 26, 1999, and the
results of their operations and their cash flows for each of the three fiscal
years (each consisting of 52 weeks) in the period ended December 26, 1999 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.
Minneapolis, Minnesota
January 21, 2000
(March 3, 2000 as to Note 3)
F-2
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 27, December 26,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $ 6,576 $ 1,726
Accounts receivable................................ 1,160 1,261
Inventories........................................ 935 2,293
Deferred income taxes.............................. 1,259
Prepaid expenses and other......................... 585 1,034
-------- -------
Total current assets............................. 9,256 7,573
PROPERTY AND EQUIPMENT, net.......................... 27,697 63,763
OTHER ASSETS......................................... 607 4,609
-------- -------
$ 37,560 $75,945
======== =======
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Accounts payable................................... $ 2,637 $ 5,303
Accrued expenses................................... 3,258 6,614
Current maturities of long-term debt............... 205 50
-------- -------
Total current liabilities........................ 6,100 11,967
LONG-TERM DEBT, less current maturities.............. 7,661 1,688
OTHER LIABILITIES.................................... 366 581
REDEEMABLE STOCK:
Preferred stock, $.01 par value, cumulative, Series
A convertible--2,396,800 and 0 shares authorized;
2,240,000 and 0 shares issued and outstanding..... 9,665
Preferred stock, $.01 par value, cumulative, Series
B convertible--2,100,000 and 0 shares authorized;
1,922,222 and 0 shares issued and outstanding..... 9,441
Preferred stock, $.01 par value, cumulative, Series
C convertible--3,679,053 and 0 shares authorized;
2,614,634 and 0 shares issued and outstanding..... 13,154
Common stock, $.01 par value; 601,929 and 0 shares
issued and outstanding............................ 4,713
--------
36,973
SHAREHOLDERS' (DEFICIT) EQUITY:
Undesignated stock, 617,147 shares authorized, none
issued or outstanding
Common stock, $.01 par value--20,000,000 shares
authorized; 1,918,056 and 10,810,295 shares issued
and outstanding, respectively..................... 19 108
Additional paid-in capital......................... 76,547
Accumulated deficit................................ (13,266) (14,413)
-------- -------
(13,247) 62,242
Notes receivable from shareholders................. (293) (533)
-------- -------
Total shareholders' (deficit) equity............. (13,540) 61,709
-------- -------
$ 37,560 $75,945
======== =======
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Fiscal Years Ended December 28, 1997,
December 27, 1998, and December 26, 1999
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
RESTAURANT SALES.......................... $ 19,030 $ 38,483 $ 71,528
RESTAURANT COSTS
Product................................. 5,520 10,876 19,723
Labor................................... 6,478 12,342 23,069
Direct and occupancy.................... 3,750 8,078 14,551
Depreciation and amortization........... 781 1,617 3,169
---------- ---------- ----------
Total restaurant costs................. 16,529 32,913 60,512
GENERAL AND ADMINISTRATIVE EXPENSES....... 3,760 5,568 5,924
PREOPENING COSTS.......................... 1,140 1,895 3,600
---------- ---------- ----------
OPERATING (LOSS) INCOME................... (2,399) (1,893) 1,492
INTEREST INCOME........................... 158 152 495
INTEREST EXPENSE.......................... (655) (1,188) (499)
SUBORDINATED DEBT CONVERSION COSTS........ (954)
---------- ---------- ----------
(LOSS) INCOME BEFORE INCOME TAXES,
EXTRAORDINARY ITEM, AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE........ (2,896) (2,929) 534
(PROVISION) BENEFIT FOR INCOME TAXES...... (72) (17) 1,817
---------- ---------- ----------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE..................... (2,968) (2,946) 2,351
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE RELATED TO PREOPENING COSTS.... (351)
EXTRAORDINARY LOSS ON EXTINGUISHMENT OF
DEBT, net of tax benefit of $618......... (927)
---------- ---------- ----------
NET (LOSS) INCOME......................... (3,319) (2,946) 1,424
CUMULATIVE PREFERRED STOCK DIVIDENDS,
ACCRETION OF PREFERRED STOCK TO
REDEMPTION VALUE, AND CHANGE IN
REDEEMABLE COMMON STOCK.................. (1,986) (2,189) (744)
---------- ---------- ----------
NET (LOSS) INCOME APPLICABLE TO COMMON
STOCK.................................... $ (5,305) $ (5,135) $ 680
========== ========== ==========
NET (LOSS) INCOME PER COMMON SHARE--BASIC
(NOTES 1 AND 6):
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE APPLICABLE TO
COMMON STOCK........................... $ (1.99) $ (2.04) $ 0.20
========== ========== ==========
NET (LOSS) INCOME APPLICABLE TO COMMON
STOCK.................................. $ (2.13) $ (2.04) $ 0.08
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 2,490,136 2,512,309 8,110,807
========== ========== ==========
NET (LOSS) INCOME PER COMMON SHARE--
DILUTED (NOTES 1 AND 6):
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM
AND CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE APPLICABLE TO
COMMON STOCK........................... $ (1.99) $ (2.04) $ 0.19
========== ========== ==========
NET (LOSS) INCOME APPLICABLE TO COMMON
STOCK.................................. $ (2.13) $ (2.04) $ 0.08
========== ========== ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING............................ 2,490,136 2,512,309 8,654,536
========== ========== ==========
</TABLE>
See notes to consolidated financial statements
F-4
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Shareholders' (Deficit) Equity
(in thousands, except for share data)
<TABLE>
<CAPTION>
Notes Total
Common Stock Additional Receivable Shareholders'
------------------ Paid-in Accumulated from (Deficit)
Shares Amount Capital Deficit Shareholders Equity
---------- ------ ---------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
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 to
shareholders......... 65,766 1 389 $(275) 115
Repurchase of common
stock................ (9,258) (50) (50)
Payment 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 to
shareholders......... 28,882 200 (160) 40
Repurchase of common
stock................ (10,072) (60) (60)
Payment 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................... 1,918,056 19 -- (13,266) (293) (13,540)
Exercise of common
stock options........ 24,665 147 147
Issuance and exercise
of common stock
warrants............. 337,831 3 1,342 (1,345) --
Issuance of common
stock, net of
issuance costs of
$3,942............... 3,220,326 32 34,651 (400) 34,283
Conversion of
preferred stock to
common stock......... 4,505,239 45 32,959 33,004
Conversion of
redeemable common
stock to common
stock................ 597,162 6 4,670 4,676
Conversion of
convertible
subordinated
debentures........... 170,824 2 2,305 2,307
Common stock issued in
exchange for non-
detachable rights.... 40,195 1 481 (482) --
Repurchase of common
stock from
shareholders......... (7,977) (48) 40 (8)
Common stock issued
under employee stock
purchase plan........ 3,974 40 40
Accretion of preferred
stock................ (150) (150)
Preferred stock
dividends............ (594) (594)
Payments of notes
receivable due from
shareholders......... 120 120
Net income............ 1,424 1,424
---------- ---- ------- -------- ----- -------
BALANCE AT DECEMBER 26,
1999................... 10,810,295 $108 $76,547 $(14,413) $(533) $61,709
========== ==== ======= ======== ===== =======
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Fiscal Years Ended December 28, 1997,
December 27, 1998, And December 26, 1999
(in thousands)
<TABLE>
<CAPTION>
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income............................... $(3,319) $ (2,946) $ 1,424
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation and amortization................. 781 1,617 3,169
Cumulative effect of change in accounting
principle.................................... 351
Deferred income taxes......................... 34 (2,865)
Loss (gain) on sale of property and
equipment.................................... 112 (52)
Extraordinary loss on extinguishment of debt.. 1,545
Subordinated debt conversion costs............ 954
Amortization of debt discount................. 216
Issuance of common stock and common stock
options for services......................... 439
Change in assets and liabilities:
Accounts receivable......................... (130) (876) (101)
Inventories................................. (247) (390) (1,358)
Prepaid expenses and other.................. (370) (128) (449)
Accounts payable............................ 985 1,740 2,666
Accrued expenses............................ (137) 884 3,356
Other....................................... 51 273 215
------- -------- --------
Net cash (used in) provided by operating
activities............................... (1,450) 338 8,556
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of available-for-sale marketable
securities..................................... (33,223)
Sale and maturity of available-for-sale
marketable securities.......................... 33,223
Purchase of property and equipment.............. (7,896) (17,864) (39,130)
Proceeds from sale of property and equipment.... 2,263
Increase in other assets........................ (176) (48) (2,459)
------- -------- --------
Net cash used in investing activities..... (8,072) (15,649) (41,589)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit borrowings......... 3,000
Payments on line of credit borrowings........... (3,000)
Proceeds from issuance of long-term debt........ 2,500 3,500 8,104
Principal payments on long-term debt and note
payable........................................ (889) (599) (13,995)
Loan and lease acquisition costs................ (251) (191) (477)
Collection on notes receivable from
shareholders................................... 4 80 120
Repurchase of common stock...................... (30) (8)
Repurchase of redeemable common stock........... (31)
Net proceeds from issuance of preferred stock... 8,537 12,958
Net proceeds from issuance of common stock...... 40 34,470
------- -------- --------
Net cash provided by financing
activities............................... 9,871 15,788 28,183
------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS........... 349 477 (4,850)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD.. 5,750 6,099 6,576
------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........ $ 6,099 $ 6,576 $ 1,726
======= ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
BUCA, INC. AND SUBSIDIARIES
Notes To Consolidated Financial Statements
Fiscal Years Ended December 28, 1997, Decmber 27, 1998
and December 26, 1999
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation--BUCA, Inc. and Subsidiaries (BUCA or the Company)
develops and operates family-style, immigrant Southern Italian restaurants
located in Arizona, California, Colorado, Florida, Illinois, Indiana, Iowa,
Kansas, Kentucky, Michigan, Minnesota, Nevada, New York, Ohio, Pennsylvania,
Washington, Wisconsin, and the District of Columbia.
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.
The Company completed an initial public offering (the Offering) in April 1999,
in which 3,185,375 new shares of common stock were issued at a price of $12 per
share. Proceeds from the offering were $34,283,000, net of issuance costs
totaling $3,942,000. From the proceeds, $9 million was used to repay certain
indebtedness of the Company outstanding under its line of credit and term loan
agreements. The remaining net proceeds were used for development of new
restaurants and general corporate purposes.
Upon completion of the Offering, all outstanding shares of preferred stock were
converted to shares of common stock. Additionally, the Company recorded a
$954,000 charge to income related to the beneficial conversion feature of its
subordinated convertible debt.
Principles of Consolidation--The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant inter-company
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.
Actual results could differ from those estimates.
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 27, 1998
and December 26, 1999, cash equivalents consisted primarily of money market
funds.
Fair Value of Financial Instruments--At December 27, 1998 and December 26,
1999, 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.
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 27, 1998 and December 26, 1999 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Food ......................................................... $249 $ 479
Beverage...................................................... 272 548
Supplies...................................................... 414 1,266
---- ------
$935 $2,293
==== ======
</TABLE>
F-7
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Other Assets--Other assets consisted of the following as of December 27, 1998
and December 26, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Deferred income taxes........................................ $1,606
Escrow deposits.............................................. $131 1,568
Loan and lease acquisition costs, net........................ 365 285
Trademarks, net.............................................. 225
Liquor license and other..................................... 111 925
---- ------
$607 $4,609
==== ======
</TABLE>
Liquor licenses, loan and lease acquisition costs are being amortized over the
term of the related debt or lease (5 to 20 years). Trademarks are being
amortized over 10 years. Accumulated amortization for other assets as of
December 27, 1998 and December 26, 1999 was $206,000 and $97,000, respectively.
Accrued expenses--Accrued expenses consisted of the following as of December
27, 1998 and December 26, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Accrued payroll and related benefits....................... $1,270 $2,263
Accrued construction....................................... 1,280
Gift certificate liability................................. 518 838
Accrued sales taxes........................................ 546 935
Other accrued expenses..................................... 924 1,298
------ ------
$3,258 $6,614
====== ======
</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. Considerable management judgement is necessary to estimate
discounted future cash flows. Accordingly, actual results could vary
significantly from such estimates.
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. The Company has disclosed the
required pro forma effect on net (loss) income as required by Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based
Compensation, in Note 11.
Net (Loss) Income Per Share-- Net (loss) income per common share is computed in
accordance with SFAS No. 128, Earnings Per Share. See Note 6 for a detailed
computation.
Post-employment and Post-retirement Benefits--The Company does not provide
post-employment health care or post-retirement benefits.
F-8
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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. Costs
incurred in connection with the opening of new restaurants are expensed as
incurred.
Comprehensive Income--The Company does not have any items of other
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 establishes accounting and reporting standards
for derivative instruments and hedging activities. In June 1999, the FASB
issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133. SFAS No.
137 defers the effective date of SFAS No. 133 until the Company's first quarter
financial statements in fiscal 2001. Management has not yet determined the
effects SFAS No. 133 will have on its financial position or the results of its
operations.
Reclassification--Certain prior year amounts have been reclassified to conform
to the current year's presentation and to improve comparability with other
restaurant entities.
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 ........................................................... 30
</TABLE>
Property and equipment consisted of the following as of December 27, 1998 and
December 26, 1999 (in thousands)
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Leasehold improvements.................................. $19,214 $35,290
Furniture, fixtures, and equipment...................... 10,869 21,454
Land.................................................... 267 2,409
Building................................................ 114 10,441
------- -------
30,464 69,594
Less accumulated depreciation and amortization.......... (2,767) (5,831)
------- -------
$27,697 $63,763
======= =======
</TABLE>
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.
3. CREDIT FACILITY
In September 1999, the Company entered into a $15 million line of credit
agreement (the Agreement) with a group of financial institutions that extends
through September 27, 2001. At December 26, 1999, $10 million
F-9
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
was available with the remaining $5 million becoming available in March 2000 if
certain financial conditions are met. The borrowing rate on the Agreement is
the lesser of the lead financial institution's reference rate or LIBOR plus
1.875% to 2.375%, based upon certain financial ratios. The Company is required
to pay 0.25% to 0.50% (dependent upon the Company meeting certain financial
ratios) on all unused available funds. However, the fee for the $5 million in
funds becoming available in March 2000 is 0.1875% until the funds become
available. The Agreement precludes additional indebtedness, restricts dividend
payments, and requires the Company to maintain certain financial ratios. If the
required financial ratios are maintained and other conditions are met, as
defined in the Agreement, additional financing could be obtained and dividend
payments would be permitted from the proceeds of a public offering. The Company
was in violation of certain covenants at December 26, 1999. The financial
institutions waived these violations and amended the covenants effective March
3, 2000. Borrowings under the Agreement are collateralized by substantially all
of the assets of the Company. As of December 26, 1999, there were no borrowings
outstanding under the Agreement.
4. LONG-TERM DEBT
Long-term debt consisted of the following as of December 27, 1998 and December
26, 1999 (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Convertible subordinated debentures maturing July 2001 with
interest payable quarterly at the prime rate plus 1%, not
to exceed 12% per annum (8.75% and 9.5% at December 27,
1998 and December 26, 1999, respectively); includes call
premium accretion of $216,000 and $110,000, respectively... $1,996 $ 660
Notes payable, with interest payable monthly at 13.5% and
accretion of common stock warrant value of 4.4%. Net of
discount of $1,089,000 at December 27, 1998, resulting from
common stock warrants issued to lenders.................... 4,911
Note payable to bank........................................ 296
Note payable to bank........................................ 29
Note payable to bank........................................ 269
Note payable, guaranteed by U.S. Small Business
Administration............................................. 365
Note payable in monthly installments, including interest at
12.0%, maturing September 2014, collateralized by leasehold
improvements............................................... 495
Note payable in monthly installments, including interest at
11.0%, maturing June 2009, collateralized by leasehold
improvements............................................... 583
------ ------
Total..................................................... 7,866 1,738
Less current maturities..................................... (205) (50)
------ ------
Total current long-term maturities........................ $7,661 $1,688
====== ======
</TABLE>
The Company's loan agreements, among other things, preclude additional
indebtedness and dividend payments.
The holders of the convertible subordinated debentures are entitled, at their
option for a one-year period commencing on the date of the Offering, to convert
the entire principal amount held by such person into fully paid shares of
common stock at a 40% discount to the initial public offering price. In
accordance with EITF 98-5, Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios,
the Company recorded a $954,000 charge to income associated with the beneficial
conversion feature at the effective date of the Offering. 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,
which was fully accreted in conjunction with the completion of the Offering.
The debentures are fully subordinated to all obligations of BUCA to the bank.
F-10
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1999, $1,476,000 of convertible subordinated debentures was converted
into 170,824 shares of common stock.
The future maturities of long-term debt are as follows (in thousands):
<TABLE>
<CAPTION>
2000............................................................... $ 50
<S> <C>
2001............................................................... 716
2002............................................................... 62
2003............................................................... 70
2004............................................................... 78
Thereafter......................................................... 762
------
$1,738
======
</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. The
credit arrangement included a $7 million term loan and an $8 million revolving
line of credit. In conjunction with this refinancing, the Company recognized an
extraordinary loss on extinguishment of debt of approximately $1.3 million in
February 1999, which included deferred financing costs associated with the
refinanced debt.
In accordance with the credit agreement, the term loan was repaid in
conjunction with the Offering, along with borrowings under the revolving line
of credit of $2 million. Deferred financing costs of approximately $230,000
were recognized as an extraordinary loss on extinguishment of debt in
conjunction with the repayment in April 1999.
In September 1999, the Company replaced this line of credit agreement with a
new $15 million credit facility discussed in Note 3.
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 reporting date 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 27, 1998 the Company had recorded a valuation
allowance to reduce recorded deferred tax assets to zero because it was deemed
more likely than not that the deferred tax asset would not be realized.
At December 26, 1999, for income tax return purposes, the Company has estimated
net federal and state operating loss carryforwards of approximately $3,500,000
and $2,500,000, respectively. If not used, these carryforwards will begin to
expire in 2003. The valuation allowance was reversed in 1999 because it was
deemed more likely than not that all deferred tax assets will be realized.
The provision (benefit) for income taxes consisted of the following for the
fiscal years ended December 28, 1997, December 27, 1998, and December 26, 1999
(in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- -------
<S> <C> <C> <C>
Current, primarily federal............................ $38 $17 $ 430
Deferred: federal..................................... 34 (2,505)
state............................................ (360)
--- --- -------
Provision (benefit) for income taxes.................. $72 $17 $(2,435)
=== === =======
</TABLE>
F-11
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The reconciliation between taxes computed at the expected federal income tax
rate and the effective tax rate for the fiscal years ended December 28, 1997,
December 27, 1998, and December 26, 1999 is as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Tax (benefit) expense computed at statutory
rates...................................... $(1,162) $(1,025) $ 187
State taxes, net of federal effect.......... (129) (114) 26
Subordinated debt conversion costs.......... 380
Tip credit--FICA............................ 136
Other....................................... 12 199
Change in valuation allowance............... 1,363 1,144 (2,745)
------- ------- -------
$72 $17 $(1,817)
======= ======= =======
</TABLE>
The tax effect of significant temporary differences representing deferred tax
assets is as follows as of December 27, 1998 and December 26, 1999 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Current:
Unearned revenue...................................... $ 102
Prepaid costs......................................... (68)
Net operating loss carryforwards and other tax
credits.............................................. 1,253
Accrued liabilities................................... $ 131 36
Other................................................. (64)
Less valuation allowance.............................. (131)
------ ------
$ -- $1,259
====== ======
Noncurrent:
Preopening costs and property and equipment........... $1,101 $ 730
Call premium accretion................................ 84
Net operating loss carryforwards and other tax
credits.............................................. 1,380 756
Unearned revenue...................................... 109
Other................................................. 49 11
Less valuation allowance.............................. (2,614)
------ ------
$ -- $1,606
====== ======
</TABLE>
F-12
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. NET (LOSS) INCOME PER SHARE
The following table sets forth the computation of basic and diluted net (loss)
income per share (in thousands, except share and per share data):
<TABLE>
<CAPTION>
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
Numerator:
(Loss) income before extraordinary item
and cumulative effect of change in
accounting principle applicable to
common stock........................... $ (2,968) $ (2,946) $ 2,351
Cumulative preferrred stock dividends,
accretion of preferred stock to
redemption value and change in
redeemable common stock................ (1,986) (2,189) (744)
---------- ---------- ----------
(4,954) (5,135) 1,607
Cumulative effect of change in
accounting principle................... (351)
Extraordinary loss on extinguishment of
debt................................... (927)
---------- ---------- ----------
Numerator for basic and diluted net
(loss) income per common share--(loss)
income allocated to common
shareholders........................... $ (5,305) $ (5,135) $ 680
========== ========== ==========
Denominator:
Denominator for basic net (loss) income
per common share--weighted average
shares................................. 2,490,136 2,512,309 8,110,807
Effect of dilutive securities:
Stock warrants........................ 398,310
Stock options......................... 145,419
---------- ---------- ----------
Denominator for diluted net (loss)
income per common share--adjusted for
weighted average shares and assumed
conversions............................ 2,490,136 2,512,309 8,654,536
========== ========== ==========
Basic net (loss) income per share:
(Loss) income before extraordinary item
and cumulative effect of change in
accounting principle per common share.. $ (1.99) $ (2.04) $ 0.20
Cumulative effect of change in
accounting principle per common share.. (0.14)
Extraordinary item per common share..... (0.12)
---------- ---------- ----------
Net (loss) income per common share...... $ (2.13) $ (2.04) $ 0.08
========== ========== ==========
Diluted net (loss) income per common
share:
(Loss) income before extraordinary item
and cumulative effect of change in
accounting principle per common share.. $ (1.99) $ (2.04) $ 0.19
Cumulative effect of change in
accounting principle per common share.. (0.14)
Extraordinary item per common share..... (0.11)
---------- ---------- ----------
Net (loss) income per share............. $ (2.13) $ (2.04) $ 0.08
========== ========== ==========
</TABLE>
F-13
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Diluted (loss) income per common share excludes the following due to their
antidilutive effect:
<TABLE>
<CAPTION>
1997 1998 1999
------------------ ------------------ ----------------
Weighted Weighted Weighted
Average Average Average
Price Price Number Price
Number of Per Number of Per of Per
Shares Share Shares Share Shares Share
--------- -------- --------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Stock warrants.......... 218,420 $3.73 331,196 $2.46
Stock options........... 581,507 5.38 854,155 6.08 69,917 $11.24
Convertible preferred
stock.................. 2,774,808 6.14 4,505,239 6.76 (/1/) (/1/)
Convertible subordinated
debentures............. 565,079 3.15 439,506 4.05 137,313 7.20
</TABLE>
- --------
(/1/)Prior to the conversion of the convertible preferred stock into 4,505,239
shares of common stock in April 1999, the convertible preferred stock was
antidilutive.
7. EMPLOYEE BENEFIT PLANS
The BUCA employee stock ownership plan (ESOP) was established for the benefit
of eligible employees of BUCA. The BUCA ESOP was frozen upon its spin-off from
its former parent company's ESOT, Parasole Restaurant Holdings, Inc.
(Parasole). No contributions were made during 1997, 1998, or 1999. Prior to the
Offering, these shares were classified as redeemable stock on the consolidated
balance sheet. Upon completion of the Offering, these shares were reclassified
to shareholders' equity. At December 27, 1998 and December 26, 1999, 504,702
and 497,670 shares were held in the Parasole ESOT, respectively, and 97,227 and
95,937 shares were held in the BUCA ESOP, respectively.
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. The Company made no contributions during
1997, 1998 or 1999.
In fiscal 1999, the Company established an employee stock purchase plan that
enables eligible employees to purchase the Company's common stock at 85% of its
fair market value on either the first or last day of the purchasing month.
Under the plan, 3,974 shares were issued at prices ranging from $9.83 to $14.66
in 1999.
8. 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 20 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 $239,000 and $204,000 as of December 27, 1998 and December
26, 1999, respectively.
Total rent expense, including real estate taxes, operating expenses, and
percentage rent, was $1,754,000, $3,812,000 and $6,719,000 in 1997, 1998, and
1999 respectively.
F-14
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Approximate future minimum lease obligations, including units that are not yet
open and excluding real estate taxes, operating expenses and percentage rents,
at December 26, 1999, are as follows (in thousands):
<TABLE>
<CAPTION>
2000 .............................................................. $5,725
<S> <C>
2001............................................................... 7,778
2002............................................................... 8,099
2003............................................................... 8,172
2004............................................................... 8,441
Thereafter......................................................... 49,685
-------
Total future minimum base rents.................................. $87,900
=======
</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.
9. RELATED-PARTY TRANSACTIONS
Management Agreement--The Company has entered into a management agreement with
Parasole to provide for certain management and administrative services.
Parasole may terminate the management agreement upon one year's written notice
and the Company may terminate the management agreement upon 60 days' written
notice. Management fees of approximately $332,500, $348,000 and $222,500 were
charged to operations in 1997, 1998, and 1999, 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 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 $180,000, $169,000 and $181,000 in 1997, 1998, and 1999, 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 2003 and includes bonus provisions in the form of both
a stock grant and stock options.
10. PREFERRED STOCK
Series A Preferred Stock Private Placement--During October 1996, the Company
issued 2,240,000 shares of Series A preferred stock convertible into 1,493,331
shares of common stock. The stock accumulated dividends at a rate of $.2625 per
share annually beginning October 24, 1996. 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 convertible into
1,281,477 shares of common stock. The stock accumulated dividends at a rate of
$.315 per share annually beginning September 3, 1997. 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 convertible into 1,092,679 shares
of common stock. In December 1998, the Company sold an
F-15
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
additional 975,609 shares of Series C preferred stock convertible into 637,752
shares of common stock. The stock accumulated dividends at a rate of $.35875
per share annually beginning October 13, 1998. 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
limited non-detachable rights. The rights entitled the holder to receive up to
approximately 610,000 (approximately 21,800 per quarter through October 2005)
additional shares of common stock if, on or prior to October 12, 2001, the
Company had 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 conjunction with the Offering, the
Company agreed to issue 40,195 shares of common stock, which approximated the
fair market value of the rights, in exchange for an agreement which resulted in
the termination of such rights.
Upon completion of the Company's stock offering in April 1999, the outstanding
shares of Series A, B and C preferred stock were converted into common stock.
There is no outstanding preferred stock as of December 26, 1999.
11. SHAREHOLDERS' EQUITY
Stock Split--On February 17, 1999, the Company effected a two-for-three reverse
stock split that 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 issuance of debt and equity securities. The warrants are
exercisable at various dates through September 2004. The fair market value of
the warrants was 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>
Outstanding, December 31, 1996....................... 104,532 $5.63
Warrants issued--Series B placement agents........... 33,333 6.75
Warrants issued--debt holders........................ 80,555 0.01
-------- -----
Outstanding, December 28, 1997....................... 218,420 3.73
Warrants issued--debt holders........................ 112,776 0.01
-------- -----
Outstanding and exercisable, December 27, 1998....... 331,196 2.46
Warrants issued--Series B shareholders............... 66,661 0.01
Warrants exercised................................... (337,833) 1.62
Warrants surrendered................................. (45,267) 5.93
-------- -----
Outstanding and exercisable, December 26, 1999....... 14,757 $0.01
======== =====
</TABLE>
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.
F-16
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
During 1998, 1999, and February 2000, 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, 1,500,000, and 1,800,000 shares,
respectively.
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 26,666 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 666 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. The
Director's Plan was terminated in 1999.
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 Future
Shares Price Price Range Grant
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
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
Granted...................... 514,749 10.96 7.68-16.50
Exercised.................... (24,665) 5.97 4.50- 7.68
Terminated................... (19,465) 7.31 5.63-11.00
---------
Outstanding, December 26,
1999........................ 1,324,774 $7.96 $1.13-16.50 54,929
=========
Exercisable, December 26,
1999........................ 385,805 $6.10 $1.13-11.25
========= ===== ===========
</TABLE>
Information regarding options outstanding and exercisable at December 26, 1999
is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (Years) Price Exercisable Price
-------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 1.13- 4.50 76,187 5.87 $ 1.33 76,186 $ 1.33
5.63 313,662 7.48 5.63 130,910 5.63
6.75 192,192 7.89 6.75 57,192 6.75
7.68 235,317 8.79 7.68 66,851 7.68
8.88-10.69 213,750 9.97 10.68
10.75-16.50 293,666 9.35 11.22 54,666 11.25
--------- -------
$ 1.13-16.50 1,324,774 8.86 $ 7.96 385,805 $ 6.10
============ ========= ==== ====== ======= ======
</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.
F-17
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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) income would have been increased (decreased) to
the following pro forma amounts for 1997, 1998, and 1999 (in thousands, except
for per share data):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -----
<S> <C> <C> <C>
Net (loss) income applicable to common stock:
As reported................................... $(5,305) $(5,135) $ 680
Pro forma..................................... (5,773) (5,380) 83
Net (loss) income per common share, basic:
As reported................................... $ (2.13) $ (2.04) $0.08
Pro forma..................................... (2.32) (2.14) 0.01
Net (loss) income per common share, diluted:
As reported................................... $ (2.13) $ (2.04) $0.08
Pro forma..................................... (2.32) (2.14) 0.01
</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>
1997 1998 1999
--------- --------- -------
<S> <C> <C> <C>
Dividend yield............................. None None None
Expected volatility........................ None None 53.6%
Expected life of option.................... 7 years 7 years 7 years
Risk-free interest rate.................... 5.76-6.70% 4.63-5.68% 6.54%
</TABLE>
Paisano Partners Program--On January 1, 1997, the Company implemented the
Paisano Partners 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 initial stock purchase
over five years at an interest rate of 8%. At December 27, 1998 and December
26, 1999, the notes receivable balances related to this financing of $293,000
and $533,000, respectively, were included as contra-equity. At December 27,
1998 and December 26, 1999, 60,416 and 88,468 shares of common stock were
issued under this program.
F-18
<PAGE>
BUCA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
12. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the years ended:
<TABLE>
<CAPTION>
1997 1998 1999
---- ----- ------
<S> <C> <C> <C>
Cash paid during year for:
Interest............................................. $527 $ 714 $ 554
Income taxes......................................... 9 17 70
Non-cash investing and financing activities:
Property and equipment additions financed through
capital lease obligation 401
Shareholder receivable from issuance of common
stock............................................... 275 160 400
Shareholder receivable reduction due to retirement of
stock............................................... 58 40
Escrow deposit transferred to property and
equipment........................................... 551
Accretion of redeemable preferred stock to redemption
value............................................... 524 247 150
Dividends accrued on redeemable preferred stock...... 785 1,292 594
Change in value of redeemable common stock........... 677 650
Conversion of preferred stock to common stock........ 33,004
Conversion of redeemable common stock to common
stock............................................... 4,676
Conversion of convertible subordinated debentures to
common stock........................................ 2,307
</TABLE>
F-19
<PAGE>
[Restaurant Menu]
Buon
Appetito!
BUCA(TM)
di BEPPO
<PAGE>
ANTIPASTI
Meant to be shared, Buca di Beppo antipasti ($5.95-$12.95) arrive in
family-style portions ("That's Italian family, not nuclear family" warns the
Seattle Post-Intelligencer). From our signature garlic bread to mussels
marinara, each boasts the powerful flavors of our immigrant southern
Italian roots.
GARLIC BREAD
BRUSCHETTA
ROASTED PEPPERS WITH GARLIC AND ANCHOVIES
FRIED CALAMARI
MUSSELS MARINARA
MOZZARELLA CAPRESE
INSALATE
Overflowing from their platters right onto the table, Buca di Beppo
salads ($7.95-$13.95) will feed your family and all the in-laws.
A small Ceasar easily serves four, our signature "Beppo 1893" salad,
laden with imported mortadella, pepperoni, and pepperoncini --
has yet to be consumed in one sitting.
MIXED GREEN SALAD SMALL AND LARGE
MIXED GREEN SALAD SMALL AND LARGE
WITH PROSCIUTTO AND GORGONZOLA CHEESE
CEASAR SALAD SMALL AND LARGE
DI BEPPO "1893" SALAD
FRESH TOMATOES
WITH RED ONIONS, OLIVE OIL, AND BASIL
FRESH TOMATOES
WITH RED ONIONS, FRESH MOZZARELLA, BASIL, SALAMI AND MORTADELLA
NEAPOLITAN PIZZA
Bigger than the 1-by-2-foot slabs they're served on, Buca di Beppo
pizzas ($9.95 up to $17.95) evoke the best of Napoli,
with their purity and simplicity of both flavor and texture.
MARINARA
TOMATOES GARLIC, BASIL AND OREGANO (NO CHEESE)
CALABRESE
TOMATOES, POTATOES, ROSEMARY, OLIVES, ONIONS, PROCIUTTO AND
PECORINO CHEESE
ARRABBIATA
FOUR CHEESES, PEPPERONI, SAUSAGE, AND CARMELIZED ONIONS
MARGHERITA
TOMATOES, FRESH MOZZARELLA AND BASIL
PIZZA BIANCA
GORGONZOLA, PROVOLONE, MOZZARELLA, ROMANO AND RED ONIONS
PEPPERONI
WITH PEPPERONCINI
VEGETALE RUSTICA
EGGPLANT, ESCAROLE, ONIONS, TOMATOES, ARTICHOKES, BROCCOLI AND
PROVOLONE CHEESE
SAUSAGE AND MUSHROOMS
PROSCIUTTO ROLLATE
SIDE DISHES
Powerfully flavored and utterly fresh, each of our side dishes
($6.95-$8.95) demonstrates the vitality and simplicity of immigrant
southern Italian cooking. And each is meant for family-style sharing.
GARLIC MASHED POTATOES
ESCAROLE
SAUTEED WITH OLIVE OIL AND GARLIC
ONE OF OUR NICE POCKET PROTECTORS
MEAT BALLS (3)
GREENS AND BEANS
ESCAROLE, CANNELLINI BEANS AND TOMATOE SAUCE
ITALIAN SAUSAGE (4)
GREEN BEANS
WITH OLIVE OIL AND LEMON
A HANDY REFRIGERATOR MAGNET
PASTA
Portioned to withstand the most powerful appetites, Buca di Beppo
pastas ($7.95-$19.95) overwhelm with flavor. We make all sauces daily;
serve only imported, 100% durum semolina (two pounds to an order);
and slow-cook our meatballs in pure marinara.
SPAGHETTI MARINARA SMALL AND LARGE
SPAGHETTI MEAT SAUCE SMALL AND LARGE
SPAGHETTI AGLIO OLIO SMALL AND LARGE
WITH FRESH VEGETABLES AND GARLIC
SPAGHETTI MATRICIANA
TOMATOES, RED ONIONS, BACON & PECORINO ROMANO CHEESE
SPAGHETTI MEAT BALLS SMALL AND LARGE
LINGUINI CLAM SAUCE (RED OR WHITE) SMALL AND LARGE
LINGUINI FRUTTI DI MARE
MUSSELS, CLAMS AND CALAMARI
HOMEMADE RAVIOLI AL POMODORO
HOMEMADE RAVIOLI - MEAT SAUCE
RIGATONI POSITANO
WITH CHIKEN, EGGPLANT, MARINARA SAUCE AND FRESH MOZZARELLA
BUCA(TM) RIGATONI COUNTRY STYLE
WITH WHITE BEANS, SAUSAGE, RED ONIONS, BROCCOLI AND TOMATOES
MACARONI ROSA
WITH CHICKEN, BROCCOLLI, MUSHROOMS AND PEAS IN PINK SAUCE
TORTELLONI
WITH CREAM, MUSHROOMS, TOMATOES, PEAS, BROCCOLI
<PAGE>
ENTREES
If you're not Italian, you'll feel like one after partaking in entrees
($14.95-$19.95) like eggplant parmigiana, veal Marsala,
or our signature chicken cacciatore -- consisting of an entire bird,
served over garlic mashed potatoes, ladled with spicy cacciatore sauce.
EGGPLANT PARMIGIANA
CHICKEN WITH LEMON
CHICKEN PARMIGIANA
CHICKEN MARSALA WITH FRESH MUSHROOMS
CHICKEN CACCIATORE
OVER GARLIC MASHED POTATOES
BUCA(TM) CHICKEN VESUVIO
WHITE BEANS, SAUSAGE, OREGANO AND POTATOES
VEAL LIMONE
WITH WHITE BEANS, ESCAROLE AND LEMON SAUCE
VEAL MARSALA WITH FRESH MUSHROOMS
VEAL PARMIGIANA
DOLCI
One glimpse of our dolci ($5.95-$8.95) will goad you into
"joyous gluttony" (Pasadena Star News). One taste will justify
the indulgence--whether you order a slab of spumoni, a platter of
chocolate-drenched cannoli, or a quart-sized bowl of rum- and
espresso-soaked tiramisu.
SPUMONI
SPUMONI WITH CHOCOLATE SAUCE
CHOCOLATE CANNOLI (3)
BUCA(TM) BREAD PUDDING CARAMELLO
TIRAMISU
TORTA FORMAGGIO CON RASBERRY
BOTTLE OF LIMONCELLO
TORTONI
-----------------------------
WE PROUDLY FEATURE PERONI,
ITALY'S #1 BEER
<PAGE>
LIKE LITTLE ITALY IN THE '50S,
Buca di Beppo celebrates the hearty
cooking of southern Italian immigrants.
It's a place where meats and
pastas overflow from their HEALTH
plates right onto the table, INSPECTED
wine flows from the jug,
and laughter often drowns SANITARY
out the music. BATHROOMS
You'll smell the sauces before you reach
the door. Inside, Neapolitan pizzas, as grand as
our ovens can accommodate, pass before your
eyes. Family platters of ravioli al pomodoro and
chicken cacciatore. And our signature spaghetti
and meatballs, two pounds of pasta,
and ladles of fresh marinara sauce.
You won't have room for dessert, but
order some anyway -- maybe our house-made
tiramisu or chocolate cannoli, with three ricotta-
stuffed pastry shells, submerged in chocolate.
Looking for something on the lighter side?
Though buried under raspberries, the torta
formaggio is as white as snow.
This is real immigrant Italian food. Smell it,
taste it, wander into the kitchen to watch us
prepare it.
<PAGE>
"Best Restaurant for a Large Group"
San Francisco Magazine
1999 Readers' Poll
"Italian family dining at its best"
Chicago Tribune
"ONE BIG RAUCOUS DINNER PARTY"
South Bay Weekly
"PORTIONS ARE NFL TRAINING TABLE WORTHY"
Cleveland Free Times
Elegant Dining
in a cosmopolitan atmosphere
"FOUR STARS"
(out of four stars)
Detroit Free Press
<PAGE>
"Joyous Gluttony"
"1998 Hot Concepts Award Winner" Pasadena Star News
Nation's Restaurant News
"BEST ITALIAN
BEST FAMILY DINING"
Minnesota Monthly
Readers' Poll
Lynwood Eden Prairie Burnsville Minneapolis
[PHOTO OF [PHOTO OF
Seattle STORE EXTERIOR] Denver STORE EXTERIOR]
St. Paul
[PHOTO OF Des Moines
STORE EXTERIOR] [PHOTO OF
Sacramento [MAP OF UNITED STATES WITH ARROWS STORE
San Francisco POINTING OUT RESTAURANT LOCATIONS] Milwaukee EXTERIOR]
Livonia
Westlake
Columbus
Cheektowaga
"Feeds an American hunger for community" Albany
Palo Alto Minneapolis Star-Tribune Jenkintown
Washington D.C.
Indianapolis(2)
Redondo Beach Louisville [PHOTO OF
[PHOTO OF Campbell Daytona Beach STORE EXTERIOR]
STORE EXTERIOR] Lenexa Lombard Tampa
Maitland
Ft. Lauderdale
"Bawdy
informality
Encino Scottsdale Chicago Wheeling and delicious
[PHOTO OF [PHOTO OF [PHOTO OF [PHOTO OF Italian fare"
STORE EXTERIOR] STORE EXTERIOR] STORE EXTERIOR] STORE EXTERIOR] Chicago Tribune
Pasadena "Voted BEST New Restaurant" "WHERE TO EAT"
[PHOTO OF Pasadena Weekly Readers' Poll The New York Times
STORE EXTERIOR]
Brea Claremont Summerlin
Chandler
<PAGE>
3,033,699 Shares
BUCA, INC.
Common Stock
---------------
PROSPECTUS
---------------
U.S. Bancorp Piper Jaffray
Banc of America Securities LLC
Robertson Stephens
, 2000
<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............................................. $ 14,992
NASD filing fee.................................................. 6,179
Nasdaq listing fee............................................... 17,500
Legal fees and expenses.......................................... 170,000
Accounting fees and expenses..................................... 150,000
Blue Sky fees and expenses....................................... 5,000
Printing expenses................................................ 250,000
Transfer agent fees and expenses................................. 15,000
Miscellaneous expenses........................................... 101,329
--------
Total........................................................ $730,000
</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, 41, 43, 44, 45, 46, 47, 48, 49, 50, 51, 52, 53, 54, 55, 56 and 57 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, 38 and 42 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 U.S. Bancorp 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 U.S. Bancorp Piper Jaffray Inc.
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.
II-2
<PAGE>
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.
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 Series C Convertible Preferred Stock convertible into
1,092,679 shares of common stock to outside investors for
$8,400,007.02 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.
II-3
<PAGE>
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.
42. On April 15, 1999, the Company sold 10,434 shares of common stock to
employees of the Company for $120,000 or $11.50 per share and
granted options to purchase 23,000 shares of the Company's common
stock at $11.50 per share to employees of the Company.
43. On April 21, 1999, the Company issued 8,152 shares of common stock
for $81.52, or $.01 per share, to an outside investor upon exercise
of a warrant previously issued to the investor.
44. On April 23, 1999, the Company issued 1,926 shares of common stock
for $19.26, or $.01 per share, to an outside investor upon exercise
of a warrant previously issued to the investor.
45. On April 26, 1999, the Company issued 149,992 shares of common stock
for $1,108,000 or $7.20 per share, to outside investors upon
conversion of certain subordinated debentures in aggregate principal
amount of $1,108,000 held by the investors.
46. On May 5, 1999, the Company issued 1,926 shares of common stock for
$19.26, or $.01 per share, to an outside investor upon exercise of a
warrant previously issued to the investor.
47. On May 18, 1999, the Company issued an aggregate of 71,843 shares of
common stock to U.S. Bancorp Piper Jaffray, Inc. and Michael Bochert
upon conversion and surrender of 104,532 warrants previously issued
to them.
48. On May 18, 1999, the Company issued 20,824 shares of common stock to
U.S. Bancorp Piper Jaffray, Inc. upon conversion and surrender of
33,333 warrants previously issued to it.
49. On July 20, 1999, the Company issued 6,944 shares of common stock
for $50,000 or $7.20 per share, to an outside investor upon
conversion of a certain subordinated debenture in aggregate
principal amount of $50,000 held by the investor.
50. On July 28, 1999, the Company issued 12,330 shares of common stock
for $184.79 or $0.01 per share to an outside investor upon exercise
of a warrant previously issued to an investor.
51. On August 4, 1999, the Company issued 7,706 shares of common stock
for $77.06, or $.01 per share, to outside investors upon exercise of
warrants previously issued to the investors.
52. On August 9, 1999, the Company issued 385 shares of common stock for
$3.85, or $.01 per share, to an outside investor upon exercise of a
warrant previously issued to the investor and 90,454 shares of
common stock to outside investors upon conversion and surrender of
90,509 warrants previously issued to the investors.
II-4
<PAGE>
53. On August 18, 1999, the Company issued 19,267 shares of common stock
for $192.67, or $.01 per share, to an outside investor upon exercise
of a warrant previously issued to the investor and 23,160 shares of
common stock to an outside investor upon conversion and surrender of
23,174 warrants previously issued to the investor.
54. On August 23, 1999, the Company issued 15,414 shares of common
stock for $154.14 or $0.01 per share, to an outside investor upon
exercise of a warrant previously issued to the investor.
55. On October 23, 1999, the Company issued 6,944 shares of common
stock for $50,000 or $7.20 per share, to an outside investor upon
conversion of a subordinated debenture in aggregate principal
amount of $50,000 held by the investor.
56. On October 25, 1999, the Company issued 6,944 shares of common
stock for $50,000 or $7.20 per share, to an outside investor upon
conversion of a subordinated debenture in aggregate principal
amount of $50,000 held by the investor.
57. On February 9, 2000, the Company issued 6,944 shares of common
stock for $50,000 or $7.20 per share, to an outside investor upon
conversion of a subordinated debenture in aggregate principal
amount of $50,000 held by the investor.
II-5
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Purchase Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant.(/1/)
3.2 Amended and Restated By-Laws of the Registrant.(/2/)
4.1 Specimen of Common Stock certificate.(/3/)
5.1 Opinion of Faegre & Benson LLP.
10.1 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated
Companies.(/4/)
10.2 Stock Option Plan for Non-Employee Directors.(/5/)
10.3 BUCA, Inc. Employee Stock Ownership Plan.(/6/)
10.4 BUCA, Inc. 401(k) Plan.(/7/)
10.5 Letter Agreement dated April 1, 1997 between the Registrant and
Greg A. Gadel.(/8/)
10.6 Credit Agreement dated as of September 27, 1999 among the
Registrant, as Borrower, and U.S. Bank National Association, Bank
of America, N.A. and BankBoston, N.A., as Lenders.(/9/)
10.7 First Amendment to Credit Agreement dated as of October 21, 1999
among the Registrant and the Lenders.(/10/)
*10.8 Second Amendment to Credit Agreement dated as of December 24, 1999
among the Registrant and the Lenders.
*10.9 Third Amendment to Credit Agreement dated as of March 3, 2000
among the Registrant and the Lenders.
10.10 Form of Series A Convertible Subordinated Debenture due July 30,
2001 of the Registrant.(/11/)
10.11 Form of Stock Purchase Warrant dated as of October 31, 1997.(/12/)
10.12 Form of Stock Purchase Warrant for the purchase of common stock of
the Registrant, dated May 19, 1998.(/13/)
10.13 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.(/14/)
10.14 Securities Purchase Agreement dated as of October 13, 1998 between
the Registrant and the Purchasers.(/15/)
10.15 Redemption Agreement between BUCA, Inc. and Parasole Restaurant
Holdings, Inc. regarding the Parasole Employee Stock Ownership
Plan.(/16/)
10.16 Amended and Restated Employment Agreement dated as of February 17,
1999, between the Registrant and Joseph P. Micatrotto.(/17/)
10.17 BUCA, Inc. Employee Stock Purchase Plan(/18/)
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Faegre & Benson LLP (included in Exhibit No. 5.1 to the
Registration Statement).
*24.1 Powers of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
(1) Incorporated by reference to Exhibit 3.4 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(2) Incorporated by reference to Exhibit 3.5 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(3) Incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(4) Incorporated by reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(5) Incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(6) Incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(7) Incorporated by reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
II-6
<PAGE>
(8) Incorporated by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(9) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 26, 1999.
(10) Incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the period ended September 26, 1999.
(11) Incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(12) Incorporated by reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(13) Incorporated by reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(14) Incorporated by reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(15) Incorporated by reference to Exhibit 10.17 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(16) Incorporated by reference to Exhibit 10.18 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(17) Incorporated by reference to Exhibit 10.20 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(18) Incorporated by reference to Exhibit 99.3 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78295).
(b) Financial Statement Schedules
None required.
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 Purchase 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-7
<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 April 11, 2000.
BUCA, INC.
/s/ Joseph P. Micatrotto
By___________________________________
Joseph P. Micatrotto
Chairman, 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 April 11, 2000.
Signature Title
/s/ Joseph P. Micatrotto Chairman, 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-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
1.1 Form of Purchase Agreement.
3.1 Amended and Restated Articles of Incorporation of the
Registrant.(/1/)
3.2 Amended and Restated By-Laws of the Registrant.(/2/)
4.1 Specimen of Common Stock certificate.(/3/)
5.1 Opinion of Faegre & Benson LLP.
10.1 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated
Companies.(/4/)
10.2 Stock Option Plan for Non-Employee Directors.(/5/)
10.3 BUCA, Inc. Employee Stock Ownership Plan.(/6/)
10.4 BUCA, Inc. 401(k) Plan.(/7/)
10.5 Letter Agreement dated April 1, 1997 between the Registrant and
Greg A. Gadel.(/8/)
10.6 Credit Agreement dated as of September 27, 1999 among the
Registrant, as Borrower, and U.S. Bank National Association, Bank
of America, N.A. and BankBoston, N.A., as Lenders.(/9/)
10.7 First Amendment to Credit Agreement dated as of October 21, 1999
among the Registrant and the Lenders.(/10/)
*10.8 Second Amendment to Credit Agreement dated as of December 24, 1999
among the Registrant and the Lenders.
*10.9 Third Amendment to Credit Agreement dated as of March 3, 2000
among the Registrant and the Lenders.
10.10 Form of Series A Convertible Subordinated Debenture due July 30,
2001 of the Registrant.(/11/)
10.11 Form of Stock Purchase Warrant dated as of October 31, 1997.(/12/)
10.12 Form of Stock Purchase Warrant for the purchase of common stock of
the Registrant, dated May 19, 1998.(/13/)
10.13 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.(/14/)
10.14 Securities Purchase Agreement dated as of October 13, 1998 between
the Registrant and the Purchasers.(/15/)
10.15 Redemption Agreement between BUCA, Inc. and Parasole Restaurant
Holdings, Inc. regarding the Parasole Employee Stock Ownership
Plan.(/16/)
10.16 Amended and Restated Employment Agreement dated as of February 17,
1999, between the Registrant and Joseph P. Micatrotto.(/17/)
10.17 BUCA, Inc. Employee Stock Purchase Plan(/18/)
*21.1 Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Faegre & Benson LLP (included in Exhibit No. 5.1 to the
Registration Statement).
*24.1 Powers of Attorney.
*27.1 Financial Data Schedule.
</TABLE>
- --------
* Previously filed.
(1) Incorporated by reference to Exhibit 3.4 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(2) Incorporated by reference to Exhibit 3.5 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(3) Incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(4) Incorporated by reference to Exhibit 10.1 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(5) Incorporated by reference to Exhibit 10.2 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(6) Incorporated by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(7) Incorporated by reference to Exhibit 10.4 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(8) Incorporated by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
<PAGE>
(9) Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report
on Form 10-Q for the period ended September 26, 1999.
(10) Incorporated by reference to Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the period ended September 26, 1999.
(11) Incorporated by reference to Exhibit 10.9 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(12) Incorporated by reference to Exhibit 10.12 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(13) Incorporated by reference to Exhibit 10.14 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(14) Incorporated by reference to Exhibit 10.15 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(15) Incorporated by reference to Exhibit 10.17 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(16) Incorporated by reference to Exhibit 10.18 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(17) Incorporated by reference to Exhibit 10.20 to the Company's Registration
Statement on Form S-1 (Registration No. 333-72593).
(18) Incorporated by reference to Exhibit 99.3 to the Company's Registration
Statement on Form S-8 (Registration No. 333-78295).
<PAGE>
EXHIBIT 1.1
3,033,699 Shares/1/
BUCA, INC.
Common Stock
PURCHASE AGREEMENT
, 2000
U.S. BANCORP PIPER JAFFRAY INC.
BANC OF AMERICA SECURITIES LLC
BANCBOSTON ROBERTSON STEPHENS INC.
As Representatives of the several Underwriters
named in Schedule II hereto
c/o U.S. Bancorp Piper Jaffray Inc.
Piper Jaffray Tower
222 South Ninth Street
Minneapolis, Minnesota 55402
Ladies and Gentlemen:
BUCA, Inc., a Minnesota corporation (the "Company"), and the shareholders
of the Company listed in Schedule I hereto (the "Selling Shareholders")
severally propose to sell to the several Underwriters named in Schedule II
hereto (the "Underwriters") an aggregate of 3033699 shares (the "Firm Shares")
of Common Stock, $.01 par value per share (the "Common Stock"), of the Company.
The Firm Shares consist of 3,000,000 authorized but unissued shares of Common
Stock to be issued and sold by the Company and 33,699 outstanding shares of
Common Stock to be sold by the Selling Shareholders. The Company and certain
Selling Shareholders have granted to the Underwriters an option to purchase up
to 455,054 additional shares of Common Stock on the terms and for the purposes
set forth in Section 3 hereof (the "Option Shares"). The Firm Shares and any
Option Shares purchased pursuant to this Purchase Agreement are herein
collectively called the "Securities."
The Company and the Selling Shareholders hereby confirm their agreement
with respect to the sale of the Securities to the several Underwriters, for whom
you are acting as Representatives (the "Representatives").
- --------------
/1/ Plus an option to purchase up to 455,054 additional shares to cover
over-allotments.
<PAGE>
1. Registration Statement and Prospectus. A registration statement on Form
S-1 (File No. 333-32794) with respect to the Securities, including a preliminary
form of prospectus, has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended (the "Act"), and the
rules and regulations ("Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") thereunder and has been filed with the Commission;
one or more amendments to such registration statement have also been so prepared
and have been, or will be, so filed; and, if the Company has elected to rely
upon Rule 462(b) of the Rules and Regulations to increase the size of the
offering registered under the Act, the Company will prepare and file with the
Commission a registration statement with respect to such increase pursuant to
Rule 462(b). Copies of such registration statement(s) and amendments and each
related preliminary prospectus have been delivered to you.
If the Company has elected not to rely upon Rule 430A of the Rules and
Regulations, the Company has prepared and will promptly file an amendment to the
registration statement and an amended prospectus (including a term sheet, if
any, meeting the requirements of Rule 434 of the Rules and Regulations). If the
Company has elected to rely upon Rule 430A of the Rules and Regulations, it will
prepare and file a prospectus (or a term sheet meeting the requirements of Rule
434) pursuant to Rule 424(b) that discloses the information previously omitted
from the prospectus in reliance upon Rule 430A. Such registration statement as
amended at the time it is or was declared effective by the Commission, and, in
the event of any amendment thereto after the effective date and prior to the
First Closing Date (as hereinafter defined), such registration statement as so
amended (but only from and after the effectiveness of such amendment), including
a registration statement (if any) filed pursuant to Rule 462(b) of the Rules and
Regulations increasing the size of the offering registered under the Act and
information (if any) deemed to be part of the registration statement at the time
of effectiveness pursuant to Rules 430A(b) and 434(d) of the Rules and
Regulations, is hereinafter called the "Registration Statement." The prospectus
included in the Registration Statement at the time it is or was declared
effective by the Commission is hereinafter called the "Prospectus," except that
if any prospectus (including any term sheet meeting the requirements of Rule 434
of the Rules and Regulations provided by the Company for use with a prospectus
subject to completion within the meaning of Rule 434 in order to meet the
requirements of Section 10(a) of the Rules and Regulations) filed by the Company
with the Commission pursuant to Rule 424(b) (and Rule 434, if applicable) of the
Rules and Regulations or any other such prospectus provided to the Underwriters
by the Company for use in connection with the offering of the Securities
(whether or not required to be filed by the Company with the Commission pursuant
to Rule 424(b) of the Rules and Regulations) differs from the prospectus on file
at the time the Registration Statement is or was declared effective by the
Commission, the term "Prospectus" shall refer to such differing prospectus
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations) from and after the time such prospectus is filed with the
Commission or transmitted to the Commission for filing pursuant to such Rule
424(b) (and Rule 434, if applicable) or from and after the time it is first
provided to the Underwriters by the Company for such use. The term "Preliminary
Prospectus" as used herein means any preliminary prospectus included in the
Registration Statement
2
<PAGE>
prior to the time it becomes or became effective under the Act and any
prospectus subject to completion as described in Rule 430A or 434 of the Rules
and Regulations.
2. Representations and Warranties of the Company and the Selling
Shareholders.
(a) The Company represents and warrants to, and agrees with, the several
Underwriters as follows:
(i) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission and each Preliminary
Prospectus, at the time of filing thereof, did not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; except
that the foregoing shall not apply to statements in or omissions from any
Preliminary Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by you, or by any Underwriter through
you, specifically for use in the preparation thereof.
(ii) As of the time the Registration Statement (or any post-effective
amendment thereto, including a registration statement (if any) filed
pursuant to Rule 462(b) of the Rules and Regulations increasing the size of
the offering registered under the Act) is or was declared effective by the
Commission, upon the filing or first delivery to the Underwriters of the
Prospectus (or any supplement to the Prospectus (including any term sheet
meeting the requirements of Rule 434 of the Rules and Regulations)) and at
the First Closing Date and Second Closing Date (as hereinafter defined),
(A) the Registration Statement and Prospectus (in each case, as so amended
and/or supplemented) conformed or will conform in all material respects to
the requirements of the Act and the Rules and Regulations, (B) the
Registration Statement (as so amended) did not or will not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and (C) the Prospectus (as so supplemented) did not or will
not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are or were
made, not misleading; except that the foregoing shall not apply to
statements in or omissions from any such document in reliance upon, and in
conformity with, written information furnished to the Company by you, or by
any Underwriter through you, specifically for use in the preparation
thereof. If the Registration Statement has been declared effective by the
Commission, no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceeding for that purpose has been
initiated or, to the Company's knowledge, threatened by the Commission.
(iii) The financial statements of the Company, together with the notes
thereto, set forth in the Registration Statement and Prospectus comply in
all material respects
3
<PAGE>
with the requirements of the Act and the Rules and Regulations and fairly
present the financial condition of the Company as of the dates indicated
and the results of operations and changes in cash flows for the periods
therein specified in conformity with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise stated therein); and the supporting schedules included in the
Registration Statement present fairly the information required to be stated
therein and comply in all material respects with the requirements of the
Act and the Rules and Regulations. No other financial statements or
schedules are required to be included in the Registration Statement or
Prospectus. Deloitte & Touche LLP, which has expressed its opinion with
respect to the financial statements and schedules filed as a part of the
Registration Statement and included in the Registration Statement and
Prospectus, are independent public accountants as required by the Act and
the Rules and Regulations.
(iv) Each of the Company and its subsidiaries has been duly organized
and is validly existing as a corporation in good standing under the laws of
its jurisdiction of incorporation. Each of the Company and its subsidiaries
has full corporate power and authority to own its properties and conduct
its business as currently being carried on and as described in the
Registration Statement and Prospectus, and is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which it
owns or leases real property or in which the conduct of its business makes
such qualification necessary and in which the failure to so qualify would
have a material adverse effect upon its business, condition (financial or
otherwise) or properties, taken as a whole.
(v) Except as contemplated in the Prospectus, subsequent to the
respective dates as of which information is given in the Registration
Statement and the Prospectus, neither the Company nor any of its
subsidiaries has incurred any material liabilities or obligations, direct
or contingent, or entered into any material transactions, or declared or
paid any dividends or made any distribution of any kind with respect to its
capital stock; and, except as contemplated in the Prospectus, there has not
been any change in the capital stock (other than a change in the number of
outstanding shares of Common Stock due to the issuance of shares upon the
exercise of outstanding options or warrants or issuance of shares pursuant
to the Company's Piasano Program or the conversion of outstanding
convertible securities), or any material change in the short-term or
long-term debt, or any issuance of options, warrants, convertible
securities or other rights to purchase the capital stock, of the Company or
any of its subsidiaries, or any material adverse change, or any development
involving a prospective material adverse change, in the condition
(financial or otherwise), business or results of operations of the Company
and its subsidiaries, taken as a whole.
(vi) Except as set forth in the Prospectus, there is not pending or,
to the knowledge of the Company, threatened or contemplated, any action,
suit or proceeding to which the Company or any of its subsidiaries is a
party before or by any court or governmental
4
<PAGE>
agency, authority or body, or any arbitrator, which might result in any
material adverse change in the condition (financial or otherwise),
business, or results of operations of the Company and its subsidiaries,
taken as a whole.
(vii) There are no contracts or documents of the Company or any of its
subsidiaries that are required to be filed as exhibits to the Registration
Statement by the Act or by the Rules and Regulations that have not been so
filed.
(viii) This Agreement has been duly authorized, executed and delivered
by the Company, and constitutes a valid, legal and binding obligation of
the Company, enforceable in accordance with its terms, except as rights to
indemnity hereunder may be limited by federal or state securities laws and
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally
and subject to general principles of equity. The execution, delivery and
performance of this Agreement and the consummation of the transactions
herein contemplated will not result in a breach or violation of any of the
terms and provisions of, or constitute a default under, any statute, any
agreement or instrument to which the Company is a party or by which it is
bound or to which any of its property is subject, the Company's charter or
by-laws, or any order, rule, regulation or decree of any court or
governmental agency or body having jurisdiction over the Company or any of
its properties; no consent, approval, authorization or order of, or filing
with, any court or governmental agency or body is required for the
execution, delivery and performance of this Agreement or for the
consummation of the transactions contemplated hereby, including the
issuance or sale of the Securities by the Company, except such as may be
required under the Act or state securities or blue sky laws; and the
Company has full power and authority to enter into this Agreement and to
authorize, issue and sell the Securities as contemplated by this Agreement.
(ix) All of the issued and outstanding shares of capital stock of the
Company, including the outstanding shares of Common Stock, are duly
authorized and validly issued, fully paid and nonassessable, have been
issued in compliance with all federal and state securities laws, were not
issued in violation of or subject to any preemptive rights or other rights
to subscribe for or purchase securities, and the holders thereof are not
subject to personal liability by reason of being such holders; the
Securities which may be sold hereunder by the Company have been duly
authorized and, when issued, delivered and paid for in accordance with the
terms hereof, will have been validly issued and will be fully paid and
nonassessable, and the holders thereof will not be subject to personal
liability by reason of being such holders; and the capital stock of the
Company, including the Common Stock, conforms to the description thereof in
the Registration Statement and Prospectus. Except as otherwise stated in
the Registration Statement and Prospectus, there are no preemptive rights
or other rights to subscribe for or to purchase, or any restriction upon
the voting or transfer of, any shares of Common Stock pursuant to the
Company's charter, by-laws or any agreement or other
5
<PAGE>
instrument to which the Company is a party or by which the Company is
bound. Neither the filing of the Registration Statement nor the offering or
sale of the Securities as contemplated by this Agreement gives rise to any
rights for or relating to the registration of any shares of Common Stock or
other securities of the Company, except for such rights which have been
waived or fully satisfied and rights with respect to an aggregate of 1,926
shares underlying a warrant held by a warrantholder of the Company. All of
the issued and outstanding shares of capital stock of each of the Company's
subsidiaries have been duly and validly authorized and issued and are fully
paid and nonassessable, and, except as otherwise described in the
Registration Statement and Prospectus and except for any directors'
qualifying shares, either the Company or a Subsidiary of 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. Except as described in the
Registration Statement and the Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire
from the Company or any subsidiary of the Company any shares of the capital
stock of the Company or any subsidiary of the Company. The Company has an
authorized and outstanding capitalization as set forth in the Registration
Statement and the Prospectus.
(x) The Company and each of its subsidiaries holds, and is operating
in compliance with, all franchises, grants, authorizations, licenses,
permits, easements, consents, certificates and orders of any governmental
or self-regulatory body required for the conduct of its business and all
such franchises, grants, authorizations, licenses, permits, easements,
consents, certifications and orders are valid and in full force and effect,
except for such failures to hold, to be in compliance, to be valid and in
full force and effect that would not, individually or in the aggregate,
have a material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company and its subsidiaries,
taken as a whole; and the Company and each of its subsidiaries is in
compliance with all applicable federal, state, local and foreign laws,
regulations, orders and decrees, except for such failures to be so in
compliance that would not, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise), business
or results of operations of the Company and its subsidiaries, taken as a
whole.
(xi) The Company and its subsidiaries have good and marketable title
to all property described in the Registration Statement and Prospectus as
being owned by them, in each case free and clear of all liens, claims,
security interests or other encumbrances except such as are described in
the Registration Statement and the Prospectus or those that are not
material in amount and do not adversely affect the use made and proposed to
be made of such property by the Company and its subsidiaries; the property
held under lease by the Company and its subsidiaries is held by them under
valid, subsisting and enforceable leases with only such exceptions with
respect to any particular lease as do not interfere in any material respect
with the conduct of the business of the Company or its subsidiaries; the
Company and each of its subsidiaries owns or possesses all patents, patent
applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses,
inventions,
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trade secrets and rights necessary for the conduct of the business of the
Company and its subsidiaries as currently carried on and as described in
the Registration Statement and Prospectus; except as stated in the
Registration Statement and Prospectus, to the Company's knowledge, no name
which the Company or any of its subsidiaries uses and no other aspect of
the business of the Company or any of its subsidiaries will involve or give
rise to any infringement of, or license or similar fees for, any patents,
patent applications, trademarks, service marks, tradenames, trademark
registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets or other similar rights of others material to the
business of the Company and neither the Company nor any of its subsidiaries
has received any notice alleging any such infringement or fee.
(xii) Neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws or in breach of or otherwise in
default in the performance of any obligation, agreement or condition
contained in any bond, debenture, note, indenture, loan agreement or any
other contract, lease or other instrument to which it is subject or by
which any of them may be bound, or to which any of the material property or
assets of the Company or any of its subsidiaries is subject, except for
such breaches or defaults that would not, individually or in the aggregate,
have a material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company and its subsidiaries,
taken as a whole.
(xiii) The Company and its subsidiaries have filed all federal, state,
local and foreign income and franchise tax returns required to be filed and
are not in default in the payment of any taxes which were payable pursuant
to said returns or any assessments with respect thereto, other than any
which the Company or any of its subsidiaries is contesting in good faith.
(xiv) The Company has not distributed and will not distribute any
prospectus or other offering material in connection with the offering and
sale of the Securities other than any Preliminary Prospectus or the
Prospectus or other materials permitted by the Act to be distributed by the
Company.
(xv) The Securities have been approved for listing on the Nasdaq
National Market.
(xvi) Other than the subsidiaries of the Company listed in Exhibit 21
to the Registration Statement, the Company owns no capital stock or other
equity or ownership or proprietary interest in any corporation,
partnership, association, trust or other entity.
(xvii) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with
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management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(xviii) Other than as contemplated by this Agreement, the Company has
not incurred any liability for any finder's or broker's fee or agent's
commission in connection with the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(xix) Neither the Company nor any of its affiliates is presently doing
business with the government of Cuba or with any person or affiliate
located in Cuba.
(xx) All reports, statements and registrations and amendments thereto
(including without limitation Quarterly Reports on Form 10-Q and Current
Reports on Form 8- K) filed by the Company with Commission since April 26,
1999, on the dates of their respective filings with the Commission,
conformed, in all material respects to the requirements of the Act or the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
applicable, and the rules and regulations of the Commission thereunder, and
none of such documents contained an untrue statement of a mateiral fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein not misleading.
(b) Each Selling Shareholder represents and warrants to, and agrees with,
the several Underwriters as follows:
(i) If such Selling Shareholder is selling Common Stock issuable upon
exercise of options ("Company Options") to purchase Common Stock of the
Company, such Selling Shareholder is the record and beneficial owner of the
Company Option, free and clear of all security interests, claims, liens,
restrictions on transferability (except as set forth in the Company
Option), legends, proxies, equities or other encumbrances.
(ii) Such Selling Shareholder is the record and beneficial owner of,
and has, and on the First Closing Date will have, valid and marketable
title to the Common Stock (including Common Stock issuable upon exercise of
Common Options) to be sold by such Selling Shareholder, free and clear of
all security interests, claims, liens, restrictions on transferability,
legends, proxies, equities or other encumbrances; and upon delivery of and
payment for such Securities hereunder, the several Underwriters will
acquire valid and marketable title thereto, free and clear of any security
interests, claims, liens, restrictions on transferability, legends,
proxies, equities or other encumbrances. Such Selling Shareholder is
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<PAGE>
selling the Common Stock to be sold by such Selling Shareholder for such
Selling Shareholder's own account and is not selling such Securities,
directly or indirectly, for the benefit of the Company, and no part of the
proceeds of such sale received by such Selling Shareholder will inure,
either directly or indirectly, to the benefit of the Company other than as
described in the Registration Statement and Prospectus.
(iii) Such Selling Shareholder has duly authorized, executed and
delivered a Letter of Transmittal and Custody Agreement ("Custody
Agreement"), which Custody Agreement is a valid and binding obligation of
such Selling Shareholder, to Norwest Bank Minnesota National Association,
as Custodian (the "Custodian"); pursuant to the Custody Agreement the
Selling Shareholder has placed in custody with the Custodian, for delivery
under this Agreement, the certificates representing the Common Stock and
agreements representing the Company Options, if any, to be exercised in
connection with the shares of Common Stock to be sold by such Selling
Shareholder; such certificates represent validly issued, outstanding, fully
paid and nonassessable shares of Common Stock or validly issued and
outstanding Company Options; when issued, the certificates representing
shares issuable upon exercise of Company Options will representvalidly
issued, outstanding, fully paid and nonassessable shares of Common Stock;
and in the case of Company Options, such agreements were accompanied by all
documents duly and properly executed that are necessary to effect the
exercise of such Company Option; and in the case of Common Stock (including
shares of Common Stock issuable upon exercise of Company Options), such
certificates were duly and properly endorsed in blank for transfer, or were
accompanied by all documents duly and properly executed that are necessary
to validate the transfer of title thereto, to the Underwriters, free of any
legend, restriction on transferability, proxy, lien or claim, whatsoever.
(iv) Such Selling Shareholder has the power and authority to enter
into this Agreement, the Letter of Transmittal and the Custody Agreement
and to sell, transfer and deliver the Securities to be sold by such Selling
Shareholder; and such Selling Shareholder has duly authorized, executed and
delivered, or prior to the First Closing will execute and deliver, to Greg
A. Gadel and John J. Motschenbacher, as attorneys-in-fact (the "Attorneys-
in-Fact"), an irrevocable power of attorney (a "Power of Attorney")
authorizing and directing the Attorneys-in-Fact, or either of them, to
effect the sale and delivery of the Securities being sold by such Selling
Shareholder, to enter into this Agreement and to take all such other action
as may be necessary hereunder.
(v) This Agreement has been duly authorized, executed and delivered by
or on behalf of such Selling Shareholder and constitutes a valid and
binding agreement of such Selling Shareholder, enforceable in accordance
with its terms, and prior to the First Closing, the Custody Agreement and
the Power of Attorney will each have been duly authorized, executed and
delivered, by or on behalf of such Selling Shareholder, and each will
constitute a valid and binding agreement of such Selling Shareholder,
enforceable in accordance with its terms, in each case, except as rights to
indemnity hereunder or thereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or laws affecting the rights of
creditors generally and subject to general principles of equity. The
execution and delivery of this
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<PAGE>
Agreement, the Custody Agreement and the Power of Attorney and the
performance of the terms hereof and thereof and the consummation of the
transactions herein and therein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any agreement or instrument to which such Selling Shareholder is a
party or by which such Selling Shareholder is bound, or any law,
regulation, order or decree applicable to such Selling Shareholder; no
consent, approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Custody Agreement and the Power of
Attorney or for the consummation of the transactions contemplated hereby
and thereby, including the sale of the Securities being sold by such
Selling Shareholder, except such as may be required under the Act or state
securities laws or blue sky laws.
(vi) Such Selling Shareholder has not distributed and will not
distribute any prospectus or other offering material in connection with the
offering and sale of the Securities other than any Preliminary Prospectus
or the Prospectus or other materials permitted by the Act to be distributed
by such Selling Shareholder.
(vii) Such Selling Shareholder has reviewed the Registration Statement
and the Prospectus and to the best knowledge of such Selling Shareholder
neither the Registration Statement nor the Prospectus contains any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading regarding such Selling Shareholder, the other Selling
Shareholders, the Company or otherwise.
(viii) To the knowledge of such Selling Shareholder, the
representations and warranties of the Company contained in paragraph (a) of
this Section 2 are true and correct.
(c) Any certificate signed by any officer of the Company and delivered to
you or to counsel for the Underwriters shall be deemed a representation and
warranty by the Company to each Underwriter as to the matters covered thereby;
any certificate signed by or on behalf of any Selling Shareholder as such and
delivered to you or to counsel for the Underwriters shall be deemed a
representation and warranty by such Selling Shareholder to each Underwriter as
to the matters covered thereby.
3. Purchase, Sale and Delivery of Securities.
(a) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to issue and sell 3,000,000 Firm Shares, and each Selling Shareholder
agrees, severally and not jointly, to sell the number of Firm Shares set forth
opposite the name of such Selling Shareholder in Schedule I hereto, to the
several Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the
10
<PAGE>
Company and the Selling Shareholders the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule II hereto. The purchase price
for each Firm Share shall be $ per share. The obligation of each Underwriter to
each of the Company and the Selling Shareholders shall be to purchase from each
of the Company and the Selling Shareholders that number of Firm Shares (to be
adjusted by the Representatives to avoid fractional shares) which represents the
same proportion of the number of Firm Shares to be sold by each of the Company
and the Selling Shareholders pursuant to this Agreement as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule II hereto
represents to the total number of Firm Shares to be purchased by all
Underwriters pursuant to this Agreement. In making this Agreement, each
Underwriter is contracting severally and not jointly; except as provided in
paragraph (c) of this Section 3 and in Section 8 hereof, the agreement of each
Underwriter is to purchase only the respective number of Firm Shares specified
in Schedule II.
The Firm Shares will be delivered by the Company and the Custodian to you
for the accounts of the several Underwriters against payment of the purchase
price therefor by wire/same day funds payable to the order of the Company and
the Custodian, as appropriate, at the offices of U.S. Bancorp Piper Jaffray
Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota, or
such other location as may be mutually acceptable, at 9:00 a.m. Central time on
the third (or if the Securities are priced, as contemplated by Rule 15c6-1(c)
under the Exchange Act, after 4:30 p.m. Eastern time, the fourth) full business
day following the date hereof, or at such other time and date as you and the
Company determine pursuant to Rule 15c6-1(a) under the Exchange Act, such time
and date of delivery being herein referred to as the "First Closing Date." If
the Representatives so elect, delivery of the Firm Shares may be made by credit
through full fast transfer to the accounts at The Depository Trust Company
designated by the Representatives. Certificates representing the Firm Shares, in
definitive form and in such denominations and registered in such names as you
may request upon at least two business days' prior notice to the Company and the
Custodian, will be made available for checking and packaging not later than
10:30 a.m., Central time, on the business day next preceding the First Closing
Date at the offices of U.S. Bancorp Piper Jaffray Inc., Piper Jaffray Tower, 222
South Ninth Street, Minneapolis, Minnesota, or such other location as may be
mutually acceptable.
(b) On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
, with respect to 55,056 Option Shares, and certain Selling Shareholders, with
respect to the number of Option Shares set forth opposite the name of such
Selling Shareholder in Schedule I hereto, hereby grant to the several
Underwriters an option to purchase all or any portion of the Option Shares at
the same purchase price as the Firm Shares, for use solely in covering any
over-allotments made by the Underwriters in the sale and distribution of the
Firm Shares. The option granted hereunder may be exercised at any time (but not
more than once) within 30 days after the effective date of this Agreement upon
notice (confirmed in writing) by the Representatives to the Company and to the
Attorneys-in-Fact setting forth the aggregate number of Option Shares as to
which the several Underwriters are exercising the option, the names and
denominations in which the certificates for the Option Shares are to be
registered and the date and time, as determined by you, when the Option Shares
are to be delivered, such time and date being herein
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<PAGE>
referred to as the "Second Closing" and "Second Closing Date," respectively;
provided, however, that the Second Closing Date shall not be earlier than the
First Closing Date nor earlier than the second business day after the date on
which the option shall have been exercised. If the option is exercised, the
obligation of each Underwirter shall be to purchase Option Shares from the
Company and the Selling Shareholders on a pro rata basis, (to be adjusted by the
Representatives to avoid fractional shares). The number of Option Shares to be
purchased by each Underwriter shall be the same percentage of the total number
of Option Shares to be purchased by the several Underwriters as the number of
Firm Shares to be purchased by such Underwriter is of the total number of Firm
Shares to be purchased by the several Underwriters, as adjusted by the
Representatives in such manner as the Representatives deem advisable to avoid
fractional shares. No Option Shares shall be sold and delivered unless the Firm
Shares previously have been, or simultaneously are, sold and delivered.
The Option Shares will be delivered by the Company and the Custodian to you
for the accounts of the several Underwriters against payment of the purchase
price therefor by wire/same day funds payable to the order of the Company and
the Custodian, as appropriate at the offices of U. S. Bancorp Piper Jaffray
Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis, Minnesota, or
such other location as may be mutually acceptable at 9:00 a.m., Central time, on
the Second Closing Date. If the Representatives so elect, delivery of the Option
Shares may be made by credit through full fast transfer to the accounts at The
Depository Trust Company designated by the Representatives. Certificates
representing the Option Shares in definitive form and in such denominations and
registered in such names as you have set forth in your notice of option
exercise, will be made available for checking and packaging not later than 10:30
a.m., Central time, on the business day next preceding the Second Closing Date
at the office of U.S. Bancorp Piper Jaffray Inc., Piper Jaffray Tower, 222 South
Ninth Street, Minneapolis, Minnesota, or such other location as may be mutually
acceptable.
(c) It is understood that you, individually and not as Representatives of
the several Underwriters may (but shall not be obligated to) make payment to the
Company or the Selling Shareholders, on behalf of any Underwriter for the
Securities to be purchased by such Underwriter. Any such payment by you shall
not relieve any such Underwriter of any of its obligations hereunder. Nothing
herein contained shall constitute any of the Underwriters an unincorporated
association or partner with the Company or any Selling Shareholder.
4. Covenants.
(a) The Company covenants and agrees with the several Underwriters as
follows:
(i) If the Registration Statement has not already been declared
effective by the Commission, the Company will use its best efforts to cause
the Registration Statement and any post-effective amendments thereto to
become effective as promptly as possible; the Company will notify you
promptly of the time when the Registration Statement or any post-effective
amendment to the Registration Statement has become effective or any
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<PAGE>
supplement to the Prospectus (including any term sheet within the meaning
of Rule 434 of the Rules and Regulations) has been filed and of any request
by the Commission for any amendment or supplement to the Registration
Statement or Prospectus or additional information; if the Company has
elected to rely on Rule 430A of the Rules and Regulations, the Company will
prepare and file a Prospectus (or term sheet within the meaning of Rule 434
of the Rules and Regulations) containing the information omitted therefrom
pursuant to Rule 430A of the Rules and Regulations with the Commission
within the time period required by, and otherwise in accordance with the
provisions of, Rules 424(b), 430A and 434, if applicable, of the Rules and
Regulations; if the Company has elected to rely upon Rule 462(b) of the
Rules and Regulations to increase the size of the offering registered under
the Act, the Company will prepare and file a registration statement with
respect to such increase with the Commission within the time period
required by, and otherwise in accordance with the provisions of, Rule
462(b); the Company will prepare and file with the Commission, promptly
upon your request, any amendments or supplements to the Registration
Statement or Prospectus (including any term sheet within the meaning of
Rule 434 of the Rules and Regulations) that, in your opinion, may be
necessary or advisable in connection with the distribution of the
Securities by the Underwriters; and the Company will not file any amendment
or supplement to the Registration Statement or Prospectus (including any
term sheet within the meaning of Rule 434 of the Rules and Regulations) to
which you shall reasonably object by notice to the Company after having
been furnished a copy a reasonable time prior to the filing.
(ii) The Company will advise you, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement,
of the suspension of the qualification of the Securities for offering or
sale in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose; and the Company will promptly use its best
efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such a stop order should be issued.
(iii) Within the time during which a prospectus (including any term
sheet within the meaning of Rule 434 of the Rules and Regulations) relating
to the Securities is required to be delivered under the Act, the Company
will comply as far as it is able with all requirements imposed upon it by
the Act, as now and hereafter amended, and by the Rules and Regulations, as
from time to time in force, so far as necessary to permit the continuance
of sales of or dealings in the Securities as contemplated by the provisions
hereof and the Prospectus. If during such period any event occurs as a
result of which the Prospectus would include an untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances then existing, not
misleading, or if during such period it is necessary to amend the
Registration Statement or supplement the Prospectus to comply with the Act,
the Company will promptly notify you and will amend the Registration
Statement or supplement the Prospectus (at the expense of the Company) so
as to correct such statement or omission or effect such compliance.
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<PAGE>
(iv) The Company will use its best efforts to qualify the Securities
for sale under the securities laws of such jurisdictions as you reasonably
designate and to continue such qualifications in effect so long as required
for the distribution of the Securities, except that the Company shall not
be required in connection therewith to qualify as a foreign corporation or
to execute a general consent to service of process in any state.
(v) The Company will furnish to the Underwriters copies of the
Registration Statement (three of which will be signed and will include all
exhibits), each Preliminary Prospectus, the Prospectus, and all amendments
and supplements (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations) to such documents, in each case as soon as
available and in such quantities as you may from time to time reasonably
request.
(vi) During a period of five years commencing with the date hereof,
the Company will furnish to the Representatives, and to each Underwriter,
who may so request in writing, copies of all periodic and special reports
furnished to the shareholders of the Company and all information, documents
and reports filed with the Commission, the National Association of
Securities Dealers, Inc., The Nasdaq National Market or any securities
exchange.
(vii) The Company will make generally available to its security
holders as soon as practicable, but in any event not later than 15 months
after the end of the Company's current fiscal quarter, an earnings
statement (which need not be audited) covering a 12-month period beginning
after the effective date of the Registration Statement that shall satisfy
the provisions of Section 11(a) of the Act and Rule 158 of the Rules and
Regulations.
(viii) The Company, whether or not the transactions contemplated
hereunder are consummated or this Agreement is prevented from becoming
effective under the provisions of Section 9(a) hereof or is terminated,
will pay or cause to be paid (A) all expenses (including transfer taxes
allocated to the respective transferees) incurred in connection with the
delivery to the Underwriters of the Securities, (B) all expenses and fees
(including, without limitation, fees and expenses of the Company's
accountants and counsel but, except as otherwise provided below, not
including fees of the Underwriters' counsel) in connection with the
preparation, printing, filing, delivery, and shipping of the Registration
Statement (including the financial statements therein and all amendments,
schedules, and exhibits thereto), the Securities, each Preliminary
Prospectus, the Prospectus, and any amendment thereof or supplement
thereto, and the printing, delivery, and shipping of this Agreement and
other underwriting documents, including Blue Sky Memoranda, (C) all filing
fees and fees and disbursements of the Underwriters' counsel incurred in
connection with the qualification of the Securities for offering and sale
by the Underwriters or by dealers under the securities or blue sky laws of
the states and other jurisdictions which you shall designate in accordance
with Section 4(d) hereof, (D) the fees and expenses of any transfer agent
or registrar, (E) the filing fees incident to any
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<PAGE>
required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Securities, (F) listing fees, if any, and (G)
all other costs and expenses incident to the performance of its obligations
hereunder that are not otherwise specifically provided for herein. If the
sale of the Securities provided for herein is not consummated by reason of
action by the Company pursuant to Section 9(a) hereof which prevents this
Agreement from becoming effective, or by reason of any failure, refusal or
inability on the part of the Company or the Selling Shareholders to perform
any agreement on its or their part to be performed, or because any other
condition of the Underwriters' obligations hereunder required to be
fulfilled by the Company or the Selling Shareholders is not fulfilled
(unless such failure to fulfill any condition is due to the default or
omission of any Underwriter), the Company will reimburse the several
Underwriters for all out-of-pocket disbursements (including fees and
disbursements of counsel) incurred by the Underwriters in connection with
their investigation, preparing to market and marketing the Securities or in
contemplation of performing their obligations hereunder. The Company shall
not in any event be liable to any of the Underwriters for loss of
anticipated profits from the transactions covered by this Agreement. The
provisions of this Section shall not affect any agreement that the Company
and the Selling Shareholders may make for the allocation or sharing of such
expenses or costs.
(ix) The Company will apply the net proceeds from the sale of the
Securities to be sold by it hereunder for the purposes set forth in the
Prospectus and will file such information with the Commission with respect
to the sale of the Securities and the application of the proceeds therefrom
as may be required in accordance with Rule 463 of the Rules and
Regulations.
(x) Except as contemplated by the Prospectus, the Company will not,
without your prior written consent, offer for sale, sell, contract to sell,
grant any option for the sale of or otherwise issue or dispose of any
Common Stock or any securities convertible into or exchangeable for, or any
options or rights to purchase or acquire, Common Stock, except to the
Underwriters pursuant to this Agreement, the 1996 Stock Incentive Plan of
BUCA, Inc. and Affiliated Company, the Stock Option Plan for Non-Employee
Directors or the Piasano Partner Program or issuances pursuant to the
exercise of options, warrants or convertible securities outstanding on the
date hereof for a period of 90 days after the commencement of the public
offering of the Securities by the Underwriters.
(xi) The Company either has caused to be delivered to you or will
cause to be delivered to you prior to the effective date of the
Registration Statement a letter from each of the Company's directors and
officers and certain other shareholders of the Company holding an aggregate
of _________________________ shares of Common Stock of the Company stating
that such person agrees that he or she will not, without your prior written
consent, offer for sale, sell, contract to sell or otherwise dispose of any
shares of Common Stock or rights to purchase
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<PAGE>
Common Stock, except to the Underwriters pursuant to this Agreement, for a
period of 90 days after commencement of the public offering of the
Securities by the Underwriters.
(xii) The Company has not taken and will not take, directly or
indirectly, any action designed to or which might reasonably be expected to
cause or result in, or which has constituted, the stabilization or
manipulation of the price of any security of the Company to facilitate the
sale or resale of the Securities, and has not effected any sales of Common
Stock which are required to be disclosed in response to Item 701 of
Regulation S-K under the Act which have not been so disclosed in the
Registration Statement.
(xiii) The Company will not incur any liability for any finder's or
broker's fee or agent's commission in connection with the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby.
(xiv) The Company will inform the Florida Department of Banking and
Finance at any time prior to the consummation of the distribution of the
Securities by the Underwriters if it commences engaging in business with
the government of Cuba or with any person or affiliate located in Cuba.
Such information will be provided within 90 days after the commencement
thereof or after a change occurs with respect to previously reported
information.
(b) Each Selling Shareholder covenants and agrees with the several
Underwriters as follows:
(i) Except as otherwise agreed to by the Company and the Selling
Shareholder, such Selling Shareholder will pay all taxes, if any, on the
transfer and sale, respectively, of the Securities being sold by such
Selling Shareholder, the fees of such Selling Shareholder's counsel and
such Selling Shareholder's proportionate share (based upon the number of
Securities being offered by such Selling Shareholder pursuant to the
Registration Statement) of all costs and expenses (except for legal and
accounting expenses and fees of the registrar and transfer agent) incurred
by the Company pursuant to the provisions of Section 4(a)(viii) of this
Agreement; provided, however, that each Selling Shareholder severally
agrees to reimburse the Company for any reimbursement made by the Company
to the Underwriters pursuant to Section 4(a)(viii) hereof to the extent
such reimbursement resulted from the failure or refusal on the part of such
Selling Shareholder to comply under the terms or fulfill any of the
conditions of this Agreement.
(ii) If this Agreement shall be terminated by the Underwriters because
of any failure, refusal or inability on the part of such Selling
Shareholder to perform any agreement on such Selling Shareholder's part to
be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled by such Selling Shareholder
is not
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<PAGE>
fulfilled, such Selling Shareholder agrees to reimburse the several
Underwriters for all out-of-pocket disbursements (including fees and
disbursements of counsel for the Underwriters) incurred by the Underwriters
in connection with their investigation, preparing to market and marketing
the Securities or in contemplation of performing their obligations
hereunder. The Selling Shareholder shall not in any event be liable to any
of the Underwriters for loss of anticipated profits from the transactions
covered by this Agreement.
(iii) The Securities to be sold by such Selling Shareholder,
represented by the certificates on deposit with the Custodian pursuant to
the Custody Agreement of such Selling Shareholder, are subject to the
interest of the several Underwriters and the other Selling Shareholders;
the arrangements made for such custody are, except as specifically provided
in the Custody Agreement, irrevocable; and the obligations of such Selling
Shareholder hereunder shall not be terminated, except as provided in this
Agreement or in the Custody Agreement, by any act of such Selling
Shareholder, by operation of law, whether by the liquidation, dissolution
or merger of such Selling Shareholder, by the death, disability, or
insolvency of such Selling Shareholder, or by the occurrence of any other
event. If any Selling Shareholder should liquidate, dissolve or be a party
to a merger (if such Selling Shareholder is other than an individual) or
die, become disabled or become insolvent (if such Selling Shareholder is an
individual) or if any other such event should occur before the delivery of
the Securities hereunder, certificates for the Securities deposited with
the Custodian shall be delivered by the Custodian in accordance with the
terms and conditions of this Agreement as if such liquidation, dissolution,
merger, death, incapacity, insolvency or other event had not occurred,
whether or not the Custodian shall have received notice thereof.
(iv) Such Selling Shareholder will not, without your prior written
consent, offer for sale, sell, contract to sell, grant any option for the
sale of or otherwise dispose of any Common Stock or any securities
convertible into or exchangeable for, or any options or rights to purchase
or acquire, Common Stock, except to the Underwriters pursuant to this
Agreement, for a period of 90 days after the commencement of the public
offering of the Securities by the Underwriters.
(v) Such Selling Shareholder has not taken and will not take, directly
or indirectly, any action designed to or which might reasonably be expected
to cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities,
and has not effected any sales of Common Stock which, if effected by the
Company, would be required to be disclosed in response to Item 701 of
Regulation S-K.
(vi) Such Selling Shareholder shall immediately notify you if any
event occurs, or of any change in information relating to such Selling
Shareholder or, to the knowledge of such Selling Shareholder, the Company
or any new information relating to the Company or relating to any matter
stated in the Prospectus or any supplement thereto
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(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations), which results in the Prospectus (as supplemented) including
an untrue statement of a material fact or omitting to state any material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5. Conditions of Underwriters' Obligations. The obligations of the several
Underwriters hereunder are subject to the accuracy, as of the date hereof and at
each of the First Closing Date and the Second Closing Date (as if made at such
Closing Date), of and compliance with all representations, warranties and
agreements of the Company and the Selling Shareholders contained herein, to the
performance by the Company and the Selling Shareholders of their respective
obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective not later than
5:00 p.m., Central time, on the date of this Agreement, or such later time and
date as you, as Representatives of the several Underwriters, shall approve and
all filings required by Rules 424, 430A and 434 of the Rules and Regulations
shall have been timely made; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereof shall have been issued; no
proceedings for the issuance of such an order shall have been initiated or
threatened; and any request of the Commission for additional information (to be
included in the Registration Statement or the Prospectus or otherwise) shall
have been complied with to your satisfaction.
(b) No Underwriter shall have advised the Company that the Registration
Statement or the Prospectus, or any amendment thereof or supplement thereto
(including any term sheet within the meaning of Rule 434 of the Rules and
Regulations), contains an untrue statement of fact which, in your opinion, is
material, or omits to state a fact which, in your opinion, is material and is
required to be stated therein or necessary to make the statements therein not
misleading.
(c) Except as contemplated in the Prospectus, subsequent to the respective
dates as of which information is given in the Registration Statement and the
Prospectus, neither the Company nor any of its subsidiaries shall have incurred
any material liabilities or obligations, direct or contingent, or entered into
any material transactions, or declared or paid any dividends or made any
distribution of any kind with respect to its capital stock; and except as
contemplated in the Prospectus, there shall not have been any change in the
capital stock (other than a change in the number of outstanding shares of Common
Stock due to the issuance of shares upon the exercise of outstanding options or
warrants or issuance of shares pursuant to the Company's Piasano Program or the
conversion of outstanding convertible securities), or any material change in the
short-term or long-term debt of the Company, or any issuance of options,
warrants, convertible securities or other rights to purchase the capital stock
of the Company or any of its subsidiaries, or any material adverse change or any
development involving a prospective material adverse change (whether or not
arising in the ordinary course of business), in the condition (financial or
otherwise), business or results of operations of the Company and its
subsidiaries,
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taken as a whole, that, in your judgment, makes it impractical or inadvisable to
offer or deliver the Securities on the terms and in the manner contemplated in
the Prospectus.
(d) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, the opinion of Faegre and Benson
LLP, counsel for the Company, dated such Closing Date and addressed to you, to
the effect that:
(i) Each of the Company and its subsidiaries has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation. Each of the Company
and its subsidiaries has full corporate power and authority to own its
properties and conduct its business as currently being carried on and as
described in the Registration Statement and Prospectus, and is duly
qualified to do business as a foreign corporation and is in good standing
in each jurisdiction in which it owns or leases real property or in which
the conduct of its business makes such qualification necessary and in which
the failure to so qualify would have a material adverse effect upon the
business, condition (financial or otherwise) or properties of the Company
and its subsidiaries, taken as a whole.
(ii) The capital stock of the Company conforms as to legal matters to
the description thereof contained in the Prospectus under the caption
"Description of Capital Stock." All of the issued and outstanding shares of
the capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, and the holders thereof are
not subject to personal liability by reason of being such holders. The
Securities to be issued and sold by the Company hereunder have been duly
authorized and, when issued, delivered and paid for in accordance with the
terms of this Agreement, will have been validly issued and will be fully
paid and nonassessable, and the holders thereof will not be subject to
personal liability by reason of being such holders. Except as otherwise
stated in the Registration Statement and Prospectus, there are no
preemptive rights or other rights to subscribe for or to purchase, or any
restriction upon the voting or transfer of, any shares of Common Stock
pursuant to the Company's charter, by-laws or any agreement or other
instrument known to such counsel to which the Company is a party or by
which the Company is bound. To the best of such counsel's knowledge,
neither the filing of the Registration Statement nor the offering or sale
of the Securities as contemplated by this Agreement gives rise to any
rights for or relating to the registration of any shares of Common Stock or
other securities of the Company, except for such rights which have been
waived or fully satisfied or otherwise disclosed in this Purchase
Agreement.
(iii) All of the issued and outstanding shares of capital stock of
each of the Company's subsidiaries have been duly and validly authorized
and issued and are fully paid and nonassessable, and, to the best of such
counsel's knowledge, except as otherwise described in the Registration
Statement and Prospectus and except for directors' qualifying shares, 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.
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To the best of such counsel's knowledge, except as described in the
Registration Statement and Prospectus, there are no options, warrants,
agreements, contracts or other rights in existence to purchase or acquire
from the Company or any subsidiary any shares of the capital stock of the
Company or any subsidiary of the Company.
(iv) The Registration Statement has become effective under the Act
and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
such counsel, threatened by the Commission.
(v) The descriptions in the Registration Statement and Prospectus of
statutes, legal and governmental proceedings, contracts and other documents
are accurate and fairly present the information required to be shown; and
such counsel does not know of any statutes or legal or governmental
proceedings required to be described in the Prospectus that are not
described as required, or of any contracts or documents of a character
required to be described in the Registration Statement or Prospectus or
included as exhibits to the Registration Statement that are not described
or included as required.
(vi) The Company has full corporate power and authority to enter into
this Agreement, and this Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid, legal and binding
obligation of the Company enforceable in accordance with its terms (except
as rights to indemnity hereunder may be limited by federal or state
securities laws and except as such enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights
of creditors generally and subject to general principles of equity); the
execution, delivery and performance of this Agreement and the consummation
of the transactions herein contemplated will not result in a breach or
violation of any of the terms and provisions of, or constitute a default
under, any applicable statute, rule or regulation, any agreement or
instrument known to such counsel to which the Company is a party or by
which it is bound or to which any of its property is subject, the Company's
charter or by-laws, or any order or decree known to such counsel of any
court or governmental agency or body having jurisdiction over the Company
or any of its respective properties; and no consent, approval,
authorization or order of, or filing with, any court or governmental agency
or body is required for the execution, delivery and performance of this
Agreement or for the consummation of the transactions contemplated hereby,
including the issuance or sale of the Securities by the Company, except
such as may be required under the Act or state securities laws.
(vii) To the best of such counsel's knowledge, neither the Company nor
any of its subsidiaries is in violation of its respective charter or
by-laws.
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(viii) The Registration Statement and the Prospectus, and any
amendment thereof or supplement thereto (including any term sheet within
the meaning of Rule 434 of the Rules and Regulations), comply as to form in
all material respects with the requirements of the Act and the Rules and
Regulations; and on the basis of conferences with officers of the Company,
examination of documents referred to in the Registration Statement and
Prospectus and such other procedures as such counsel deemed appropriate,
nothing has come to the attention of such counsel that causes such counsel
to believe that the Registration Statement or any amendment thereof, at the
time the Registration Statement became effective and as of such Closing
Date (including any Registration Statement filed under Rule 462(b) of the
Rules and Regulations), contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus (as of its date and as of such Closing Date), as amended or
supplemented, includes any untrue statement of material fact or omits to
state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; it being
understood that such counsel need express no opinion as to the financial
statements or other financial data included in or omitted from any of the
documents mentioned in this clause.
In rendering such opinion such counsel may rely (i) as to matters of law
other than Minnesota and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and that they believe they and you are justified in
relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of officers of the Company and its subsidiaries
provided that the extent of such reliance is specified in such opinion.
(e) On the First Closing Date, each Selling Shareholder shall have
furnished to you, as Representatives of the several Underwriters, an opinion of
counsel of such Selling Shareholder, dated such Closing Date and addressed to
you, to the effect that:
(i) Such Selling Shareholder is the sole record and beneficial owner
of the Securities to be sold by such Selling Shareholder and delivery of
the certificates for the Securities to be sold by such Selling Shareholder
pursuant to this Agreement, upon payment therefor by the Underwriters, will
pass marketable title to such Securities to the Underwriters and the
Underwriters will acquire all the rights of such Selling Shareholder in the
Securities (assuming the Underwriters have no knowledge of an adverse
claim), free and clear of any security interests, claims, liens or other
encumbrances.
(ii) Such Selling Shareholder has the power and authority to enter
into the Custody Agreement, the Power of Attorney and this Agreement and to
perform and discharge such Selling Shareholder's obligations thereunder and
hereunder; and this Agreement, the Custody Agreements and the Powers of
Attorney have been duly and validly authorized,
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executed and delivered by (or by the Attorneys-in-Fact, or either of them,
on behalf of) such Selling Shareholder and are valid and binding agreements
of the Selling Shareholders, enforceable in accordance with their
respective terms (except as rights to indemnity hereunder or thereunder may
be limited by federal or state securities laws and except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally and subject to general
principles of equity).
(iii) The execution and delivery of this Agreement, the Custody
Agreement and the Power of Attorney and the performance of the terms hereof
and thereof and the consummation of the transactions herein and therein
contemplated will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under, any statute, rule or
regulation, or any agreement or instrument known to such counsel to which
such Selling Shareholder is a party or by which such Selling Shareholder is
bound or to which any of its property is subject, any such Selling
Shareholder's charter or by-laws, or any order or decree known to such
counsel of any court or government agency or body having jurisdiction over
such Selling Shareholder or any of its respective properties; and no
consent, approval, authorization or order of, or filing with, any court or
governmental agency or body is required for the execution, delivery and
performance of this Agreement, the Custody Agreement and the Power of
Attorney or for the consummation of the transactions contemplated hereby
and thereby, including the sale of the Securities being sold by such
Selling Shareholder, except such as may be required under the Act or state
securities laws or blue sky laws.
(iv) Such other matters as you may reasonably request.
In rendering such opinion such counsel may rely (i) as to matters of law
other than Minnesota and federal law, upon the opinion or opinions of local
counsel provided that the extent of such reliance is specified in such opinion
and that such counsel shall state that such opinion or opinions of local counsel
are satisfactory to them and that they believe they and you are justified in
relying thereon and (ii) as to matters of fact, to the extent such counsel deems
reasonable upon certificates of such Selling Shareholder provided that the
extent of such reliance is specified in such opinion.
(f) On each Closing Date, there shall have been furnished to you, as the
Representatives of the several Underwriters, such opinion or opinions from
Dorsey & Whitney LLP, counsel for the Underwriters, dated such Closing Date and
addressed to you, with respect to the formation of the Company, the validity of
the Securities, the Registration Statement, the Prospectus and other related
matters as you reasonably may request, and such counsel shall have received such
papers and information as they request to enable them to pass upon such matters.
(g) On each Closing Date you, as Representatives of the several
Underwriters, shall have received a letter of Deloitte & Touche LLP, dated such
Closing Date and addressed to you, confirming that they are independent public
accountants within the meaning of the Act and are in
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compliance with the applicable requirements relating to the qualifications of
accountants under Rule 2-01 of Regulation S-X of the Commission, and stating, as
of the date of such letter (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in the Prospectus, as of a date not more than five days
prior to the date of such letter), the conclusions and findings of said firm
with respect to the financial information and other matters covered by its
letter delivered to you concurrently with the execution of this Agreement, and
the effect of the letter so to be delivered on such Closing Date shall be to
confirm the conclusions and findings set forth in such prior letter.
(h) On each Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, a certificate of the Company, dated
such Closing Date and addressed to you, signed by the chief executive officer
and by the chief financial officer of the Company, to the effect that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, in all material respects, as if made at and
as of such Closing Date, and the Company has complied with all the
agreements and satisfied all the conditions on its part to be performed or
satisfied at or prior to such Closing Date;
(ii) No stop order or other order suspending the effectiveness of the
Registration Statement or any amendment thereof or the qualification of the
Securities for offering or sale has been issued, and no proceeding for that
purpose has been instituted or, to the best of their knowledge, is
contemplated by the Commission or any state or regulatory body; and
(iii) The signers of said certificate have carefully examined the
Registration Statement and the Prospectus, and any amendments thereof or
supplements thereto (including any term sheet within the meaning of Rule
434 of the Rules and Regulations), and (A) such documents contain all
statements and information required to be included therein, the
Registration Statement, or any amendment thereof, does not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectus, as amended or supplemented, does not
include any untrue statement of material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, (B) since the
effective date of the Registration Statement, there has occurred no event
required to be set forth in an amended or supplemented prospectus which has
not been so set forth, (C) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Company nor any of its subsidiaries has incurred any material
liabilities or obligations, direct or contingent, or entered into any
material transactions, not in the ordinary course of business, or declared
or paid any dividends or made any distribution of any kind with respect to
its capital stock, and except as contemplated in the
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Prospectus, there has not been any change in the capital stock (other than
a change in the number of outstanding shares of Common Stock due to the
issuance of shares upon the exercise of outstanding options or warrants or
issuance of shares pursuant to the Company's Piasano Program or the
conversion of outstanding convertible securities), or any material change
in the short-term or long-term debt, or any issuance of options, warrants,
convertible securities or other rights to purchase the capital stock, of
the Company, or any of its subsidiaries, or any material adverse change or
any development involving a prospective material adverse change (whether or
not arising in the ordinary course of business), in the condition
(financial or otherwise), business or results of operations of the Company
and its subsidiaries, taken as a whole, and (D) except as stated in the
Registration Statement and the Prospectus, there is not pending, or, to the
knowledge of the Company, threatened or contemplated, any action, suit or
proceeding to which the Company or any of its subsidiaries is a party
before or by any court or governmental agency, authority or body, or any
arbitrator, which might result in any material adverse change in the
condition (financial or otherwise), business or results of operations of
the Company and its subsidiaries, taken as a whole.
(i) On the First Closing Date, there shall have been furnished to you, as
Representatives of the several Underwriters, a certificate or certificates,
dated such Closing Date and addressed to you, signed by each of the Selling
Shareholders or either of such Selling Shareholder's Attorneys-in-Fact to the
effect that the representations and warranties of such Selling Shareholder
contained in this Agreement are true and correct as if made at and as of such
Closing Date, and that such Selling Shareholder has complied with all the
agreements and satisfied all the conditions on such Selling Shareholder's part
to be performed or satisfied at or prior to such Closing Date.
(j) The Company shall have furnished to you and counsel for the
Underwriters such additional documents, certificates and evidence as you or they
may have reasonably requested.
(k) The Securities to be sold by the Company and the Selling Shareholders
shall have been duly accepted for listing, subject to notice of issuance,
through The Nasdaq National Market.
All such opinions, certificates, letters and other documents will be in
compliance with the provisions hereof only if they are satisfactory in form and
substance to you and counsel for the Underwriters. The Company will furnish you
with such conformed copies of such opinions, certificates, letters and other
documents as you shall reasonably request.
6. Indemnification and Contribution.
(a)(i) The Company and the Selling Shareholders listed on Schedule
I(a), jointly and severally, agree to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
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otherwise (including in settlement of any litigation if such settlement is
effected with the written consent of the Company and/or such Selling
Shareholders, as the case may be), insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement, including the information deemed
to be a part of the Registration Statement at the time of effectiveness
pursuant to Rules 430A and 434(d) of the Rules and Regulations, if
applicable, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (including any term sheet within the meaning of Rule 434
of the Rules and Regulations), 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 not
misleading, and will reimburse each Underwriter for any legal or other
expenses reasonably incurred by it in connection with investigating or
defending against such loss, claim, damage, liability or action; provided,
however, that neither the Company nor any Selling Shareholder shall be
liable in any such case to the extent that any such loss, claim, damage,
liability or action arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by you, or by any Underwriter
through you, specifically for use in the preparation thereof; and further
provided, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any untrue statement, alleged
untrue statement, omission or alleged omission made in any Preliminary
Prospectus but eliminated or remedied in the Prospectus, such indemnity
agreement shall not inure to the benefit of any Underwriter (or to the
benefit of any person who controls the Underwriter) if the person asserting
any loss, claim, damage or liability purchased the Securities from the
Underwriter, and a copy of the Prospectus was not given to such person
with, or prior to, the written confirmation of the sale of such Securities
to such person. However, in no event shall any Selling Shareholder be
liable under the provisions of this Section 6 for any amount in excess of
the aggregate amount of proceeds such Selling Shareholder received from the
sale of the Securities pursuant to this Agreement.
(ii) In addition to their other obligations under this Section 6(a),
the Company and each Selling Shareholder, jointly and severally, agree
that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in
this Section 6(a), they will reimburse each Underwriter on a monthly basis
for all reasonable legal fees or other expenses incurred in connection with
investigating or defending any such claim, action, investigation, inquiry
or other proceeding, notwithstanding the absence of a judicial
determination as to the propriety and enforceability of the Company's
and/or such Selling Shareholder's obligation to reimburse the Underwriters
for such expenses and the possibility that such payments might later be
held to have been improper by a court of competent jurisdiction. To the
extent that any such interim reimbursement payment is so held to have been
improper, the Underwriter that received such payment shall promptly return
it to the party or parties that made such payment, together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing)
announced from time to time by US Bancorp (the "Prime Rate"). Any such
interim
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reimbursement payments which are not made to an Underwriter within 30 days
of a request for reimbursement shall bear interest at the Prime Rate from
the date of such request. This indemnity agreement shall be in addition to
any liabilities which the Company or such Selling Shareholders may
otherwise have.
(iii) Each Selling Shareholder who is listed in Schedule I(b),
severally and not jointly, agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject under the Act or
otherwise (including in settlement of any litigation if such settlement is
effected with the written consent of such Selling Stockholder), insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement,
including the information deemed to be a part of the Registration Statement
at the time of effectiveness pursuant to Rule 430A and 434(d) of the Rules
and Regulations, if applicable, any Preliminary Prospectus, the Prospectus,
or any amendment or supplement thereto (including any term sheet within the
meaning of Rule 434 of the Rules and Regulations), 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 not misleading, but only to the extent that such untrue statement
or alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company or such Underwriter by such Selling Shareholder, specifically for
use in the preparation thereof, and will reimburse each Underwriter for any
legal or other expenses reasonably incurred by it in connection with
investigating or defending against such loss, claim, damage, liability or
action; provided, however, that the Selling Shareholder shall not be liable
in any such case to the extent that any such loss, claim, damage, liability
or action arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by you, or by any Underwriter through
you, specifically for use in the preparation thereof; and further provided,
that the foregoing indemnity agreement is subject to the condition that,
insofar as it relates to any untrue statement, alleged untrue statement,
omission or alleged omission made in any Preliminary Prospectus but
eliminated or remedied in the Prospectus, such indemnity agreement shall
not inure to the benefit of the Underwriter (or to the benefit of any
person who controls the Underwriter) if the person asserting any loss,
claim, damage or liability purchased the Securities from the Underwriter,
and a copy of the Prospectus was not given to such person with, or prior
to, the written confirmation of the sale of such Securities to such person.
However, in no event shall any Selling Shareholder be liable under the
provisions of this Section 6(a) (iii) for any amount in excess of the
aggregate amount of proceeds such Selling Shareholder received from the
sale of the Securities pursuant to this Agreement.
(b) Each Underwriter will indemnify and hold harmless the Company and each
Selling Shareholder against any losses, claims, damages or liabilities to which
the Company and the Selling Shareholders may become subject, under the Act or
otherwise (including in settlement of any
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litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto (including any term sheet within the meaning of Rule 434 of
the Rules and Regulations), 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 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 made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any such amendment or
supplement, in reliance upon and in conformity with written information
furnished to the Company by you, or by such Underwriter through you,
specifically for use in the preparation thereof, and will reimburse the Company
and the Selling Shareholders for any legal or other expenses reasonably incurred
by the Company or any such Selling Shareholder in connection with investigating
or defending against any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve the indemnifying party from any liability that it may have to any
indemnified party to the extent it is not prejudiced as a proximate result of
such failure. In case any such action shall be brought against any indemnified
party, and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in, and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of the indemnifying party's election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that if the indemnified
party shall have reasonably concluded that there may be a conflict between the
positions of the indemnifying party and the indemnified party in conducting the
defense of any such action or that there may be legal defenses available to it
or other indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party shall have the right
to employ separate counsel at the expense of the indemnifying party. It is
understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm at any time for all such
indemnified parties. Such firm shall be designated in writing by the
Representatives and shall be reasonably satisfactory to the Company in the case
of parties indemnified pursuant to Section 6(a) and shall be designated in
writing by the Company and shall be reasonably satisfactory to the
Representatives in the case of parties indemnified pursuant to Section 6(b). An
indemnifying party shall not be obligated under any settlement agreement
relating to any action under this Section 6 to which it has not agreed in
writing.
27
<PAGE>
(d) If the indemnification provided for in this Section 6 is unavailable or
insufficient to hold harmless an indemnified party under subsection (a) or (b)
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 (a) or (b) above, (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Selling Shareholders on the one hand and the Underwriters on the other from
the offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Selling Shareholders on the one
hand and the Underwriters on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company and the Selling Shareholders on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Shareholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, the Selling Shareholders or the
Underwriters and the parties' relevant intent, knowledge, access to information
and opportunity to correct or prevent such untrue statement or omission. The
Company, the Selling Shareholders and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were to
be determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the first sentence
of this subsection (d). The amount paid by an indemnified party as a result of
the losses, claims, damages or liabilities referred to in the first sentence of
this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending against any action or claim which is the subject of this subsection
(d). Notwithstanding the provisions of this subsection (d), no Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the Securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages that such
Underwriter has otherwise been required to pay by reason of such 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. The Underwriters' obligations in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling Shareholders under this
Section 6 shall be in addition to any liability which the Company and the
Selling Shareholders may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls any Underwriter within the
meaning of the Act; and the obligations of the Underwriters under
28
<PAGE>
this Section 6 shall be in addition to any liability that the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each director of the Company (including any person who, with his
consent, is named in the Registration Statement as about to become a director of
the Company), to each officer of the Company who has signed the Registration
Statement and to each person, if any, who controls the Company or any Selling
Shareholder within the meaning of the Act.
7. Representations and Agreements to Survive Delivery. All representations,
warranties, and agreements of the Company and the Selling Shareholders contained
herein or in certificates delivered pursuant hereto, and the agreements of the
several Underwriters, the Company and the Selling Shareholders contained in
Section 6 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriter or any controlling
person thereof, or the Company or any of its officers, directors, or controlling
persons, or any Selling Shareholders or any controlling person thereof, and
shall survive delivery of, and payment for, the Securities to and by the
Underwriters hereunder.
8. Substitution of Underwriters.
(a) If any Underwriter shall fail to take up and pay for the amount of Firm
Shares agreed by such Underwriter to be purchased hereunder, upon tender of such
Firm Shares in accordance with the terms hereof, and the amount of Firm Shares
not purchased does not aggregate more than 10% of the total amount of Firm
Shares set forth in Schedule II hereto, the other Underwriters shall be
obligated to take up and pay for the Firm Shares that the withdrawing or
defaulting Underwriter agreed but failed to purchase.
(b) If any Underwriter shall fail to take up and pay for the amount of Firm
Shares agreed by such Underwriter to be purchased hereunder, upon tender of such
Firm Shares in accordance with the terms hereof, and the amount of Firm Shares
not purchased aggregates more than 10% of the total amount of Firm Shares set
forth in Schedule II hereto, and arrangements satisfactory to you for the
purchase of such Firm Shares by other persons are not made within 36 hours
thereafter, this Agreement shall terminate. In the event of any such termination
neither the Company nor any Selling Shareholder shall be under any liability to
any Underwriter (except to the extent provided in Section 4(a)(viii), Section
4(b)(ii) and Section 6 hereof) nor shall any Underwriter (other than an
Underwriter who shall have failed, otherwise than for some reason permitted
under this Agreement, to purchase the amount of Firm Shares agreed by such
Underwriter to be purchased hereunder) be under any liability to the Company or
the Selling Shareholders (except to the extent provided in Section 6 hereof).
If Firm Shares to which a default relates are to be purchased by the
non-defaulting Underwriter or by any other party or parties, the Representatives
or the Company shall have the right to postpone the First Closing Date for not
more than seven business days in order that the necessary changes in the
Registration Statement, Prospectus and any other documents, as well as any other
arrangements, may
29
<PAGE>
be effected. As used herein, the term "Underwriter" includes any person
substituted for an Underwriter under this Section 8.
9. Effective Date of this Agreement and Termination.
(a) This Agreement shall become effective at 10:00 a.m., Central time, on
the first full business day following the effective date of the Registration
Statement, or at such earlier time after the effective time of the Registration
Statement as you in your discretion shall first release the Securities for sale
to the public; provided, that if the Registration Statement is effective at the
time this Agreement is executed, this Agreement shall become effective at such
time as you in your discretion shall first release the Securities for sale to
the public. For the purpose of this Section, the Securities shall be deemed to
have been released for sale to the public upon release by you of the publication
of a newspaper advertisement relating thereto or upon release by you of telexes
offering the Securities for sale to securities dealers, whichever shall first
occur. By giving notice as hereinafter specified before the time this Agreement
becomes effective, you, as Representatives of the several Underwriters, or the
Company may prevent this Agreement from becoming effective without liability of
any party to any other party, except that the provisions of Section 4(a)(viii),
Section 4(b)(ii) and Section 6 hereof shall at all times be effective.
(b) You, as Representatives of the several Underwriters, shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time at or prior to the First Closing Date, and the option referred to in
Section 3(b), if exercised, may be canceled at any time prior to the Second
Closing Date, if (i) the Company shall have failed, refused or been unable, at
or prior to such Closing Date, to perform any agreement on its part to be
performed hereunder, (ii) any other condition of the Underwriters' obligations
hereunder is not fulfilled, (iii) trading on the New York Stock Exchange or the
Nasdaq National Market shall have been wholly suspended, (iv) minimum or maximum
prices for trading shall have been fixed, or maximum ranges for prices for
securities shall have been required, on the New York Stock Exchange or the
Nasdaq National Market, by such Exchange or by order of the Commission or any
other governmental authority having jurisdiction, (v) a banking moratorium shall
have been declared by Federal, New York or Minnesota authorities, or (vi) there
has occurred any material adverse change in the financial markets in the United
States or an outbreak of major hostilities (or an escalation thereof) in which
the United States is involved, a declaration of war by Congress, any other
substantial national or international calamity or any other event or occurrence
of a similar character shall have occurred since the execution of this Agreement
that, in your judgment, makes it impractical or inadvisable to proceed with the
completion of the sale of and payment for the Securities. Any such termination
shall be without liability of any party to any other party except that the
provisions of Section 4(a)(viii), Section 4(b)(ii) and Section 6 hereof shall at
all times be effective.
(c) If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section, the Company and an
Attorney-in-Fact, on behalf of the Selling Shareholders, shall be notified
promptly by you by telephone or telegram, confirmed by letter. If
30
<PAGE>
the Company elects to prevent this Agreement from becoming effective, you and an
Attorney-in-Fact, on behalf of the Selling Shareholders, shall be notified by
the Company by telephone or telegram, confirmed by letter.
10. Default by One or More of the Selling Shareholders or the Company. If
one or more of the Selling Shareholders shall fail at the First Closing Date to
sell and deliver the number of Securities which such Selling Shareholder or
Selling Shareholders are obligated to sell hereunder, and the remaining Selling
Shareholders do not exercise the right hereby granted to increase, pro rata or
otherwise, the number of Securities to be sold by them hereunder to the total
number of Securities to be sold by all Selling Shareholders as set forth in
Schedule I, then the Underwriters may at your option, by notice from you to the
Company and the non-defaulting Selling Shareholders, either (a) terminate this
Agreement without any liability on the part of any non-defaulting party or (b)
elect to purchase the Securities which the Company and the non-defaulting
Selling Shareholders have agreed to sell hereunder.
In the event of a default by any Selling Shareholder as referred to in this
Section, either you or the Company or, by joint action only, the non-defaulting
Selling Shareholders shall have the right to postpone the First Closing Date for
a period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
If the Company shall fail at the First Closing Date to sell and deliver the
number of Securities which it is obligated to sell hereunder, then this
Agreement shall terminate without any liability on the part of any
non-defaulting party.
No action taken pursuant to this Section shall relieve the Company or any
Selling Shareholders so defaulting from liability, if any, in respect of such
default.
11. Information Furnished by Underwriters. The statements set forth in the
last paragraph of the cover page and under the caption "Underwriting" in any
Preliminary Prospectus and in the Prospectus constitute the written information
furnished by or on behalf of the Underwriters referred to in Section 2 and
Section 6 hereof.
12. Notices. Except as otherwise provided herein, all communications
hereunder shall be in writing or by telegraph and, if to the Underwriters, shall
be mailed, telegraphed or delivered to the Representatives c/o U.S. Bancorp
Piper Jaffray Inc., Piper Jaffray Tower, 222 South Ninth Street, Minneapolis,
Minnesota 55402, except that notices given to an Underwriter pursuant to Section
6 hereof shall be sent to such Underwriter at the address stated in the
Underwriters' Questionnaire furnished by such Underwriter in connection with
this offering; if to the Company, shall be mailed, telegraphed or delivered to
it at BUCA, Inc., 1300 Nicollet Avenue, Suite 5003, Minneapolis, Minnesota
55402, Attention: Greg A. Gadel; if to any of the Selling Shareholders, at the
address of the Attorneys-in-Fact as set forth in the Powers of Attorney, or in
each case to such other address as the
31
<PAGE>
person to be notified may have requested in writing. All notices given by
telegram shall be promptly confirmed by letter. Any party to this Agreement may
change such address for notices by sending to the parties to this Agreement
written notice of a new address for such purpose.
13. Persons Entitled to Benefit of Agreement. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns and the controlling persons, officers and directors
referred to in Section 6. Nothing in this Agreement is intended or shall be
construed to give to any other person, firm or corporation any legal or
equitable remedy or claim under or in respect of this Agreement or any provision
herein contained. The term "successors and assigns" as herein used shall not
include any purchaser, as such purchaser, of any of the Securities from any of
the several Underwriters.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Minnesota.
32
<PAGE>
Please sign and return to the Company the enclosed duplicates of this
letter whereupon this letter will become a binding agreement between the
Company, the Selling Shareholders and the several Underwriters in accordance
with its terms.
Very truly yours,
BUCA, Inc.
By
------------------------------------
Title:
Selling Shareholders:
Jennifer A. Roberts
By:
-----------------------------------
Name:
Steven Roberts
By:
-----------------------------------
Name:
John J. Motschenbacher
By:
-----------------------------------
Name:
Lane Schmiesing
By:
-----------------------------------
Name:
Philip A. Roberts
By:
-----------------------------------
Name:
Don W. Hays
By:
-----------------------------------
Name:
Hays Family Limited Partnership
By:
-----------------------------------
Name:
Linda Hays Revocable Trust
By:
-----------------------------------
Name:
Peter J. Mihajlov
By:
-----------------------------------
Name:
Mihajlov Family Limited Partnership
By:
-----------------------------------
Name:
Martha A. Mihajlov
By:
-----------------------------------
Name:
Joseph P. Micatrotto
By:
-----------------------------------
Name:
Greg A. Gadel
By:
-----------------------------------
Name:
Leonard A. Ghilani
By:
-----------------------------------
Name:
Confirmed as of the date first above
mentioned, on behalf of themselves and
the other several Underwriters named in
Schedule II hereto
U.S. BANCORP PIPER JAFFRAY INC.
BANC OF AMERICA SECURITIES LLC
BANCBOSTON ROBERTSON STEPHENS INC.
By U.S. BANCORP PIPER JAFFRAY INC.
By
------------------------------------
Managing Director
33
<PAGE>
SCHEDULE I
SELLING SHAREHOLDERS
Number of Firm Number of Option
Name Shares To Be Sold Shares to Be Sold
- ---------------------- ----------------------- ------------------------
Jennifer A. Roberts 10,000 0
Steven Roberts 10,000 0
John J. Motschenbacher 3,833 0
Lane Schmiesing 9,866 0
Philip A. Roberts 0 100,000
Don W. Hays 0 60,000
Hays Family Limited Partnership 0 20,000
Linda Hays Revocable Trust 0 20,000
Peter J. Mihajlov 0 50,000
Martha A. Mihajlov 0 25,000
Mihajlov Family Limited Partnership 0 25,000
Joseph P. Micatrotto 0 70,000
Greg A. Gadel 0 24,665
Leonard A. Ghilani 0 5,333
----------------------- ------------------------
Total 33,699 399,998
======================= ========================
<PAGE>
SCHEDULE I(a)
John J. Motschenbacher
Lane Schmiesing
Philip A. Roberts
Don W. Hays
Peter J. Mihajlov
Joseph P. Micatrotto
Greg A. Gadel
Leonard A.Ghilani
<PAGE>
SCHEDULE I(b)
Jennfier A. Roberts
Steven Roberts
<PAGE>
SCHEDULE II
Number of Firm
Underwriter Shares (1)
- --------------------------------------------- -----------------------
U.S. Bancorp Piper Jaffray Inc.
Banc of America Securities LLC
BancBoston Robertson Stephens Inc.
Total 3,033,699
=======================
- -----------------
(1) The Underwriters may purchase up to an additional 455,05 Option Shares, to
the extent the option described in Section 3(b) of the Agreement is
exercised, in the proportions and in the manner described in the Agreement.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF FAEGRE & BENSON LLP]
April 10, 2000
BUCA, Inc.
1300 Nicollet Mall
Suite 5003
Minneapolis, MN 55403
Ladies and Gentlemen:
In connection with the proposed registration under the Securities Act of
1933, as amended, of 3,488,753 shares of Common Stock, par value $.01 per share,
of BUCA, Inc., a Minnesota corporation (the "Company"), we have examined such
corporate records and other documents, including the Registration Statement on
Form S-1 relating to such shares (as such Registration Statement may be amended
from time to time, the "Registration Statement"), and have reviewed such matters
of law as we have deemed necessary for this opinion, and we advise you that in
our opinion:
1. The Company is a corporation duly organized and existing under the laws
of the State of Minnesota.
2. When the shares of Common Stock to be sold by the Company are issued and
sold as contemplated in the Registration Statement, all necessary corporate
action on the part of the Company will have been taken to authorize the issuance
and sale of such shares and such shares will be legally and validly issued and
fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the use of our name under the heading "Legal Matters" in the
Prospectus constituting a part of the Registration Statement and to the
reference to our firm wherever appearing therein.
Very truly yours,
/s/ Faegre & Benson LLP
Faegre & Benson LLP
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No. 333-
32794 of BUCA, Inc. and Subsidiaries on Form S-1 of our report dated January 21,
2000 (March 3, 2000 as to Note 3) appearing in the Prospectus, which is part of
this Registration Statement and to the reference to us under the headings
"Selected Financial Data" and "Experts" in such Prospectus.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
April 10, 2000
