-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K4twE1lDOMcAeWi0weQHC3gBkO939LM37oVkWZ0KsaK1Fjj6CniEqHpr+6lBemO1 Uieo3lRZ7hUpSJdkBsiheQ== 0000912057-02-013070.txt : 20020415 0000912057-02-013070.hdr.sgml : 20020415 ACCESSION NUMBER: 0000912057-02-013070 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20011230 FILED AS OF DATE: 20020401 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIG BUCK BREWERY & STEAKHOUSE INC CENTRAL INDEX KEY: 0001009652 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 383196031 STATE OF INCORPORATION: MI FISCAL YEAR END: 0103 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-20845 FILM NUMBER: 02598015 BUSINESS ADDRESS: STREET 1: 550 S WISCONSIN ST STREET 2: P.O. BOX 1430 CITY: GAYLORD STATE: MI ZIP: 49734 BUSINESS PHONE: 5177310401 MAIL ADDRESS: STREET 1: 1999 WALDEN DR STREET 2: PO BOX 1430 CITY: GAYLORD STATE: MI ZIP: 49735 FORMER COMPANY: FORMER CONFORMED NAME: MICHIGAN BREWERY INC DATE OF NAME CHANGE: 19960415 10KSB 1 a2075337z10ksb.txt FORM 10-KSB =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-KSB /X/ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 30, 2001 / / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-20845 BIG BUCK BREWERY & STEAKHOUSE, INC. (Name of Small Business Issuer in Its Charter) MICHIGAN 38-3196031 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 550 SOUTH WISCONSIN STREET, GAYLORD, MICHIGAN 49734 (Address of Principal Executive Offices, including Zip Code) (989) 731-0401 (Issuer's Telephone Number, including Area Code) Securities registered pursuant to Section 12(b)of the Exchange Act: NONE Securities registered pursuant to Section 12(g)of the Exchange Act: UNITS (EACH CONSISTING OF ONE SHARE OF COMMON STOCK, $0.01 PAR VALUE, AND ONE REDEEMABLE CLASS A WARRANT TO PURCHASE ONE SHARE OF COMMON STOCK), COMMON STOCK ($0.01 PAR VALUE) AND REDEEMABLE CLASS A WARRANTS TO PURCHASE COMMON STOCK (Title of Class) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. / / The issuer's revenues for its most recent fiscal year were $17,487,957. The aggregate market value of the common equity held by non-affiliates of the issuer as of March 20, 2002, was approximately $760,431. As of March 20, 2002, the issuer had outstanding 6,083,358 shares of common stock and 2,550,000 Class A Warrants. DOCUMENTS INCORPORATED BY REFERENCE None. =============================================================================== TABLE OF CONTENTS PART I............................................................................. 1 ITEM 1 Description of Business........................................ 1 ITEM 2 Description of Property........................................ 6 ITEM 3 Legal Proceedings.............................................. 10 ITEM 4 Submission of Matters to a Vote of Security Holders............ 12 PART II............................................................................ 13 ITEM 5 Market for Common Equity and Related Shareholder Matters....... 13 ITEM 6 Management's Discussion and Analysis or Plan of Operation...... 14 ITEM 7 Financial Statements........................................... 34 ITEM 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure....................................... 51 PART III........................................................................... 52 ITEM 9 Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.............. 52 ITEM 10 Executive Compensation......................................... 55 ITEM 11 Security Ownership of Certain Beneficial Owners and Management 57 ITEM 12 Certain Relationships and Related Transactions................. 60 ITEM 13 Exhibits, List and Reports on Form 8-K......................... 63 SIGNATURES......................................................................... 64 INDEX TO EXHIBITS.................................................................. 66
i THE FOLLOWING DISCUSSION CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH WE BELIEVE THAT, IN MAKING ANY SUCH STATEMENT, OUR EXPECTATIONS ARE BASED ON REASONABLE ASSUMPTIONS, ANY SUCH STATEMENT MAY BE INFLUENCED BY FACTORS THAT COULD CAUSE ACTUAL OUTCOMES AND RESULTS TO BE MATERIALLY DIFFERENT FROM THOSE PROJECTED. WHEN USED IN THE FOLLOWING DISCUSSION, THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "PLANS," "ESTIMATES" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO US OR OUR MANAGEMENT, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED, CERTAIN OF WHICH ARE BEYOND OUR CONTROL, ARE SET FORTH UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - CAUTIONARY STATEMENT." OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THOSE EXPRESSED IN, OR IMPLIED BY, FORWARD-LOOKING STATEMENTS. ACCORDINGLY, WE CANNOT BE CERTAIN THAT ANY OF THE EVENTS ANTICIPATED BY FORWARD-LOOKING STATEMENTS WILL OCCUR OR, IF ANY OF THEM DO OCCUR, WHAT IMPACT THEY WILL HAVE ON US. WE CAUTION YOU TO KEEP IN MIND THE CAUTIONS AND RISKS DESCRIBED IN OUR CAUTIONARY STATEMENT AND TO REFRAIN FROM ATTRIBUTING UNDUE CERTAINTY TO ANY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THE DOCUMENT IN WHICH THEY APPEAR. PART I ITEM 1 DESCRIPTION OF BUSINESS OVERVIEW We develop and operate restaurant-brewpubs under the name "Big Buck Brewery & Steakhouse(SM)." We currently operate one unit in each of the following cities in Michigan: Gaylord, Grand Rapids and Auburn Hills. In addition, we opened a fourth unit in Grapevine, Texas, a suburb of Dallas, in August 2000. This unit is owned and operated by Buck & Bass, L.P. pursuant to our joint venture agreement with Bass Pro Outdoor World, L.L.C., a premier retailer of outdoor sports equipment. We had planned, subject to obtaining adequate financing, to open our next unit in Nashville, Tennessee. In March 2002, following the recommendation of the landlord and after careful consideration of the marketplace and our limited capital resources, we determined to discontinue our plans to open this unit. For the foreseeable future, we plan to focus on the following objectives: - exploration of licensing and franchising opportunities, - refinancing of existing indebtedness, - continued implementation of cost controls, and - recapturing market share lost following the events of September 11. We were incorporated under the Michigan Business Corporation Act in November 1993, as Michigan Brewery, Inc. All references to us herein include our subsidiaries, unless otherwise noted. Our executive office is located at 550 South Wisconsin Street, Gaylord, Michigan 49734. Our telephone number is (989) 731-0401. RESTAURANT OPERATIONS GENERAL. Big Buck Brewery & Steakhouses offer craft brewed beer brewed on site along with a menu featuring steaks, ribs, chicken, fish, pasta and other food in a unique, architecturally spacious setting. Our units offer over ten different types of beers ranging from a light golden ale to a full-bodied stout. We also offer customers a full selection of hard liquors. We attempt to create an exciting yet casual restaurant where patrons can have fun and feel comfortable. DESIGN AND LAYOUT. Big Buck Brewery & Steakhouses feature large, open and visually stimulating dining areas, highlighted by gleaming stainless steel and copper brewing equipment. Each unit's interior follows the same motif with a warm, cozy atmosphere utilizing soft lighting and Amish furniture. The menu and beer styles are the same at each existing unit. - The Gaylord unit features a 4,000 square foot dining area and a 1,600 square foot bar area, with combined seating capacity of approximately 420. It is decorated with a rustic wood-finished interior, mounted deer racks, 36-foot high vaulted ceilings and warm lighting. The specially commissioned Amish hand-carved wooden furniture and overhead genuine Tennessee whisky barrel lighting fixtures add character to the building's decor. The layout is flexible, permitting tables to be rearranged to accommodate customer demand. A wall of television sets, including a ten-foot screen television set, adjacent to the bar area provides customers the opportunity to watch sporting and other special events. The friendly and attentive staff, on-site brewing, summertime outdoor seating and live music are designed to create an appealing atmosphere for lunch, dinner and bar customers. - The Grand Rapids unit's seating capacity is approximately 250 in the restaurant and bar combined. The brewing and fermenting tanks of this unit front directly on 28th Street, a street with an average daily vehicle count of approximately 52,000. - The Auburn Hills unit, which houses a 15-barrel brewing system, encompasses approximately 26,700 square feet including brewery, bar and restaurant, with a total seating capacity of approximately 650. This unit is accessible to Detroit metro area residents. - The Grapevine unit, which is located between Bass Pro Outdoor World, a premier retailer of outdoor sports equipment, and Embassy Suites Outdoor World Hotel and Convention Center on Bass Pro Drive, encompasses approximately 20,500 square feet including brewery, bar and restaurant. This unit has a total seating capacity of approximately 500 and is accessible to Dallas/Fort Worth metro area residents. MENU AND PRICING. The menu at each unit consists of appetizers, soups, meal-sized salads, and entrees, including steaks, ribs, chicken, fish, pastas as well as a variety of desserts. Management analyzes menu items for popularity, profitability and ease of preparation. The menu items are selected to complement our craft brewed beers. The menu is designed to offer a broad range of prices that convey value to the customer. Entrees range in price from $6.99 to $22.99 with an average entree price of $12.99. During 2001 sales of alcohol, including beer and wine, accounted for 17.9%, 19.3%, 20.6% and 22.2% of the Gaylord, Grand Rapids, Auburn Hills and Grapevine unit sales, respectively. CUSTOMERS. We believe our restaurants appeal to a wide range of customers and will draw clientele from throughout the region in which they are located. Increased customer loyalty to our beers results in repeat business at each unit, thereby increasing revenues from restaurant operations. 2 BREWING OPERATIONS GENERAL. The brewery at the Gaylord unit presently has the capacity to brew 10,000 barrels of beer per year, and is designed to produce 20,000 barrels per year with the installation of additional fermentation tanks. The Grand Rapids unit features a 7.5-barrel brewing system that can produce 7,000 barrels per year with the installation of additional fermentation tanks. The Auburn Hills unit features a 15-barrel brewing system that can produce 15,000 barrels per year with the installation of additional fermentation tanks. The Grapevine unit features a 15-barrel brewing system that can produce 15,000 barrels per year with the installation of additional fermentation tanks. Each existing brewery has been custom-designed to be integrated into the restaurant layout in an efficient and aesthetically pleasing manner. QUALITY CONTROL. Quality control of each brewery is under the supervision of our brewmaster. Each unit contains a laboratory to monitor and maintain quality assurance in the brewing and packaging processes. INGREDIENTS. Beer is made primarily from four natural ingredients: malted barley, hops, yeast and water. We use only the finest barley, primarily two row, in our production. The universal spice of beer is hops. Hops, like the grapes used in wine, are varietal. Brewers select hops based on specific varieties grown in select areas around the world. Some hop varieties are selected for their bittering qualities, while others are chosen for their ability to impart distinctive aromas to the beer. Yeast is a uni-cellular organism whose metabolism converts sugar into alcohol and carbon dioxide. We use only specially selected yeast. The entire brewing process from mashing through filtration typically is completed in 14 to 21 days, depending on the formulation and style of the beer being brewed. We purchase the required raw materials from market sources on a competitive bid basis. SALES AND MARKETING We advertise primary through four-walls marketing, including the use of table tents, in-house promotions and other events to build customer loyalty. We strive to provide our customers with a dining experience that will encourage repeat business and promote "word-of-mouth" advertising. To supplement our service-oriented marketing efforts, we sell merchandise, including hats, t-shirts, sweatshirts and other items bearing the Big Buck Brewery & Steakhouse name and logo. During 2001, we incurred approximately $96,000 in marketing expenses. COMPETITION RESTAURANT COMPETITORS. The restaurant industry is highly competitive with respect to price, service, location and food quality, including taste, freshness and nutritional value. New restaurants have a high failure rate. New restaurants generally experience a decline in revenue growth, or in actual revenues, following a period of excitement that accompanies their opening. The restaurant industry is also generally affected by changes in consumer preferences, national, regional and local economic conditions, and demographic trends. The performance of individual restaurants may also be affected by factors such as traffic patterns, demographic considerations, and the type, number and location of competing restaurants. In addition, factors such as inflation, increased food, labor and employee benefit costs, and unavailability of experienced management and hourly employees may also adversely affect the restaurant industry in general and our units in particular. Restaurant operating costs are further affected by increases in the minimum hourly wage, unemployment tax rates and similar matters over which we have no control. We face numerous well-established competitors, including national, regional and local restaurant chains, possessing substantially greater financial, marketing, personnel and other resources than we do. We also compete with a large variety of locally owned restaurants, diners, and other establishments that offer moderately priced food to the public and with other brewpubs. Competitors 3 could utilize the Big Buck Brewery & Steakhouse format or a related format. We cannot assure you that we will be able to respond to various competitive factors affecting the restaurant industry. BREWING INDUSTRY COMPETITORS. The domestic beer market is highly competitive due to: - the enormous advertising and marketing expenditures by national and major regional brewers, - the proliferation of craft breweries and brewpubs, - the introduction of fuller-flavored products by certain major national brewers, and - a general surplus of domestic brewing capacity, which facilitates existing contract brewer expansion and the entry of new contract brewers. We cannot assure you that demand for craft brewed beers will continue. Most of our brewing competitors possess greater financial, marketing, personnel and other resources than we do. We cannot assure you that we will be able to succeed against such competition. GOVERNMENT REGULATION BEER REGULATION. A significant percentage of our revenue is derived from beer sales. Total sales of alcohol, including beer, wine and hard liquor, accounted for 20.4% of our revenues during 2001. We must comply with federal licensing requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of the United States Department of Treasury, as well as the licensing requirements of states and municipalities where our units are located. Our failure to comply with federal, state or local regulations could cause our licenses to be revoked and force us to cease brewing and selling our beer. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. We believe we are operating in substantial compliance with applicable laws and regulations governing our operations. RESTAURANT REGULATION. The restaurant industry is subject to numerous federal, state and local government regulations, including those relating to the preparation and sale of food and those relating to building and zoning requirements. We are subject to regulation by air and water pollution control divisions of the Environmental Protection Agency of the United States and by certain states and municipalities in which our units are located. We are also subject to laws governing our relationship with our employees, including minimum wage requirements, overtime, working and safety conditions and citizenship requirements. Restaurant operating costs are affected by increases in the minimum hourly wage, unemployment tax rates, sales taxes and similar matters, such as any government-mandated health insurance, over which we have no control. We believe we are operating in substantial compliance with applicable laws and regulations governing our operations. DRAM-SHOP LAWS. We are subject to "dram-shop" laws in Michigan and Texas. These laws generally provide someone injured by an intoxicated person the right to recover damages from the establishment that wrongfully served alcoholic beverages to such person. We carry liquor liability coverage as part of our existing comprehensive general liability insurance. However, a judgment against us under a dram-shop statute in excess of our liability coverage could have a material adverse effect on our business, operating results, cash flows and financial condition. STATE LIQUOR LAWS. We are licensed under Michigan law as a "brewpub." A brewpub in Michigan is (1) limited to a combined annual production of not more than 5,000 barrels, (2) limited to no more than three units in Michigan, and (3) prohibited from selling beer on a wholesale basis. Buck & Bass is licensed under Texas law as a "brewpub." A brewpub in Texas is limited to the production of not 4 more than 5,000 barrels of malt liquor, ale, and beer for each licensed brewpub established, operated, or maintained in Texas by the holder of the brewpub license. Brewpubs in Michigan and Texas are also licensed to sell hard liquor with appropriate licensing. Applicable legislation, regulations or administrative interpretations of liquor laws may hinder our operations or increase our operating costs. EXCISE TAXES. The federal government imposes an excise tax of $18.00 on each barrel of beer produced for domestic consumption in the United States. However, each brewer with production under 2,000,000 barrels per year is granted a small brewer's excise tax credit in the amount of $11.00 per barrel on its first 60,000 barrels produced annually. We cannot assure you that the federal government will not reduce or eliminate this credit. Michigan imposes an excise tax of $6.30 per barrel on each barrel of beer sold in Michigan. However, each brewer that is a "brewpub" under Michigan law and manufactures less than 50,000 barrels per year is granted a brewer's excise tax credit in the amount of $2.00 per barrel. Buck & Bass is subject to excise taxes under Texas law. Excise taxes in Texas are $6.138 per barrel for ale and malt liquor, and $6.00 per barrel for beer. However, Texas grants a 25% tax exemption for manufacturers of beer whose annual production in Texas does not exceed 75,000 barrels of beer per year. As a result, Buck & Bass faces an effective excise tax of $4.50 per barrel for beer. If our beer production exceeds the foregoing credit thresholds, our average excise tax rate would increase. It is possible that the rate of excise taxation could be increased by either federal or state governments, or both. Increased excise taxes on alcoholic beverages have been considered by the federal government as an additional source of tax revenue in connection with various proposals and could be included in future legislation. Future increases in excise taxes on alcoholic beverages, if enacted, could adversely affect our business, operating results, cash flows and financial condition. EMPLOYEES At December 30, 2001, we employed 419 persons at our units, including approximately 112 full-time employees. Of our total number of employees, 30 served as restaurant management personnel, 8 served in executive and corporate administrative capacities, and the remainder were hourly personnel. No employee is covered by a collective bargaining agreement and we have never experienced an organized work stoppage, strike or labor dispute. We consider relations with our employees to be satisfactory. TRADEMARKS AND SERVICE MARKS We claim trademark and service mark rights to, and ownership in, a number of marks including, but not limited to, BIG BUCK BREWERY & STEAKHOUSE and BIG BUCK BEER(R). Our service mark for BIG BUCK BREWERY & STEAKHOUSE expires in September 2007 and our trademark for BIG BUCK BEER expires in March 2007. We cannot assure you that our marks will be enforceable against prior users in the areas where we conduct our operations. We regard our marks as having substantial value and as being an important factor in the marketing of our restaurants and beer. Our policy is to pursue registration of our marks whenever possible and to oppose vigorously any infringement of our marks. 5 ITEM 2 DESCRIPTION OF PROPERTY GAYLORD We own the Gaylord unit, including the real property on which it is located. See "Description of Business - Restaurant Operations" for a description of the Gaylord unit. As of March 27, 2002, we owed Wayne County Employees' Retirement System ("WCERS") approximately $8.9 million. A first priority lien in favor of WCERS on all of our assets, including the Gaylord unit, our leasehold interest in the Auburn Hills unit, our leasehold interest in the Grand Rapids unit and all of our other assets, now or hereafter acquired, secures this indebtedness. GRAND RAPIDS AND AUBURN HILLS GRAND RAPIDS We purchased the Grand Rapids site in December 1996. The site included an existing structure of approximately 8,200 square feet and is located on 28th Street in Grand Rapids. Seating capacity is approximately 250 for restaurant and bar combined. The Grand Rapids unit opened in March 1997. In April 1997, we sold the Grand Rapids site, including all improvements thereto, to an entity owned by one of our shareholders, Eyde Brothers Development Co., pursuant to a real estate purchase and leaseback agreement for $1.4 million. Pursuant to a separate lease agreement, we lease the Grand Rapids site at a minimum annual base rent of $140,000 and a maximum annual base rent of $192,500 over a ten-year term. The lease may be extended at our option for up to two additional five-year terms. In addition to the annual base rent, the lease, as amended in March 2000, provides that we are obligated to pay annual percentage rent in the amount of 5% on gross sales at the site in excess of $1.5 million per year. Because annual gross sales did not exceed $1.5 million for the lease year ended April 2001, the lessor obtained the right to require us to repurchase the Grand Rapids site. In March 2002, the lessor waived its right to require repurchase based upon annual gross sales for the lease years ended April 2001 and April 2002. For more information regarding such repurchase obligation, please review "Description of Property - Repurchase Obligation." During 2001, we paid annual rent of $17.07 per square foot at the Grand Rapids unit. AUBURN HILLS We purchased the Auburn Hills site in August 1996. The site is just off of Interstate 75 at exit 79. The unit constructed on this site encompasses approximately 26,700 square feet including brewery, bar and restaurant. Seating capacity is approximately 650 for the restaurant and bar combined. The Auburn Hills unit opened in October 1997. In August 1997, we entered into a real estate purchase and leaseback agreement providing for the sale of the Auburn Hills site to one of our shareholders, Michael G. Eyde, for $4.0 million. In connection with this transaction, we granted a five-year stock option, exercisable at $5.00 per share, for 50,000 shares of our common stock to Mr. Eyde. We lease the Auburn Hills site pursuant to a separate lease agreement which provides for a minimum annual base rent of $400,000, and a maximum annual base rent of $550,000, over a 25-year term. The lease may be extended at our option for up to two additional ten-year terms. In addition to the annual base rent, we are obligated to pay an annual percentage rent of 5.25% of gross sales at the site in excess of $8.0 million per year. We were required to pay Mr. Eyde annual percentage rent of $17,970 based upon annual gross sales for the third year of the lease term. Annual gross sales for the fourth year of the lease term did not exceed $8.0 million. If annual gross sales do not exceed $8.0 million for any two consecutive years during the lease term, Mr. Eyde will have the right to require us to repurchase the Auburn Hills site. For more information regarding such repurchase 6 obligation, please review "Description of Property - Repurchase Obligation." During 2001, we paid annual rent of $14.98 per square foot at the Auburn Hills unit. TERMINATION PROVISIONS The Grand Rapids and Auburn Hills lessors may terminate in the event of a default which is not cured within the applicable grace period. A default is defined as: - our failure to make a rental payment within 30 days after receipt of written notice that a payment is past due, or - our failure to perform our obligations under the lease, other than rent payments, within 30 days after written notice of a curable violation; provided, however, that if such default cannot be cured within the 30-day period, a default will be deemed to have occurred only if we have failed to commence a cure within such 30-day period. In the event of a default and termination of either lease, we would be unable to continue operating the related unit, which would have a material adverse effect on our business, operating results, cash flows and financial condition. REPURCHASE OBLIGATION Because annual gross sales at the Grand Rapids site did not exceed $1.5 million for the lease year ended April 2001, the lessor of the Grand Rapids site obtained the right to require us to repurchase such site for $1.4 million, plus $70,000 for each lease year on a pro rata basis. As noted above, in March 2002, the lessor waived its right to require repurchase based upon annual gross sales for the lease years ended April 2001 and April 2002. The lessor of the Grand Rapids site has the option to require us to repurchase such site after the seventh full lease year for the same price. We also have the option to purchase the Grand Rapids site from the lessor after the seventh full lease year for the same price. If annual gross sales at the Auborn Hills site do not exceed $8.0 million for any two consecutive years during the lease term, the lessor of the Auburn Hills site could require us to repurchase such site for $4.0 million, plus $200,000 for each lease year on a pro rata basis. We also have the option to purchase the Auburn Hills site from the lessor after the seventh full lease year for the same price. If either lessor elects to exercise his option to require us to repurchase a site, we would be forced to repurchase such site at a premium over its sale price. We cannot assure you that we will have sufficient funds to repurchase either site. If we are required to repurchase a site and cannot do so, it would have a material adverse impact on our business, operating results, cash flows and financial condition. GRAPEVINE The Grapevine unit is owned and operated by Buck & Bass pursuant to our joint venture agreement with Bass Pro. The Grapevine unit is off Highway 121, the major artery between downtown Dallas and the Dallas/Fort Worth airport. The Grapevine site houses a 15-barrel brewing system and encompasses approximately 20,500 square feet including brewery, bar and restaurant, with a total seating capacity of approximately 500. In September 1999, Bass Pro declared the limited partnership agreement of Buck & Bass and the commercial sublease agreement for the Grapevine site to be breached and in default due to, among other things, our failure to make our required capital contribution. In February 2000, we made all required 7 capital contributions and satisfied all subcontractors' liens and claims. In March 2000, we agreed with Bass Pro in writing to the reinstatement of the limited partnership agreement and the sublease. In August 2000, we generated approximately $1.4 million from the private placement of a $1.5 million secured promissory note to WCERS. We used these funds and working capital to lend $1.5 million to Buck & Bass in August 2000. These funds were applied by Buck & Bass to the construction of the Grapevine unit. During the first quarter of 2001, certain contractors of Buck & Bass filed liens and made demands for payment of additional sums aggregating approximately $1.4 million in connection with the construction of the Grapevine unit. In February 2001, as guarantor of the obligations of Buck & Bass, we arranged to have filed of record a bond with respect to each lien for which we had received notice. In March 2001, we obtained approximately $1.0 million in debt financing from Crestmark Bank, guaranteed by WCERS, for working capital purposes including the payment of such contractors. Although we have satisfied our obligations to the subcontractors, we remain involved in litigation with the general contractor. We cannot assure you that we will be able to fully and finally discharge of record all outstanding liens and claims. If we fail to do so, we may be in material default under the limited partnership agreement and the commercial sublease agreement (described below). For more information regarding such litigation, please review "Legal Proceedings - Grapevine Unit." The existence of such encumbrances, the failure of Buck & Bass to perform quarterly customer satisfaction surveys and the failure of Buck & Bass to achieve annual gross sales of $7.0 million give Bass Pro the ability to declare an event of default under the sublease, terminate the sublease and demand all unpaid and reasonably calculable future rent over the balance of the sublease term. Pursuant to the limited partnership agreement, a material default under the sublease would also entitle Bass Pro to purchase our interest in the joint venture at 40% of book value, thereby eliminating our interest in the Grapevine unit. Further, Bass Pro has the right to purchase up to 15% of our interest in the joint venture, at 100% of our original cost, on or before August 31, 2002; provided, however, that our interest in the joint venture may not be reduced below 51%. The termination of the sublease or the elimination of our interest in the Grapevine unit would have a material adverse effect on our business, operating results, cash flows and financial condition. Pursuant to the above-referenced commercial sublease agreement, Buck & Bass leases the Grapevine site from Bass Pro over a 15-year term. Buck & Bass may extend the sublease for up to seven additional five-year terms. Buck & Bass is obligated to pay an annual percentage rent in the amount of 5.5% on gross sales less than $11.0 million per year and 6.5% on gross sales in excess of $11.0 million per year; provided, however, that the minimum annual base rent is $385,000. The minimum annual base rent is required whether the Grapevine unit is profitable or not. If Buck & Bass is required to pay in excess of the minimum annual base rent, the funds available to us for other purposes will be reduced. During 2001, Buck & Bass paid annual rent of $18.78 per square foot at the Grapevine unit (when the second story bar area of such unit is included in the total square footage). Bass Pro may terminate the sublease in the event of a default which is not cured within the applicable grace period. In March 2000, we agreed with Bass Pro in writing to revise the definition of default under the sublease. As amended, the sublease provides that a default includes, but is not limited to: - the failure of Buck & Bass to remain open during all business days, - the failure of Buck & Bass to maintain on duty a fully trained service staff, - the failure of Buck & Bass to provide high quality food of the type provided at our Gaylord unit, 8 - the failure of Buck & Bass to achieve gross sales in the first full calendar year immediately following the opening and for each calendar year thereafter of $7.0 million, - Buck & Bass encumbering in any manner any interest in the subleased premises, or - the failure of Buck & Bass to conduct full and complete customer surveys no less frequently than each calendar quarter. In the event of a default and termination of the joint venture agreement, our interest in the Grapevine unit would be eliminated. This would have a material adverse effect on our business, operating results, cash flows and financial condition. NASHVILLE In November 2000, we executed a lease with Opry Mills Limited Partnership, a division of the Mills Corporation, for 20,046 square feet of space in a one-level building in Nashville, Tennessee. During 2001, we received a $340,000 tenant allowance from Opry Mills. In September 2001, Opry Mills brought suit against us for breach of commercial lease. In March 2002, following the recommendation of the landlord and after careful consideration of the marketplace and our limited capital resources, we determined to discontinue our plans to open this unit. We based our decision on several factors, including but not limited to: - decreased tourism following the events of September 11, - possible permanent relocation of the Grand Ole Opry away from the premises, - information provided by Opry Mills showing that area restaurants of similar size have struggled to be profitable, - increased steakhouse competition in the market, - parking challenges, and - traffic flow issues. As a consequence of such decision, we entered into a possession agreement and a settlement and termination agreement with Opry Mills. Pursuant to such agreements, we relinquished possession of the Nashville premises to Opry Mills, we paid Opry Mills $200,000 for termination of the related lease and the parties agreed to dismiss with prejudice the litigation commenced by Opry Mills for breach of such lease. Under the terms of such agreements, we also forfeited all improvements made to the site, including assets purchased through use of the tenant allowance. For more information regarding such settlement, see "Legal Proceedings - Nashville Unit." In the opinion of management, our properties are adequately covered by insurance. 9 ITEM 3 LEGAL PROCEEDINGS GRAPEVINE UNIT On May 3, 2001, Knoebel Construction, Inc., the general contractor of the Grapevine unit, sued Buck & Bass, L.P., BBBP Management Company, Bass Pro Outdoor World, L.L.C., St. Paul Fire & Marine Insurance Company, Grapevine II, L.P. and our company in the 352nd District Court of Tarrant County, Texas, for breach of contract and quantum meruit, as well as claims under the Texas Property Code for alleged failure to make prompt payment and alleged misapplication of statutory construction trust funds. Our company owns an 89.9% interest in Buck & Bass. The proceeding is a lawsuit that arises out of the construction of the Grapevine unit. Buck & Bass, as owner, and Knoebel, as construction manager, signed an AIA "Standard Form of Agreement Between Owner and Construction Manager" dated March 31, 2000. Under the agreement, Buck & Bass hired Knoebel to construct the Grapevine unit. Knoebel alleges that it performed its obligations under the agreement but is still owed $1,174,516 that Buck & Bass has failed to pay. Buck & Bass disputes the amount of Knoebel's claims and has sought to have the district court case abated while the parties pursue mediation and binding arbitration, as required under the agreement. Knoebel also seeks recovery under St. Paul's bond and foreclosure of a statutory lien. In addition to its alleged damages of $1,174,516, Knoebel's petition asks for attorneys' fees, court costs, and pre-judgment and post-judgment interest. On behalf of Buck & Bass, we have settled directly with and obtained releases from the subcontractors on the Grapevine unit, as well as the project's architect. Knoebel has asserted that it may dispute the validity of some or all of the claims of the subcontractors and, therefore, will dispute the amount of any offset that we would apply to Knoebel's claim based upon our payments to the subcontractors. We cannot assure you that we will be able to fully and finally discharge of record all outstanding liens and claims. NASHVILLE UNIT In November 2000, we executed a lease with Opry Mills Limited Partnership, a division of the Mills Corporation for 20,046 square feet of space in a one-level building in Nashville, Tennessee. During 2001, we received a $340,000 tenant allowance from Opry Mills. In September 2001, Opry Mills brought suit against us in the Chancery Court for Davidson County, Tennessee, for breach of a commercial lease agreement. This case was removed to the U.S. District Court for the Middle District of Tennessee (Nashville Division) in October 2001. In October 2001, Opry Mills brought a separate suit against us in the General Sessions Court for Davidson County, Tennessee for breach of the same commercial lease agreement (the "eviction action"). The eviction action was also removed to the U.S. District Court for the Middle District of Tennessee in November 2001. The lawsuits sought both a monetary judgment for unpaid rent and other moneys allegedly owed to Opry Mills pursuant to the lease and that legal possession of the premises be returned to Opry Mills. In March 2002, we entered into two agreements with Opry Mills to resolve the lawsuits, a possession agreement and a settlement and termination agreement. Pursuant to such agreements, we relinquished possession of the Nashville premises to Opry Mills, we paid Opry Mills $200,000 for termination of the related lease and the parties agreed to dismiss with prejudice the litigation commenced by Opry Mills for breach of such lease. Under the terms of such agreements, we also forfeited all improvements made to the site, including assets purchased through use of the tenant allowance. We also agreed to provide Opry Mills by April 30, 2002 a full and complete release of liens and claims from suppliers, contractors or laborers which performed work or supplied materials to the premises. We have also agreed to indemnify Opry Mills from any claims or actions taken against Opry Mills or the premises by any unpaid supplier, contractor or laborer which performed work or supplied materials to the premises. 10 GENERAL In addition, we are involved in routine legal actions in the ordinary course of our business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management these routine legal proceedings are unlikely to have a material adverse effect upon our business, operating results, cash flows and financial condition. 11 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The 2001 Annual Meeting of Shareholders was held on December 11, 2001. Two proposals were submitted for shareholder approval, both of which passed with voting results as follows: (1) To elect five directors for the ensuing year and until their successors shall be elected and duly qualified.
FOR WITHHOLD AUTHORITY --- ------------------ William F. Rolinski 4,061,866 60,876 Jonathon D. Ahlbrand 4,062,966 59,776 Matthew P. Cullen 4,062,866 59,876 Blair A. Murphy, D.O.* 4,062,666 60,076 Henry T. Siwecki 4,063,366 59,376
---------- * Dr. Murphy passed away on December 1, 2001. (2) To ratify the appointment of Plante & Moran, LLP as our independent auditors for the fiscal year ending December 30, 2001. For: 4,092,795 Against: 22,077 Abstain: 7,870 Non-Vote: 0
EXECUTIVE OFFICERS OF THE REGISTRANT The following table provides information with respect to our executive officers as of March 20, 2002. Each executive officer has been appointed to serve until his successor is duly appointed by the board or his earlier removal or resignation from office.
Name Age Position With Big Buck - ----------------------- --- ------------------------------------------------ William F. Rolinski 54 Chief Executive Officer, President and Chairman of the Board Anthony P. Dombrowski 41 Chief Financial Officer and Treasurer Timothy J. Pugh 42 Executive Vice President of Operations
William F. Rolinski is a founder of our company and has been the Chief Executive Officer, President and Chairman of the Board since our formation in 1993. From 1987 to 1994, Mr. Rolinski was the founder, secretary and corporate counsel of Ward Lake Energy, Inc., an independent producer of natural gas in Michigan. While Mr. Rolinski was at Ward Lake, the company drilled and produced over 500 natural gas wells with combined reserves of over $200 million. Anthony P. Dombrowski became the Chief Financial Officer and Treasurer of our company in May 1996. He acted as a consultant to our company, in the capacity of Chief Financial Officer, from January 1996 to May 1996. From February 1995 to May 1996, Mr. Dombrowski operated his own financial and consulting business. From May 1989 to January 1995, Mr. Dombrowski was the Chief Financial Officer of Ward Lake. Mr. Dombrowski began his career with Price Waterhouse LLP in 1982. Timothy J. Pugh became our Executive Vice President of Operations in December 2000. From November 1998 to November 2000, he was a franchisee partner of Damon's International, a full-service chain of over 100 casual dining restaurants, in Kalamazoo, Michigan. From April 1996 to October 1998, he was a regional manager of Damon's International. From October 1993 to April 1996, he was a general manager at of Damon's International. From April 1991 to October 1993, he managed the Houston's restaurant in Dallas, Texas, and the Houston's restaurant in Memphis, Tennessee. 12 PART II ITEM 5 MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS Our common stock has been listed on The Nasdaq SmallCap Market under the symbol "BBUC" since the completion of our initial public offering in June 1996. The following table sets forth the approximate high and low closing prices for our common stock for the periods indicated as reported by The Nasdaq SmallCap Market. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
PERIOD HIGH LOW ------ ---- --- 2000 First Quarter.................................................. $ 2.88 $ 1.75 Second Quarter................................................. $ 2.03 $ 1.56 Third Quarter.................................................. $ 2.25 $ 1.50 Fourth Quarter................................................. $ 1.86 $ 0.56 2001 First Quarter.................................................. $ 1.50 $ 0.72 Second Quarter................................................. $ 1.13 $ 0.71 Third Quarter.................................................. $ 1.40 $ 0.75 Fourth Quarter................................................. $ 0.99 $ 0.38
As of February 1, 2002, we had 338 shareholders of record and approximately 1,932 beneficial owners. We have never declared or paid cash dividends. We currently intend to retain future earnings for the operation of our business and do not anticipate paying cash dividends on our securities 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. The payment by us of dividends is subject to the terms of the subscription and investment representation agreement governing the 10% convertible secured promissory note due February 2003 we issued to WCERS in February 2000. SALES OF UNREGISTERED SECURITIES DURING THE FOURTH QUARTER OF 2001 On December 11, 2001, we issued a convertible subordinated promissory note in the principal amount of $100,000 to an accredited investor, Pac Rim Associates, Inc. Such entity is owned by Thomas E. Zuhl, who became one of our directors on January 17, 2002. The note matures on December 11, 2002. It may be converted into 194,552 shares of common stock at a conversion price of $0.514 per share. The foregoing issuance was made in reliance upon the exemption provided in Section 4(2) of the Securities Act. Such securities are restricted as to sale or transfer, unless registered under the Securities Act, and certificates representing such securities contain restrictive legends preventing sale, transfer or other disposition unless registered under the Securities Act. In addition, the recipient of such securities received, or had access to, material information concerning us, including, but not limited to, our reports on Form 10-KSB, Form 10-QSB and Form 8-K, as filed with the SEC. No underwriting commissions or discounts were paid with respect to the issuance of such securities. 13 ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW We develop and operate restaurant-brewpubs under the name "Big Buck Brewery & Steakhouse." Until May 1995 when we opened our first unit in Gaylord, Michigan, we had no operations or revenues and our activities were devoted solely to development. In March 1997, we opened our second unit in Grand Rapids, Michigan, and in October 1997, we opened our third unit in Auburn Hills, Michigan, a suburb of Detroit. In August 2000, we opened our fourth unit in Grapevine, Texas, a suburb of Dallas. This unit is owned and operated by Buck & Bass pursuant to our joint venture agreement with Bass Pro. We had planned, subject to obtaining adequate financing, to open our next unit in Nashville, Tennessee. In March 2002, following the recommendation of the landlord and after careful consideration of the marketplace and our limited capital resources, we determined to discontinue our plans to open this unit. For the foreseeable future, we plan to focus on the following objectives: - exploration of licensing and franchising opportunities, - refinancing of existing indebtedness, - continued implementation of cost controls, and - recapturing market share lost following the events of September 11. Our future revenues and profits will depend upon various factors, including market acceptance of the Big Buck Brewery & Steakhouse concept and general economic conditions. We use a 52-/53-week fiscal year ending on the Sunday nearest December 31. All references herein to "2001" and "2000" represent the 52-week fiscal years ended December 30, 2001 and December 31, 2000, respectively. 14 RESULTS OF OPERATIONS Our operating results, expressed as a percentage of total revenue, were as follows:
DECEMBER 30, DECEMBER 31, 2001 2000 -------------- -------------- REVENUE Restaurant sales............................................. 98.4% 97.5% Wholesale and retail sales................................... 1.6 2.5 ----------- ---------- Total revenue............................................ 100.0 100.0 ----------- ---------- COSTS AND EXPENSES: Cost of sales................................................ 33.0 34.1 Restaurant salaries and benefits............................. 26.3 30.8 Operating expenses........................................... 21.1 23.9 Depreciation................................................. 7.6 5.8 Preopening expenses and store development costs.............. 2.0 3.0 General and administrative expenses.......................... 10.2 10.1 ----------- ---------- Total costs and expenses................................. 100.2 107.7 ----------- ---------- LOSS FROM OPERATIONS.............................................. (0.2) (7.7) ----------- ---------- OTHER INCOME (EXPENSE): Interest expense............................................. (9.5) (8.7) Interest income.............................................. -- -- Other........................................................ (2.9) (3.2) Minority interest's share of subsidiary's loss............... -- 0.5 ----------- ---------- Other income (expense), net.............................. (12.4) (11.4) ----------- ---------- NET LOSS ......................................................... (12.6)% (19.1)% ============== ===========
RESULTS OF OPERATIONS FOR THE FISCAL YEARS ENDED DECEMBER 30, 2001 AND DECEMBER 31, 2000 REVENUES Revenues increased 5.0% to $17,487,957 in 2001 from $16,638,282 in 2000. The increase was mainly due to the opening of the Grapevine unit on August 31, 2000, which offset lower revenue in 2001 from the existing units in Michigan. Revenues from our Michigan units were negatively affected by a decline in tourism following the events of September 11. We believe that an improved economy will increase revenues at our existing units. COSTS OF SALES Cost of sales, which consists of food, merchandise and brewery supplies, increased 1.5% to $5,763,345 in 2001 compared to $5,676,108 in 2000. The increase was primarily due to the opening of the Grapevine unit in August 2000. As a percentage of revenues, costs of sales decreased to 33.0% in 2001 from 34.1% in 2000. The percentage decrease was due to limiting portion sizes to specifications and entering into certain food purchasing contracts. 15 RESTAURANT SALARIES AND BENEFITS Restaurant salaries and benefits, which consist of restaurant management and hourly employee wages and benefits, payroll taxes and workers' compensation insurance, decreased 10.5% to $4,591,917 in 2001 compared to $5,131,584 in 2000. As a percentage of revenues, restaurant salaries and benefits decreased to 26.3% in 2001 as compared to 30.8% in 2000. The decreases were due to lower staffing levels and more efficient scheduling. OPERATING EXPENSES Operating expenses, which include supplies, utilities, repairs and maintenance, advertising and occupancy costs, decreased 7.2% to $3,694,304 in 2001 compared to $3,981,450 in 2000. The decrease was due to the reduction of certain in-store promotions and discounting. As a percentage of revenues, operating expenses decreased to 21.1% in 2001 as compared to 23.9% in 2000. The percentage decrease was due to reduced discounting, the elimination of certain in-store promotions, reduced laundry expenses resulting from a dress code modification and a reduction in outside janitorial services. PREOPENING EXPENSES AND STORE DEVELOPMENT COSTS Preopening expenses and store development costs consist of expenses incurred prior to an opening of a new unit, including but not limited to wages and benefits, relocation costs, supplies, advertising expenses and training costs. The preopening expenses and store development costs of $354,923 for 2001 related to the development costs incurred in connection with the abandoned plans to open a unit in Nashville, compared to $494,630 in 2000 associated with the opening of the Grapevine unit. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses increased 6.6% to $1,785,886 in 2001 compared to $1,675,700 in 2000. The increase reflected the added professional fees incurred in connection with our lawsuits with the general contractor of the Grapevine unit and Opry Mills, as well as travel expenses related to the Grapevine unit. As a percentage of revenue, these expenses increased to 10.2% in 2001 as compared to 10.1% in 2000. DEPRECIATION Depreciation expenses increased 39.3% to $1,338,650 in 2001 compared to $961,003 in 2000. The increase was due to the additional depreciation from the Grapevine unit being open for the entire year in 2001 as compared to 2000. As a percentage of revenues, these expenses increased to 7.6% in 2001 from 5.8% in 2000. The increase was the result of the Grapevine unit having a higher amount of depreciation as a percentage of revenue as this leasehold is depreciated over a 15-year term without considering renewals. INTEREST EXPENSE Interest expense increased $209,587 to $1,658,409 in 2001 compared to $1,448,822 in 2000. The increase reflected the additional borrowings for the completion of the Grapevine unit and working capital purposes. As a percentage of revenues, interest expense increased to 9.5% in 2001 from 8.7% in 2000. OTHER INCOME AND EXPENSE Other income and expense includes miscellaneous income and amortization expense. Other expenses were $501,086 in 2001 compared to $535,746 in 2000. 16 LIQUIDITY AND CAPITAL RESOURCES OVERVIEW We used $431,899 in cash for operating activities during 2001, and used $1,533,075 in cash for operating activities during 2000. We had working capital deficits of $3,026,286 at December 30, 2001, and $3,495,425 at December 31, 2000. During 2001, we spent $494,923 in leasehold improvements at the Nashville site and $161,567 in project management fees and new equipment for existing units. We obtained additional financing of $1,199,729 during 2001 for the working capital purposes. In general, we have experienced operating losses in each quarterly and annual period since inception. We incurred net losses of approximately $2.2 million for the fiscal year ended December 30, 2001, and approximately $3.2 million for the fiscal year ended December 31, 2000. As of December 30, 2001, we had an accumulated deficit of $9.8 million. We currently depend upon our existing units for all of our revenues. We expect to incur significant losses for the foreseeable future. We will need to generate significant increases in our revenues to achieve and maintain profitability. If our revenues fail to grow or grow more slowly than we anticipate, or our operating expenses exceed our expectations, our losses could significantly increase, which would harm our business, operating results, cash flows and financial condition. In addition, our failure to become and remain profitable may adversely affect the market price of our securities and our ability to raise capital and continue operations. The reports of our independent public accountants for the years ended December 30, 2001 and December 31, 2000 include explanatory paragraphs expressing doubt about our ability to continue as a going concern. Since inception, our principal capital requirements have been the funding of (a) our operations and promotion of the Big Buck Brewery & Steakhouse format and (b) the construction of units and the acquisition of furniture, fixtures and equipment for such units. Total capital expenditures for the Gaylord, Grand Rapids and Auburn Hills units were approximately $6.2 million, $3.2 million and $10.2 million, respectively. Total capital expenditures of Buck & Bass for the Grapevine unit were approximately $7.6 million. Pursuant to our joint venture agreement with Bass Pro, we funded approximately $6.4 million of that cost, including our $1.5 million loan to Buck & Bass. FINANCING ACTIVITIES IN 2000 In January 2000, we generated $237,500 in net proceeds from the private placement of $250,000 principal amount of convertible subordinated promissory notes. In February 2000, we generated $7,017,000 in net proceeds from the private placement of $7,500,000 principal amount convertible secured promissory notes to WCERS. We used these funds to repay $2,495,000 due Bank One (f/k/a NBD Bank) and Crestmark Bank and to make a required capital contribution to Buck & Bass. In August 2000, we generated $1,425,000 in net proceeds from the private placement of a $1,500,000 principal amount non-convertible secured promissory note to WCERS. We used these funds and working capital to lend $1,500,000 to Buck & Bass in August 2000. Buck & Bass applied such funds to the construction of the Grapevine unit. In October 2000, we agreed with WCERS to extend the maturity dates of certain promissory notes held by WCERS, with an aggregate principal amount of approximately $7,500,000, to October 2002. Also in October 2000, we entered into a first amendment and acknowledgment of partial payment with the holder of one of our convertible subordinated promissory notes with a principal amount of $50,000. Pursuant to such agreement, we repaid $25,000 of principal, extended the maturity date on the remaining $25,000 of principal from January 2001 to June 2001, and adjusted the conversion price on such note from $1.9125 to $1.50. In addition, we entered into a first amendment with the holder of two of our convertible subordinated promissory notes with an aggregate principal amount of $150,000. Pursuant to such amendment, we extended the maturity date on $100,000 of principal from October 2000 to October 2001, and adjusted the conversion price on such note from $1.5252 to $1.50. In December 2000, we generated $100,000 in net proceeds from the private placement of a $100,000 principal amount non- 17 convertible subordinated promissory note to one of our shareholders, Michael G. Eyde. We used the funds provided by the subordinated debt financings for working capital purposes. FINANCING ACTIVITIES IN 2001 In February 2001, we agreed with WCERS to extend the maturity dates of certain promissory notes held by WCERS, with an aggregate principal amount of approximately $7,400,000, to February 2003. As a consequence, each of our outstanding promissory notes held by WCERS has a maturity date of February 1, 2003. On the same day, we also issued 323,406 shares of our common stock to WCERS in lieu of $327,610 in principal and/or interest otherwise payable to WCERS in February, March, April and May 2001. In March 2001, we entered into a first amendment and acknowledgment of partial payment with the holder of one of our convertible subordinated promissory notes with a principal amount of $250,000. Pursuant to such agreement, we repaid $75,000 of principal, agreed to a repayment schedule involving monthly payments of principal and interest commencing May 1, 2001, and adjusted the conversion price on such note from $1.4752 to $0.73 per share. We repaid such note in full in March 2002. Also in March 2001, we entered into a first amendment with Michael G. Eyde, one of our shareholders and the holder of our non-convertible subordinated promissory note with a principal amount of $100,000. Pursuant to such agreement, we made such note convertible into shares of our common stock at a conversion price of $1.00 and extended the maturity date of such note until October 2001. In addition, we entered into another first amendment with Michael G. Eyde, one of our shareholders and the holder of one of our convertible subordinated promissory notes with a principal amount of $100,000. Pursuant to such agreement, the maturity date of such note was extended until October 2001 and the conversion price was adjusted from $1.9188 to $1.00. In April 2001, we entered into a first amendment with the holder of one of our convertible subordinated promissory notes with a principal amount of $50,000. Pursuant to such agreement, the maturity date of such note was extended until January 2002 and the conversion price was adjusted from $1.9125 to $0.73 per share. In April 2001, we entered into a first amendment with the holder of one of our convertible subordinated promissory notes with a principal amount of $250,000. Pursuant to such agreement, the maturity date of such note was extended until October 2001 and the conversion price was adjusted from $1.4752 to $0.73 per share. In July 2001, we issued a convertible subordinated promissory note in the principal amount of $100,000 to Thomas E. Zuhl, who became one of our directors in January 2002. The note matures on July 20, 2002. It may be converted into 115,473 shares of common stock at a conversion price of $0.866 per share. In December 2001, we issued a convertible subordinated promissory note in the principal amount of $100,000 to Pac Rim Associates, Inc. Such entity is owned by Thomas E. Zuhl, who became one of our directors in January 2002. The note matures on December 11, 2002. It may be converted into 194,552 shares of common stock at a conversion price of $0.514 per share. ADDITIONAL FINANCING IS REQUIRED FOR DEBT REPAYMENT Without additional financing, our leveraged position, requirements for payments to the holders of our secured and subordinated debt and requirements for payments on our line of credit and loan agreement may require us to liquidate all or a portion of our assets. We had working capital deficits of approximately $3.0 million at December 30, 2001 and approximately $3.5 million at December 31, 2000. As of March 27, 2002, we had outstanding (1) convertible secured debt aggregating $7,409,271, (2) non-convertible secured debt aggregating $6,500,000, (3) a line of credit for up to $1,000,000, of which we had borrowed the full amount, and (4) convertible subordinated debt aggregating $862,000. Of the outstanding convertible subordinated debt, $100,000 matured in November 2000, $300,000 matured in October 2001 and $50,000 matured in January 2002. We cannot assure you that we will be able to extend the maturity dates of those, or any other, notes. Our outstanding debt must be repaid in full as follows: 18
Type of Debt Principal Amount Maturity Date --------------------------------------------------------------------------- Convertible Secured Debt $ 7,409,271 February 2003 Non-Convertible Secured Debt $ 1,500,000 February 2003 Non-Convertible Secured Debt $ 5,000,000 March 2004 Line of Credit $ 1,000,000 March 2002 Convertible Subordinated Debt $ 450,000 Immediate Convertible Subordinated Debt $ 212,000 * Convertible Subordinated Debt $ 100,000 July 2002 Convertible Subordinated Debt $ 100,000 December 2002
---------- * Big Buck has agreed to make eleven additional monthly payments of $18,000 (commencing April 1, 2002) and one monthly payment of $14,000 (on March 1, 2003) to repay this note in full. To fund the maturity of the outstanding debt, we will be required to obtain additional financing or refinance the debt. However, we cannot assure you that we will be able to obtain the required funds or refinance the debt, which could materially adversely affect our business, operating results, cash flows and financial condition. WCERS COVENANT VIOLATIONS Among other things, we agreed with WCERS, the holder of approximately $8.9 of our secured debt, that (1) we would not create, incur or suffer to be created or incurred or to exist, any lien of any kind upon any of our property or assets of any character whether then owned or thereafter acquired, or upon the income or profits therefrom except for certain permitted liens, (2) we would keep and maintain tangible net worth plus subordinated debt in an amount not less than $8.5 million, (3) we would keep and maintain a minimum debt coverage ratio of 1.25 to 1.0 (excluding Grapevine pre-opening and financing costs), (4) we would maintain our then current cash flow position, and (5) we would not permit the difference between our current assets and our current liabilities (other than subordinated debt) to be less than $500,000. We have notified WCERS that we have violated each of the foregoing covenants. On April 3, 2001, we entered into a letter agreement with WCERS pursuant to which the foregoing covenants were modified to provide that (1) we must maintain tangible net worth plus subordinated debt in an amount not less than $6.25 million and (2) we have until January 1, 2002 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). We notified WCERS that we violated the amended covenants. On April 1, 2002, we entered into a letter agreement with WCERS pursuant to which the foregoing covenants were modified to provide that (1) we must maintain tangible net worth plus subordinated debt in an amount not less than $4.5 million and (2) we have until January 1, 2003 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). Our agreements with WCERS require us to make payments of principal and interest aggregating approximately $80,000 per month. We did not make the payments due on June 1, 2001 and July 1, 2001. Because we did not make timely payments of principal and interest on our indebtedness to WCERS, we are in default under our agreements with WCERS. As a result, WCERS may, by notice in writing to us, declare all amounts owing with respect to the agreements to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which we previously waived. On October 1, 2001, we established a repayment schedule for the two missed payments whereby we will pay 1/6 of the amount due each month over a six-month period. These payments are in addition to all other amounts as they become due under the loan documents. We cannot assure you that we will maintain compliance with the amended covenants or be able to repay or refinance our indebtedness to WCERS. Our agreements with WCERS define an event of default 19 to include our failure to perform any term, covenant or agreement contained in our agreement. In the event of a default which is not waived under our agreements with WCERS, our assets would be at risk. Foreclosure by WCERS would force us to cease all operations. ADDITIONAL FINANCING IS REQUIRED FOR GRAPEVINE In September 1999, Bass Pro declared the limited partnership agreement of Buck & Bass and the commercial sublease agreement for the Grapevine site to be breached and in default due to, among other things, our failure to make our required capital contribution. In February 2000, we made all required capital contributions and satisfied all subcontractors' liens and claims. In March 2000, we agreed with Bass Pro in writing to the reinstatement of the limited partnership agreement and the sublease. In August 2000, we generated approximately $1.4 million from the private placement of a $1.5 million secured promissory note to WCERS. We used these funds and working capital to lend $1.5 million to Buck & Bass in August 2000. These funds were applied by Buck & Bass to the construction of the Grapevine unit. During the first quarter of 2001, certain contractors of Buck & Bass filed liens and made demands for payment of additional sums aggregating approximately $1.4 million in connection with the construction of the Grapevine unit. In February 2001, as guarantor of the obligations of Buck & Bass, we arranged to have filed of record a bond with respect to each lien for which we had received notice. In March 2001, we obtained approximately $1.0 million in debt financing from Crestmark Bank, guaranteed by WCERS, for working capital purposes including the payment of such contractors. Although we have satisfied our obligations to the subcontractors, we remain involved in litigation with the general contractor. We cannot assure you that we will be able to fully and finally discharge of record all outstanding liens and claims. If we fail to do so, we may be in material default under the limited partnership agreement and the commercial sublease agreement. GRAPEVINE COVENANT VIOLATIONS The existence of such encumbrances, the failure of Buck & Bass to perform quarterly customer satisfaction surveys and the failure of Buck & Bass to achieve annual gross sales of $7.0 million give Bass Pro the ability to declare an event of default under the sublease, terminate the sublease and demand all unpaid and reasonably calculable future rent over the balance of the sublease term. Pursuant to the limited partnership agreement, a material default under the sublease would also entitle Bass Pro to purchase our interest in the joint venture at 40% of book value, thereby eliminating our interest in the Grapevine unit. Further, Bass Pro has the right to purchase up to 15% of our interest in the joint venture, at 100% of our original cost, on or before August 31, 2002; provided, however, that our interest in the joint venture may not be reduced below 51%. The termination of the sublease or the elimination of our interest in the Grapevine unit would have a material adverse effect on our business, operating results, cash flows and financial condition. LIMITATIONS ON ABILITY TO INCUR ADDITIONAL INDEBTEDNESS We granted the following security interests to WCERS in connection with their provision of certain debt financing: - a pledge of our limited partnership interest in Buck & Bass, - a pledge of our shares of the issued and outstanding common stock of BBBP Management Company, and 20 - a security interest, assignment or mortgage, as applicable, in our interest in all assets now or hereafter owned, ownership interests, licenses, and permits, including, without limitation, a mortgage encumbering the Gaylord, Auburn Hills and Grand Rapids sites. We also granted to WCERS a right of first refusal pursuant to which WCERS may, for so long as the approximately $5.8 million promissory note is outstanding or WCERS owns more than 15% of our common stock, elect to purchase securities offered by us, within 45 days of the receipt of notice by WCERS, at the same price and on the same terms and conditions as are offered to a third party. Our agreement with WCERS imposes limitations on our ability to incur additional indebtedness. We agreed that we would not create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any indebtedness, except for indebtedness incurred in the ordinary course of business not to exceed at any time $1.5 million in the aggregate. Any indebtedness not in the ordinary course of business or in excess of $1.5 million requires the approval of WCERS. These restrictions may impede our ability to secure financing for continued operations. Our failure to raise capital when needed would have a material adverse effect on our business, operating results, cash flows and financial condition. LIQUIDITY PLANS In February 2002, we received a $500,000 advance from WCERS to cover unpaid real estate taxes in Michigan. In March 2002, we obtained a loan from United Bank and Trust Company for $5,000,000 which matures in March 2004. The collateral of this loan is a $5,000,000 letter of credit from WCERS. Of the proceeds from such loan, we used $200,000 to terminate our lease of the Nashville site and $500,000 to repay the advance from WCERS. We intend to use the remaining proceeds of such loan to repay approximately $1,000,000 of indebtedness to Crestmark bank, to pay certain accounts payable and for various working capital purposes. Although our short-term liquidity issues have been improved as a result of this financing, we cannot assure you that we will have sufficient financial resources to repay existing indebtedness or to continue operations. We intend to explore licensing and franchising arrangements. We are in discussions with several parties regarding the possible licensing of the Big Buck Brewery & Steakhouse concept in and outside the state of Michigan. We have entered into a license agreement with Up North Adventures, an entity owned by one of our directors, Thomas E. Zuhl, pursuant to which we hope to introduce our concept to various Asian markets. Our beers have already received awards for excellence in Japan. We also seek to refinance our indebtedness to WCERS. We hope to refinance such indebtedness at lower interest rates. We also plan to continue searching for ways of reducing our operating costs. At the beginning of 2001, we set goals to equal or exceed the operating benchmarks of several of our competitors. We believe that we have attained those goals and we seek continued improvement. During 2002, we also plan to implement new short-term and long-term marketing campaigns pursuant to which we hope to regain revenues lost due to the decrease in tourism following the events of September 11. SEASONALITY Our operating results are expected to fluctuate based on seasonal patterns. Based on our existing units, we anticipate that our highest revenues will occur in the second and third calendar quarters due to the milder climate during those quarters in Michigan. Because of the effect of seasonality on our business, results for any quarter are not necessarily indicative of the results that may be achieved for a full fiscal year and cannot be used to indicate financial performance for a full fiscal year. 21 CAUTIONARY STATEMENT BIG BUCK BREWERY & STEAKHOUSE, INC., OR PERSONS ACTING ON OUR BEHALF, OR OUTSIDE REVIEWERS RETAINED BY US MAKING STATEMENTS ON OUR BEHALF, OR UNDERWRITERS OF OUR SECURITIES, FROM TIME TO TIME, MAY MAKE, IN WRITING OR ORALLY, "FORWARD-LOOKING STATEMENTS" AS DEFINED UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THIS CAUTIONARY STATEMENT, WHEN USED IN CONJUNCTION WITH AN IDENTIFIED FORWARD-LOOKING STATEMENT, IS FOR THE PURPOSE OF QUALIFYING FOR THE "SAFE HARBOR" PROVISIONS OF THE LITIGATION REFORM ACT AND IS INTENDED TO BE A READILY AVAILABLE WRITTEN DOCUMENT THAT CONTAINS FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY FROM SUCH FORWARD-LOOKING STATEMENTS. THESE FACTORS ARE IN ADDITION TO ANY OTHER CAUTIONARY STATEMENTS, WRITTEN OR ORAL, WHICH MAY BE MADE, OR REFERRED TO, IN CONNECTION WITH ANY SUCH FORWARD-LOOKING STATEMENT. THE FOLLOWING MATTERS, AMONG OTHERS, MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS. WE HAVE INCURRED LOSSES AND WE EXPECT TO INCUR SUBSTANTIAL FUTURE LOSSES. THIS MAY PREVENT US FROM RAISING CAPITAL AND CONTINUING OPERATIONS. In general, we have experienced operating losses in each quarterly and annual period since inception. We incurred net losses of approximately $2.2 million for the fiscal year ended December 30, 2001, and approximately $3.2 million for the fiscal year ended December 31, 2000. As of December 30, 2001, we had an accumulated deficit of $9.8 million. We currently depend upon our existing units for all of our revenues. We expect to incur significant losses for the foreseeable future. We will need to generate significant increases in our revenues to achieve and maintain profitability. If our revenues fail to grow or grow more slowly than we anticipate, or our operating expenses exceed our expectations, our losses could significantly increase, which would harm our business, operating results, cash flows and financial condition. In addition, our failure to become and remain profitable may adversely affect the market price of our securities and our ability to raise capital and continue operations. The reports of our independent public accountants for the years ended December 30, 2001 and December 31, 2000 include explanatory paragraphs expressing doubt about our ability to continue as a going concern. WE CANNOT ASSURE YOU THAT FUTURE OPERATIONS OF ANY UNIT WILL BE PROFITABLE. Future revenues and profits, if any, will depend upon various factors, including: - the quality of restaurant and brewery operations, - the acceptance of our food and beer, and - general economic conditions. We cannot assure you that we will ever operate profitably. WE MAY BE UNABLE TO REPAY CURRENT MATURITIES OF EXISTING INDEBTEDNESS, FORCING US TO LIQUIDATE ALL OR A PORTION OF OUR ASSETS. OVERVIEW Without additional financing, our leveraged position, requirements for payments to the holders of our secured and subordinated debt and requirements for payments on our line of credit and loan 22 agreement may require us to liquidate all or a portion of our assets. We had working capital deficits of approximately $3.0 million at December 30, 2001 and approximately $3.5 million at December 31, 2000. As of March 27, 2002, we had outstanding (1) convertible secured debt aggregating $7,409,271, (2) non-convertible secured debt aggregating $6,500,000, (3) a line of credit for up to $1,000,000, of which we had borrowed the full amount, and (4) convertible subordinated debt aggregating $862,000. Of the outstanding convertible subordinated debt, $100,000 matured in November 2000, $300,000 matured in October 2001 and $50,000 matured in January 2002. We cannot assure you that we will be able to extend the maturity dates of those, or any other, notes. Our outstanding debt must be repaid in full as follows:
Type of Debt Principal Amount Maturity Date --------------------------------------------------------------------------- Convertible Secured Debt $ 7,409,271 February 2003 Non-Convertible Secured Debt $ 1,500,000 February 2003 Non-Convertible Secured Debt $ 5,000,000 March 2004 Line of Credit $ 1,000,000 March 2002 Convertible Subordinated Debt $ 450,000 Immediate Convertible Subordinated Debt $ 212,000 * Convertible Subordinated Debt $ 100,000 July 2002 Convertible Subordinated Debt $ 100,000 December 2002
---------- * Big Buck has agreed to make eleven additional monthly payments of $18,000 (commencing April 1, 2002) and one monthly payment of $14,000 (on March 1, 2003) to repay this note in full. CONVERTIBLE SECURED AND NON-CONVERTIBLE SECURED DEBT We granted the following security interests to WCERS in connection with their provision of certain debt financing: - a pledge of our limited partnership interest in Buck & Bass, - a pledge of our shares of the issued and outstanding common stock of BBBP Management Company, and - a security interest, assignment or mortgage, as applicable, in our interest in all assets now or hereafter owned, ownership interests, licenses, and permits, including, without limitation, a mortgage encumbering the Gaylord, Auburn Hills and Grand Rapids sites. We also granted to WCERS a right of first refusal pursuant to which WCERS may, for so long as the approximately $5.8 million promissory note is outstanding or WCERS owns more than 15% of our common stock, elect to purchase securities offered by us, within 45 days of the receipt of notice by WCERS, at the same price and on the same terms and conditions as are offered to a third party. Among other things, we agreed with WCERS, the holder of approximately $8.9 of our secured debt, that (1) we would not create, incur or suffer to be created or incurred or to exist, any lien of any kind upon any of our property or assets of any character whether then owned or thereafter acquired, or upon the income or profits therefrom except for certain permitted liens, (2) we would keep and maintain tangible net worth plus subordinated debt in an amount not less than $8.5 million, (3) we would keep and maintain a minimum debt coverage ratio of 1.25 to 1.0 (excluding Grapevine pre-opening and financing costs), (4) we would maintain our then current cash flow position, and (5) we would not permit the difference between our current assets and our current liabilities (other than subordinated debt) to be less than $500,000. We have notified WCERS that we have violated each of the foregoing covenants. On April 3, 2001, we entered into a letter agreement with WCERS pursuant to which the foregoing covenants 23 were modified to provide that (1) we must maintain tangible net worth plus subordinated debt in an amount not less than $6.25 million and (2) we have until January 1, 2002 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). We notified WCERS that we violated the amended covenants. On April 1, 2002, we entered into a letter agreement with WCERS pursuant to which the foregoing covenants were modified to provide that (1) we must maintain tangible net worth plus subordinated debt in an amount not less than $4.5 million and (2) we have until January 1, 2003 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). Our agreements with WCERS require us to make payments of principal and interest aggregating approximately $80,000 per month. We did not make the payments due on June 1, 2001 and July 1, 2001. Because we did not make timely payments of principal and interest on our indebtedness to WCERS, we are in default under our agreements with WCERS. As a result, WCERS may, by notice in writing to us, declare all amounts owing with respect to the agreements to be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which we previously waived. On October 1, 2001, we established a repayment schedule for the two missed payments whereby we will pay 1/6 of the amount due each month over a six-month period. These payments are in addition to all other amounts as they become due under the loan documents. We cannot assure you that we will maintain compliance with the amended covenants or be able to repay or refinance our indebtedness to WCERS. Our agreements with WCERS define an event of default to include our failure to perform any term, covenant or agreement contained in our agreement. In the event of a default which is not waived under our agreements with WCERS, our assets would be at risk. Foreclosure by WCERS would force us to cease all operations. In March 2002, we obtained a loan from United Bank and Trust Company for $5.0 million which matures in March 2004. The collateral of this loan is a $5.0 million letter of credit from WCERS. We cannot assure you that we will be able to repay our indebtness to United Bank. LINE OF CREDIT During 2001, we obtained a line of credit from Crestmark Bank for up to $1.0 million. The collateral on this line of credit is a $1.0 million letter from WCERS. This letter of credit is valid through March 2002. As of March 27, 2002, we had borrowed $1.0 million under this line of credit for working capital purposes. We anticipate repaying this line of credit with proceeds from our loan agreement with United Bank and Trust Company. CONVERTIBLE SUBORDINATED PROMISSORY NOTES To fund the maturity of the outstanding convertible subordinated promissory notes, we will be required to obtain additional financing or refinance the debt. However, we cannot assure you that we will be able to obtain the required funds or refinance the debt, which could materially adversely affect our business, operating results, cash flows and financial condition. As of March 27, 2002, our outstanding convertible subordinated promissory notes had the following terms and conditions: 24
Principal Date of Maturity Shares Issuable Conversion Amount Issuance Date Upon Conversion Price - ----------------- -------------- -------------- -------------------- --------------- $212,000 10-11-99 * 290,410 $ 0.73 $100,000 11-17-99 11-01-00 41,233 $2.4252 $100,000 01-19-00 10-01-01 100,000 $ 1.00 $100,000 12-04-00 10-01-01 100,000 $ 1.00 $100,000 10-08-99 10-07-01 66,666 $ 1.50 $ 50,000 01-27-00 01-01-02 68,493 $ 0.73 $100,000 07-20-01 07-20-02 115,473 $ 0.866 $100,000 12-11-01 12-11-02 194,552 $ 0.514
- ---------- * Big Buck has agreed to make eleven additional monthly payments of $18,000 (commencing April 1, 2002) and one monthly payment of $14,000 (on March 1, 2003) to repay this note in full. IF WE ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL WHEN REQUIRED, WE MAY BE REQUIRED TO SCALE BACK OUR OPERATIONS. If additional capital does not become available to us when required, we may be required to scale back our operations. We cannot assure you that we will be able to secure additional financing when required. If we are able to obtain financing, we cannot assure you that it will be on favorable or acceptable terms. To obtain additional financing, we anticipate that we will be required to sell additional debt or equity securities. New investors may seek and obtain substantially better terms than those available in connection with open market purchases and our issuance of securities in the future may result in substantial dilution. Our agreement with WCERS imposes limitations on our ability to incur additional indebtedness. We agreed that we would not create, incur, assume, guarantee or be or remain liable, contingently or otherwise, with respect to any indebtedness, except for indebtedness incurred in the ordinary course of business not to exceed at any time $1.5 million in the aggregate. Any indebtedness not in the ordinary course of business or in excess of $1.5 million requires the approval of WCERS. These restrictions may impede our ability to secure financing for future expansion and continued operations. Our failure to raise capital when needed would have a material adverse effect on our business, operating results, cash flows and financial condition. WE ARE NOT IN COMPLIANCE WITH THE NASDAQ CONTINUED LISTING REQUIREMENTS. IF WE DO NOT MAINTAIN OUR NASDAQ LISTING, YOU MAY HAVE DIFFICULTY RESELLING YOUR SECURITIES. Our common stock, Class A Warrants and units are currently listed on The Nasdaq SmallCap Market. We have received notices from Nasdaq regarding our non-compliance with the $1,000,000 minimum market value of publicly held shares requirement stated in Marketplace Rule 4310(c)(7) and the $1.00 minimum bid price requirement stated in Marketplace Rule 4310(c)(4). We have until June 17, 2002 to regain compliance with the minimum market value requirement, which would require our common stock to achieve a market value of publicly held shares of $1,000,000 or more for a minimum of 10 consecutive trading days. If we fail to meet this requirement, or fail to maintain compliance with any other listing requirement, our securities will become subject to delisting from The Nasdaq SmallCap Market. If we regain compliance with the minimum market value requirement by June 17, 2002, we will have until August 13, 2002 to regain compliance with the minimum bid price requirement, which would require our common stock to achieve a bid price of $1.00 or more for a minimum of 10 consecutive trading days. If we fail to meet this requirement, or fail to maintain compliance with any other listing requirement, our securities will become subject to delisting from The Nasdaq SmallCap Market. 25 If our securities do not continue to be listed on The Nasdaq SmallCap Market, such securities would become subject to certain rules of the SEC relating to "penny stocks." Such rules require broker-dealers to make a suitability determination for purchasers and to receive the purchaser's prior written consent for a purchase transaction, thus restricting the ability to purchase or sell the securities in the open market. In addition, trading, if any, would be conducted in the over-the-counter market in the so-called "pink sheets" or on the OTC Bulletin Board, which was established for securities that do not meet Nasdaq listing requirements. Consequently, selling our securities would be more difficult because smaller quantities of securities could be bought and sold, transactions could be delayed, and security analyst and news media coverage of our company may be reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for our securities. We cannot assure you that our securities will continue to be listed on The Nasdaq SmallCap Market. OUR INTEREST IN THE GRAPEVINE UNIT MAY BE REDUCED OR ELIMINATED BY BASS PRO. The Grapevine unit is owned and operated by Buck & Bass pursuant to our joint venture agreement with Bass Pro. In September 1999, Bass Pro declared the limited partnership agreement of Buck & Bass and the commercial sublease agreement for the Grapevine site to be breached and in default due to, among other things, our failure to make our required capital contribution. In February 2000, we made all required capital contributions and satisfied all subcontractors' liens and claims. In March 2000, we agreed with Bass Pro in writing to the reinstatement of the limited partnership agreement and the sublease. In August 2000, we generated approximately $1.4 million from the private placement of a $1.5 million secured promissory note to WCERS. We used these funds and working capital to lend $1.5 million to Buck & Bass in August 2000. These funds were applied by Buck & Bass to the construction of the Grapevine unit. During the first quarter of 2001, certain contractors of Buck & Bass filed liens and made demands for payment of additional sums aggregating approximately $1.4 million in connection with the construction of the Grapevine unit. In February 2001, as guarantor of the obligations of Buck & Bass, we arranged to have filed of record a bond with respect to each lien for which we had received notice. In March 2001, we obtained approximately $1.0 million in debt financing from Crestmark Bank, guaranteed by WCERS, for working capital purposes including the payment of such contractors. Although we have satisfied our obligations to certain subcontractors, we remain involved in litigation with the general contractor. We cannot assure you that we will be able to fully and finally discharge of record all outstanding liens and claims. If we fail to do so, we may be in material default under the limited partnership agreement and the commercial sublease agreement (described below). For more information regarding such litigation, please review "Legal Proceedings - Grapevine Unit." The existence of such encumbrances, the failure of Buck & Bass to perform quarterly customer satisfaction surveys and the failure of Buck & Bass to achieve annual gross sales of $7.0 million give Bass Pro the ability to declare an event of default under the sublease, terminate the sublease and demand all unpaid and reasonably calculable future rent over the balance of the sublease term. Pursuant to the limited partnership agreement, a material default under the sublease would also entitle Bass Pro to purchase our interest in the joint venture at 40% of book value, thereby eliminating our interest in the Grapevine unit. Further, Bass Pro has the right to purchase up to 15% of our interest in the joint venture, at 100% of our original cost, on or before August 31, 2002; provided, however, that our interest in the joint venture may not be reduced below 51%. The termination of the sublease or the elimination of our interest in the Grapevine unit would have a material adverse effect on our business, operating results, cash flows and financial condition. 26 IF BUCK & BASS IS REQUIRED TO PAY MORE THAN THE MINIMUM ANNUAL BASE RENT FOR THE GRAPEVINE SITE, FUNDS AVAILABLE TO US FOR OTHER PURPOSES WILL BE REDUCED. Pursuant to a commercial sublease agreement, Buck & Bass leases the Grapevine site from Bass Pro over a 15-year term. Buck & Bass is obligated to pay annual percentage rent in the amount of 5.5% on gross sales less than $11.0 million per year and 6.5% on gross sales in excess of $11.0 million per year; provided, however, that the minimum annual base rent is $385,000. Bass Pro may terminate the sublease in the event of a default which is not cured within the applicable grace period. In March 2000, we agreed with Bass Pro in writing to revise the definition of default under the sublease. As amended, the sublease provides that a default includes, but is not limited to: - the failure of Buck & Bass to remain open during all business days, - the failure of Buck & Bass to maintain on duty a fully trained service staff, - the failure of Buck & Bass to provide high quality food of the type provided at our Gaylord unit, - the failure of Buck & Bass to achieve gross sales in the first full calendar year immediately following the opening and for each calendar year thereafter of $7.0 million, - Buck & Bass encumbering in any manner any interest in the subleased premises, or - the failure of Buck & Bass to conduct full and complete customer surveys no less frequently than each calendar quarter. The minimum annual base rent is required whether the Grapevine unit is profitable or not. If Buck & Bass is required to pay in excess of the minimum annual base rent, the funds available to us for other purposes will be reduced. In the event of a default and termination of the joint venture agreement, our interest in the Grapevine unit would be eliminated. This would have a material adverse effect on our business, operating results, cash flows and financial condition. IF WE ARE REQUIRED TO PAY MORE THAN THE MINIMUM ANNUAL BASE RENT FOR THE GRAND RAPIDS OR AUBURN HILLS SITES, FUNDS AVAILABLE TO US FOR OTHER PURPOSES WILL BE REDUCED. In April 1997, we sold the Grand Rapids site, including all improvements thereto, to an entity owned by one of our shareholders, Eyde Brothers Development Co., pursuant to a real estate purchase and leaseback agreement for $1.4 million. Pursuant to a separate lease agreement, we lease the Grand Rapids site at a minimum annual base rent of $140,000 and a maximum annual base rent, of $192,500 over a ten-year term. The lease may be extended at our option for up to two additional five-year terms. In addition to the annual base rent, the lease, as amended in March 2000, provides that we are obligated to pay annual percentage rent in the amount of 5% on gross sales at the site in excess of $1.5 million per year. Annual gross sales did not exceed $1.5 million for the lease year ended April 2001. In August 1997, we entered into a real estate purchase and leaseback agreement providing for the sale of the Auburn Hills site to one of our shareholders, Michael G. Eyde, for $4.0 million. In connection with this transaction, we granted a five-year stock option, exercisable at $5.00 per share, for 50,000 shares of our common stock to Mr. Eyde. We lease the Auburn Hills site pursuant to a separate lease agreement which provides for a minimum annual base rent of $400,000, and a maximum annual base rent of $550,000, over a 25-year term. The lease may be extended at our option for up to two additional ten-year terms. In addition to the annual base rent, we are obligated to pay annual percentage rent of 5.25% of 27 gross sales at the site in excess of $8.0 million per year. We were required to pay Mr. Eyde annual percentage rent of $17,970 based upon annual gross sales for the third year of the lease term. Annual gross sales for the fourth year of the lease term did not exceed $8.0 million. Annual percentage rent is required whether or not such units are profitable. If we are required to pay annual percentage rent, the funds available to us for other purposes will be reduced. IF WE DEFAULT AND THE LESSOR OF THE GRAND RAPIDS SITE OR THE LESSOR OF THE AUBURN HILLS SITE TERMINATES THE RELATED LEASE, WE WOULD BE UNABLE TO CONTINUE OPERATING SUCH UNIT. The Grand Rapids and Auburn Hills lessors may terminate in the event of a default which is not cured within the applicable grace period. A default is defined as: - our failure to make a rental payment within 30 days after receipt of written notice that a payment is past due, or - our failure to perform our obligations under the lease, other than rent payments, within 30 days after written notice of a curable violation; provided, however, that if such default cannot be cured within the 30-day period, a default will be deemed to have occurred only if we have failed to commence a cure within such 30-day period. In the event of a default and termination of either lease, we would be unable to continue operating the related unit, which would have a material adverse effect on our business, operating results, cash flows and financial condition. IF WE ARE REQUIRED TO REPURCHASE THE GRAND RAPIDS SITE OR THE AUBURN HILLS SITE AND CANNOT DO SO, WE WOULD BE UNABLE TO CONTINUE OPERATING SUCH UNIT. Because annual gross sales at the Grand Rapids site did not exceed $1.5 million for the lease year ended April 2001, the lessor of the Grand Rapids site obtained the right to require us to repurchase such site for $1.4 million, plus $70,000 for each lease year on a pro rata basis. In March 2002, the lessor waived its right to require repurchase based upon annual gross sales for the lease years ended April 2001 and April 2002. The lessor of the Grand Rapids site has the option to require us to repurchase such site after the seventh full lease year for the same price. We also have the option to purchase the Grand Rapids site from the lessor after the seventh full lease year for the same price. If annual gross sales at the Auburn Hills site do not exceed $8.0 million for any two consecutive years during the lease term, the lessor of the Auburn Hills site could require us to repurchase such site for $4.0 million, plus $200,000 for each lease year on a pro rata basis. We also have the option to purchase the Auburn Hills site from the lessor after the seventh full lease year for the same price. If either lessor elects to exercise his option to require us to repurchase a site, we would be forced to repurchase such site at a premium over its sale price. We cannot assure you that we will have sufficient funds to repurchase either site. If we are required to repurchase a site and cannot do so, it would have a material adverse impact on our business, operating results, cash flows and financial condition. WE MAY BE UNABLE TO COMPETE WITH LARGER, BETTER ESTABLISHED RESTAURANT COMPETITORS. The restaurant industry is highly competitive with respect to price, service, location and food quality, including taste, freshness and nutritional value. New restaurants have a high failure rate. New restaurants generally experience a decline in revenue growth, or in actual revenues, following a period of 28 excitement that accompanies their opening. The restaurant industry is also generally affected by changes in consumer preferences, national, regional and local economic conditions, and demographic trends. The performance of individual restaurants may also be affected by factors such as traffic patterns, demographic considerations, and the type, number and location of competing restaurants. In addition, factors such as inflation, increased food, labor and employee benefit costs, and the unavailability of experienced management and hourly employees may also adversely affect the restaurant industry in general and our units in particular. Restaurant operating costs are further affected by increases in the minimum hourly wage, unemployment tax rates and similar matters over which we have no control. We face numerous well-established competitors, including national, regional and local restaurant chains, possessing substantially greater financial, marketing, personnel and other resources than we do. We also compete with a large variety of locally owned restaurants, diners and other establishments that offer moderately priced food to the public and with other brewpubs. Competitors could utilize the Big Buck Brewery & Steakhouse format or a related format. We cannot assure you that we will be able to respond to various competitive factors affecting the restaurant industry. WE MAY BE UNABLE TO COMPETE WITH LARGER, BETTER ESTABLISHED COMPETITORS IN THE BREWING INDUSTRY. The domestic beer market is highly competitive due to: - the enormous advertising and marketing expenditures by national and major regional brewers, - the proliferation of craft breweries and brewpubs, - the introduction of fuller-flavored products by certain major national brewers, and - a general surplus of domestic brewing capacity, which facilitates existing contract brewer expansion and the entry of new contract brewers. We cannot assure you that demand for craft brewed beers will continue. Most of our brewing competitors possess greater financial, marketing, personnel and other resources than we do. We cannot assure you that we will be able to succeed against such competition. OUR ABILITY TO EXPAND DEPENDS UPON A NUMBER OF FACTORS, MANY OF WHICH ARE BEYOND OUR CONTROL. In addition to the availability of adequate financing, any expansion of our operations will depend upon a variety of factors, some of which are currently unknown or beyond our control, including: - customer acceptance of Big Buck Brewery & Steakhouses and Big Buck Beer, - timely and economic development and construction of new units, - timely approval from local governmental authorities, - hiring of skilled management and other personnel, - ability of our management to apply its policies and procedures to a larger number of units, and - the general state of the economy. We cannot assure you that we will be able to open any additional units. 29 A CONTAMINATION PROBLEM IN OUR PRODUCTS COULD SERIOUSLY DAMAGE OUR REPUTATION AND MATERIALLY DECREASE OUR REVENUES. Our brewing operations are subject to certain hazards and liability risks faced by all brewers, such as potential contamination of ingredients or products by bacteria or other external agents that may be wrongfully or accidentally introduced into products or packaging. Our products are not pasteurized. While we have never experienced a contamination problem in our products, the occurrence of such a problem could result in a costly product recall and serious damage to our reputation for product quality. Our operations are also subject to certain injury and liability risks normally associated with the operation and possible malfunction of brewing and other equipment. Although we maintain insurance against certain risks under various general liability and product liability insurance policies, we cannot assure you that our insurance will be adequate. OUR OPERATIONS DEPEND UPON OBTAINING AND MAINTAINING GOVERNMENTAL LICENSES AND PERMITS REQUIRED FOR BREWING AND SELLING BEER. A significant percentage of our revenue is derived from beer sales. Total sales of alcohol, including beer, wine and hard liquor, accounted for 20.4% of our revenues during 2001. We must comply with federal licensing requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of the United States Department of Treasury, as well as the licensing requirements of states and municipalities where our units are located. Our failure to comply with federal, state or local regulations could cause our licenses to be revoked and force us to cease brewing and selling our beer. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. STATE LIQUOR LAWS MAY IMPEDE OUR OPERATIONS, LIMITING OUR FUTURE REVENUES. We are licensed under Michigan law as a "brewpub." A brewpub in Michigan is (1) limited to a combined annual production of not more than 5,000 barrels, (2) limited to no more than three units in Michigan, and (3) prohibited from selling beer on a wholesale basis. Buck & Bass is licensed under Texas law as a "brewpub." A brewpub in Texas is limited to the production of not more than 5,000 barrels of malt liquor, ale, and beer for each licensed brewpub established, operated, or maintained in Texas by the holder of the brewpub license. Brewpubs in Michigan and Texas are also licensed to sell hard liquor with appropriate licensing. Applicable legislation, regulations or administrative interpretations of liquor laws may hinder our operations or increase our operating costs. IF WE ARE UNABLE TO COMPLY WITH APPLICABLE RESTAURANT REGULATIONS, WE WILL BE UNABLE TO OPERATE; COMPLIANCE WITH SUCH REGULATIONS MAY INCREASE OUR OPERATING EXPENSES. The restaurant industry is subject to numerous federal, state and local government regulations, including those relating to the preparation and sale of food and those relating to building and zoning requirements. We are subject to regulation by air and water pollution control divisions of the Environmental Protection Agency of the United States and by certain states and municipalities in which our units are located. We are also subject to laws governing our relationship with our employees, including minimum wage requirements, overtime, working and safety conditions and citizenship requirements. Restaurant operating costs are affected by increases in the minimum hourly wage, unemployment tax rates, sales taxes and similar matters, such as any government mandated health insurance, over which we have no control. WE MAY FACE LIABILITY UNDER DRAM-SHOP LAWS. We are subject to "dram-shop" laws in Michigan and Texas. These laws generally provide someone injured by an intoxicated person the right to recover damages from the establishment that 30 wrongfully served alcoholic beverages to such person. We carry liquor liability coverage as part of our existing comprehensive general liability insurance. However, a judgment against us under a dram-shop statute in excess of our liability coverage could have a material adverse effect on our business, operating results, cash flows and financial condition. WE MUST PAY FEDERAL AND STATE EXCISE TAXES ON OUR BEER; WE MAY BE UNABLE TO RETAIN THE CREDITS THAT HELP US TO OFFSET PART OF SUCH TAXES. The federal government imposes an excise tax of $18.00 on each barrel of beer produced for domestic consumption in the United States. However, each brewer with production under 2,000,000 barrels per year is granted a small brewer's excise tax credit in the amount of $11.00 per barrel on its first 60,000 barrels produced annually. We cannot assure you that the federal government will not reduce or eliminate this credit. Michigan imposes an excise tax of $6.30 per barrel on each barrel of beer sold in Michigan. However, each brewer that is a "brewpub" under Michigan law and manufactures less than 50,000 barrels per year is granted a brewer's excise tax credit in the amount of $2.00 per barrel. Buck & Bass is subject to excise taxes under Texas law. Excise taxes in Texas are $6.138 per barrel for ale and malt liquor, and $6.00 per barrel for beer. However, Texas grants a 25% tax exemption for manufacturers of beer whose annual production in Texas does not exceed 75,000 barrels of beer per year. As a result, Buck & Bass faces an effective excise tax of $4.50 per barrel for beer. If our beer production exceeds the foregoing credit thresholds, our average excise tax rate would increase. It is possible that the rate of excise taxation could be increased by either federal or state governments, or both. Increased excise taxes on alcoholic beverages have been considered by the federal government as an additional source of tax revenue in connection with various proposals and could be included in future legislation. Future increases in excise taxes on alcoholic beverages, if enacted, could adversely affect our business, operating results, cash flows and financial condition. THE LOSS OF KEY PEOPLE, INCLUDING WILLIAM F. ROLINSKI, ANTHONY P. DOMBROWSKI AND TIMOTHY J. PUGH, COULD ADVERSELY AFFECT US. Our future success depends in large part upon the continued service of our key management personnel, including William F. Rolinski, Anthony P. Dombrowski and Timothy J. Pugh. Given our limited operating history, we depend on our ability to identify, hire, train and motivate qualified personnel necessary to enable us to continue operations. We do not have key person life insurance policies on any of our employees. The departure of key employees could have a material adverse effect on our business, operating results, cash flows and financial condition. Our success will also depend upon our ability to attract and retain qualified people, including additional management personnel. We cannot assure you that our current employees will continue to work for us or that we will be able to obtain the services of additional personnel necessary for any growth. To date, we have not entered into any agreements providing for the continued employment of our personnel. WE MAY REDEEM OUR OUTSTANDING CLASS A WARRANTS, CAUSING YOU TO LOSE YOUR RIGHT TO EXERCISE SUCH SECURITIES. We may redeem our outstanding Class A Warrants at any time for $0.01 per warrant, on 30 days prior written notice, if the high closing bid price of our common stock exceeds $9.00 per share, subject to customary antidilution adjustments, for 20 consecutive trading days. If the Class A Warrants are redeemed, those warrant holders will lose their right to exercise the warrants except during such 30-day redemption period. Redemption of the Class A Warrants could force the holders to exercise the warrants at a time when it may be disadvantageous for the holders to do so or to accept the redemption price of $0.01 per warrant. 31 OUR MANAGEMENT POSSESSES SIGNIFICANT CONTROL WHICH COULD REDUCE YOUR ABILITY TO RECEIVE A PREMIUM FOR YOUR SECURITIES THROUGH A CHANGE IN CONTROL. As of March 1, 2002, our officers and directors beneficially owned approximately 53.9% of our outstanding common stock. Accordingly, such persons can: - exert substantial influence over the composition of our board of directors, - generally direct our affairs, and - may have the power to control the outcome of shareholder approvals of business acquisitions, mergers and combinations and other actions. We are also subject to Michigan statutes regulating business combinations and restricting voting rights of certain persons acquiring shares of common stock which may hinder or delay a change in control. FLUCTUATIONS IN OUR OPERATING RESULTS MAY RESULT IN DECREASES IN THE MARKET PRICE OF OUR SECURITIES. Our sales and earnings are expected to fluctuate based on seasonal patterns. Based on our existing units, we anticipate that our highest earnings will occur in the second and third calendar quarters due to the milder climate during those quarters in Michigan. Because of the effect of seasonality on our business, results for any quarter are not necessarily indicative of the results for a full fiscal year. YOU MAY NOT BE ABLE TO SELL OUR SECURITIES AT THE SAME PRICE AT WHICH YOU PURCHASE OUR SECURITIES DUE TO SIGNIFICANT VOLATILITY IN THE MARKET PRICE OF OUR SECURITIES. The market price of our common stock has been subject to significant fluctuations in response to numerous factors, including: - variations in our annual or quarterly financial results or those of our competitors, - changes by financial research analysts in their estimates of our earnings or those of our competitors, - conditions in the economy in general or in the brewing industry in particular, - unfavorable publicity, and - changes in applicable laws and regulations, or judicial or administrative interpretations thereof, affecting us or the brewing industry. During 2000, our common stock ranged from a high of $2.88 per share on February 7, 2000, to a low of $0.56 per share on December 29, 2000. During 2001, our common stock ranged from a high of $1.50 on seven trading days in February 2001 to a low of $0.38 per share on December 27, 2001. We cannot assure purchasers of our securities that they will be able to sell such securities at or above the prices at which they were purchased. THE SALE OF ADDITIONAL SECURITIES MAY BE DILUTIVE TO EXISTING SECURITY HOLDERS. We had 6,083,358 shares of common stock outstanding as of March 20, 2002. On that date, we also had warrants, stock options, convertible debt and other rights outstanding to purchase an additional 9,342,513 shares of common stock, exercisable at prices ranging from $0.19 to $8.00 per share. We have also registered 32 certain shares of our common stock for resale on the public market. The sale of such shares, and the sale of additional shares which may become eligible for sale in the public market from time to time upon the exercise of warrants, stock options, convertible debt and other rights, may be dilutive to existing security holders and could have the effect of depressing the market price of our securities. 33 ITEM 7 FINANCIAL STATEMENTS INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE ------- BIG BUCK BREWERY & STEAKHOUSE, INC. Report of Independent Public Accountants............................................ 35 Consolidated Financial Statements Consolidated Balance Sheets................................................ 36 Consolidated Statements of Operations...................................... 37 Consolidated Statements of Shareholders' Equity............................ 38 Consolidated Statements of Cash Flows...................................... 39 Notes Consolidated to Financial Statements................................. 40
34 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Big Buck Brewery & Steakhouse, Inc.: We have audited the accompanying consolidated balance sheet of Big Buck Brewery & Steakhouse, Inc. (a Michigan corporation) as of December 30, 2001 and December 31, 2000, and the related consolidated statements of operations, shareholders' equity and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Big Buck Brewery & Steakhouse, Inc. as of December 30, 2001 and December 31, 2000, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 9 to the financial statements, the Company has suffered recurring losses from operations and has a net working capital deficiency, which raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 9. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ PLANTE & MORAN, LLP Grand Rapids, Michigan, April 1, 2002 35 BIG BUCK BREWERY & STEAKHOUSE, INC. Consolidated Balance Sheets
December 30, December 31, 2001 2000 --------------- ------------- ASSETS CURRENT ASSETS: Cash $ 96,453 $ 22,901 Accounts receivable 237,187 385,536 Inventories (Note 1) 223,891 309,906 Prepaids and other 592,927 384,669 ------------- ------------- Total current assets 1,150,457 1,103,012 PROPERTY AND EQUIPMENT (Note 1) 22,926,270 24,030,987 OTHER ASSETS, net 803,881 1,094,367 ------------- ------------- $ 24,880,609 $ 26,228,366 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 1,925,998 $ 2,972,225 Accrued expenses 1,099,017 676,555 Current maturities of long-term obligations 1,151,728 949,657 ------------- ------------- Total current liabilities 4,176,743 4,598,437 LONG-TERM OBLIGATIONS, less current maturities (Note 2) 15,084,690 14,379,594 ------------- ------------- Total liabilities 19,261,433 18,978,031 MINORITY INTEREST (Note 8) 466,143 463,811 SHAREHOLDERS' EQUITY (Notes 5 and 6): Common stock, $0.01 par value, 20,000,000 shares authorized; 6,083,358 and 5,474,562 shares issued and outstanding 60,834 54,746 Warrants - 153,650 Additional paid-in capital 14,870,141 14,153,174 Accumulated deficit (9,777,941) (7,575,046) ------------- ------------- Total shareholders' equity 5,153,033 6,786,524 ------------- ------------- $ 24,880,609 $ 26,228,366 ============= =============
The accompanying notes are an integral part of these financial statements. 36 BIG BUCK BREWERY & STEAKHOUSE, INC. Consolidated Statements of Operations
For the Years Ended ------------------------------- December 30, December 31, 2001 2000 ------------ ------------- REVENUE: Restaurant sales $ 17,207,829 $ 16,230,185 Wholesale and retail sales 280,128 408,097 ------------- ------------- Total revenue 17,487,957 16,638,282 ------------- ------------- COSTS AND EXPENSES: Cost of sales 5,763,345 5,676,108 Restaurant salaries and benefits (Notes 6 and 7) 4,591,917 5,131,584 Operating expenses 3,694,304 3,981,450 Depreciation 1,338,650 961,003 Preopening expenses and store development costs (Note 3) 354,923 494,630 General and administrative expenses 1,785,886 1,675,700 ------------- ------------- Total costs and expenses 17,529,025 17,920,475 ------------- ------------- LOSS FROM OPERATIONS (41,068) (1,282,193) ------------- ------------- OTHER EXPENSE: Interest expense (1,658,409) (1,448,822) Other expense/amortization of financing cost (501,086) (535,746) ------------- ------------- Other expense, net (2,159,495) (1,984,568) ------------- ------------- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (2,200,563) (3,266,761) INCOME TAX EXPENSE -- -- ------------- ------------- LOSS BEFORE MINORITY INTEREST (2,200,563) (3,266,761) MINORITY INTEREST SHARE OF JOINT VENTURE (2,332) 83,506 NET LOSS $ (2,202,895) $ (3,183,255) ============= ============= BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.37) $ (0.59) ============= ============= OUTSTANDING WEIGHTED AVERAGE SHARES 5,883,417 5,422,102 ============= =============
The accompanying notes are an integral part ofthese financial statements. 37 BIG BUCK BREWERY & STEAKHOUSE, INC. Consolidated Statements of Shareholders' Equity For the Years Ended
ADDITIONAL COMMON STOCK PAID-IN ACCUMULATED SHARES AMOUNT WARRANTS CAPITAL DEFICIT TOTAL BALANCE, January 2, 2000 5,405,481 54,055 153,650 13,685,520 (4,391,791) 9,501,434 Issuance of warrants for services rendered -- -- -- 57,866 -- 57,866 Issuance of warrants to WCERS -- -- -- 300,000 -- 300,000 Issuance of warrants to Mike Eyde -- -- -- 28,750 -- 28,750 Issuance of common stock for employee stock purchase plan at $1.447655 15,374 154 -- 22,103 -- 22,256 Conversion of debt into common stock at $1.4752 33,893 339 -- 49,660 -- 49,999 Issuance of common stock for employee stock purchase plan at $0.478125 19,814 198 -- 9,275 -- 9,474 Net loss -- -- -- -- (3,183,255) (3,183,255) ---------- --------- --------- ----------- ------------ ------------ BALANCE, December 31, 2000 5,474,562 54,746 153,650 14,153,174 (7,575,046) 6,786,524 Issuance of common stock for debt and and interest to WCERS 323,406 3,234 -- 324,376 -- 327,610 Issuance of common stock for services to to Morgan James 125,000 1,250 -- 112,500 -- 113,750 Issuance of common stock for employee stock purchase plan at $0.478125 20,914 209 -- 9,790 -- 10,000 Issuance of common stock for services to Columbia Construction 50,000 500 -- 45,000 -- 45,500 Issuance of common stock for services to to Morgan James 75,000 750 -- 66,750 -- 67,500 Issuance of common stock for employee stock purchase plan at $0.3485 14,476 145 -- 4,900 -- 5,045 Expiration of warrants -- -- (153,650) 153,650 -- -- Net loss -- -- -- -- (2,202,895) (2,202,895) ---------- --------- --------- ----------- ------------ ------------ BALANCE, December 30, 2001 6,083,358 60,834 -- 14,870,141 (9,777,941) 5,153,033 ========== ========= ========= =========== ============ ============
The accompanying notes are an integral part of these financial statements. 38 BIG BUCK BREWERY & STEAKHOUSE, INC. Consolidated Statements of Cash Flows
For the Years Ended ------------------------------------- December 30, December 31, 2001 2000 ---------------- --------------- OPERATING ACTIVITIES: Net loss $ (2,202,895) $ (3,183,255) Adjustments to reconcile net loss to cash flows used in operating activities-- Depreciation and amortization 1,720,112 1,488,609 Loss on sale of property 6,868 46,998 Loss on forfeiture of property 354,923 - Minority interest's share of joint venture income (loss) 2,332 (83,506) Interest expense paid for with common stock 303,170 - Consulting services paid for with common stock 94,519 - Change in operating assets and liabilities: Accounts receivable 148,349 (152,263) Inventories 86,015 (74,235) Prepaids and other (121,527) (136,577) Accounts payable (1,046,227) 336,454 Accrued expenses 222,462 224,700 -------------- ------------- Net cash used in operating activities (431,899) (1,533,075) -------------- ------------- INVESTING ACTIVITIES: Purchases of property and equipment (736,490) (4,409,574) Increase in other assets (34,710) - Proceeds from sale of asset 7,750 -- -------------- ------------- Net cash used in investing activities (763,450) (4,409,574) -------------- ------------- FINANCING ACTIVITIES: Borrowings under long-term debt 1,199,729 9,300,000 Payments on long-term debt and capital lease obligations (268,122) (3,129,079) Payment of deferred financing costs (17,750) (606,330) Tenant allowance 340,000 -- Proceeds from sale of common stock 15,045 31,731 -------------- ------------- Net cash provided by financing activities 1,268,901 5,596,322 -------------- ------------- INCREASE (DECREASE) IN CASH 73,552 (346,327) CASH, beginning of year 22,901 369,228 -------------- ------------- CASH, end of year $ 96,453 $ 22,901 ============== ============= SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ 1,099,428 $ 1,497,398 Income taxes paid -- -- NONCASH TRANSACTIONS: Issuance of common stock, stock options and warrants for property and services and interest and debt 554,360 386,614 Accounts payable assumed for purchase of equipment 800,000 Conversion of long-term debt to common stock 50,000 Noncash contribution by minority partner 399,976
The accompanying notes are an integral part of these financial statements. 39 BIG BUCK BREWERY & STEAKHOUSE, INC. Notes to Consolidated Financial Statements December 30, 2001 and December 31, 2000 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES: NATURE OF BUSINESS Big Buck Brewery & Steakhouse, Inc. (f/k/a Michigan Brewery, Inc.) develops and operates restaurant-brewpubs under the name "Big Buck Brewery & Steakhouse." As of December 30, 2001, the Company owned and operated three units in the state of Michigan. The first unit opened in Gaylord, Michigan, on May 26, 1995. Subsequent Michigan units opened on March 17, 1997 in Grand Rapids and on October 1, 1997 in Auburn Hills, a suburb of Detroit. On August 31, 2000, the Company opened a fourth unit in Grapevine, Texas, a suburb of Dallas. This unit is operated by Buck & Bass, L.P. pursuant to a joint venture agreement between the Company and Bass Pro Outdoor World, L.P. The Company incurred net losses of $2,202,895 in 2001 and $3,183,255 in 2000. The Company has a limited operating history, and future revenues and attaining profitability from operations will depend upon various factors, including market acceptance of the Big Buck Brewery & Steakhouse concept and general economic conditions. The Company's ability to achieve profitability depends on its ability to refinance its indebtedness, increase revenues, reduce costs and attain sufficient working capital. FISCAL YEAR The Company has adopted a 52-/53-week fiscal year ending on the Sunday nearest December 31 of each year. All references herein to "2001" and "2000" represent the fiscal years ended December 30, 2001 (a 52 week year) and December 31, 2000 (a 52 week year), respectively. CONSOLIDATION The consolidated financial statements include the accounts of the Company and its majority-owned subsidiary, Buck & Bass, L.P. All significant intercompany accounts and transactions are eliminated. INVENTORIES Inventories consist primarily of restaurant food and beverage items, raw materials used in the brewing process, finished goods, including beer in kegs and beer held in fermentation prior to the filtration and packaging process, and retail goods for resale. Inventories are stated at the lower of cost or market as determined by the first-in, first out inventory method and consisted of the following at:
December 30, December 31, 2001 2000 -------------- -------------- Food..................................... $ 95,757 $ 145,610 Brewery (including wine and liquor)...... 103,452 116,416 Retail goods............................. 24,682 47,880 -------------- ------------- $ 223,891 $ 309,906 ============== =============
40 PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Improvements are capitalized, while repair and maintenance costs are charged to operations when incurred. Property and equipment are depreciated using the straight-line method for financial reporting purposes and accelerated methods for income tax reporting purposes over their estimated useful lives of 5 to 40 years. In the event that facts and circumstances indicate that the carrying amount of property may not be recoverable, an evaluation would be performed using such factors as recent operating results, projected cash flows and management's plans for future operations. Property and equipment consisted of the following at:
December 30, December 31, Estimated 2001 2000 Useful Lives --------------- ----------------- ------------- Land and improvements $ 5,052,914 $ 5,052,914 20 years for improvements Leasehold improvements 5,978,865 5,836,092 15 years Building and improvements 9,328,391 9,328,391 40 years Brewery equipment 2,656,518 2,656,518 12-30 years Restaurant equipment 1,880,255 1,838,876 10 years Furniture, fixtures and equipment 2,665,956 2,672,117 5-7 years ------------- ---------- Total property and equipment 27,562,899 27,384,908 Accumulated depreciation (4,636,629) (3,353,921) ------------- ----------- Net carrying amount $ 22,926,270 $24,030,987 ============= ===========
INCOME TAXES Deferred tax assets and liabilities are computed based on the difference between the financial reporting and tax bases of the Company's assets and liabilities using currently enacted tax rates. BASIC LOSS PER SHARE Basic net loss per share is computed by dividing net income by the weighted average number of common shares outstanding during the year, without regard to stock options outstanding. In the computation of fully diluted earnings per share, the weighted average shares outstanding is increased to reflect the potential dilution if stock warrants, stock options and convertible securities were to be exercised or converted common stock, if such exercise or conversion has a dilutive effect. The options, warrants, and convertible securities have been excluded from the earnings per share calculation because each would have an antidilutive effect. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Ultimate results could differ from those estimates. 41 2. LONG-TERM OBLIGATIONS: Long-term obligations consisted of the following as of:
December 30, December 31, 2001 2000 ---------------- -------------- Convertible note payable to the Wayne County Employees' Retirement System (WCERS), with monthly payments beginning April 1, 2000, in an amount which would fully amortize the principal and interest over a period of 300 months, which approximates $53,400, including interest at 10%. The unpaid balance is due in February 2003 and is convertible into common stock at $2.42 per share at any time during the agreement. 5,806,084 5,840,271 Convertible notes payable to WCERS, with monthly payments of $14,756 including interest at 10%, due February 2003. The note is convertible into common stock at $2.42 per share. This note is guaranteed by a shareholder of the Company. 1,603,187 1,613,980 Equipment note payable to WCERS, with monthly interest payments at 11%, due February 2003. 1,500,000 1,500,000 Capital lease obligations (see below). 5,400,000 5,400,000 Line of Credit for $1,000,000 from Crestmark Bank, monthly interest only payments at prime plus one percent (effective rate of 5.75 percent at December 31, 2001). Principal due March 2002, collateralized by letter of credit from WCERS. This line of credit was refinanced on a long-term basis subsequent to year end. 999,729 -- Convertible subordinated promissory notes payable to various investors, bearing interest at 10%, due October 2000 through November 2000. 340,000 350,000 Convertible subordinated promissory notes payable to various investors, bearing interest at 10%, due October 2001 through March 2002. 187,417 425,000 Convertible subordinated promissory notes payable to director and Company owned by a director, bearing interest at 10%, due July 2002 through December 2002. 200,000 -- Leasehold tenant allowance to be repaid as the result of a settlement reached with Opry Mills to terminate lease, due March 2002. 200,000 -- Convertible subordinated promissory notes payable to shareholder, with monthly interest payments ranging from 10.00% to 12.75%, remaining balance due January 2001 through April 2001. The notes are unsecured. 200,000 200,000 ------------- ------------- Total 16,236,418 15,329,251 Less-Current maturities 1,151,728 949,657 ------------- ------------- Long-term obligations $ 15,084,690 $ 14,379,594 ============= =============
42 The Notes payable to WCERS are collateralized by all assets of the Company, the Company's limited partnership interest in Buck & Bass, L.P., and a pledge of the Company's shares of the issued and outstanding common stock of BBBP Management Company. Effective December 2001 and February 2002, two officers of WCERS became directors of the Company. The debt agreements with WCERS contain certain financial covenants, including minimum tangible net worth, debt coverage, working capital and liabilities to tangible net worth ratios. At December 31, 2000, the Company was not in compliance with the debt coverage and working capital ratios. On April 3, 2001, the Company entered into a letter agreement with WCERS pursuant to which the foregoing covenants were modified to provide that (1) the Company must maintain tangible net worth plus subordinated debt in an amount not less than $6.25 million and (2) the Company had until January 1, 2002 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). At December 30, 2001, the Company was not in compliance with various covenants. On April 1, 2002, the Company entered into a letter agreement with WCERS pursuant to which the foregoing covenants were modified to provide that (1) the Compnay must maintain tangible net worth plus subordinated debt in an amount not less than $4.5 million and (2) the Company has until January 1, 2003 to meet all other covenants set forth in the loan documents (unless modified by the parties in writing). In April 1997, the Company entered into a real estate sale and leaseback agreement with a shareholder of the Company, for the land and property of its Grand Rapids unit. The Company received proceeds of $1,400,000 and in return, entered into a ten-year lease with a minimum annual base rent of $140,000 and a maximum annual base rent of $192,500 and percentage rent provisions. In March 2000, the lease was amended to adjust the gross sales level over which annual percentage rent is payable to $1,500,000 per year. Because annual gross sales did not exceed $1.5 million for the lease year ended April 2001, the lessor obtained the right to require the Company to repurchase the Grand Rapids site for $1.4 million, plus $70,000 for each lease year on a pro rata basis. In March of 2002, the lessor waived its right to require repurchase based upon annual gross sales for the lease years ended April 2001 and April 2002. The lessor has the option to require the Company to repurchase the Grand Rapids site after the seventh full lease year for the same price. In August 1997, the Company entered into a second real estate sale and leaseback agreement with the same shareholder, for the land of its Auburn Hills unit. The Company received proceeds of $4,000,000 and in return, entered into a 25-year lease with a minimum annual base rent of $400,000 and percentage rent provisions. In the event gross sales, as defined, do not exceed $8,000,000 for any two consecutive lease years, the Company is obligated to repurchase the land for $4.0 million, plus $200,000 for each lease year on a pro rata basis. In 2000, the Company was required to pay the shareholder annual percentage rent of $19,000 based upon annual gross sales for the lease year ended October 2000. Annual gross sales for the lease year ended October 2001 did not exceed $8.0 million. The Company has the option to purchase the Auburn Hills site from the lessor after the seventh full lease year for the same price. No gain or loss was recognized on the sale and leaseback transactions and the leases were accounted for as financing transactions. Management expects that if the Company was required to purchase the land at these units that these leases could be renewed or replaced by mortgage or other financing arrangements; however, there can be no assurance that such financing would be available on acceptable terms or at all. 43 The convertible subordinated promissory notes may be converted at any time, at the option of the holders, into a total of 1,066,440 shares of common stock. Interest is paid monthly in arrears. $400,000 of the convertible subordinated notes matured as of December 30, 2001 and were not paid. Therefore, the notes are in default at December 30, 2001. An additional note of $50,000 became due in January 2002 and was not paid. In March 2001, the Company entered into a first amendment and acknowledgment of partial payment with the holder of one of the convertible subordinated promissory notes with a principal amount of $250,000. Pursuant to such agreement, the Company repaid $75,000 of principal, agreed to a repayment schedule involving monthly payments of principal and interest of $18,161, commencing May 1, 2001, and adjusted the conversion price on such note from $1.4752 to $0.73. Also in March 2001, the Company entered into a first amendment with the holder of the non-convertible subordinated promissory note to shareholder with a principal amount of $100,000. Pursuant to such agreement, the Company made such note convertible into shares of the Company's common stock at a conversion price of $1.00 and extended the maturity date of such note until October 2001. In addition, the Company entered into a first amendment with the holder of one of the convertible subordinated promissory notes with a principal amount of $100,000. Pursuant to such agreement, the maturity date of such note was extended until October 2001 and the conversion price was adjusted from $1.9188 to $1.00. In April 2001, the Company entered into a first amendment with the holder of one of the convertible subordinated promissory notes with a principal amount of $50,000. Pursuant to such agreement, the maturity date of such note was extended until January 2002 and the conversion price was adjusted from $1.9125 to $0.73. In March 2002, the Company obtained a loan from United Bank and Trust Company for $5.0 million, with monthly payments of $95,870, including interest at 5.57 percent, through February 2004. The remaining balance is due in March 2004. The collateral of this loan is a $5.0 million letter of credit from WCERS. The Company intends to use a portion of the proceeds of this loan to pay all outstanding borrowings on the Crestmark line of credit, and accordingly, that amount has been classified as long-term debt at December 30, 2001. Maturities of long-term obligations as of December 30, 2001, based on the amended payment terms discussed above, are as follows: 2002 1,151,728 2003 9,004,731 2004 679,959 2005 -- 2006 -- Thereafter 5,400,000 ----------- $16,236,418 ===========
3. OPERATING LEASE In November 2000, the Company executed a lease with Opry Mills Limited Partnership, a division of the Mills Corporation, for approximately 20,000 square feet of space in the Opry Mills mall over a 10-year term. Beginning August 2001, the company was obligated to pay monthly rental payments of $43,211, regardless of whether the store was open for business. Additionally, the lease required the Company to pay an annual percentage rent in the amount of 6% on gross sales in excess of $8.5 million. The Company did not pay the rental payments. 44 In March 2002, the Company terminated the lease agreement for $200,000. Under the terms of the possession agreement and the settlement and termination agreement, the Company forfeited all improvements made to the site, including assets purchased through use of the tenant allowance of $340,000 provided by the landlord. As a result of the terminated lease transaction, the Company incurred a loss of approximately $355,000, including the termination fee paid in 2002. The loss is recorded in preopening expenses and store development costs in the statement of operations. The construction on this location was performed by Columbia Construction, a company owned by an individual who became a director of the Company in February 2002. 4. INCOME TAXES: The deferred tax assets and liabilities consisted of the following at:
December 30, December 31, 2001 2000 ----------------- ----------------- Deferred tax liabilities (831,000) (870,000) Deferred tax assets 3,991,000 3,430,000 --------------- -------------- Net deferred tax asset 3,160,000 2,560,000 Valuation allowance (3,160,000) (2,560,000) --------------- -------------- Net deferred tax -- --
Effective January 1, 1996, the Company converted from S Corporation status to a C Corporation. As of December 30, 2001 and December 31, 2000, the Company's deferred tax assets consist primarily of net operating loss carryforwards, and deferred tax liabilities result from the use of accelerated methods of depreciation for tax purposes. The Company has recorded a full valuation allowance against the net deferred tax asset due to the uncertainty of realizing the related benefit. As of December 30, 2001, the Company had net operating loss carryforwards of approximately $11.7 million which expire through the year 2021. 5. WARRANTS: Each of the 2,550,000 units issued in connection with the Company's IPO consisted of one share of common stock and one Redeemable Class A Warrant, exercisable at $8.00 per share. In 2001, the expiration date of these warrants was extended through December 2002. In connection with the bridge financing before the IPO, the Company issued warrants, exercisable at $5.00 per share, for 150,000 shares of its common stock. These warrants expired in February 2001. In connection with the joint venture agreement (Notes 1 and 7), the Company issued a warrant, exercisable at $2.625 per share, for 50,000 shares of its common stock to Bass Pro expiring in August 2003. The Company also issued a warrant to its private placement agent, exercisable at $2.7625 per share, for 14,582 shares of its common stock, expiring in November 2003. In exchange for services, the Company issued warrants, exercisable at $1.625 per share, for 100,000 shares of its common stock. In connection with the same service agreements, the Company also issued warrants for 200,000 shares of common stock. 100,000 of these warrants are exercisable at $2.50 per share and vest in October 2000. The remaining 100,000 warrants, are exercisable at $3.50 per share and vest in October 2001. All of the warrants issued as part of these service agreements expire in October 2002. 45 In connection with a consulting agreement, the Company issued a warrant, exercisable at $1.625 per share, for 50,000 shares of its common stock, expiring in October 2002. The Company also issued warrants, exercisable at $2.00 per share, for 150,000 shares of its common stock, vesting in 50,000 increments as the Company's stock price reaches $4.00, $5.00, and $6.00 per share, expiring in October 2002. In connection with the refinancing of debt, the Company issued a warrant to WCERS, exercisable at $2.00 per share, for 200,000 shares of its common stock, expiring in February 2004. The conversion to stock of these warrants and the convertible notes disclosed in Note 2, when added to common stock owned by WCERS, would result in WCERS owning 3,585,088 shares of common stock, or a 38.4% ownership of the Company. In connection with amending the Auburn Hills lease, the Company issued a warrant, exercisable at $1.8125 per share, for 25,000 shares of its common stock, expiring in January 2003. The Company has also issued a warrant to this lessor, which is exercisable at $5.00 per share, for 25,000 shares, expiring August 2002. 6. STOCK OPTION AND STOCK PURCHASE PLANS: During January 1996, the Company adopted the 1996 Stock Option Plan (the Plan), pursuant to which options to acquire an aggregate of 600,000 shares, as amended in June 1997, of the Company's common stock may be granted. Under the Plan, the board of directors may grant options to purchase shares of the Company's stock to eligible employees, nonemployees and contractors at a price not less than 100% of the fair market value at the time of the grant for both incentive and nonstatutory stock options. Options granted under the Plan vest annually over four years from date of grant and are exercisable for ten years, except that the term may not exceed five years for incentive stock options granted to persons who own more than 10% of the Company's outstanding voting stock. Also, during January 1996, the Company adopted the 1996 Director Stock Option Plan (the Director's Plan) pursuant to which options to acquire an aggregate of 100,000 shares of the Company's common stock were available for grant to outside directors. Under the Director's Plan, 5,000 options were automatically granted to each outside director upon the completion of the Company's IPO, and thereafter 5,000 options were granted annually for each year of continued service by the outside director. Each option was granted at fair market value on the date of grant, vested one year after the date of grant and was exercisable for ten years. During 2000, this plan was canceled with options for 75,000 shares outstanding. These options will remain exercisable as originally issued, and additional options will not be issued. During October, 2000, the Company adopted the 2000 Stock Option Plan (the 2000 Plan), pursuant to which options to acquire an aggregate of up to 1,000,000 shares of common stock may be granted to qualified employees, directors, and outside consultants. Under the 2000 Plan, 20,000 options are automatically granted annually to each outside director and an additional 10,000 options to each outside director serving on the executive committee. Each option is granted at fair market value on the date of grant, vests one year after the date of grant and is exercisable for ten years. 46 A summary of the status of the Company's stock option plans at December 30, 2001 and December 31, 2000, and changes during the fiscal years then ended, is presented in the table and narrative below:
Year Ended Year Ended December 30, 2001 December 31, 2000 --------------------------------- -------------------------------- Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price ------ ---------------- ------ ----------------- Outstanding, beginning of Period.................. 746,058 $ 3.30 717,800 $ 4.06 Granted...................... 411,333 .75 283,086 1.70 Exercised.................... -- -- -- -- Forfeited.................... 178,740 2.52 254,828 4.17 Expired...................... 25,000 5.00 -- -- --------- ---------- ------------ ------- Outstanding, end of Period.................. 983,651 $ 2.31 746,058 $ 3.30 ========= ========== ============ ======= Exercisable, end of Period.................. 922,751 483,458 ========= ============ Weighted average fair value Of options granted...... $ .69 $ 1.47 ========== =======
The following table provides certain information with respect to stock options outstanding at December 30, 2001:
Stock options Weighted average Weighted average Range of exercise prices Outstanding exercise price remaining contractual life ------------------------------ --------------------- -------------------- --------------------------- .47 - 1.50 491,333 .86 8.96 1.51 - 3.00 197,818 2.43 7.36 3.01 - 5.25 294,500 4.63 4.64
The following table provides certain information with respect to stock options exercisable at December 30, 2001:
Stock options Weighted average Range of exercise prices exercisable exercise price ------------------------------ --------------------- -------------------- .47 - 1.50 455,333 .85 1.51 - 3.00 172,918 2.50 3.01 - 5.25 294,500 4.63
47 The Company accounts for options issued to employees and directors under these plans using APB Opinion No. 25, under which no compensation cost has been recognized. Had compensation cost for these plans been determined consistent with SFAS No. 123, "Accounting for Stock-Based Compensation," the Company's net loss and loss per share would have been increased to the following pro forma amounts:
2001 2000 ------------------ ------------------ Net Loss As Reported $ (2,202,895) $ (3,183,255) Pro Forma (2,549,634) (3,546,385) Basic and Diluted EPS As Reported (.37) (0.59) Pro Forma (.43) (0.63)
The fair value of each employee option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2001 and 2000, respectively: risk-free interest rates of 1.68% and 4.93%; no expected dividend yields; expected lives of 7 years; and expected volatility of 131.09% and 106.50%. Non-employee option grants are recorded at fair value. There have been no non-employee options granted under the plan. On October 18, 1999, the Company established a qualified Employee Stock Purchase Plan, effective as of January 1, 2000. The Company is authorized to issue up to 200,000 shares of its common stock for qualified employees, as defined. Under the terms of the plan, employees can choose each year to have up to 15 percent of their annual base earnings withheld to purchase the Company's common stock. The purchase price of the stock is 85 percent of the lower of the closing price at the beginning of the 18-month offering period or end of the 6-month accumulation period. Under the plan, the Company sold approximately 35,000 shares in each of 2001 and 2000. 7. RETIREMENT PLAN: On February 1, 1999, the Company began sponsoring a 401(k) plan for employees with a minimum of six months of service with the Company. Contributions to the plan totaled $8,731 and $12,559 for 2001 and 2000, respectively. 8. COMMITMENTS AND CONTINGENCIES: LEGAL PROCEEDINGS The Company is involved in various legal actions rising in the ordinary course of business. Although the outcomes of any such legal actions cannot be predicted, in the opinion of management there is no legal proceeding pending against or involving the Company, except as described below, for which the outcome is likely to have a material adverse effect upon the financial position or results of operations of the Company. JOINT VENTURE The Company owns 89.1 percent as a limited partner and 0.8 percent as a general partner, for an aggregate 89.9 percent ownership of Buck & Bass, L.P., which owns and operates the Grapevine unit. During 2000, the Company contributed $3.8 million to the limited partnership. During the first quarter of 2001, certain contractors of Buck & Bass filed liens and made demands for payment of additional sums aggregating approximately $1.4 million in connection with the construction of the Grapevine unit, which the Company disputes. In February 2001, as guarantor of the obligations of Buck & Bass, the Company arranged to have filed of record a bond with respect to each lien for which the Company had received notice. The Company recorded a liability for $800,000 as its best estimate of amounts it may be required to pay to settle the dispute in 2000. The Company 48 remains involved in litigation with the general contractor. There can be no assurance that the Company will be able to fully and finally discharge of record all outstanding liens and claims. If the Company is unable to do so, it may be in material default under the limited partnership agreement and the commercial sublease agreement. Pursuant to the commercial sublease agreement, the limited partnership created by the joint venture leases the Grapevine site from Bass Pro over a 15-year term. The lease may be extended for seven additional five-year terms subject to Bass Pro renewing its lease of the location. The sublessee is obligated to pay an annual percentage rent in the amount of 5.5% on gross sales less than $11.0 million per year and 6.5% on gross sales in excess of $11.0 million per year (with a minimum annual base rent of $385,000). Bass Pro may terminate in the event of a default which is not cured within the applicable grace period. In March 2000, the Company and Bass Pro L.P. agreed in writing to revise the definition of default under the sublease. As amended, the sublease provides that a default includes, but is not limited to, (a) the sublessee's failure to remain open during all business days, (b) the sublessee's failure to maintain on duty a fully trained service staff, (c) the sublessee's failure to provide high quality food of the type provided at the Gaylord unit, (d) the sublessee's failure to achieve gross sales in the first full calendar year immediately following the opening and for each calendar year thereafter of $7.0 million, (e) the sublessee encumbering in any manner any interest in the subleased premises, or (f) the sublessee's failure to conduct full and complete customer surveys no less frequently than each calendar quarter. The existence of the liens discussed above, the failure of Buck & Bass to perform quarterly customer satisfaction surveys, and the failure to achieve gross sales in the first full calendar year immediately following the opening of $7.0 million give Bass Pro the ability to declare an event of default under the sublease at December 30, 2001, terminate the sublease and demand all unpaid and reasonably calculable future rent over the balance of the sublease term. Pursuant to the limited partnership agreement, a material default under the sublease would also entitle Bass Pro to purchase the Company's interest in the joint venture at 40% of book value, thereby eliminating the Company's interest in the Grapevine unit. Further, Bass Pro has the right to purchase up to 15% of the Company's interest in the joint venture, at 100% of the Company's original cost, on or before August 31, 2002; provided, however, that the Company's interest in the joint venture may not be reduced below 51%. The termination of the sublease or the elimination of the Company's interest in the Grapevine unit would have a material adverse effect on the Company's business, operating results, cash flows and financial condition. 9. MANAGEMENT'S PLAN The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the financial statements the Company has experienced net losses since inception, resulting in an accumulated deficit of $9.8 million and a working capital deficit of $3.0 million as of December 30, 2001. These factors, among others, raise doubt about the Company's ability to continue as a going concern for a reasonable period of time. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company's continuation as a going concern depends upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms and covenants of its financing and joint venture agreements, to obtain additional financing or refinancing as may be required, and to attain profitable operations. The Company is continuing its efforts to obtain additional funds so that the Company can meet its obligations and sustain operations. There can be no assurance that additional financing will be available on terms acceptable or favorable to the Company, or at all. 49 In February 2002, the Company received a $500,000 advance from WCERS to cover unpaid real estate taxes in Michigan. In March 2002, the Company obtained a loan from United Bank and Trust Company for $5,000,000 which matures in March 2004. The collateral of this loan is a $5,000,000 letter of credit from WCERS. Of the proceeds from such loan, the Company used $200,000 to terminate its lease of the Nashville site and $500,000 to repay the advance from WCERS. The Company intends to use the remaining proceeds of such loan to repay approximately $1,000,000 of indebtedness to Crestmark bank, to pay certain accounts payable and for various working capital purposes. Although the Company's short-term liquidity issues have been improved as a result of this financing, there can be no assurance that the Company will have sufficient financial resources to repay existing indebtedness or to continue operations. The Company intends to explore licensing and franchising arrangements. The Company is in discussions with several parties regarding the possible licensing of the Big Buck Brewery & Steakhouse concept in and outside the state of Michigan. The Company has entered into a license agreement with Up North Adventures, an entity owned by one of the Company's directors, Thomas E. Zuhl, pursuant to which the Company hopes to introduce its concept to various Asian markets. The Company also seeks to refinance its indebtedness to WCERS. The Company hopes to refinance such indebtedness at lower interest rates. The Company also plans to continue searching for ways of reducing its operating costs. At the beginning of 2001, the Company set goals to equal or exceed the operating benchmarks of several of its competitors. The Company believes that it has attained those goals and it seeks continued improvement. During 2002, the Company also plans to implement new short-term and long-term marketing campaigns pursuant to which the Company hopes to regain revenues lost due to the decrease in tourism following the events of September 11. 50 ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 51 PART III ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The following table provides information with respect to our directors and executive officers as of March 20, 2002. Each director serves for a one-year term and until his successor has been duly elected and qualified. Each executive officer has been appointed to serve until his successor is duly appointed by the board or his earlier removal or resignation from office. There are no family relationships between any director or executive officer.
NAME AGE PRINCIPAL OCCUPATION POSITION WITH BIG BUCK DIRECTOR SINCE - ------------------------ ----- -------------------- ---------------------- --------------- William F. Rolinski............. 54 Chief Executive Officer, Chief Executive Officer, 1993 President and Chairman of President and Chairman the Board of Big Buck the Board of the Board Anthony P. Dombrowski........... 41 Chief Financial Officer and Chief Financial Officer and N/A Treasurer of Big Buck Treasurer Timothy J. Pugh................. 42 Executive Vice President of Executive Vice President of N/A Operations of Big Buck Operations Jonathon D. Ahlbrand............ 40 President and Chief Director 2001 Executive Officer of The Center of American Jobs Matthew P. Cullen............... 46 General Manager of General Director 2000 Motors Enterprise Activity Group Richard A. Noelke............... 50 Deputy Director of Wayne Director 2001 County Employees' Retirement System Mark Provenzano................. 44 President of Columbia Director 2002 Construction Services Henry T. Siwecki................ 57 Sole Owner and President of Director 1995 Siwecki Construction Ronald Yee...................... 49 Director of Wayne County Director 2002 Employees' Retirement System Thomas E. Zuhl.................. 41 Owner of Pac Rim Associates, Director 2002 Inc.
William F. Rolinski is a founder of our company and has been the Chief Executive Officer, President and Chairman of the Board since our formation in 1993. From 1987 to 1994, Mr. Rolinski was the founder, secretary and corporate counsel of Ward Lake Energy, Inc., an independent producer of natural gas in Michigan. While Mr. Rolinski was at Ward Lake, the company drilled and produced over 500 natural gas wells with combined reserves of over $200 million. 52 Anthony P. Dombrowski became the Chief Financial Officer and Treasurer of our company in May 1996. He acted as a consultant to our company, in the capacity of Chief Financial Officer, from January 1996 to May 1996. From February 1995 to May 1996, Mr. Dombrowski operated his own financial and consulting business. From May 1989 to January 1995, Mr. Dombrowski was the Chief Financial Officer of Ward Lake. Mr. Dombrowski began his career with Price Waterhouse LLP in 1982. Timothy J. Pugh became our Executive Vice President of Operations in December 2000. From November 1998 to November 2000, he was a franchisee partner of Damon's International, a full-service chain of over 100 casual dining restaurants, in Kalamazoo, Michigan. From April 1996 to October 1998, he was a regional manager of Damon's International. From October 1993 to April 1996, he was a general manager of Damon's International. From April 1991 to October 1993, he managed the Houston's restaurant in Dallas, Texas, and the Houston's restaurant in Memphis, Tennessee. Jonathon D. Ahlbrand became a director in January 2001. Since June 1999, Mr. Ahlbrand has been President and Chief Executive Officer of The Center of American Jobs, a nation-wide recruiting service. Since April 1998, he has been a managing member of Private Equity, LLC, an entity that concentrates on the private placement of debt and equity securities. From April 1998 to July 1998, Private Equity performed certain consulting and advisory services for Seger Financial, Inc. Private Equity currently provides certain financial advisory services to us. In addition, both Private Equity and Seger Financial have served as our private placement agents. From August 1997 to March 1998, Mr. Ahlbrand was Senior Vice President of IntelliQuest, an Austin, Texas based global research services firm. From December 1994 to August 1997, he was Chief Executive Officer of National TechTeam Europe, a global information services company. For more information regarding our transactions with Private Equity, Seger Financial and Mr. Ahlbrand, please review "Certain Relationships and Related Transactions." Matthew P. Cullen has been a director since July 2000. Mr. Cullen is General Manager of General Motors Enterprise Activity Group, which includes the company's worldwide real estate division. He joined General Motors in 1979 as a real estate administrator and subsequently assumed a variety of senior assignments. Prior to his current position, he was responsible for the disposal and redevelopment of surplus property as well as site selection and strategic site acquisition. Mr. Cullen is Vice Chairman of Detroit Downtown, Inc., past Chairman of Detroit News Center Area Council, and the Chair-Elect of the International Association of Corporation Real Estate Executives. Richard A. Noelke became a director in December 2001. Mr. Noelke has served as the Deputy Director of WCERS since February 1997. Mr. Noelke was an elected Trustee of WCERS for ten years prior to becoming Deputy Director. He has been employed with Wayne County, Michigan, for the past 24 years, including ten years as an Accountant and Supervisor of Accounting, and ten years as the Assistant Finance Director, at Detroit Metropolitan Wayne County Airport. Mr. Noelke is also a director of Everest Energy Fund. WCERS beneficially owns approximately 38.4% of our common stock. For more information regarding our transactions with WCERS, please review "Certain Relationships and Related Transactions." Mark Provenzano became a director in February 2002. He is the President and a shareholder of Columbia Construction Services, a general contracting and construction management firm he founded in 1981. Columbia specializes in hospitality, restaurant and retail construction in the Eastern United States. Mr. Provenzano is also the President and a shareholder of Supreme Heating and Supply Co, Inc., a family operated firm started in 1950 by his father. Supreme provides HVAC services throughout Southeastern Michigan. Columbia, which beneficially owns less than one percent of our common stock, has provided certain services to our company pursuant to a Master Agreement for Program Management Services. For more information regarding our transactions with Columbia, please review "Certain Relationships and Related Transactions." 53 Henry T. Siwecki has been a director since August 1995. For more than the last five years, Mr. Siwecki has been the sole owner and President of Siwecki Construction, Inc., a commercial and residential contractor. Ronald Yee became a director in February 2002. He has served as a Director of WCERS since February 1997. Prior to that, he was WCERS' Deputy Director for six years. Mr. Yee also served as Wayne County's Risk Manager, Chief Labor Relations Analyst, Director of Administration for Personnel as well as other professional level positions during his 28 year career. WCERS beneficially owns approximately 38.4% of our common stock. For more information regarding our transactions with WCERS, please review "Certain Relationships and Related Transactions." Thomas E. Zuhl became a director in January 2002. Mr. Zuhl has owned Pac Rim Associates, Inc., an automotive parts manufacturer's representative company, since October 1991. He also owns Up North Adventures, Inc. and Tried and True Builders, LLC. Mr. Zuhl was Director of International Programs for Magee Industrial Enterprises from March 1987 to August 1991. From September 1984 to February 1987, he was a National Account Sales Manager for Xerox Corporation. Mr. Zuhl beneficially owns 5.2% of our common stock. In July 2001, we granted a license to Up North Adventures (1) to use our intellectual property, (2) to import, sell and distribute our products, and (3) to open and operate Big Buck restaurants, in Japan, Thailand, Malaysia and Singapore. For more information regarding our transactions with Up North Adventures, Pac Rim Associates and Mr. Zuhl, please review "Certain Relationships and Related Transactions." SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC. Such officers, directors and shareholders are required by the SEC to furnish us with copies of all such reports. To our knowledge, based solely on a review of copies of reports filed with the SEC during the last fiscal year, all applicable Section 16(a) filing requirements were met, except that the following reports were not filed on a timely basis: (1) one report on Form 3 relating to the appointment of Jonathon D. Ahlbrand to our board of directors on January 18, 2001, and (2) one report on Form 4 relating to the grant of options to purchase 25,000 shares received by Jonathon D. Ahlbrand on January 18, 2001. 54 ITEM 10 EXECUTIVE COMPENSATION The following table sets forth information with respect to compensation paid by us to our Chief Executive Officer and the other highest paid executive officers (the "Named Executive Officers") during the three most recent fiscal years. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION ----------------------- ANNUAL COMPENSATION AWARDS ------------------- ----------------------- SECURITIES UNDERLYING NAME AND PRINCIPAL POSITION YEAR SALARY OPTIONS - ----------------------------------- ------ ------------- ----------------------- William F. Rolinski.................... 2001 $ 188,279 0 Chief Executive Officer, President 2000 $ 153,247 32,037 and Chairman of the Board 1999 $ 157,219 0 Anthony P. Dombrowski.................. 2001 $ 108,953 60,000 Chief Financial Officer and 2000 $ 94,742 14,962 Treasurer 1999 $ 97,321 0 Timothy J. Pugh(1)..................... 2001 $ 119,365 75,000 Executive Vice President of 2000 $ 10,346 0 Operations
- ---------- (1) Mr. Pugh joined our company as Executive Vice President of Operations in December 2000. The following table sets forth each grant of stock options during 2001 to the Named Executive Officers. No stock appreciation rights were granted during 2001. OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF SECURITIES PERCENT OF TOTAL UNDERLYING OPTIONS GRANTED EXERCISE OR OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION NAME GRANTED(1) FISCAL YEAR ($/SHARE)(2) DATE - ------------------------ --------------- ---------------- --------------- ------------ William F. Rolinski............... 0 - - - Anthony P. Dombrowski ............ 60,000 31.9% $ 0.80 10/25/11 Timothy J. Pugh................... 25,000 13.3% $ 0.91 07/19/11 50,000 26.6% $ 0.80 10/25/11
- ---------- (1) These options became exercisable immediately upon grant. (2) Fair market value per share on the date of grant. 55 The following table sets forth information concerning the unexercised options held by the Named Executive Officers as of the end of the last fiscal year. No options were exercised by the Named Executive Officers during the last fiscal year. No stock appreciation rights were exercised by the Named Executive Officers during the last fiscal year or were outstanding at the end of that year. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS OPTIONS AT FY-END AT FY-END(1) ------------------------------ ------------------------------ NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE - ------------------------------------------- ----------- ------------- ----------- ------------- William F. Rolinski........................ 137,037 0 $ 0 N/A Anthony P. Dombrowski...................... 187,962 0 $ 0 N/A Timothy J. Pugh............................ 75,000 0 $ 0 N/A
- ---------- (1) Market value of underlying securities at fiscal year end minus the exercise price. COMPENSATION OF DIRECTORS Directors who are also our employees receive no remuneration for services as members of the board or any board committee. Each non-employee director receives $500 for each regularly scheduled meeting of the board he attends. Each non-employee director who serves on our executive committee receives $3,000 per month for such service. Our directors are also reimbursed for expenses incurred solely in connection with our business purposes. During 2001, our non-employee directors received the options described below. On December 1, 2001, pursuant to the automatic grant provisions of the 2000 Stock Option Plan, we granted (1) an option for the purchase of 20,000 shares of common stock to each non-employee director and (2) an option for the purchase of 10,000 shares of common stock to each non-employee member of the Executive Committee of the board. We automatically grant such options annually for each year of continued service. Any person who first becomes eligible to receive a grant pursuant to this provision of the 2000 Stock Option Plan following any December 1, will automatically receive a pro rata portion of such grant upon their appointment to such position. Each option is granted at fair market value on the date of grant, vests one year after the date of grant and expires ten years after the date of grant. 56 ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding beneficial ownership of our common stock as of March 1, 2002, by (a) each person who is known to us to own beneficially more than five percent of our common stock, (b) each director, (c) each Named Executive Officer (as defined herein), and (d) all executive officers and directors as a group. Unless otherwise noted, each person identified below possesses sole voting and investment power with respect to such shares. Except as otherwise noted below, we know of no agreements among our shareholders which relate to voting or investment power with respect to our common stock.
SHARES PERCENT BENEFICIALLY OF NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNED(1) CLASS(2) - --------------------------------------- -------------------- -------------- Wayne County Employees' Retirement System(3).................................... 3,585,088 38.4% 400 Monroe Street, Suite 230 Detroit, Michigan 48226 Perkins Capital Management, Inc.(4)............................................. 1,121,500 16.4 730 East Lake Street Wayzata, Minnesota 55391 William F. Rolinski(5).......................................................... 977,645 15.7 Estate of Blair A. Murphy, D.O.(6).............................................. 680,007 11.1 The Perkins Opportunity Fund(7)................................................. 500,000 7.8 730 East Lake Street Wayzata, Minnesota 55391 Michael G. Eyde(8).............................................................. 395,481 6.2 6250 West Michigan Avenue Lansing, Michigan 48917 FMR Corp.(9).................................................................... 373,800 6.1 82 Devonshire Street Boston, Massachusetts 02109 Thomas E. Zuhl(10).............................................................. 334,125 5.2 Anthony P. Dombrowski(11)....................................................... 193,962 3.1 Henry T. Siwecki(6)............................................................. 175,989 2.9 Jonathon D. Ahlbrand(12)........................................................ 89,582 1.5 Timothy J. Pugh(13)............................................................. 75,000 1.2 Mark Provenzano(14)............................................................. 50,000 * Matthew P. Cullen(13)........................................................... 20,000 * Ronald Yee(15).................................................................. 3,587,588 38.4 Richard A. Noelke............................................................... 500 * All Executive Officers and Directors as a Group (10 persons) (16)............................................... 5,504,391 53.9%
- ---------- * Represents less than one percent. (1) Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to securities. Securities "beneficially owned" by a person may include securities owned by or for, among others, the spouse, children or certain other relatives of such person as well as other securities as to which the person has or shares voting or investment power or has the option or right to acquire within 60 days of March 1, 2002. Unless otherwise 57 indicated, the address of each shareholder is c/o Big Buck Brewery & Steakhouse, Inc., 550 South Wisconsin Street, Gaylord, Michigan 49734. (2) Percentage of beneficial ownership is based on 6,083,358 shares outstanding as of March 1, 2002. Shares issuable upon the exercise of warrants and options are deemed outstanding for computing the percentage of the person holding such warrants or options but are not deemed outstanding for computing the percentage of any other person. (3) Includes 200,000 shares purchasable upon the exercise of a warrant and 3,061,682 shares purchasable upon the conversion of promissory notes. (4) As set forth in Schedule 13G filed with the SEC by Perkins Capital Management, Inc. ("PCM"), The Perkins Opportunity Fund ("POF") and Richard W. Perkins on January 29, 2002. Represents (a) 161,000 shares owned by the clients of PCM, (b) 460,500 shares purchasable upon the exercise of warrants owned by the clients of PCM, (c) 200,000 shares owned by POF and (d) 300,000 shares purchasable upon the exercise of warrants owned by POF. PCM has (a) sole power to vote 337,500 shares, representing 137,500 shares owned by clients of PCM and 200,000 shares owned by POF, and (b) sole power to dispose of 621,500 shares. PCM disclaims beneficial ownership of the securities owned by POF. (5) Includes 137,037 shares purchasable upon the exercise of options. (6) Includes 45,000 shares purchasable upon the exercise of options. (7) As set forth in Schedule 13G filed with the SEC by PCM, POF and Richard W. Perkins on January 29, 2002. Includes 300,000 shares purchasable upon the exercise of warrants. (8) Includes (a) 50,000 shares purchasable upon the exercise of an option, (b)25,000 shares purchasable upon the exercise of a warrant and (c) 200,000 shares purchasable upon the conversion of promisory notes. (9) As set forth in Schedule 13G filed with the SEC by FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson on February 13, 2002. Fidelity Management & Research Company, a wholly-owned subsidiary of FMR Corp. and an investment adviser registered under the Investment Advisers Act of 1940, is the beneficial owner of 373,800 shares as a result of acting as investment adviser to various investment companies registered under the Investment Company Act of 1940. The ownership of one investment company, Fidelity Capital Appreciation Fund, amounted to 373,800 shares. Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and the funds each has sole power to dispose of the 373,800 shares owned by the funds. Neither FMR Corp. nor Edward C. Johnson 3d has the sole power to vote or direct the voting of the shares owned directly by the Fidelity funds, which power resides with the funds' Boards of Trustees. Fidelity carries out the voting of the shares under written guidelines established by the funds' Boards of Trustees. Members of the Edward C. Johnson 3d family are the predominant owners of Class B shares of common stock of FMR Corp., representing approximately 49% of the voting power of FMR Corp. Mr. Johnson 3d owns 12.0% and Abigail P. Johnson owns 24.5% of the aggregate outstanding voting stock of FMR Corp. Mr. Johnson 3d is Chairman of FMR Corp. and Ms. Johnson is a Director of FMR Corp. The Johnson family group and all other Class B shareholders have entered into a shareholders' voting agreement under which all Class B shares will be voted in accordance with the majority vote of Class B shares. Accordingly, through their ownership of voting common stock and the execution of the shareholders' voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR Corp. (10) Includes (a) 115,473 shares purchasable upon the conversion of a promissory note and (b) 194,552 shares purchasable upon the conversion of a promissory note held by Pac Rim Associates, Inc. (11) Includes 187,962 shares purchasable upon the exercise of options. (12) Represents 25,000 shares purchasable upon the exercise of options, 50,000 shares purchasable upon the exercise of a warrant held by Private Equity, LLC and 14,582 shares purchasable upon the exercise of a warrant held by Seger Financial, Inc. (13) Represents shares purchasable upon the exercise of options. 58 (14) Represents shares held by Columbia Construction Services - Michigan, Inc. (15) Mr. Yee disclaims beneficial ownership of the 3,585,088 shares owned by WCERS. (16) Includes (a) 489,999 shares purchasable upon the exercise of options, (b) 3,371,707 shares purchasable upon the conversion of promissory notes and (c) 264,582 shares purchasable upon the exercise of warrants. 59 ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AGREEMENTS WITH WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, RELATIONSHIPS WITH RONALD YEE AND RICHARD A. NOELKE, AND GUARANTY FROM CERTAIN DIRECTORS We have obtained certain debt financing from WCERS. As of March 27, 2002, we owed WCERS approximately $8.9 million. A first priority lien in favor of WCERS on all of our assets, including the Gaylord unit, our leasehold interest in the Auburn Hills unit, our leasehold interest in the Grand Rapids unit and all of our other assets, now or hereafter acquired, secures this indebtedness. As of March 1, 2002, WCERS beneficially owned approximately 38.4% of our common stock. For more information regarding our transactions with WCERS, please review "Management's Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources." Ronald Yee, who became one of our directors in February 2002, serves as Director of WCERS. Richard A. Noelke, who became one of our directors in December 2001, serves as Deputy Director of WCERS. In February 2000, we obtained certain financing from WCERS. Messrs. William F. Rolinski, Blair A. Murphy, D.O. and Casimer I. Zaremba, each a director of our company at that time, personally guaranteed this indebtedness to the extent of $1,623,885. In August 2000, Messrs. Rolinski, Murphy and Zaremba confirmed their guaranty obligations with respect to the non-convertible secured debt financing we obtained from WCERS. Our directors do not intend to personally guarantee our future obligations. AGREEMENTS WITH MICHAEL G. EYDE We have entered into certain sale/leaseback transactions with Michael G. Eyde. As of March 1, 2002, Mr. Eyde beneficially owned approximately 6.2% of our common stock. For more information regarding our transactions with Mr. Eyde, please review "Description of Property - Grand Rapids and Auburn Hills." AGREEMENTS WITH UP NORTH ADVENTURES, TRANSACTIONS WITH PAC RIM ASSOCIATES AND THOMAS E. ZUHL, AND RELATIONSHIP WITH THOMAS E. ZUHL In July 2001, we granted an exclusive license to Up North Adventures, Inc. (1) to use our intellectual property, (2) to import, sell and distribute our products, and (3) to open and operate our restaurants, in Japan, Thailand, Malaysia and Singapore. In consideration of such rights, the licensee, an entity owned by Thomas E. Zuhl, will pay us one and one half percent of its gross receipts for products sold in the territory for the first 24 months after the first Big Buck restaurant is opened. For the remainder of the 25-year term, the royalty amount will increase to two percent. In July 2001, we issued a convertible subordinated promissory note in the principal amount of $100,000 to Thomas E. Zuhl. This note matures in July 2002. It may be converted into 115,473 shares of common stock at a conversion price of $0.866 per share. In December 2001, we issued a convertible subordinated promissory note in the principal amount of $100,000 to Pac Rim Associates, Inc. Such entity is owned by Mr. Zuhl. This note matures in December 2002. It may be converted into 194,552 shares of common stock at a conversion price of $0.514 per share. In January 2002, Mr. Zuhl became one of our directors. AGREEMENTS AND TRANSACTIONS WITH COLUMBIA CONSTRUCTION SERVICES AND RELATIONSHIP WITH MARK PROVENZANO In January 2001, we entered into a Master Agreement for Program Management Services with Columbia Construction Services - Michigan, Inc. Pursuant to this agreement, Columbia provides us with certain project-specific construction management services and advises us on a regular basis regarding development, design and construction issues related to our restaurant business. Under this agreement, Columbia conducted certain demolition and construction work in connection with the Nashville location. For such services, we paid Columbia $212,423 during 2001. At December 30, 2001, we owed Columbia 60 an additional $62,187 for project-specific construction management services rendered during 2001. Columbia also provides us with advisory services in connection with our pending construction litigation. For such services, we paid Columbia $79,613 during 2001. We anticipate retaining the services of Columbia until the pending construction litigation has been resolved. Our agreement with Columbia provides that we will pay it $6,000 per month to cover its normal office overhead and as compensation for the services of its President and shareholder, Mark Provenzano, who became one of our directors in February 2002. Our agreement also provides that we will reimburse Columbia, at actual cost plus 15%, for all reimbursable costs incurred by it in connection with project-specific construction management services as well as advisory services. In addition, effective February 9, 2001, we issued 50,000 shares of common stock to Columbia as compensation for field audit services provided by such entity to us in connection with the Grapevine unit. TRANSACTION WITH SEGER FINANCIAL, AGREEMENTS WITH PRIVATE EQUITY, AND RELATIONSHIP WITH JONATHON D. AHLBRAND On November 20, 1998, we issued a five-year warrant, exercisable at $2.7625 per share, for the purchase of 14,582 shares of our common stock to Seger Financial, Inc. This issuance was made in connection with the $1.4 million debt financing which Seger Financial obtained for us from Crestmark Bank. In addition, we paid Seger Financial a commission of 5% of the total amount of the debt placed ($70,000). Private Equity, LLC, an entity of which Jonathon D. Ahlbrand, who became one of our directors in January 2001, is a managing member, performed certain consulting and advisory services for Seger Financial from April 1998 to July 1998. In connection with the dissolution of such relationship, Mr. Ahlbrand came to beneficially own the securities underlying the foregoing warrant and was paid $17,500 of the above-referenced commissions. On September 17, 1999, we entered into a consulting services agreement with Private Equity, LLC. Pursuant to this agreement, Private Equity agreed to provide advice, recommendations and introductions regarding financing options, market conditions, program structure and strategic options, including acquisitions and mergers. We agreed to bear all reasonable costs and expenses associated with such consulting efforts. We reimbursed Private Equity for $22,400 of costs and expenses during 2000. In addition, we issued warrants to purchase an aggregate of 200,000 shares of our common stock to Private Equity. Mr. Ahlbrand, who became one of our directors in January 2001, has served as a managing member of Private Equity since April 1998. As a result of such relationship, Mr. Ahlbrand is deemed to beneficially own the securities underlying the warrants issued to Private Equity. Such warrants have the following terms of exercise:
VESTING NUMBER OF SHARES EXERCISE PRICE PER SHARE INFORMATION EXPIRATION DATE - ------------------------- ------------------------------- ------------------- ------------------------- 50,000 $ 1.625 Immediate 10/1/02 50,000 $ 2.00 $ 4.00 (1) 10/1/02 (2) 50,000 $ 2.00 $ 5.00 (1) 10/1/02 (2) 50,000 $ 2.00 $ 6.00 (1) 10/1/02 (2)
- ---------- (1) Becomes exercisable when the closing price of our common stock equals or exceeds such price for a period of ten consecutive trading days. (2) Outstanding warrants that have not become exercisable before the termination of the consulting services agreement expire upon termination of such agreement. On July 1, 1999, we entered into a one-year non-exclusive financing agreement with Private Equity, LLC. Pursuant to this agreement, Private Equity agreed to provide advice, recommendations and introductions regarding financing options, market conditions and program structure. Private Equity 61 agreed to assist in arranging term debt financing for us and we agreed to bear all reasonable costs and expenses associated with the issuance of such debt. In addition, we agreed to pay Private Equity a commission of 5% of the total amount of the debt placed. Between October 8, 1999 and January 27, 2000, we issued convertible subordinated promissory notes with an aggregate principal amount of $950,000 to six accredited investors. Private Equity was responsible for our introduction to five of the six investors, whose purchases aggregated $850,000. Pursuant to our agreement, we paid commissions equal to 5% of the gross proceeds raised pursuant to those introductions ($42,500) to Private Equity. Private Equity was also responsible for our introduction to WCERS. On February 4, 2000, we issued convertible secured promissory notes with an aggregate principal amount of $7,500,000 to WCERS. Pursuant to our agreement, we paid commissions equal to 5% of the gross proceeds raised ($375,000) to Private Equity. On August 21, 2000, we issued a secured promissory note with a principal amount of $1,500,000 to WCERS. Pursuant to our agreement, we paid commissions equal to 5% of the gross proceeds raised ($75,000) to Private Equity. Mr. Ahlbrand, one of our directors, is a managing member of Private Equity and was paid $133,750 of the above-referenced commissions. GENERAL All future transactions between us and our officers, directors and principal shareholders and their affiliates will be approved by a majority of the board, including a majority of the independent and disinterested non-employee directors, and will be on terms no less favorable to us than could be obtained from unaffiliated third parties. 62 ITEM 13 EXHIBITS, LIST AND REPORTS ON FORM 8-K (a) Exhibits See "Index to Exhibits." (b) Reports on Form 8-K On December 11, 2001, we filed a Current Report on Form 8-K relating to the extension of the expiration date of our Class A Warrants through 5:00 p.m. (CST) on December 13, 2002. We filed no other Current Reports on Form 8-K during the quarter ended December 30, 2001. 63 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Gaylord, State of Michigan, on April 1, 2002. BIG BUCK BREWERY & STEAKHOUSE, INC. By /s/ William F. Rolinski --------------------------------------- William F. Rolinski President and Chief Executive Officer (Principal Executive Officer) POWER OF ATTORNEY KNOW ALL BY THESE PRESENT, that each person whose signature appears below constitutes and appoints William F. Rolinski and Anthony P. Dombrowski as his or her true and lawful attorney-in-fact and agent, with full powers of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the SEC, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof. In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant, and in the capacities and on the date indicated.
Signature Title Date --------- ----- ---- /s/ William F. Rolinski President, Chief Executive Officer and April 1, 2002 - -------------------------------------------- Director (Principal Executive Officer) William F. Rolinski /s/ Anthony P. Dombrowski Chief Financial Officer and Treasurer April 1, 2002 - -------------------------------------------- (Principal Accounting Officer and Anthony P. Dombrowski Principal Financial Officer) Director - -------------------------------------------- Jonathon D. Ahlbrand Director - -------------------------------------------- Matthew P. Cullen /s/ Richard A. Noelke Director April 1, 2002 - -------------------------------------------- Richard A. Noelke
64 /s/ Mark Provenzano Director April 1, 2002 - -------------------------------------------- Mark Provenzano Director - -------------------------------------------- Henry T. Siwecki /s/ Ronald Yee Director April 1, 2002 - -------------------------------------------- Ronald Yee /s/ Thomas E. Zuhl Director April 1, 2002 - -------------------------------------------- Thomas E. Zuhl
65 INDEX TO EXHIBITS
Exhibit Number Description - ------- ----------- 3.1 Restated Articles of Incorporation, as amended (incorporated by reference to our Current Report on Form 8-K, filed on December 11, 2000 (File No. 0-20845)). 3.2 Amended and Restated Bylaws (incorporated by reference to our Registration Statement on Form SB-2, filed on April 15, 1996 (File No. 333-3548)). 4.1 See Exhibit 3.1. 4.2 See Exhibit 3.2. 4.3 Specimen common stock certificate (incorporated by reference to our Registration Statement on Form SB-2, filed on April 15, 1996 (File No. 333-03548)). 4.4 Form of Warrant Agreement with Wells Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association) (including specimen Class A Warrant certificate) (incorporated by reference to our Registration Statement on Form SB-2, filed on April 15, 1996 (File No. 333-03548)). 4.5 Amendment to Warrant Agreement with Wells Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association) (including specimen Class A Warrant certificate) (incorporated by reference to Post-Effective Amendment No. 2 to our Registration Statement on Form S-3, filed on June 8, 2000 (File No. 333-03548)). 4.6 Amendment No. 2 to Warrant Agreement with Wells Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association). 10.1 1996 Stock Option Plan (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 23, 1998 (File No. 0-20845)). 10.2 1996 Director Stock Option Plan (incorporated by reference to our Registration Statement on Form SB-2, filed on April 15, 1996 (File No. 333-3548)). 10.3 1999 Employee Stock Purchase Plan (incorporated by reference to our Definitive Schedule 14A (Proxy Statement), filed on October 26, 1999 (File No. 0-20845)). 10.4 Amendment No. 1 to 1999 Employee Stock Purchase Plan (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.5 2000 Stock Option Plan (incorporated by reference to our Definitive Schedule 14A (Proxy Statement), filed on October 18, 2000 (File No. 0-20845)). 10.6 Loan Agreement dated July 28, 1995, by and among Big Buck, William F. Rolinski, Dr. Blair A. Murphy, Walter Zaremba, Casimer I. Zaremba and Bank One (f/k/a NBD Bank) (incorporated by reference to our Registration Statement on Form SB-2, filed on April 15, 1996 (File No. 333-3548)). 10.7 Real Estate Purchase and Leaseback Agreement by and between Eyde Brothers Development Co., Landlord, and Big Buck, Tenant, dated April 11, 1997 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 9, 1997 (File No. 0-20845)). 10.8 Lease Agreement by and between Eyde Brothers Development Co., Landlord, and Big Buck, Tenant, dated April 11, 1997 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 9, 1997 (File No. 0-20845)). 10.9 Amendment to Lease Agreement by and between Eyde Brothers Development Co., Landlord, and Big Buck, Tenant, dated March 27, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.10 Real Estate Purchase and Leaseback Agreement by and between Michael G. Eyde, Landlord, and Big Buck, Tenant, dated August 1, 1997 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 12, 1997 (File No. 0-20845)). 10.11 Lease Agreement by and between Michael G. Eyde, Landlord, and Big Buck, Tenant, dated October 1, 1997 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 23, 1998 (File No. 0-20845)).
66 10.12 Stock Option Agreement between Big Buck and Michael G. Eyde, dated August 1, 1997 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 23, 1998 (File No. 0-20845)). 10.13 Amendment to Lease Agreement by and between Michael G. Eyde, Landlord, and Big Buck, Tenant, dated January 26, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.14 Common Stock Purchase Warrant issued by Big Buck to Michael G. Eyde, dated January 26, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.15 Limited Partnership Agreement by and among BBBP Management Company, Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.) and Big Buck, dated November 5, 1998 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No. 0-20845)). 10.16 Shareholders' Agreement by and among BBBP Management Company, Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.) and Big Buck, dated November 5, 1998 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No. 0-20845)). 10.17 Commercial Sublease Agreement by and between Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.) and Buck and Bass, L.P., dated November 5, 1998 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No. 0-20845)). 10.18 Common Stock Purchase Warrant issued by Big Buck to Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.), dated November 5, 1998 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No. 0-20845)). 10.19 Amended and Restated Real Estate Mortgage Note dated July 27, 1999, by and between Big Buck, Borrower, and Crestmark Bank, Lender (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on August 18, 1999 (File No. 0-20845)). 10.20 Common Stock Purchase Warrant issued by Big Buck to Seger Financial, Inc., dated November 20, 1998 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No. 0-20845)). 10.21 Stock Option Agreement between Big Buck and William F. Rolinski, dated December 29, 1998 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No. 0-20845)). 10.22 Stock Option Agreement between Big Buck and Anthony P. Dombrowski, dated December 29, 1998 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No. 0-20845)). 10.23 Non-Exclusive Financing Agreement by and between Big Buck and Private Equity, LLC, dated July 1, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.24 Consulting Agreement by and between Big Buck and Private Equity, LLC, dated September 17, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.25 Common Stock Purchase Warrant issued by Big Buck to Private Equity, LLC, dated September 17, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.26 Common Stock Purchase Warrant issued by Big Buck to Private Equity, LLC, dated September 17, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.27 Common Stock Purchase Warrant issued by Big Buck to Private Equity, LLC, dated September 17, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)).
67 10.28 Common Stock Purchase Warrant issued by Big Buck to Private Equity, LLC, dated September 17, 1999 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.29 Form of Subscription and Investment Representation Agreement for 10% Convertible Subordinated Promissory Note (including form of note) (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.30 Subscription and Investment Representation Agreement for 10% Convertible Secured Promissory Note executed by Wayne County Employees' Retirement System, dated February 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.31 10% Convertible Secured Promissory Note in the principal amount of $5,876,114.74, issued by Big Buck, Maker, to Wayne County Employees' Retirement System, Payee, dated February 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.32 Amended, Restated and Consolidated Convertible Note in the principal amount of $1,623,885.26, issued by Big Buck, Maker, to Wayne County Employees' Retirement System, Payee, dated February 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.33 Common Stock Purchase Warrant issued by Big Buck to Wayne County Employees' Retirement System, dated February 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)). 10.34 Promissory Note and Security Agreement by and between Big Buck and Buck & Bass, L.P., dated August 23, 2000 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 15, 2000 (File No. 0-20845)). 10.35 Promissory Note in the principal amount of $1,500,000.00, issued by Big Buck, Maker, to Wayne County Employees' Retirement System, Payee, dated August 21, 2000 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on November 15, 2000 (File No. 0-20845)). 10.36 First Loan Modification Agreement by and between Wayne County Employees' Retirement System and Big Buck, dated August 21, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.37 Second Loan Modification Agreement by and between Wayne County Employees' Retirement System and Big Buck, dated October 1, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.38 Third Loan Modification Agreement by and between Wayne County Employees' Retirement System and Big Buck, dated February 20, 2001 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.39 Fourth Loan Modification Agreement by and between Wayne County Employees' Retirement System and Big Buck, dated March 15, 2001. 10.40 Fifth Loan Modification Agreement by and between Wayne County Employees' Retirement System and Big Buck, dated March 20, 2002. 10.41 Letter Agreement between Wayne County Employees' Retirement System and Big Buck, dated February 1, 2001 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.42 Letter Agreement between Wayne County Employees' Retirement System and Big Buck, dated February 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.43 Letter Agreement between Wayne County Employees' Retirement System and Big Buck, dated April 3, 2001 (incorporated by reference to our Annual Report on Form 10-KSB/A, filed on April 13, 2001 (File No. 0-20845)). 10.44 Letter Agreement by and between Big Buck and Wayne County Employees' Retirement System, dated October 1, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed November 14, 2001 (File No. 0-20845)).
68 10.45 Letter Agreement between Wayne County Employees' Retirement System and Big Buck, dated February 28, 2002. 10.46 Promissory Note in the principal amount of $12,000.00, issued by Anthony P. Dombrowski, Maker, to Big Buck, Payee, dated April 18, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.47 Promissory Note in the principal amount of $100,000.00, issued by Big Buck, Maker, to Michael G. Eyde, Payee, dated December 4, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.48 Promissory Note (Line of Credit) in the principal amount of $1,000,000.00, issued by Big Buck, Maker, to Crestmark Bank, Payee, dated March 16, 2001 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.49 Loan Agreement by and between Crestmark Bank and Big Buck, dated March 16, 2001 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.50 Form of First Amendment to 10% Convertible Subordinated Promissory Note (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.51 Shopping Center Lease between Opry Mills Limited Partnership, Landlord, and Big Buck, Tenant, for Opry Mills Shopping Center, Nashville, Tennessee, dated November 9, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)). 10.52 Form of Non-Qualified Stock Option Agreement between Big Buck and certain directors of Buck & Bass, L.P., dated March 30, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 4, 2001 (File No. 0-20845)). 10.53 First Amendment and Acknowledge of Partial Payment to Convertible Subordinated Promissory Note issued by Big Buck to James E. Blasius, dated March 22, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 4, 2001 (File No. 0-20845)). 10.54 First Amendment to Non-Convertible Subordinated Promissory Note issued by Big Buck to Michael G. Eyde, dated March 29, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 4, 2001 (File No. 0-20845)). 10.55 Letter Agreement between Big Buck and Steven G. Balan, dated April 12, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on May 4, 2001 (File No. 0-20845)). 10.56 Consulting Agreement between Big Buck and Morgan James & Associates, effective July 12, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed November 14, 2001 (File No. 0-20845)). 10.57 Second Amendment to Convertible Subordinated Promissory Note by and between Big Buck and Steven G. Balan, dated October 17, 2001 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed November 14, 2001 (File No. 0-20845)). 10.58 Promissory Note in the principal amount of $100,000.00, issued by Big Buck, Maker, to Thomas E. Zuhl, Payee, dated July 20, 2001. 10.59 License Agreement between Up North Adventures, Inc. and Big Buck, dated July 20, 2001. 10.60 Promissory Note in the principal amount of $100,000.00, issued by Big Buck, Maker, to Pac Rim Associates, Inc., Payee, dated December 11, 2001. 10.61 Promissory Note in the principal amount of $5,000,000.00, issued by Big Buck, Maker, to United Bank and Trust Company, Payee, dated March 15, 2002. 10.62 Master Agreement for Program Management Services between Big Buck and Columbia Construction Services - Michigan, Inc., dated January 1, 2001. 10.63 Possession Agreement between Big Buck and Opry Mills Limited Partnership, dated March 14, 2002. 10.64 Settlement and Termination Agreement between Big Buck and Opry Mills Limited Partnership, dated March 28, 2002.
69 10.65 Amendment No. 2 to Lease Agreement by and between Eyde Brothers Development Co., Landlord and Big Buck, Tenant, dated March 29, 2002. 10.66 Letter Agreement by and between Big Buck and Wayne County Employees' Retirement System, dated April 1, 2002 21 Subsidiaries of Big Buck (incorporated by reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No. 0-20845)). 23 Consent of Independent Public Accountants. 24 Power of Attorney (included on signature page to Form 10-KSB).
70 EX-4.6 3 a2075337zex-4_6.txt EXHIBIT 4.6 EXHIBIT 4.6 AMENDMENT NO. 2 TO WARRANT AGREEMENT THIS AMENDMENT is made and entered into as of December 10, 2001, by and between Big Buck Brewery & Steakhouse, Inc. (f/k/a Michigan Brewery, Inc.), a Michigan corporation (the "Company"), and Wells Fargo Bank Minnesota, National Association (f/k/a Norwest Bank Minnesota, National Association), as the Warrant Agent (the "Warrant Agent"). WHEREAS, the Company appointed the Warrant Agent to provide certain services in connection with and following the Company's initial public offering of units, each unit consisting of one share of common stock and one redeemable Class A Warrant to purchase one share of common stock ("Warrant"); WHEREAS, the Company and the Warrant Agent entered into an agreement (the "Warrant Agreement") with respect to such appointment on June 7, 1996, as amended by the first amendment thereto dated May 26, 2000; WHEREAS, the Company has extended the expiration date of the Warrants from December 13, 2001 to December 13, 2002; WHEREAS, the Company wishes to amend the Warrant Agreement to correspond with the new term of the Warrants. NOW, THEREFORE, in consideration of the premises and agreements set forth herein, the parties hereto agree to restate (i) Sections 2.1, 2.2 and 4.1 of the Warrant Agreement as follows and (ii) Exhibit A of the Warrant Agreement as attached hereto: Section 2.1 EXERCISE. Any or all of the Warrants represented by each Warrant Certificate may be exercised by the holder thereof on or before 5:00 p.m., Minneapolis time, on December 13, 2002 (unless extended by the Company), by surrender of the Warrant Certificate with the purchase form, which is printed on the reverse thereof (or a reasonable facsimile thereof), duly executed by such holder, to the Warrant Agent at its principal office in South St. Paul, Minnesota. The purchase form must be accompanied by payment, in cash or by certified check payable to the Company, in an amount equal to the product of the number of shares of Common Stock issuable upon exercise of the Warrant represented by such Warrant Certificate, as adjusted pursuant to the provisions of Article III hereof, multiplied by the exercise price of $8.00, as adjusted pursuant to the provisions of Article III hereof (such price as so adjusted from time to time being herein called the "Purchase Price"), and such holder shall be entitled to receive such number of fully paid and nonassessable shares of Common Stock, as so adjusted, at the time of such exercise. Section 2.4 EXTENSION OF EXERCISE PERIOD; CHANGE OF EXERCISE PRICE. The Company may, upon notice given to the Warrant Agent, and without the consent of the holders of the Warrant Certificates, (a) extend the period over which the Warrants are exercisable beyond December 13, 2002, and (b) increase or decrease the Purchase Price for any period. Within a reasonable time after the effective time of such change or extension, the Company shall provide the Warrant Agent and Warrantholders of record with written notice of any change in the Purchase Price or extension of the exercise period, as the case may be, specifying the time to which such exercise period is extended, or the new Purchase Price and the periods for which such new Purchase Price is in effect. Section 4.1 REDEMPTION PRICE. The Warrants may be redeemed at the option of the Company, at any time on or before December 13, 2002, upon notice as set forth in Section 4.2 and at the redemption price equal to $0.01 per warrant, provided that (a) the last reported sale price of the Common Stock on a national securities exchange, if the Common Stock shall be listed or admitted to unlisted trading, privileges on a national securities exchange, or (b) the closing, bid price of the Common Stock on the Nasdaq system, if the Common Stock is not so listed or admitted to unlisted trading privileges, exceeds $9.00 per share (such price subject to adjustment from time to time in the same manner as the Purchase Price pursuant to the provisions of Article III hereof) for any 20 consecutive trading days prior to the date such notice of redemption is given. IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the day and year first above written. BIG BUCK BREWERY & STEAKHOUSE, INC. By /s/ William F. Rolinski ----------------------------------- William F. Rolinski President and Chief Executive Officer WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION By /s/ Cindy Gesme ----------------------------------- Cindy Gesme Account Manager EX-10.39 4 a2075337zex-10_39.txt EXHIBIT 10.39 EXHIBIT 10.39 FOURTH LOAN MODIFICATION AGREEMENT THIS FOURTH LOAN MODIFICATION AGREEMENT ("Amendment") is entered into as of the 15th day of March, 2001 by and between BIG BUCK BREWERY & STEAKHOUSE, INC., a Michigan corporation, f/k/a Michigan Brewery, Inc. ("Borrower"), and WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, a body politic of the State of Michigan ("Lender"). RECITALS: WHEREAS, on or about February 4, 2000, Lender (i) acquired certain loans to Borrower from Bank One, Michigan ("BANK ONE"), formerly known as NBD Bank, a Michigan banking corporation (collectively, the "BANK ONE LOANS"), (ii) restructured and consolidated the Bank One Loans ("RESTRUCTURED LOAN"), and (iii) made an additional $5,876,114.74 loan to Borrower ("NEW LOAN"). WHEREAS, the Restructured Loan is evidenced by that certain Amended, Restated and Consolidated Convertible Note dated February 4, 2000 in the principal amount of $1,623,885.26 given by Borrower in favor of Lender ("CONSOLIDATED NOTE"). WHEREAS, the New Loan is evidenced by that certain 10% Convertible Secured Promissory Note Due February 2003 dated February 4, 2000 in the principal amount of $5,876,114.74 given by Borrower in favor of Lender ("CONVERTIBLE NOTE"). WHEREAS, on or about August 21, 2000, Lender made an additional loan to Borrower in the principal amount of $1,500,000 ("Texas Loan"), which Texas Loan was evidenced by a Promissory Note in the principal amount of $1,500,000 dated August 21, 2000 given by Borrower in favor of Lender ("Texas Note"; and the Consolidated Note, the Convertible Note and the Texas Note, as amended are hereinafter collectively referred to as the "NOTES"), and in connection therewith entered into a Loan Modification Agreement and various other loan and security documents executed in connection therewith (collectively, the "FIRST MODIFICATION DOCUMENTS"). WHEREAS, on or about October 20, 2000 but effective as of October 1, 2000, Borrower and Lender entered into that certain Second Loan Modification Agreement pursuant to which, among other things, Lender agreed to extend the term of the Consolidated Note until October 1, 2002, and Borrower executed and delivered an Allonge to the Consolidated Note and various other loan and security documents executed in connection therewith (collectively, the "SECOND MODIFICATION DOCUMENTS"). WHEREAS, on or about February 20, 2001 Borrower and Lender entered into that certain Third Loan Modification Agreement pursuant to which Lender agreed to extend the term of the (i) Consolidated Note to February 1, 2003 and (ii) Texas Note to no later than February 1, 2003, and, in connection therewith, Borrower executed and delivered a Second Allonge to the Consolidated Note ("SECOND ALLONGE") and an Allonge to the Texas Note ("TEXAS ALLONGE") and various other loan and security documents executed in connection therewith (collectively, the "THIRD MODIFICATION DOCUMENTS"). WHEREAS, the Notes are secured or evidenced by: (i) Mortgage (Future Advance) dated April 25, 1995 given by Borrower to Bank One, as recorded in Liber 586, Page 112, Otsego County Records, as amended by Amendment dated July 28, 1995, as recorded in Liber 591, Page 139, Otsego County Records, as assigned to Lender by Assignment of Mortgage dated February 4, 2000, as recorded in Liber 749, Page 302, Otsego County Records, as amended by that certain Second Amendment to Mortgage dated February 4, 2000, as recorded in Liber 749, Page 309, Otsego County Records, as further amended by that certain Third Amendment to Mortgage dated August 21, 2000, as recorded in Liber 772, Page 001, Otsego County Records and as further amended by that certain Fourth Amendment to Mortgage dated as of October 20, 2000 but effective as of October 1, 2000, as recorded in Liber 0777, Page 844 Otsego County Records (as amended, the "GAYLORD MORTGAGE"), which Gaylord Mortgage encumbers certain real property owned by Borrower in the City of Gaylord, Otsego County, Michigan ("GAYLORD PROPERTY"); (ii) Mortgage dated February 4, 2000, given by Borrower in favor of Lender as recorded in Liber 21160, Page 389, Oakland County Records, as amended by that certain First Amendment to Mortgage dated effective as of August 21, 2000 as recorded in Liber 21788, Page 775, Oakland County Records and as further amended by that certain Second Amendment to Mortgage dated October 20, 2000 but effective as of October 1, 2000 as recorded in Liber 21952, Page 742, Oakland County Records (as amended, "LEASEHOLD MORTGAGE", encumbering Borrower's leasehold interest in certain real property located in the City of Auburn Hills, Oakland County, Michigan ("AUBURN HILLS PROPERTY"); (iii) Common Stock Purchase Warrant dated February 4, 2000 executed by the Borrower; (iv) Subscription and Investment Representation Agreement for 10% Convertible Secured Promissory Note due February 2003 by and between Lender and Borrower; (v) Security Agreement dated February 4, 2000 executed by Lender and Borrower; (vi) Limited Partnership Interest Pledge and Security Agreement dated February 4, 2000 executed by Lender and Borrower; (vii) Stock Pledge and Security Agreement dated February 4, 2000 executed by Lender and Borrower; (viii) an Assignment of Real Estate Leases and Rents dated July 28, 1995, recorded in Liber 591, Page 144, Otsego County Records given by Borrower in favor of Bank One, as assigned to Lender by Assignment of Real Estate Leases and Rents dated February 4, 2000, as recorded in Liber 0749, Page 305, Otsego County Records and as amended (as amended, the "ASSIGNMENT"); (ix) Loan Agreement dated July 28, 1995 by and between Borrower and Bank One, as assigned to Lender; (x) Assignment of Note dated as of August 21, 2000 by and between Borrower and Lender; and (xi) UCC Financing Statements and other loan documents with respect to the Notes and the documents executed in connection with the Bank One Loan. (All of the documents described in this recital as amended by the First Modification Documents, the Second Modification Documents and the Third Modification Documents are hereinafter collectively referred to as the "ORIGINAL LOAN DOCUMENTS".) WHEREAS, Borrower requested, and Lender agreed, to permit Borrower to obtain a Line of Credit in the amount of $1,000,000.00 from Crestmark Bank ("CRESTMARK LINE OF CREDIT"). WHEREAS, as security for the Crestmark Line of Credit, Lender has agreed to issue an unconditional and irrevocable Letter of Credit in favor of Crestmark Bank ("CRESTMARK") for the account of Borrower in the amount of $1,000,000.00 expiring on April 1, 2002 ("LETTER OF CREDIT"). WHEREAS, Borrower has agreed to use the proceeds of the Crestmark Line of Credit to provide certain financing to Buck & Bass, L.P. ("BUCK & BASS"), an affiliate of Borrower, to pay various construction liens incurred in connection with the construction and fixturing of Buck & Bass' Grapevine, Texas restaurant ("GRAPEVINE PROPERTY"), as more particularly set forth on EXHIBIT A attached hereto (collectively the "LIENS"). WHEREAS, the obligations of Buck & Bass to the Borrower with respect to the $1,000,000 loan to Buck & Bass to finance the payment of the Liens ("BIG BUCK LOAN") shall be evidenced by a promissory note and security agreement in the principal amount of $1,000,000 ("BUCK & BASS NOTE"). WHEREAS, in connection with Lender supplying Borrower with a Letter of Credit, the Borrower is executing and delivering to Lender this Agreement. NOW, THEREFORE, as consideration of the foregoing it is hereby agreed that: 1. RECITALS. The recitals set forth above are incorporated herein by reference and shall form a part of this Agreement. 2. MODIFICATIONS. Subject to all the terms and conditions set forth in this Agreement, Lender is agreeing, INTER ALIA, to permit the Borrower to obtain the Line of Credit from Crestmark and provide the Letter of Credit to Crestmark Bank as security for the Crestmark Line of Credit. (For convenience, the modification referred to in this Paragraph 2 is hereinafter referred to as the "MODIFICATIONS".) 3. BORROWERS ACKNOWLEDGEMENTS. As of March 15, 2001, there was (i) $1,608,688.09 in principal owing under the Consolidated Note, (ii) $5,821,123.07 in principal owing under the Convertible Note and (iii) $1,500,000.00 in principal owing under the Texas Note, plus accrued but unpaid interest, costs and expenses and other obligations provided in the Loan Documents (all such obligations of Borrower to Lender are hereinafter collectively referred to as the "OBLIGATIONS"). The Obligations are due and owing Lender without setoff, recoupment, defense, deduction, counterclaim, credit, allowance or adjustment, whether in law or equity, of any kind or nature. 4. MODIFICATION OF DOCUMENTS. (a) AMENDMENT TO GAYLORD MORTGAGE. The Gaylord Mortgage and Assignment shall be amended by a Fifth Amendment to Mortgage dated as the date hereof to evidence the fact that the Gaylord Mortgage also secures the Reimbursement Obligations (as herein defined) and to evidence the fact that the Gaylord Mortgage also secures the Texas Note as amended by the Allonge and the Consolidated Note as amended by the Second Allonge, in substantially the form of EXHIBIT B attached hereto; (b) AMENDMENT TO LEASEHOLD MORTGAGE. The Leasehold Mortgage shall be amended by a Third Amendment to Mortgage dated as of the date of this Agreement to evidence the fact that the Leasehold Mortgage secures the Reimbursement Obligations, and that the Gaylord Mortgage also secures the Texas Note as amended by the Texas Allonge and the Consolidated Note as amended by the Second Allonge, in substantially the form of EXHIBIT C attached hereto; (c) RATIFICATION OR ACKNOWLEDGEMENT OF GUARANTEES. William Rolinski, (the "GUARANTOR") shall confirm his guaranty obligations with respect to the Restructured Loan, Texas Loan and the Reimbursement Obligations by executing a Ratification of Guaranty substantially the form of EXHIBIT D attached hereto; (d) ACKNOWLEDGEMENT. Buck & Bass, Borrower and Bass Pro Outdoor World, L.L.C. shall execute and deliver to Lender an acknowledgement and subordination of interest in the form of EXHIBIT E attached hereto. (e) ASSIGNMENT OF NOTE. Borrower shall execute and deliver an assignment of Buck & Bass Note and endorse the Buck & Bass Note to Lender as collateral security for the Notes, in substantially the form of EXHIBIT F attached hereto. (f) MISCELLANEOUS. All such other documents and agreements reasonably required by Lender to effectuate the provisions of this Agreement. (For convenience, this Agreement and all other documents executed in connection herewith are sometimes hereinafter collectively referred to as the "FOURTH MODIFICATION DOCUMENTS"; and the Original Loan Documents and the Fourth Modification Documents are sometimes hereinafter collectively referred to as the "LOAN DOCUMENTS".) 5. REIMBURSEMENT OBLIGATIONS. (a) In the event the Letter of Credit shall be drawn upon by Crestmark, Borrower shall immediately pay to Lender in the immediately available U. S. funds at the principal office of Lender or as otherwise directed by Lender the full amount of all funds paid to Crestmark under the Letter of Credit. (b) Borrower hereby agrees to pay and to indemnify, defend and hold Lender harmless against all amounts, damages, liabilities, costs, expenses and/or losses arising from or connected in any way with respect to, without limitation, the following: (i) Borrower's failure to pay and perform under this Amendment and/or the other Loan Documents evidencing and securing the Reimbursement Obligations; (ii) Any drawing against the Letter of Credit by Crestmark Bank; (iii) Any amounts advanced by Lender to protect and preserve the Letter of Credit and/or any collateral securing the Reimbursement Obligations and/or the issuance of the Letter of Credit; (iv) Any action taken by Lender to prevent any draw against the Letter of Credit by Crestmark; (v) Any breach of any representation or warranty contained in this Amendment and the Loan Documents evidencing or securing the Notes; (vi) Any other event related to the Reimbursement Obligations or the Letter of Credit; (c) All amounts due Lender hereunder shall be paid by Borrower when due. In the event Borrower fails to timely make such payments, Borrower agrees to pay interest and all amounts paid by and payable to Lender under this Paragraph 5 at a rate per annum equal to the highest default rate permitted under the Notes. All interest due under this Paragraph 5 shall accrue on the basis of a 360-day year. (d) Borrower further indemnifies, defends and holds Lender harmless from any losses, damages, liabilities, costs and expenses incurred by Lender in enforcing Lender's rights under this Paragraph 5, including, without limitation, reasonable attorneys' fees. (e) The obligations of Borrower under this Paragraph 5 (collectively, the "REIMBURSEMENT OBLIGATIONS") are absolute and unconditional, subject to no condition precedent whatsoever and are subject to no off-set, defense, claim or other diminution of value by reason of any claim or defense Borrower may have against Lender now or in the future. Lender may release any or all security for the obligations and liabilities securing the Reimbursement Obligations, without in any way affecting or releasing the obligations or liabilities of Borrower. Borrower waives demand, presentment, notice of dishonor and protest. Borrower agrees Lender shall not be liable for any delay under this Paragraph 5 nor shall Lender be liable under any obligation to take any action with respect to any security interest granted to Lender in connection with the Letter of Credit and/or this Paragraph 5, including, without limitation, any obligation to file, record or re-file or re-record, and/or to maintain or establish the validity, priority or enforceability of its rights into the collateral. (f) Lender may receive and apply all payments received from Borrower with respect to the reimbursement obligations against all obligations of Borrower to Lender under any of the Loan Documents in any order of priority selected by Lender. (g) All of the collateral securing the Obligations shall secure the Reimbursement Obligations, and a default by Borrower with respect to the Obligations shall be a default by Borrower with respect to the Reimbursement Obligations, and a default by Borrower with respect to the Reimbursement Obligations shall be a default by Borrower with respect to the Obligations. 6. REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS OF BORROWER. The Borrower represents, warrants and covenants to Lender that: (a) Borrower is a corporation duly organized and validly existing under the laws of the State of Michigan and is qualified to conduct its business in Texas; and (b) Borrower has the full power and authority to execute and deliver this Agreement and the Fourth Modification Documents, which has been duly authorized by all necessary corporate action of Borrower. This Agreement is valid, binding and enforceable in accordance with its terms. (c) Borrower for itself and on behalf of Buck & Bass represent that the Liens are the only liens or potential liens with respect to the Grapevine Property and all other construction and fixturing expenses have been paid in full. (d) Borrower shall not, and shall not permit Buck & Bass to, without the prior written consent of Lender, use any of the Crestmark Letter of Credit proceeds or the Big Buck Loan for any purpose other than to pay the Liens set forth in EXHIBIT A attached hereto. (e) Borrower agrees that it shall cause Buck & Bass to promptly provide Lender with evidence of the payment of the Liens. 7. CONDITIONS PRECEDENT. It is a condition precedent of Lender to issue its Letter of Credit that (i) it shall have approved all documents, in its sole discretion, to be executed by the Borrower in connection with the Crestmark Line of Credit and (ii) Buck & Bass shall have executed and delivered the Buck & Bass Note. 8. COSTS, EXPENSES, AND FEES. (a) Borrower agrees to pay all Modification costs, fees and expenses of Lender's attorney and all out of pocket costs of Lender. (b) Borrower will pay to Lender an annual fee in the amount of $10,000.00 ("ISSUER FEE") in connection with Lender issuing the Letter of Credit on behalf of Borrower. The Issuer Fee shall be deemed earned and payable upon the execution of this Amendment. 9. DOCUMENTS CONTINUE. Except as expressly modified and amended by the terms of this Amendment, all of the terms and conditions of the Loan Documents remain in full force and effect and are hereby ratified, confirmed and approved. If there is an express conflict between the terms of this Amendment and the terms of the Loan Documents, the terms of this Amendment shall govern and control. 10. IMPAIRMENT OF COLLATERAL. The execution and delivery of this amendment in no manner shall impair or affect any other security (by endorsement or otherwise) for the Obligations. No security taken heretofore or hereafter security for the Obligations or the Reimbursement Obligations shall impair in any manner or affect this amendment. All present and future additional security is to be considered as cumulative security. 11. DEFAULT. A default under any of the terms of this Amendment shall be a default under each of the Loan Documents and a default under any of the Loan Documents shall be a default under this Amendment. 12. MISCELLANEOUS. (a) This Amendment constitutes the entire understanding of the parties with respect to the subject matter hereof and may be modified or amended only by a writing signed by the parties to be charged. (b) This Amendment is governed by the internal laws of the State of Michigan (without regard to conflicts of the law of principles). (c) This Amendment may be executed in counterparts, each of which shall be deemed an original, but together they shall constitute one and the same instrument, and facsimile copies of signatures shall be treated as original signatures for all purposes. (d) This Amendment is binding on, and inure to the benefit of, the parties hereto and their respective successors and assigns. (e) If any provision of this Amendment is in conflict with any applicable statutes or rule of law or otherwise unenforceable, such offending provision shall be null and void only to the extent of such conflict or unenforceability, but shall be deemed separate from and shall not invalidate any other provision of this Amendment. [SIGNATURE BLOCK ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. BIG BUCK BREWERY & STEAKHOUSE, INC., a Michigan corporation, (f/k/a Michigan Brewery, Inc.) By: /s/ William F. Rolinski ----------------------- Print name: William F. Rolinski Its: President "Borrower" STATE OF MICHIGAN) )SS COUNTY OF_______________) On this ____ day of _____________, 2001, before me appeared ____________________ as the _______________ of Big Buck Brewery & Steakhouse, Inc., a Michigan corporation, f/k/a Michigan Brewery, Inc., on behalf of the corporation. Print name:_____________________________ Notary Public, __________ County, ______ My commission expires __________________ [SEAL] [SIGNATURE PAGE FOR FOURTH LOAN MODIFICATION AGREEMENT] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, a body politic of the State of Michigan By: /s/ Ronald Yee -------------- Print name: Ronald Yee Its: Director "Lender" STATE OF MICHIGAN) )ss. COUNTY OF WAYNE) The foregoing instrument was acknowledged before me this ____ day of ________________, 2001 by __________________, the _________________ of Wayne County Employees' Retirement System, on behalf of the Lender. Print name:_____________________________ Notary Public, __________ County, ______ My commission expires __________________ [SEAL] Exhibits: A - Construction Liens B - Fifth Amendment to Mortgage C - Third Amendment to Mortgage D - Ratification of Guarantee E - Acknowledgement F - Assignment of Note and Allonge [SIGNATURE PAGE FOR FOURTH LOAN MODIFICATION AGREEMENT] EX-10.40 5 a2075337zex-10_40.txt EXHIBIT 10.40 EXHIBIT 10.40 FIFTH LOAN MODIFICATION AGREEMENT THIS FIFTH LOAN MODIFICATION AGREEMENT ("Amendment") is entered into as of the 22nd day of March, 2002 by and between BIG BUCK BREWERY & STEAKHOUSE, INC., a Michigan corporation, f/k/a Michigan Brewery, Inc. ("Borrower"), and WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, a body politic of the State of Michigan ("Lender"). RECITALS: WHEREAS, on or about February 4, 2000, Lender (i) acquired certain loans to Borrower from Bank One, Michigan ("BANK ONE"), formerly known as NBD Bank, a Michigan banking corporation (collectively, the "BANK ONE LOANS"), (ii) restructured and consolidated the Bank One Loans ("RESTRUCTURED LOAN"), and (iii) made an additional $5,876,114.74 loan to Borrower ("NEW LOAN"). WHEREAS, the Restructured Loan is evidenced by that certain Amended, Restated and Consolidated Convertible Note dated February 4, 2000 in the principal amount of $1,623,885.26 given by Borrower in favor of Lender ("CONSOLIDATED NOTE"). WHEREAS, the New Loan is evidenced by that certain 10% Convertible Secured Promissory Note Due February 2003 dated February 4, 2000 in the principal amount of $5,876,114.74 given by Borrower in favor of Lender ("CONVERTIBLE NOTE"). WHEREAS, on or about August 21, 2000, Lender made an additional loan to Borrower in the principal amount of $1,500,000 ("Texas Loan"), which Texas Loan was evidenced by a Promissory Note in the principal amount of $1,500,000 dated August 21, 2000 given by Borrower in favor of Lender ("Texas Note"; and the Consolidated Note, the Convertible Note and the Texas Note, as amended, are hereinafter collectively referred to as the "NOTES"), and in connection therewith entered into a Loan Modification Agreement and various other loan and security documents executed in connection therewith (collectively, the "FIRST MODIFICATION DOCUMENTS"). WHEREAS, on or about October 20, 2000 but effective as of October 1, 2000, Borrower and Lender entered into that certain Second Loan Modification Agreement pursuant to which, among other things, Lender agreed to extend the term of the Consolidated Note until October 1, 2002, and Borrower executed and delivered an Allonge to the Consolidated Note and various other loan and security documents executed in connection therewith (collectively, the "SECOND MODIFICATION DOCUMENTS"). WHEREAS, on or about February 20, 2001 Borrower and Lender entered into that certain Third Loan Modification Agreement pursuant to which Lender agreed to extend the term of the (i) Consolidated Note to February 1, 2003 and (ii) Texas Note to no later than February 1, 2003, and, in connection therewith, Borrower executed and delivered a Second Allonge to the Consolidated Note ("SECOND ALLONGE") and an Allonge to the Texas Note ("TEXAS ALLONGE") and various other loan and security documents executed in connection therewith (collectively, the "THIRD MODIFICATION DOCUMENTS"). WHEREAS, on March 15, 2001, Borrower and Lender entered into that certain Fourth Loan Modification Agreement pursuant to which, among other things, Lender issued an unconditional and irrevocable letter of credit to Crestmark Bank ("Crestmark") in the amount of $1,000,000 ("CRESTMARK LETTER OF CREDIT"), to secure Borrower's obligations with respect to a $1,000,000 line of credit provided by Crestmark to Borrower and various other loan and security documents executed in connection therewith (collectively, the "FOURTH MODIFICATION DOCUMENTS"). WHEREAS, the Notes are secured or evidenced by: (i) Mortgage (Future Advance) dated April 25, 1995 given by Borrower to Bank One, as recorded in Liber 586, Page 112, Otsego County Records, as amended by Amendment dated July 28, 1995, as recorded in Liber 591, Page 139, Otsego County Records, as assigned to Lender by Assignment of Mortgage dated February 4, 2000, as recorded in Liber 749, Page 302, Otsego County Records, as amended by that certain Second Amendment to Mortgage dated February 4, 2000, as recorded in Liber 749, Page 309, Otsego County Records, as amended by that certain Third Amendment to Mortgage dated August 21, 2000, as recorded in Liber 772, Page 001, Otsego County Records, as amended by that certain Fourth Amendment to Mortgage dated as of October 20, 2000 but effective as of October 1, 2000, as recorded in Liber 0777, Page 844 Otsego County Records, and as further amended by that certain Fifth Amendment to Mortgage dated March 15, 2001, as recorded in Liber 794, Page 165, Otsego County Records (as amended, the "GAYLORD MORTGAGE"), which Gaylord Mortgage encumbers certain real property owned by Borrower in the City of Gaylord, Otsego County, Michigan ("GAYLORD PROPERTY"); (ii) Mortgage dated February 4, 2000, given by Borrower in favor of Lender as recorded in Liber 21160, Page 389, Oakland County Records, as amended by that certain First Amendment to Mortgage dated effective as of August 21, 2000 as recorded in Liber 21788, Page 775, Oakland County Records, as amended by that certain Second Amendment to Mortgage dated October 20, 2000 but effective as of October 1, 2000 as recorded in Liber 21952, Page 742, Oakland County Records, and as further amended by that certain Third Amendment to Mortgage dated March 15, 2001, as recorded in Book 22485, Page 281, Oakland County Records (as amended, "LEASEHOLD MORTGAGE"), encumbering Borrower's leasehold interest in certain real property located in the City of Auburn Hills, Oakland County, Michigan ("AUBURN HILLS PROPERTY"); (iii) Common Stock Purchase Warrant dated February 4, 2000 executed by the Borrower; (iv) Subscription and Investment Representation Agreement for 10% Convertible Secured Promissory Note due February 2003 by and between Lender and Borrower; (v) Security Agreement dated February 4, 2000 executed by Lender and Borrower; (vi) Limited Partnership Interest Pledge and Security Agreement dated February 4, 2000 executed by Lender and Borrower; (vii) Stock Pledge and Security Agreement dated February 4, 2000 executed by Lender and Borrower; (viii) an Assignment of Real Estate Leases and Rents dated July 28, 1995, recorded in Liber 591, Page 144, Otsego County Records given by Borrower in favor of Bank One, as assigned to Lender by Assignment of Real Estate Leases and Rents dated February 4, 2000, as recorded in Liber 0749, Page 305, Otsego County Records and as amended (as amended, the "ASSIGNMENT"); (ix) Loan Agreement dated July 28, 1995 by and between Borrower and Bank One, as assigned to Lender; (x) Assignment of Note dated as of August 21, 2000 by and between Borrower and Lender; (xi) Continuing Guaranty dated March 31, 1995 and Continuing Guaranty dated July 28, 1995, from William F. Rolinski ("GUARANTOR") to Bank One, as assigned to Lender and as ratified (collectively, the "ORIGINAL GUARANTEES"); and (xii) UCC Financing Statements and other loan documents with respect to the Notes and the documents executed in connection with the Bank One Loan. (All of the documents described in this recital as amended by the First Modification Documents, the Second Modification Documents, the Third Modification Documents and the Fourth Modification Documents are hereinafter collectively referred to as the "ORIGINAL LOAN DOCUMENTS".) WHEREAS, on February 28, 2002, Lender made a bridge loan to Borrower in the amount of $500,000 to cover unpaid real property taxes on its Michigan properties ("ADVANCE"). WHEREAS, Borrower requested, and Lender agreed, to permit Borrower to obtain a loan from United Bank and Trust ("UNITED Bank") in the amount of $5,000,000 ("UNITED BANK LOAN") to, among other things, repay the Advance and to repay the Crestmark Line of Credit and other items, as more particularly described on EXHIBIT A attached hereto ("USES"). WHEREAS, as security for the United Bank Loan, Lender has agreed to either (i) issue an unconditional and irrevocable Letter of Credit in favor of United Bank for the account of Borrower in the amount of $5,000,000.00 or (ii) provide cash collateral for the United Bank Loan in the amount of $5,000,000 ("WCERS COLLATERAL"). WHEREAS, Borrower has represented to Lender that it shall use the proceeds of the United Bank Loan to pay the items listed on EXHIBIT A attached hereto ("USES"). WHEREAS, in connection with Lender providing the WCERS Collateral for the benefit of Borrower, the Borrower is executing and delivering to Lender this amendment. NOW, THEREFORE, as consideration of the foregoing it is hereby agreed that: 1. RECITALS. The recitals set forth above are incorporated herein by reference and shall form a part of this Agreement. 2. MODIFICATIONS. Subject to all the terms and conditions set forth in this Agreement, Lender is agreeing, INTER ALIA, to permit the Borrower to obtain the United Bank Loan and provide the WCERS Collateral to United Bank for the benefit of Borrower as security for the United Bank Loan. (For convenience, the modification referred to in this Paragraph 2 is hereinafter referred to as the "MODIFICATIONS".) 3. BORROWERS ACKNOWLEDGEMENTS. As of March 20, 2002, there was (i) $1,603,187.30 in principal owing under the Consolidated Note, (ii) $5,809,598.48 in principal owing under the Convertible Note and (iii) $1,500,000.00 in principal owing under the Texas Note, plus accrued but unpaid interest, costs and expenses and other obligations provided in the Loan Documents (all such obligations of Borrower to Lender are hereinafter collectively referred to as the "OBLIGATIONS"). The Obligations are due and owing Lender without setoff, recoupment, defense, deduction, counterclaim, credit, allowance or adjustment, whether in law or equity, of any kind or nature. 4. MODIFICATION OF DOCUMENTS. (a) AMENDMENT TO GAYLORD MORTGAGE. The Gaylord Mortgage and Assignment shall be amended by a Sixth Amendment to Mortgage dated as the date hereof to evidence the fact that the Gaylord Mortgage also secures the United Bank Reimbursement Obligations (as herein defined), in substantially the form of EXHIBIT B attached hereto; (b) AMENDMENT TO LEASEHOLD MORTGAGE. The Leasehold Mortgage shall be amended by a Fourth Amendment to Mortgage dated as of the date of this Agreement to evidence the fact that the Leasehold Mortgage secures the United Bank Reimbursement Obligations, in substantially the form of EXHIBIT C attached hereto; (c) GRAND RAPIDS MORTGAGE. Borrower shall execute and deliver to Lender a first priority mortgage ("GRAND RAPIDS MORTGAGE") on Borrower's leasehold interest in its Grand Rapids Big Buck Brewery & Steakhouse operations ("GRAND RAPIDS LOCATION"), in substantially the form of EXHIBIT D attached hereto. (d) GUARANTY AND INDEMNIFICATION. Guarantor shall execute and deliver to Lender a Guaranty and Indemnification Agreement in substantially the form of EXHIBIT E ("New Guaranty") attached hereto, pursuant to which Guarantor shall guaranty and indemnify Lender with respect to the United Bank Reimbursement Obligations; provided, however, the aggregate obligations of Guarantor with respect to the Original Guaranties and the New Guaranty, shall be limited to $5,000,000 plus Enforcement Costs, as defined in the New Guaranty. (e) Borrower shall, within 10 days of the date hereof, provide Lender with an estoppel letter in substantially the form of EXHIBIT F attached hereto executed by Borrower's landlord at the Grand Rapids location. (f) MISCELLANEOUS. All such other documents and agreements reasonably required by Lender to effectuate the provisions of this Agreement. (For convenience, this Agreement and all other documents executed in connection herewith are sometimes hereinafter collectively referred to as the "FIFTH MODIFICATION DOCUMENTS"; and the Original Loan Documents and the Fifth Modification Documents are sometimes hereinafter collectively referred to as the "LOAN DOCUMENTS".) 5. UNITED BANK REIMBURSEMENT OBLIGATIONS. (a) In the event the WCERS Collateral shall be drawn upon by United Bank, Borrower shall immediately pay to Lender in the immediately available U.S. funds at the principal office of Lender or as otherwise directed by Lender the full amount of all funds paid to United Bank under the WCERS Collateral. (b) Borrower hereby agrees to pay and to indemnify, defend and hold Lender harmless against all amounts, damages, liabilities, costs, expenses and/or losses arising from or connected in any way with respect to, without limitation, the following: (i) Borrower's failure to pay and perform under this Amendment and/or the other Loan Documents evidencing and securing the United Bank Reimbursement Obligations; (ii) Any drawing against the WCERS Collateral by United Bank; (iii) Any amounts advanced by Lender to protect and preserve the WCERS Collateral and/or any collateral securing the United Bank Reimbursement Obligations and/or the issuance of the Letter of Credit; (iv) Any action taken by Lender to prevent any draw against the WCERS Collateral by United Bank; (v) Any breach of any representation or warranty contained in this Amendment and the Loan Documents evidencing or securing the Notes; (vi) Any other event related to the United Bank Reimbursement Obligations or the WCERS Collateral; (c) All amounts due Lender hereunder shall be paid by Borrower when due. In the event Borrower fails to timely make such payments, Borrower agrees to pay interest and all amounts paid by and payable to Lender under this Paragraph 5 at a rate per annum equal to the highest default rate permitted under the Notes. All interest due under this Paragraph 5 shall accrue on the basis of a 360-day year. (d) Borrower further indemnifies, defends and holds Lender harmless from any losses, damages, liabilities, costs and expenses incurred by Lender in enforcing Lender's rights under this Paragraph 5, including, without limitation, reasonable attorneys' fees. (e) The obligations of Borrower under this Paragraph 5 (collectively, the "UNITED BANK REIMBURSEMENT OBLIGATIONS") are absolute and unconditional, subject to no condition precedent whatsoever and are subject to no off-set, defense, claim or other diminution of value by reason of any claim or defense Borrower may have against Lender now or in the future. Lender may release any or all security for the obligations and liabilities securing the United Bank Reimbursement Obligations, without in any way affecting or releasing the obligations or liabilities of Borrower. Borrower waives demand, presentment, notice of dishonor and protest. Borrower agrees Lender shall not be liable for any delay under this Paragraph 5 nor shall Lender be liable under any obligation to take any action with respect to any security interest granted to Lender in connection with the WCERS Collateral and/or this Paragraph 5, including, without limitation, any obligation to file, record or re-file or re-record, and/or to maintain or establish the validity, priority or enforceability of its rights into the collateral. (f) Lender may receive and apply all payments received from Borrower with respect to the United Bank Reimbursement Obligations against all obligations of Borrower to Lender under any of the Loan Documents in any order of priority selected by Lender. (g) All of the collateral securing the Obligations shall secure the Reimbursement Obligations, and a default by Borrower with respect to the Obligations shall be a default by Borrower with respect to the United Bank Reimbursement Obligations, and a default by Borrower with respect to the United Bank Reimbursement Obligations shall be a default by Borrower with respect to the Obligations. 6. REPRESENTATIONS, WARRANTIES, AGREEMENTS AND COVENANTS OF BORROWER. The Borrower represents, warrants and covenants to Lender that: (a) Borrower is a corporation duly organized and validly existing under the laws of the State of Michigan and is qualified to conduct its business in Texas; and (b) Borrower has the full power and authority to execute and deliver this Agreement and the Fifth Modification Documents, which has been duly authorized by all necessary corporate action of Borrower. This Agreement is valid, binding and enforceable in accordance with its terms. (c) Borrower acknowledges and agrees that all proceeds of the United Bank Loan shall be deposited in an account ("ACCOUNT") to which Lender shall be a required signatory to all withdrawals from said Account. (d) Borrower shall not, without the prior written consent of Lender, use any of the United Bank Loan proceeds for any purpose other than to pay the Uses set forth in EXHIBIT A attached hereto. 7. CONDITIONS PRECEDENT. It is a condition precedent of Lender to provide the WCERS Collateral that it shall have approved all documents, in its sole discretion, to be executed by the Borrower and/or Lender in connection with the United Bank Loan. 8. COSTS, EXPENSES, AND FEES. (a) Borrower agrees to pay all Modification costs, fees and expenses of Lender's attorney and all out of pocket costs of Lender. (b) Borrower will pay to Lender an annual fee in the amount of $2,500.00 ("WCERS COLLATERAL FEE") in connection with Lender providing the WCERS Collateral on behalf of Borrower. The WCERS Collateral Fee shall be deemed earned and payable upon the execution of this Amendment. 9. DOCUMENTS CONTINUE. Except as expressly modified and amended by the terms of this Amendment, all of the terms and conditions of the Loan Documents remain in full force and effect and are hereby ratified, confirmed and approved. If there is an express conflict between the terms of this Amendment and the terms of the Loan Documents, the terms of this Amendment shall govern and control. 10. IMPAIRMENT OF COLLATERAL. The execution and delivery of this amendment in no manner shall impair or affect any other security (by endorsement or otherwise) for the Obligations. No security taken heretofore or hereafter security for the Obligations or the Reimbursement Obligations shall impair in any manner or affect this amendment. All present and future additional security is to be considered as cumulative security. 11. DEFAULT. A default under any of the terms of this Amendment shall be a default under each of the Loan Documents and a default under any of the Loan Documents shall be a default under this Amendment. 12. MISCELLANEOUS. (a) This Amendment constitutes the entire understanding of the parties with respect to the subject matter hereof and may be modified or amended only by a writing signed by the parties to be charged. (b) This Amendment is governed by the internal laws of the State of Michigan (without regard to conflicts of the law of principles). (c) This Amendment may be executed in counterparts, each of which shall be deemed an original, but together they shall constitute one and the same instrument, and facsimile copies of signatures shall be treated as original signatures for all purposes. (d) This Amendment is binding on, and inure to the benefit of, the parties hereto and their respective successors and assigns. (e) If any provision of this Amendment is in conflict with any applicable statutes or rule of law or otherwise unenforceable, such offending provision shall be null and void only to the extent of such conflict or unenforceability, but shall be deemed separate from and shall not invalidate any other provision of this Amendment. [SIGNATURE BLOCK ON NEXT PAGE] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. BIG BUCK BREWERY & STEAKHOUSE, INC., a Michigan corporation, (f/k/a Michigan Brewery, Inc.) By: /s/ William F. Rolinski ----------------------- William F. Rolinski Its: President "Borrower" STATE OF MICHIGAN ) )SS COUNTY OF_______________) On this ____ day of March, 2002, before me appeared William F. Rolinski as the President of Big Buck Brewery & Steakhouse, Inc., a Michigan corporation, f/k/a Michigan Brewery, Inc., on behalf of the corporation. Print name: ____________________________ Notary Public, __________ County, ______ My commission expires___________________ [SEAL] [SIGNATURE PAGE FOR FIFTH LOAN MODIFICATION AGREEMENT] IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above. WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM, a body politic of the State of Michigan By: /s/ Ronald Yee -------------- Print name: Ronald Yee Its: Director "Lender" STATE OF MICHIGAN ) )ss. COUNTY OF WAYNE) The foregoing instrument was acknowledged before me this ____ day of March, 2002 by __________________, the _________________ of Wayne County Employees' Retirement System, on behalf of the Lender. Print name: ____________________________ Notary Public, __________ County, ______ My commission expires___________________ [SEAL] Exhibits: A - Uses B - Sixth Amendment to Mortgage C - Fourth Amendment to Mortgage D - Grand Rapids Mortgage E - Guaranty and Indemnification Agreement F - Landlord Estoppel Letter [SIGNATURE PAGE FOR FIFTH LOAN MODIFICATION AGREEMENT] EX-10.45 6 a2075337zex-10_45.txt EXHIBIT 10.45 EXHIBIT 10.45 BIG BUCK BREWERY & STEAKHOUSE, INC. P.O. BOX 1430 GAYLORD, MICHIGAN 49735-0617 February 28, 2002 Wayne County Employees' Retirement System 400 Monroe Street - Ste. 320 Detroit, Michigan 48226 RE: LETTER AGREEMENT REGARDING ADVANCE FOR PAYMENT OF TAXES Gentlemen: This Letter Agreement is being written to acknowledge that you are advancing the sum of $500,000.00 to cover unpaid real estate taxes as to the Michigan properties. We acknowledge and agree that this amount is being advanced under our current loan documents with you and is fully evidenced and secured by those loan documents and the collateral securing those loan documents. We also agree to repay this amount upon the earlier to occur of (i) the date of any refinancing obtained by Company and/or with respect to its properties and/or assets as part of any such financing or (ii) April 1, 2002. Please indicate your approval by signing below. Very truly yours, BIG BUCK BREWERY & STEAKHOUSE, INC. By: /s/ William F. Rolinski ------------------------------- Its: President and Chief Executive Officer ----------------------------------------- Agreed to and accepted by: Wayne County Employees' Retirement System By: /s/ Ronald Yee -------------------------------------- Its: Director --------------------------- EX-10.58 7 a2075337zex-10_58.txt EXHIBIT 10.58 EXHIBIT 10.58 THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS, AND ARE SUBJECT TO A SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT. THEY MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL ACCEPTABLE TO BIG BUCK BREWERY & STEAKHOUSE, INC. THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS. BIG BUCK BREWERY & STEAKHOUSE, INC. CONVERTIBLE SUBORDINATED PROMISSORY NOTE $100,000 Gaylord, Michigan July 20, 2001 FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the undersigned, Big Buck Brewery & Steakhouse, Inc., a Michigan corporation (the "Maker"), promises to pay to the order of Thomas E. Zuhl (the "Payee"), the principal sum of One Hundred Thousand Dollars ($100,000), plus interest at the rate specified below. The unpaid principal from time to time outstanding shall bear interest prior to maturity at an annual rate of interest equal to ten percent (10%) per annum, and all interest accrued on the unpaid principal balance of this Promissory Note shall be due and payable in arrears as provided below. The Maker agrees to pay the accrued interest due hereunder monthly on the first day of each month, beginning August 1, 2001, until July 20, 2002, on which date the entire amount due hereunder, including all unpaid principal and interest shall be due and payable in full. All principal and interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed until all accrued and unpaid interest is paid in full. All interest due and payable hereunder that is not paid when due for any reason shall be cumulated, added to the principal and accrue interest at the highest lawful rate per annum on that delinquent amount until paid, to the extent permitted by law. All payments of interest and principal shall be payable in lawful currency of the United States of America ("Currency"), unless and to the extent Payee exercises Payee's option hereunder to convert all or part of the unpaid principal balance of this Promissory Note into shares of common stock, par value $0.01 per share (the "Shares"), of the Maker. At any time prior to maturity, Payee shall have the option to convert all or part of the unpaid principal balance of this Promissory Note into that number of Shares of the Maker (the "Option") equal to (i) all or such part of the unpaid principal balance of the Promissory Note being converted divided by (ii) $0.866, any fractional Shares to be paid in Currency. To exercise the Option, Payee shall surrender this Promissory Note to the Maker, accompanied by written notice of Payee's intention to exercise the Option, which notice shall set forth the principal amount of this Promissory Note and such portion of the unpaid principal balance of the Promissory Note, if not the entire unpaid principal balance, to be converted into Shares (the "Notice of Conversion"). Within ten (10) business days of Maker's receipt of the Notice of Conversion and Payee's surrender of this Promissory Note, Maker shall deliver or cause to be delivered to the Payee, the Shares in the name of the Payee. When delivered, all Shares shall be duly authorized, validly issued, fully paid, and nonassessable. Maker shall take any and all action necessary to maintain the required authority to issue the Shares to Payee in the event Payee exercises the Option. Prepayment of the principal of this Promissory Note is permitted, in whole or in part, without premium or penalty of any kind; provided Maker provides Payee with ten (10) business days' prior written notice of its intention to prepay the principal of this Promissory Note, in whole or in part, during which time Payee may exercise the Option by delivering to the Maker Payee's Notice of Conversion within ten (10) business days following Payee's receipt of such notice from the Maker. All partial prepayments of principal shall reduce the principal balance hereunder in reverse order of maturity. This Promissory Note is given in consideration of a loan by Payee to Maker in the principal amount of this Promissory Note. This Promissory Note may not be changed orally, but only by an agreement in writing signed by the parties against whom enforcement of any waiver, change, modification, or discharge is sought. The holder of this Promissory Note and all successors thereof shall have all of the rights of a holder in due course under the Uniform Commercial Code as in effect in the State of Michigan and the other laws of the State of Michigan. Maker hereby waives demand, presentment, protest, notice of protest and/or dishonor, and all other notices or requirements that might otherwise be required by law. The Maker promises to pay on demand all costs of collection, including reasonable attorneys' fees and court costs, paid or incurred by Payee to enforce this Promissory Note upon an Event of Default (as defined below) hereunder. The occurrence of any of the following shall constitute an "Event of Default" under this Promissory Note: a. The failure of Maker to make any payment of principal in Currency when due under this Promissory Note (time is of the essence), unless such failure is the result of payments of principal in Currency required to be made with respect to any Senior Debt (as defined below) of the Maker; or b. The institution of proceedings by or against the Maker under any state insolvency laws, federal bankruptcy law, or similar debtor relief laws then in effect. Upon an Event of Default that has not been cured within ten (10) business days from the date of written notice by Payee, Payee may, at Payee's option and without notice, declare all principal and interest due under this Promissory Note to be due and payable immediately. Payee may waive any default before or after it occurs and may restore this Promissory Note in full effect without impairing the right to declare it due for a subsequent default. Payment of the principal of this Promissory Note in Currency is subordinated in right of payment, to the prior payment of all Senior Debt of the Maker then currently due and payable. "Senior Debt" means all liabilities, contingent or otherwise, of the Maker (i) for borrowed money (but only if the recourse of the lender is secured by any assets of the Maker) and (ii) with respect to letters of credit, bankers acceptances, or similar instruments issued or accepted by banks ("Indebtedness") incurred by the Maker prior to or after the date of this Promissory Note and any replacement, renewal, refinancing, and extension (whether direct or indirect) thereof; provided, however, that notwithstanding anything to the contrary in this Promissory Note, Senior Debt does not include (i) any Indebtedness of the Maker that by its terms or the terms of the instrument creating or evidencing it expressly provides that such Indebtedness is subordinate in right of payment to, or pari passu in right of payment with, this Promissory Note or (ii) any Indebtedness of the Maker to an executive officer or director of the Maker. THE PAYEE, BY ACCEPTING THIS PROMISSORY NOTE, AGREES TO SUCH SUBORDINATION. IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be executed in its corporate name by the signature of its duly authorized officer. BIG BUCK BREWERY & STEAKHOUSE, INC. By: /s/ William F. Rolinski ----------------------- William F. Rolinski President and Chief Executive Officer EX-10.59 8 a2075337zex-10_59.txt EXHIBIT 10.59 EXHIBIT 10.59 TRADEMARK AND INTELLECTUAL PROPERTY LICENSE AGREEMENT This Trademark and Intellectual Property License Agreement (this "Agreement") is made and entered into on this 20th day of July, 2001, by Big Buck Brewery & Steakhouse, Inc., a Michigan corporation, ("Big Buck") and Up North Adventures, Inc., a Michigan corporation ("Up North"). WITNESSETH: WHEREAS, Big Buck is the owner of the trademarks, tradenames, service marks, know how, and other intellectual property listed on the attached EXHIBIT A as well as the registrations and applications therefor in the forms set forth in the attached EXHIBIT B (collectively, the "Intellectual Property"); WHEREAS, Up North is owned by Thomas Zuhl, Trustee of the Thomas Zuhl Revocable Living Trust dated February 20, 2001, Thomas Zuhl, Grantor (the "Trust"); and WHEREAS, Big Buck is willing to grant to Up North the right to use the Intellectual Property, subject to the terms and conditions or this Agreement, so that Up North may expand the development of the "Big Buck" concept in the Territory (as defined in Section 2.1), and Up North desires to accept said right. NOW, THEREFORE, the parties, in consideration of the mutual agreements contained in this Agreement, the parties agree as follows: AGREEMENT: ARTICLE I GRANT OF LICENSE 1.1 THE LICENSE. Subject to the terms and limitations set forth in this Agreement, Big Buck hereby grants to Up North, and Up North hereby accepts, the exclusive right and license (the "License") to: (i) use and exploit the Intellectual Property and all later developments to the Intellectual Property throughout the Territory (as defined in Section 2.1) in connection with Big Buck's services and products (collectively, the "Products"), (ii) import, sell, and distribute the Products under the Big Buck name, label, and trademarks, (iii) open and operate Big Buck restaurants in the Territory at location(s) of Up North's choice; and (iv) sublicense (or grant franchise rights) to others the rights granted hereunder. 1.2 EXCLUSIVE LICENSE. Up North's rights under this Agreement shall be exclusive; provided, however, that in the event Up North shall be in default under this Agreement and have failed to cure the default within thirty (30) days after receipt of written notice from Big Buck, then Big Buck may, by written notice to Up North, declare such rights to be non-exclusive. 1.3 SUBLICENSE; ASSIGNMENT. The grant of the License includes the right by Up North to grant sublicenses, within the scope of the License, or assign this Agreement to Thomas Zuhl ("Zuhl"), the Trust, or entities wholly owned or controlled by Zuhl or the Trust. Except as provided in this Agreement, the License and Agreement shall be nontransferable and nonassignable without Big Buck's prior written consent. In the event Up North assigns this Agreement to a person or entity other than Zuhl, the Trust, or entities wholly owned or controlled by Zuhl or the Trust, Zuhl shall personally guarantee such person or entity's obligations under this Agreement. 1.4 REVERSION OF RIGHTS, RETURN OF DOCUMENTS. Upon the termination or expiration of this Agreement, all rights granted to Up North hereunder shall automatically revert to Big Buck. In addition, upon Big Buck's written request, Up North shall, within a reasonable time after the termination or expiration of this Agreement, return to Big Buck all documents belonging to Big Buck that it has in its possession. ARTICLE II TERRITORY 2.1 TERRITORY DEFINED. "Territory" means the following countries: Japan, Thailand, Malaysia and Singapore. ARTICLE III TERM AND TERMINATION 3.1 TERM. The initial term of this Agreement shall begin on July 20, 2001, and extend for a period of twenty-five (25) years (the "Initial Term"). Upon the expiration of the Initial Term, this Agreement shall automatically renew for four (4) successive five (5)-year periods (the "Renewal Terms") unless Up North terminates this Agreement by providing written notice to Big Buck at least sixty (60) days prior to the end of the then term. The Initial Term and the Renewal Terms shall be collectively referred to as the "Term." 3.2 TERMINATION. This Agreement may be terminated: (i) by either party upon thirty (30) - days written notice to other party if the other party has materially breached this Agreement and has failed to cure such breach within thirty (30) days after receiving notice from the other party, or (ii) as otherwise provided in this Agreement. ARTICLE IV OWNERSHIP AND USE OF THE INTELLECTUAL PROPERTY 4.1 NO OWNERSHIP RIGHTS. Up North acknowledges that it is not, and will not become, by virtue of this Agreement the owner of any right, title, or interest in and to the Intellectual Property in any form or embodiment other than pursuant to the License granted hereby. 4.2 ADVERSE CLAIMS. Up North agrees that it will do nothing inconsistent with Big Buck's ownership of the Intellectual Property and will not claim, or assist any third party in attempting to claim, adversely to Big Buck with regard to such ownership. 4.3 QUALITY OF PRODUCTS. Up North agrees that the nature and quality of all Products sampled, sold, or otherwise disposed of by it and covered by the Intellectual Property shall conform to the standards set by and under Big Buck's control (the "Quality Standards"). The Quality Standards shall be reasonable and no greater than the quality standards maintained by Big Buck in its restaurant operations. ARTICLE V AGREEMENTS OF UP NORTH 5.1 BEST EFFORTS. Up North agrees to use commercially reasonable efforts to promote the Products in the Territory, including displays at major trade shows and distribution of promotional literature. 5.2 SCOPE OF LICENSE. The License gives Up North the right to promote, manufacture, distribute, and sell the Products in the Territory. Up North is not authorized to promote, distribute, or sell the Products outside of the Territory, unless it obtains Big Buck's prior written consent. Up North will refer inquiries for the distribution or sale of the Products outside the Territory to Big Buck for follow up, and Big Buck will refer inquires for sales inside the Territory to Up North for follow up. 5.3 UPDATES. Periodically, at Big Buck's request and upon reasonable notice to Up North, Up North will update Big Buck on matters, including, but not limited to, the following: promotional efforts, sales activity, and brand performance. ARTICLE VI AGREEMENTS OF BIG BUCK 6.1 MARKETING MATERIALS. At Up North's request from time to time and upon reasonable notice and frequency, Big Buck will provide Up North with a reasonable number of marketing and promotional literature and materials, including Product samples, t-shirts, uniforms, and other similar items. Up North shall reimburse Big Buck for big Buck's actual cost for such items. 6.2 OTHER MATERIALS AND INFORMATION. Big Buck shall provide Up North with: (i) its beer and food recipes, menus, Product labels, list of suppliers, training and operations manuals, building guidelines and site/architectural plans, and (ii) any other materials or information that will assist Up North in promoting or distributing the Products and establishing Big Buck franchises in the Territory. Such assistance will include, without limitation, access to Big Buck's architects and other consultants regarding the construction and design of the restaurants' physical structure, access to Big Buck's personnel for reasonable consultation assistance, and access to its suppliers of the Products. In the event any of the materials or information is updated or modified, Big Buck shall promptly notify Up North and furnish Up North with the updated or modified materials or information. 6.3 REGISTRATIONS. Up North will use its best efforts, at its expense, to obtain the appropriate registrations for all Intellectual Property requiring registration, including, without limitation, trademark registration for the Big Buck name, in Japan. In addition, Up North will undertake such registrations in the other countries of the Territory, on a country-by-country basis, prior to Up North actually opening a Big Buck franchise in the particular country. ARTICLE VII MEETINGS 7.1 REQUESTED MEETINGS. From time to time at either party's request, but not less than once each year, the parties will meet to determine performance objectives as well as other mutual concerns. The parties will hold meetings at least once during each six (6) - month period by telephone for the same purposes. ARTICLE VIII ROYALTIES 8.1 ROYALTY AMOUNT. Upon Up North's opening of a Big Buck restaurant in the Territory (the "Opening Date"), Up North agrees to pay to Big Buck the following percentages of royalties (the "Royalties") in consideration for the rights granted to Up North under this Agreement: 8.1.1 FOR THE FIRST TWENTY-FOUR MONTHS AFTER THE FIRST BIG BUCK RESTAURANT IS OPENED: One and one half (1 1/2 %) percent of Up North's Gross Receipts (as defined in Section 8.2 of the Agreement) for the Products sold in the Territory; and 8.1.2 FOR THE REMAINDER OF THE TERM OF THIS AGREEMENT AFTER THE EXPIRATION OF THE PERIOD SET FORTH IN SECTION 8.1.1 ABOVE: Two (2 %) percent of Up North's Gross Receipts for the Products sold in the Territory. 8.2 DEFINITION OF GROSS RECEIPTS. For purposes of this Agreement, "Gross Receipts" means all cash received by Up North for operations relative to the Intellectual Property. 8.3 PAYMENT OF ROYALTIES. The Royalties shall be paid within forty-five (45) business days following each Contract Quarter. A "Contract Quarter" as used in this Agreement means each successive period of three (3) calendar months beginning on the first day of the calendar month following the Opening Date. With each Royalty payment, Up North shall render to Big Buck a royalty statement showing Up North's gross receipts such information shall be needed to compute the Royalties. 8.4 REMITTANCES IN U.S. DOLLARS. All remittances under this Agreement shall be made in United States Dollars, with exchange being made at the exchange rate prevailing on the date of remittance. 8.5 AUDIT RIGHT. Big Buck and/or its agents will have the right to review Up North's books and records, on reasonable notice are during normal business hours to verify the amounts of any Royalties owed and paid (the "Audit Right"). This Audit Right shall be an annual right, exercisable one time per each twelve (12) month period of the term. The costs incurred in connection with Big Buck's exercise of the Audit Right shall be paid by Big Buck. If, with respect to any royalty period, the audit reveals an understatement in the Royalties due of the greater of Five Thousand United States ($5,000.00) Dollars or ten (10%) percent, however, Up North will then bear Big Buck's reasonable costs incurred in the audit, not to exceed the lesser of Ten Thousand United States ($10,000.00) Dollars or the amount of the shortfall. 8.6 ATTORNEY FEES. Upon execution of this Agreement and upon approval of Big Buck's lender, Wayne County Employees' Retirement System ("WCERS"), Up North shall pay to Big Buck the sum of One Thousand Five Hundred ($1,500.00) Dollars to cover Big Buck's legal costs incurred in reviewing and negotiating this Agreement ARTICLE IX REPRESENTATIONS AND WARRANTIES 9.1 BY BIG BUCK. Big Buck represents and warrants that: (i) it has good title to the Intellectual Property; (ii) has the right to grant the License in accordance with the terms of this Agreement free of any liabilities, charges, liens, restrictions, or encumbrances of any kind; (iii) there is no claim, action, proceeding, or other litigation pending or, to Big Buck's knowledge, threatened with regard to its ownership of the Intellectual Property or which, if adversely determined, would restrict or otherwise interfere in any material respect with Up North's exercise of the License; (iv) in the event it grants to any third party any licenses or rights in the Intellectual Property, it will not take any action or suffer any omission which would adversely affect the existence or validity of the Intellectual Property or conflict with the rights granted to Up North under this Agreement; (v) during the Term, it will not abandon the Intellectual Property, (vi) it is a Michigan corporation, duly organized and validly existing under Michigan law, and has the power and authority to enter into this Agreement and perform all of its obligations hereunder; and (vii) its execution, delivery, and performance of this Agreement will not conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, judgment, or decree applicable to it. 9.2 BY UP NORTH. Up North represents and warrants that: (i) it is a Michigan corporation, duly organized and validly existing under Michigan law, and has the power and authority to enter into this Agreement and perform all of its obligations hereunder, and (ii) to the best of its knowledge, its execution, delivery, and performance of this Agreement will not conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, judgment, or decree applicable to it. 9.3 SURVIVAL. The parties representations and warranties contained in this Article 9 will survive the execution and delivery of this Agreement. ARTICLE X CONFIDENTIALITY 10.1 CONFIDENTIALITY. Each party shall: (i) keep secret and maintain in confidence all confidential and proprietary information and data of the other party disclosed to it in connection with the performance of its obligations under this Agreement (the "Confidential Information"); (ii) not disclose the Confidential Information to any party other than its respective agents (e.g., employees, attorneys, and consultants) who need to know the Confidential Information in order to assist Big Buck in fulfilling its obligations under this Agreement; (iii) not use the Confidential Information for any purpose other than determining and performing its obligations and exercising its rights under this Agreement; and (iv) take all reasonable measures necessary to prevent any unauthorized disclosure of the Confidential Information by any of their respective agents. Measures taken to protect the Confidential Information shall be deemed reasonable if the measures taken are at least as strong as the measures taken by the disclosing party to protect the Confidential Information. 10.2 PERMITTED DISCLOSURE. Nothing in this Agreement shall prevent Big Buck or Up North or its respective agents from using, disclosing, or authorizing the disclosure of the Confidential Information it receives and which: (i) has been published or is in the public domain, or which subsequently comes into the public domain, through no fault of the receiving party; (ii) prior to receipt under this Agreement was property within the receiving party's legitimate possession or, subsequent to receipt under this Agreement, is lawfully received from a third party having rights therein without restriction of the third party's right to disseminate the Confidential Information and without notice of any restriction against its further disclosure; (iii) is independently developed by the receiving party through persons who have not had, either directly or indirectly, access to or knowledge of the Confidential Information (iv) is disclosed to a third party with the written approval of the party originally disclosing the Confidential Information, provided that the Confidential Information shall cease to be confidential and proprietary information covered by this Agreement only to the extent of the disclosure so consented to; or (v) is required to be produced under order of a court of competent jurisdiction or other similar requirements of a governmental agency, provided that the Confidential Information to the extent covered by a protective order or its equivalent shall otherwise continue to be Confidential Information required to be held confidential for purpose of this Agreement. 10.3 SURVIVAL. The obligations under Sections 10.1 and 10.2 shall survive, as to any party, until two (2) years following the date of termination or expiration of this Agreement, provided that such obligations shall continue indefinitely with regard to any trade secret or similar information that is proprietary to a party and provides such party with an advantage over its competitors. ARTICLE XI THIRD-PARTY INFRINGEMENTS 11.1 VIOLATION BY THIRD PARTY. If either party becomes aware of any product or activity of any third party that involves infringement or violation of any of the Intellectual Property licensed under this Agreement, it shall notify the other of such violation in writing within thirty (30) days. Up North shall then have the right, for a period of sixty (60) days, to commence litigation to enforce its rights. If Up North does not do so, then Big Buck shall thereafter have the right to take action directed toward settling the controversy or restraining or enjoining such infringement at its own expense. Up North may participate in such action taken by Big Buck at its own expense. 11.2 JOINT COOPERATION. The parties will reasonably cooperate with the other, at their own reasonable expense, in efforts undertaken by the other to enforce their respective rights. As part of such cooperation, either party may join the other in a lawsuit to enforce such rights. The party joining the other will indemnify the joined party against all expenses of such joinder. 11.3 EXPENSES OF INFRINGEMENT SUIT. If either Up North or Big Buck elects to bring a suit for infringement, all expenses thereof shall be borne by the party initiating such suit, and all proceeds, after costs of litigation, shall be divided equally between Up North and Big Buck. ARTICLE XII INDEMNIFICATION 12.1 INDEMNIFICATION BY BIG BUCK. Big Buck agrees to indemnify Up North against damages and expenses arising from claims of third parties: (i) that Big Buck does not have the right to grant Up North the rights under this Agreement with respect to the Products or the Products violate or infringe on the publicity, privacy or other rights of such third parties, or (ii) resulting from a breach of its representations and warranties contained in this Agreement. 12.2 INDEMNIFICATION BY UP NORTH. Up North agrees to indemnify Big Buck against damages and expenses arising from claims of third parties resulting from a breach of its representations and warranties contained in this Agreement, and from any action taken by Up North in connection with exploitation of the Intellectual Property 12.3 DAMAGES WITH REGARD TO THIRD-PARTY CLAIMS. The damages of either Big Buck or Up North with respect to claims of third parties shall be limited to amounts required to reasonable costs of defense and amounts to be paid to such third parties pursuant to settlement or judgment, and not to lost profits or other amounts incurred. 12.4 DEFENSE OF CLAIM OR ACTION. The party owing a duty of indemnification shall have the right to control the defense of any claim or action alleging facts which, if true, would give rise to a duty of indemnification. ARTICLE XIII MISCELLANEOUS 13.1 LENDER APPROVAL. Big Buck's execution of this Agreement is contingent upon the approval of its lender, WCERS. 13.2 GOVERNING LAW; DISPUTE RESOLUTION. This Agreement will be governed by the laws of the State of Michigan, United States of America. Any disputes arising under this Agreement will be settled by binding arbitration in Troy, Michigan, in accordance with the Commercial Arbitration Rules of the American Arbitration Association, and judgment on such award may be entered in any court of competent jurisdiction in the United States or the Territory. Each of the parties will bear their own costs of arbitration, including attorneys' fees. 13.3 COMPLETE AGREEMENT. This Agreement is the complete and binding agreement between the parties and supersedes any previous discussions or writings. 13.4 SEVERABILITY. If any provision of this Agreement is found to be invalid or illegal, the remainder of this Agreement shall continue to be enforceable. 13.5 FORCE MAJEURE. Neither party shall be liable for any failure to perform its obligations under this Agreement, other than the payment of money, by reason of any event or action beyond its control, including without limitation, labor stoppage, material shortage or unavailability, war, Act of God, or casualty to facilities. 13.6 NOTICES. All notices and other communications under this Agreement shall be in writing and given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: IF TO BIG BUCK: Big Buck Brewery & Steakhouse, Inc. Attention.: William F. Rolinski 550 S. Wisconsin P.O. Box 1430 Gaylord, Michigan 49734 With Copy To: Honigman, Miller, Schwartz & Cohn Attention: Greg Demars 2290 First National Building Detroit, Michigan 48226 IF TO UP NORTH: Up North Adventures, Inc. Attention: Thomas Zuhl 4555 Investment Drive, Suite 202 Troy, Michigan 48098 With Copy To: Safford & Baker, PLLC Attention: Donald H. Baker, Jr. 40900 Woodward Avenue, Suite 110 Bloomfield Hills, Michigan 48304 13.7 COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be deemed as original. Said counterparts shall constitute one and the same instrument. 13.8 HEADINGS. The headings contained in this Agreement are for reference purposes only and are not intended to describe, interpret, define, or limit the scope, extent, or intent of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement by their duly authorized officers or agents as of the day and year first written above. BIG BUCK BREWERY & STEAKHOUSE, INC. /s/ William F. Rolinski ----------------------- By William F. Rolinski Its President and Chief Executive Officer UP NORTH ADVENTURES, INC. /s/ Thomas Zuhl --------------- By Thomas Zuhl Its President EX-10.60 9 a2075337zex-10_60.txt EXHIBIT 10.60 EXHIBIT 10.60 THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, HAVE NOT BEEN REGISTERED UNDER ANY STATE SECURITIES LAWS, AND ARE SUBJECT TO A SUBSCRIPTION AND INVESTMENT REPRESENTATION AGREEMENT. THEY MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF EITHER AN EFFECTIVE REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL ACCEPTABLE TO BIG BUCK BREWERY & STEAKHOUSE, INC. THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER APPLICABLE STATE SECURITIES LAWS. BIG BUCK BREWERY & STEAKHOUSE, INC. CONVERTIBLE SUBORDINATED PROMISSORY NOTE $100,000 Gaylord, Michigan December 11, 2001 FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which is hereby acknowledged, the undersigned, Big Buck Brewery & Steakhouse, Inc., a Michigan corporation (the "Maker"), promises to pay to the order of Pac Rim Associates, Inc., 4555 Investment Drive, Suite 202, Troy, Michigan 48098 (the "Payee"), the principal sum of One Hundred Thousand Dollars ($100,000), plus interest at the rate specified below. The unpaid principal from time to time outstanding shall bear interest prior to maturity at an annual rate of interest equal to ten percent (10%) per annum, and all interest accrued on the unpaid principal balance of this Promissory Note shall be due and payable in arrears as provided below. The Maker agrees to pay the accrued interest due hereunder monthly on the first day of each month, beginning January 1, 2001, until December 11, 2002, on which date the entire amount due hereunder, including all unpaid principal and interest shall be due and payable in full. All principal and interest shall be payable in arrears. Interest hereon shall be calculated on the basis of a 360-day year applied to the actual number of days elapsed until all accrued and unpaid interest is paid in full. All interest due and payable hereunder that is not paid when due for any reason shall be cumulated, added to the principal and accrue interest at the highest lawful rate per annum on that delinquent amount until paid, to the extent permitted by law. All payments of interest and principal shall be payable in lawful currency of the United States of America ("Currency"), unless and to the extent Payee exercises Payee's option hereunder to convert all or part of the unpaid principal balance of this Promissory Note into shares of common stock, par value $0.01 per share (the "Shares"), of the Maker. At any time prior to maturity, Payee shall have the option to convert all or part of the unpaid principal balance of this Promissory Note into that number of Shares of the Maker (the "Option") equal to (i) all or such part of the unpaid principal balance of the Promissory Note being converted divided by (ii) $0.514, any fractional Shares to be paid in Currency. To exercise the Option, Payee shall surrender this Promissory Note to the Maker, accompanied by written notice of Payee's intention to exercise the Option, which notice shall set forth the principal amount of this Promissory Note and such portion of the unpaid principal balance of the Promissory Note, if not the entire unpaid principal balance, to be converted into Shares (the "Notice of Conversion"). Within ten (10) business days of Maker's receipt of the Notice of Conversion and Payee's surrender of this Promissory Note, Maker shall deliver or cause to be delivered to the Payee, the Shares in the name of the Payee. When delivered, all Shares shall be duly authorized, validly issued, fully paid, and nonassessable. Maker shall take any and all action necessary to maintain the required authority to issue the Shares to Payee in the event Payee exercises the Option. Prepayment of the principal of this Promissory Note is permitted, in whole or in part, without premium or penalty of any kind; provided Maker provides Payee with ten (10) business days' prior written notice of its intention to prepay the principal of this Promissory Note, in whole or in part, during which time Payee may exercise the Option by delivering to the Maker Payee's Notice of Conversion within ten (10) business days following Payee's receipt of such notice from the Maker. All partial prepayments of principal shall reduce the principal balance hereunder in reverse order of maturity. This Promissory Note is given in consideration of a loan by Payee to Maker in the principal amount of this Promissory Note. This Promissory Note may not be changed orally, but only by an agreement in writing signed by the parties against whom enforcement of any waiver, change, modification, or discharge is sought. The holder of this Promissory Note and all successors thereof shall have all of the rights of a holder in due course under the Uniform Commercial Code as in effect in the State of Michigan and the other laws of the State of Michigan. Maker hereby waives demand, presentment, protest, notice of protest and/or dishonor, and all other notices or requirements that might otherwise be required by law. The Maker promises to pay on demand all costs of collection, including reasonable attorneys' fees and court costs, paid or incurred by Payee to enforce this Promissory Note upon an Event of Default (as defined below) hereunder. The occurrence of any of the following shall constitute an "Event of Default" under this Promissory Note: a. The failure of Maker to make any payment of principal in Currency when due under this Promissory Note (time is of the essence), unless such failure is the result of payments of principal in Currency required to be made with respect to any Senior Debt (as defined below) of the Maker; or b. The institution of proceedings by or against the Maker under any state insolvency laws, federal bankruptcy law, or similar debtor relief laws then in effect. Upon an Event of Default that has not been cured within ten (10) business days from the date of written notice by Payee, Payee may, at Payee's option and without notice, declare all principal and interest due under this Promissory Note to be due and payable immediately. Payee may waive any default before or after it occurs and may restore this Promissory Note in full effect without impairing the right to declare it due for a subsequent default. Payment of the principal of this Promissory Note in Currency is subordinated in right of payment, to the prior payment of all Senior Debt of the Maker then currently due and payable. "Senior Debt" means all liabilities, contingent or otherwise, of the Maker (i) for borrowed money (but only if the recourse of the lender is secured by any assets of the Maker) and (ii) with respect to letters of credit, bankers acceptances, or similar instruments issued or accepted by banks ("Indebtedness") incurred by the Maker prior to or after the date of this Promissory Note and any replacement, renewal, refinancing, and extension (whether direct or indirect) thereof; provided, however, that notwithstanding anything to the contrary in this Promissory Note, Senior Debt does not include (i) any Indebtedness of the Maker that by its terms or the terms of the instrument creating or evidencing it expressly provides that such Indebtedness is subordinate in right of payment to, or pari passu in right of payment with, this Promissory Note or (ii) any Indebtedness of the Maker to an executive officer or director of the Maker. THE PAYEE, BY ACCEPTING THIS PROMISSORY NOTE, AGREES TO SUCH SUBORDINATION. IN WITNESS WHEREOF, the Maker has caused this Promissory Note to be executed in its corporate name by the signature of its duly authorized officer. BIG BUCK BREWERY & STEAKHOUSE, INC. By: /s/ William F. Rolinski ----------------------------------------- William F. Rolinski President and Chief Executive Officer EX-10.61 10 a2075337zex-10_61.txt EXHIBIT 10.61 EXHIBIT 10.61 PROMISSORY NOTE
- ---------------------------------------------------------------------------------------------------------------------- PRINCIPAL LOAN DATE MATURITY LOAN NO. CALL/COLL ACCOUNT OFFICER INITIALS $5,000,000.00 03-15-2002 03-15-2004 55 - ----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing "***" has been omitted due to text length limitations. BORROWER: BIG BUCK BREWERY & STEAKHOUSE, INC. LENDER: UNITED BANK AND TRUST COMPANY P.O. BOX 1430 P.O. BOX 14517 GAYLORD, MI 49734 ST. PETERSBURG, FL 33733 ===============================================================================================
PRINCIPAL AMOUNT: $5,000,000.00 INTEREST RATE: 5.570% DATE OF NOTE: MARCH 15, 2002
PROMISE TO PAY. BIG BUCK BREWERY & STEAKHOUSE, INC. ("BORROWER") PROMISES TO PAY TO UNITED BANK AND TRUST COMPANY ("LENDER"), OR ORDER, IN LAWFUL MONEY OF THE UNITED STATES OF AMERICA, THE PRINCIPAL AMOUNT OF FIVE MILLION & 00/100 DOLLARS ($5,000,000.00), TOGETHER WITH INTEREST AT THE RATE OF 5.570% PER ANNUM ON THE UNPAID PRINCIPAL BALANCE FROM MARCH 15, 2002, UNTIL PAID IN FULL. PAYMENT. BORROWER WILL PAY THIS LOAN IN 23 REGULAR PAYMENTS OF $95,870.15 EACH AND ONE IRREGULAR LAST PAYMENT ESTIMATED AT $3,263,326.48. BORROWER'S FIRST PAYMENT IS DUE APRIL 15, 2002, AND ALL SUBSEQUENT PAYMENTS ARE DUE ON THE SAME DAY OF EACH MONTH AFTER THAT. BORROWER'S FINAL PAYMENT WILL BE DUE ON MARCH 15, 2004, AND WILL BE FOR ALL PRINCIPAL AND ALL ACCRUED INTEREST NOT YET PAID. PAYMENTS INCLUDE PRINCIPAL AND INTEREST. UNLESS OTHERWISE AGREED OR REQUIRED BY APPLICABLE LAW, PAYMENTS WILL BE APPLIED FIRST TO ACCRUED UNPAID INTEREST, THEN TO PRINCIPAL, AND ANY REMAINING AMOUNT TO ANY UNPAID COLLECTION COSTS AND LATE CHARGES. THE ANNUAL INTEREST RATE FOR THIS NOTE IS COMPUTED ON A 365/360 BASIS; THAT IS, BY APPLYING THE RATIO OF THE ANNUAL INTEREST RATE OVER A YEAR OF 360 DAYS, MULTIPLIED BY THE OUTSTANDING PRINCIPAL BALANCE, MULTIPLIED BY THE ACTUAL NUMBER OF DAYS THE PRINCIPAL BALANCE IS OUTSTANDING. BORROWER WILL PAY LENDER AT LENDER'S ADDRESS SHOWN ABOVE OR AT SUCH OTHER PLACE AS LENDER MAY DESIGNATE IN WRITING. PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower's making fewer payments. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: United Bank and Trust Company, P.O. Box 14517, St. Petersburg, FL 33733. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the regularly scheduled payment or $10.00, whichever is greater. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the interest rate on this Note to 25.000% per annum, if and to the extent that the increase does not cause the interest rate to exceed the maximum rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: PAYMENT DEFAULT. Borrower fails to make any payment when due under this Note. OTHER DEFAULTS. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower. FALSE STATEMENTS. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower's behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. INSOLVENCY. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self--help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may, but shall not be required to, permit the guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. CHANGE IN OWNERSHIP. Any change in ownership of twenty--five percent (25%) or more of the common stock of Borrower. ADVERSE CHANGE. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. INSECURITY. Lender in good faith believes itself insecure. CURE PROVISIONS. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within five (5) days; or (2) if the cure requires more than five (5) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount. ATTORNEYS' FEES; EXPENSES: Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender the amount of these costs and expenses, which includes, subject to any limits under applicable law, Lender's reasonable attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including reasonable attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of Florida. This Note has been accepted by Lender in the State of Florida. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph. COLLATERAL. Borrower acknowledges this Note is secured by United Bank Certificate of Deposit #11084, in the amount of $5,000,000.00, in the name of Wayne County Retirement System. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report any inaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address: United Bank and Trust Company, P.O. Box 14517, St. Petersburg, FL 33733 GENERAL PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Borrower does not agree or intend to pay, and Lender does not agree or intend to contract for, charge, collect, take, reserve or receive (collectively referred to herein as "charge or collect"), any amount in the nature of interest or in the nature of a fee for this loan, which would in any way or event (including demand, prepayment, or acceleration) cause Lender to charge or collect more for this loan than the maximum Lender would be permitted to charge or collect by federal law or the law of the State of Florida (as applicable). Any such excess interest or unauthorized fee shall, instead of anything stated to the contrary, be applied first to reduce the principal balance of this loan, and when the principal has been paid in full, be refunded to Borrower. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: BIG BUCK BREWERY & STEAKHOUSE, INC. By: /s/ William F. Rolinski ----------------------------------------------- William F. Rolinski, Chairman/CEO/Pres of Big Buck Brewery & Steakhouse, Inc. ATTEST: /s/ Diane M. House (Corporate Seal) - ------------------ Secretary or Assistant Secretary EX-10.62 11 a2075337zex-10_62.txt EXHIBIT 10.62 EXHIBIT 10.62 MASTER AGREEMENT PROGRAM MANAGEMENT SERVICES This Master Agreement for Program Management Services (Agreement) is entered into this 01 day of JANUARY, 2001 Contract Number 78-0002 BETWEEN the Client: (NAME, ADDRESS AND OTHER INFORMATION) Big Buck Brewery & Steakhouse, Inc. 550 South Wisconsin Gaylord, Michigan 49735 William F. Rolinski, President/CEO Phone: 517/731-0401, Ext. 25 FAX: 517/731-2788 Mobile: 517/350-3344 Email: pres@bigbuck.com and the Program Manager: (NAME, ADDRESS AND OTHER INFORMATION) COLUMBIA CONSTRUCTION SERVICES-MICHIGAN, INC. 14641 East Warren Avenue Detroit, Michigan 48215-0428 USA Mark S. Provenzano, President, CIT, CSI, CDT Phone: 313/886-0606, Ext. 201 FAX: 313/885-2885 Pager: 810/704-1522 Email: mprovenzano@columbiaconstruction.com the Client and Program Manager agree as follows: 1. PROGRAM MANAGEMENT SERVICES Throughout the term of this Agreement, the Program Manager shall perform the Program Management Services listed below. 1.1 The Program Manager shall consult with and advise the Client on a regular basis regarding the Client's on-going construction and/or renovation of restaurants in connection with Client's business operations. The Program Manager shall assist the Client in developing an overall program for the development of Client's restaurants and shall provide assistance and advice in the on-going management of the Client's program. 1.2 The Program Manager shall assist the Client in developing overall program criteria for Client's development of new restaurants and renovation and expansion of existing restaurant spaces. 1.3 The Program Manager shall consult with the Client regarding development, design and construction issues related to Client's restaurant business. 1.4 The Program Manager shall assist the Client in reviewing design and construction considerations in connection with selection of food service equipment suppliers ("Suppliers"). 1.5 The Program Manager shall assist the Client in reviewing and evaluating potential sites for new restaurants. 1.6 The Program Manager shall assist the Client in preparing preliminary budgets for development, design and construction or renovation of restaurants. The Program Manager shall consult with the Client and other consultants and Suppliers retained by the Client regarding value engineering recommendations to reduce design and construction costs. 1.7 The Program Manager shall assist the Client in preparing preliminary schedules for the Client's overall development program. 1.8 The Client acknowledges that this Agreement does not include Services for regular repair and maintenance work for Client's restaurants or for limited construction or renovation projects (of $50,000.00 or less). At the request of the Client, the Program Manager shall provide Program Management Services for such projects for an agreed-upon lump sum amount or on a cost-plus basis with an agreed-upon mark-up. 2. SERVICES FOR A SPECIFIC PROJECT 2.1 PRE-CONSTRUCTION PHASE SERVICES: If the Client authorizes the Program Manager to perform services for a specific project ("Project") or proposed Project site, the Program Manager shall perform the Pre-Construction Phase Services listed in this Section 2.1. Such Pre-Construction Phase Services are in addition to the Program Management Services provided under Section 1. 2.1.1 The Program Manager shall provide overall coordination of] activities of the Client's consultants and Suppliers with each other in connection with the design of the Project. The Program Manager shall coordinate with the Client's landlord in connection with the design of the Project, shall monitor the compliance of the design of the Project with the landlord's design criteria, and shall monitor the review and approval of drawings and specifications by the landlord as required by the lease for the Project space. 2.1.2 The Program Manager shall assist the Client and the Client's architect or other design consultant (the "Design Professional") in finalizing a specific program for the Project. The Program Manager shall provide preliminary evaluation of the Project program and budget requirements, each in terms of the other. With the Design Professional's assistance, the Program Manager shall provide preliminary estimates of construction cost for early schematic designs based on area, volume or other standards. The Program Manager shall assist the Client and the Design Professional in achieving mutually agreed upon program and Project budget requirements and other design parameters. The Program Manager shall provide cost evaluations of alternative materials and systems. 2.1.3 The Program Manager shall review the project schedule for the pre-construction phase developed by the Design Professional and make recommendations to the Design Professional regarding revisions to such project schedule. 2.1.4 The Program Manager shall review designs during their development. The Program Manager shall advise on site use and improvements, if applicable, selection of materials, equipment and methods of Project delivery. The Program Manager shall provide recommendations on relative feasibility of construction methods, availability of materials and labor, time requirements for procurement, installation and construction, and factors related to cost including, but not limited to, costs of alternative designs or materials, preliminary budgets and possible economies. 2.1.5 The Program Manager shall coordinate contract documents by consulting with the Client and the Design Professional regarding drawings and specifications as they are being prepared, and recommending alternative solutions whenever design details affect construction feasibility, cost or schedules. 2.1.6 The Program Manager shall investigate and recommend a schedule for the Client's purchase of materials and equipment requiring long lead time procurement, and coordinate the schedule with the early preparation of portions of the contract documents by the Design Professional. The Program Manager shall expedite and coordinate delivery of these purchases. 2.1.7 Based on construction drawings and specifications approved by the Client, the Program Manager shall develop a line item Construction Budget for construction work (the "Work") for the Project for review and approval of the Client. The Construction Budget shall list exclusions for any Work item not covered by the Construction Budget and shall list any alternates for consideration by the Client. In determining the line item amounts for the Construction Budget, if appropriate, the Program Manager shall obtain at least three (3) competitive bids for each line item, unless the Client and the Program Manager agree the competitive bidding is not required for a particular line item. The Program Manager shall consult with the Client regarding the Construction Budget prepared by the Program Manager. 2.1.8 The Program Manager shall develop a bar chart Preliminary Construction Schedule for the Project for review and approval of the Client. The Preliminary Construction Schedule shall include commencement and completion dates for portions of the Work, dates for delivery, installation and start-up of equipment items, Client's occupancy requirements, and other significant dates. The Program Manager shall consult with the Client regarding the Preliminary Construction Schedule prepared by the Program Manager. 2.2 CONSTRUCTION PHASE SERVICES: If the Client authorizes the construction of a specific Project to proceed, the Program Manager shall perform the Construction Phase Services listed below in connection with such Project. The Client will not be deemed to have authorized the construction of the Project until the Client signs and submits to the Program Manager a Project Authorization in the form attached as Exhibit A, confirming that (i) the Client approves the construction drawings and specifications for the Project developed by the Design Professional; (ii) the Client approves the Construction Budget developed by the Program Manager; (iii) the Client approves the Preliminary Construction Schedule developed by the Program Manager; and (iv) the Client authorizes construction to proceed. The Construction Phase Services listed below are in addition to the Program Management Services provided under Section 1. 2.2.1 The Program Manager shall enter into construction contracts ("Contracts") with construction contractors ("Contractors") on behalf of the Client. Unless the Client and Program Manager agree otherwise, the Contract amount shall be the amount indicated in the Construction Budget attached to the Authorization To Proceed With Construction and the Contractor shall be the bidder recommended by the Project Manager. 2.2.2 The Program Manager shall provide overall coordination of activities of the Client's contractors, consultants and Suppliers with each other in connection with the construction of the Project. 2.2.3 The Program Manager shall coordinate with the Client's landlord in connection with the construction of the Project, shall monitor the review and approval of contractor submittals by the landlord, and shall monitor compliance of the Contractors' and suppliers activities at the site with Shopping Center security requirements and other requirements of the Landlord pertaining to construction activities at the Shopping Center. 2.2.4 The Program Manager, in cooperation with the Design Professional, shall provide administration of the Contracts on behalf of the Client. 2.2.5 The Project Manager shall provide administrative, management and related services as required to coordinate Work of the Contractors with each other and with the activities and responsibilities of the Suppliers, Program Manager, the Client and the Design Professional to complete the Project in accordance with the Client's objectives for cost, time and quality. The Program Manager shall provide sufficient organization, personnel and management to provide the Construction Phase Services required under this Section 2.2. 2.2.6 The Program Manager shall schedule and conduct pre-construction, construction and progress meetings to discuss such matters as procedures, progress, problems and scheduling. The Program Manager shall prepare and promptly distribute minutes. 2.2.7 Consistent with the Preliminary Construction Schedule attached to the Authorization To Proceed With Construction, and utilizing the construction schedules provided by the separate Contractors, the Program Manager shall prepare a Construction Schedule for the Project incorporating the activities of Contractors and Suppliers on the Project, including activity sequences and durations, allocation of labor and materials, processing of shop drawings, product data and samples, and delivery of products requiring long lead time procurement. The Program Manager shall include the Client's occupancy requirements showing portions of the Project having occupancy priority. The Program Manager shall update and reissue the Construction Schedule as required to show current conditions and revisions required by actual experience. 2.2.8 The Program Manager shall endeavor to achieve satisfactory performance from each of the Contractors. The Program Manager shall recommend courses of action to the Client when requirements of a Contract are not being fulfilled, and the nonperforming party will not take satisfactory corrective action. 2.2.9 The Program Manager shall revise and refine the approved Construction Budget incorporate approved changes as they occur, and develop cash flow reports and forecasts as needed. The Program Manager shall provide regular monitoring of the approved Construction Budget, showing actual costs for activities in progress and estimates for uncompleted tasks. The Program Manger shall identify variances between actual and budgeted or estimated costs, and advise the Client whenever projected costs exceed budgets or estimates. 2.2.10 The Program Manager shall maintain cost accounting records on authorized Work performed under unit costs, additional Work performed on the basis of actual costs of labor and materials, or other Work requiring accounting records. 2.2.11 The Program Manager shall recommend necessary or desirable changes to the Design Professional and the Client, review requests for changes, assist in negotiating Contractors' proposals, submit recommendations to the Design Professional and the Client, and if they are accepted, prepare and sign change orders for the Design Professional's signature and the Client's authorization. 2.2.12 The Program Manager shall develop and implement procedures for the review and processing of applications by Contractors and Suppliers for progress and final payments. The Program Manager shall make recommendations to the Design Professional for certification to the Client for payment. 2.2.13 The Program Manager shall assist in obtaining building permits and any applicable special permits for permanent improvements, excluding permits required to be obtained directly by the various Contractors. The Program Manager shall verify that the Client has paid applicable fees and assessments. The Program Manager shall assist in obtaining approvals from authorities having jurisdiction over the Project. 2.2.14 If required, the Program Manager shall assist the Client in selecting and retaining the professional services of special consultants and testing laboratories and shall coordinate their services. 2.2.15 The Program Manager shall determine in general that the Work of each Contractor is being performed in accordance with the requirements of the applicable Contract. The Program Manager shall endeavor to guard the Client against defects and deficiencies in the Work. As appropriate, the Program Manager shall require special inspection or testing, or make recommendations to the Design Professional regarding special inspection or testing, of Work not in accordance with the drawings and specifications for the Contract whether or not such Work be then fabricated, installed or completed. Subject to review by the Design Professional, the Program Manager shall reject Work, which does not conform to the requirements of the drawings and specifications for the Contract. 2.2.16 The Program Manager shall consult with the Design Professional and the Client if any Contractor requests interpretations of the meaning and intent of the drawings and specifications, and assist in the resolution of questions, which may arise. 2.2.17 The Program Manager shall receive certificates of insurance from the Contractors, and forward them to the Client. 2.2.18 The Program Manager shall receive from the Contractors all shop drawings, product data, samples and other submittals, coordinate them with information contained in related documents and transmit them to the Design Professional for approval. In collaboration with the Design Professional, the Program Manager shall establish and implement procedures for expediting the processing and approval of shop drawings, product data, samples and other submittals. 2.2.19 The Program Manager shall record the progress of the Project. The Program Manager shall submit written progress reports to the Client and the Design Professional including information on each Contractor and each Contractor's Work, as well as the entire Project, showing percentages of completion and the number and amounts of change orders. The Program Manager shall keep a daily log containing a record of Contractors' Work on the site, number of workers, Work accomplished, problems encountered, and other similar relevant data as the Client may require. The Program Manager shall make the log available to the Client. 2.2.20 The Program Manager shall maintain at the Project site, on a current basis: a record copy of all Contracts, drawings, specifications, addenda, change orders and other modifications, in good order and marked to record all changes made during construction; shop drawings; product data; samples; submittals; purchases; materials; equipment; applicable handbooks; maintenance and operating manuals and instructions; other related documents and revisions which arise out of the Contracts or Work. The Program Manager shall make all records available to the Client. At the completion of the Project, the Program Manager shall deliver all such records to the Client. 2.2.21 The Program Manager shall arrange for delivery and storage, protection and security for Client-purchased materials, systems and equipment which are a part of the Project, until such items are incorporated into the Project. 2.2.22 With the Design Professional and the Client's maintenance personnel, the Program Manager shall observe the Contractors' checkout of utilities, operational systems and equipment for readiness and assist in their initial start-up and testing. 2.2.23 When the Program Manager considers each Contractor's Work or a designated portion thereof substantially complete, the Program Manager shall prepare for the Client a list of incomplete or unsatisfactory items and a schedule for their completion. The Program Manager shall assist the Design Professional in conducting inspections. The Program Manager shall coordinate the correction and completion of the Work. 2.2.24 The Program Manager shall evaluate the completion of the Work of the Contractors and make recommendations to the Design Professional when Work is ready for final inspection. The Program Manager shall assist the Design Professional in conducting final inspections. The Program Manager shall secure and transmit to the Client required guarantees, affidavits, releases, bonds and waivers. The Program Manager shall deliver all keys, manuals, record drawings and maintenance stocks to the Client. 2.2.25 The Program Manager shall perform the Construction Phase Services under this Section 2.2 as expeditiously as is consistent with reasonable skill and care and the orderly progress of the Project. 2.2.26 The extent of the duties, responsibilities and limitations of authority of the Program Manager as a representative of the Client during construction shall not be modified or extended without the written consent of the Client, the Contractors, the Design Professional and the Program Manager, which consent shall not be unreasonably withheld. 3. CLIENT'S RESPONSIBILITIES 3.1 The Client shall provide full information regarding the Client's requirements for its restaurant development program and, as applicable, its requirements for specific Projects, including information regarding the Client's objectives, constraints and criteria, including space requirements and relationships, flexibility and expandability requirements, special equipment and systems and site requirements. 3.2 The Client shall designate a representative authorized to act in the Client's behalf with respect to Client's restaurant program and for specific Projects. The Client, or such authorized representative, shall examine documents submitted by the Program Manager and shall render decisions pertaining thereto promptly to avoid unreasonable delay in the progress of the Program Manager's services. 3.3 The Client shall furnish such legal, accounting and insurance counseling services as may be necessary for the Client's restaurant program and for specific Projects, including such auditing services as the Client may require to verify the Project applications for payment or to ascertain how or for what purposes the Contractors have used the monies paid by or on behalf of the Client. 3.4 The services, information and reports required by Sections 3.1 through 3.3, inclusive, shall be furnished at the Client's expense, and the Program Manager shall be entitled to reasonably rely upon their accuracy and completeness. 3.5 The Client shall furnish the required information and services and shall render approvals and decisions as expeditiously as necessary for the orderly progress of the Program Manager's services and the Work of the Contractors. 4. PROGRAM MANAGER'S COMPENSATION AND PAYMENTS 4.1 PROGRAM MANAGEMENT SERVICES: For Program Management Services (as described in Section 1), the Client shall pay the Program Manager on the first of each month a Monthly Retainer in the amount of Six Thousand ($6,000.00) Dollars. The Monthly Retainer amount covers the Program Manager's normal office overhead and compensation for the services of Mark S. Provenzano. In addition to the Monthly Retainer, the Client shall reimburse the Program Manager (at actual cost plus fifteen (15%) percent) for all reimbursable costs incurred by the Program Manager in connection with the performance of Program Management Services. 4.2 SERVICES FOR A SPECIFIC PROJECT: For Services for a specific Project (as described in Section 2), the Client shall pay the Program Manager on a monthly basis the sum of the following: (1) Amounts due to the Contractors, consultants and Suppliers under Contracts, consultant agreements and purchase orders held by the Program Manager on behalf of the Client with respect to the Project; (2) Actual cost incurred by the Program Manager to provide General Conditions items and other reimbursable cost items for the Project; (3) Amount due for Program Manager's site personnel and other personnel (other than Mark S. Provenzano) providing services in connection with the Project; plus (4) A Construction Management Fee in the amount of fifteen (15%) percent of the amounts listed in Subsections (1) through (3) above. Each month the Program Manager shall submit an invoice to the Client for the amount due for Services performed for the Project during the month, and the Client shall pay such amount to the Program Manager within ten (10) days after receipt of such invoice. 4.3 COST RECORDS: The Program Manager shall maintain cost records of Project costs and shall make such records available to the Client or the Client's authorized representative at mutually convenient times. At the request of the Client, the Program Manager shall provide receipts and other back-up documentation as reasonably required to substantiate the amounts included in invoices submitted by the Program Manager under Section 4.2. 5. INSURANCE 5.1 The Program Manager shall purchase and maintain Worker's Compensation Insurance, Commercial General Liability insurance and Automobile Liability Insurance coverage covering its activities under this Agreement. At the time the Client issues an Authorization To Proceed With Construction for a specific Project, the Program Manager shall submit to the Client a certificate of insurance evidencing coverage maintained by the Program Manager in connection with the Project in at least the following amounts: Worker's Compensation $ 100,000 Commercial General Liability $ 3,000,000 Automotive Liability $ 1,000,000 Excess Liability Coverage $ 1,000,000
The Client and the Client's landlord shall be named as additional insured on Program Manager's policies (except Worker's Compensation). 5.2 With respect to each specific Project covered by an Authorization To Proceed With Construction, the Client shall provide builder's risk property insurance for the specific Project. The Client's property insurance will not cover tools and equipment used during construction but not incorporated in the completed Work. At the request of the Client, the Program Manager will provide property insurance for a specific Project, and the premium cost for such coverage will be included in the General Conditions costs reimbursable to the Program Manager under Section 4.2. 5.3 The Client and the Program Manager waive all rights against each other, and against the Contractors, consultants, Suppliers, agents and employees of the other, for damages covered by any property insurance maintained in connection with construction. The Client and the Program Manager shall each require appropriate similar waivers from their Contractors, consultants, Suppliers and agents. 6. TERMINATION 6.1 The Client shall have the right to terminate this Agreement at any time, with or without cause, upon ninety (90) days prior written notice to Program Manager. In the event of such termination, the Program Manager shall be entitled to receive (i) full payment of all amounts due under Sections 4.1 and 4.2 for services performed as of the effective date of termination; plus (ii) Contractor and Supplier restocking and cancellation fees and similar termination expenses incurred by Program Manager under Contracts and purchase orders held by the Program Manager on behalf of the Client. 6.2 The Program Manager shall have the right to terminate this Agreement with respect to the Program Management Services under Section 1, with or without cause, upon ninety (90) days prior written notice to the Client; provided, however, that at the request of the Client, the Program Manager shall continue to perform Services with respect to construction of a specific Project authorized by the Client under Section 2.2 until the completion of construction of such Project. In the event of termination of the Program Management Services under this Section 6.2, the Program Manager shall be entitled to receive full payment of all amounts due under Section 4.1 for Program Management Services performed as of the effective date of termination. 6.3 The Program Manager shall have the right to terminate this Agreement upon ten (10) days prior written notice to the Client in the event of a substantial failure of the Client to perform the Client's obligations under this Agreement and failure of the Client to correct such substantial failure within such ten (10) day notice period. In the event of termination of this Agreement under this Section 6.3, the Program Manager shall be entitled to receive (i) full payment of all amounts due under Sections 4.1 and 4.2 for services performed as of the effective date of termination; plus (ii) Contractor and Supplier restocking and cancellation fees and similar termination expenses incurred by the Program Manager under Contracts and purchase orders held by the Program Manager on behalf of the Client. 7. MISCELLANEOUS 7.1 Unless otherwise specified, this Agreement shall be governed by the laws of the State of Michigan. 7.2 The Client and the Program Manager, respectively, bind themselves, their partners, successors, assigns and legal representatives to the other party to this Agreement, and to the partners, successors, assigns and legal representatives of such other party with respect to all covenants of this Agreement. Neither the Client nor the Program Manager shall assign, sublet or transfer any interest in this Agreement without the written consent of the other. 7.3 This Agreement represents the entire and integrated agreement between the Client and the Program Manager with respect to the matters set forth herein and supersedes all prior negotiations, representations or agreements, either written or oral. This Agreement may be amended only by written instrument signed by both the Client and the Program Manager. 7.4 Nothing contained in this Agreement shall be deemed to give any third party any claim or right of action against the Client or the Program Manager which does not otherwise exist without regard to this Agreement. 8. LIMITATION ON LIABILITY 8.1 Budgets and cost estimates prepared by the Program Manager represent the Program Manager's best judgment as a professional familiar with the construction industry. It is recognized, however, that neither the Program Manager nor the Client has control over the cost of labor, materials or equipment, over Contractors' methods of determining bid prices or other competitive bidding or negotiating conditions. Accordingly, the Program Manager cannot and does not warrant or represent that bids or negotiated prices will not vary from the Project budget proposed, established or approved by the Client, or from any cost estimate or evaluation or budget prepared by the Program Manager. 8.2 The Program Manager shall not be responsible for construction means, methods, techniques, sequences and procedures employed by Contractors and/or Suppliers in the performance of their Contracts and purchase orders, and shall not be responsible for the failure of any Contractor or Supplier to carry out Work in accordance with drawings and specifications or other Contract requirements. 8.3 In no event shall the Program Manager or the Client be liable to the other for special, incidental or consequential damages, including without limitation, loss of profits, revenue or use of capital, claims of customers, whether based on contract, tort, negligence, strict liability or otherwise. This Agreement entered into as of the day and year first written above. CLIENT PROGRAM MANAGER Big Buck Brewery & Steakhouse, Inc. Columbia Construction Services-Michigan, Inc. By: /s/ William F. Rolinski By: /s/ Mark S. Provenzano ------------------------------ ------------------------------------- William F. Rolinski Mark S. Provenzano, CIT, CSI, CDT Its: President/CEO Its: President EX-10.63 12 a2075337zex-10_63.txt EXHIBIT 10.63 EXHIBIT 10.63 AGREEMENT This Agreement is entered into between Big Buck Brewery & Steakhouse, Inc. ("Big Buck") and Opry Mills Limited Partnership ("Opry Mills") on this 14th day of March, 2002. WHEREAS, on November 9, 2000, Big Buck and Opry Mills entered into a commercial lease (the "Lease") for 20,046 square feet of space in a one-level building in Opry Mills (the "Demised Premises"). WHEREAS, disputes have arisen between the parties which resulted in the initiation of litigation by Opry Mills against Big Buck, including not only a Complaint filed in Davidson County Chancery Court (the "Complaint"), but an unlawful detainer warrant in Davidson County General Sessions Court (the "Eviction Action"), which seeks both a monetary judgment for unpaid rent and that legal possession of the Demised Premises be returned to Opry Mills. The Complaint and Eviction Action were both removed by Big Buck to Federal Court, and the consolidated action is now styled OPRY MILLS LIMITED PARTNERSHIP V. BIG BUCK BREWERY & STEAKHOUSE, INC., United States Federal Court, Middle District of Tennessee, Case No. 3:01-1417 (collectively the "Litigation"). WHEREAS, that portion of the Litigation concerning the Eviction Action in which Opry Mills seeks legal possession of the Demised Premises has been set for trial on April 23, 2002 (the "Possession Trial"). WHEREAS, while the parties are still discussing a full and complete resolution of all of the issues raised in the Litigation, including a payment by Big Buck to Opry Mills for a termination of the Lease and dismissal of the Litigation with prejudice, the parties wish to reach an agreement, while reserving all rights, with regard to Opry Mills obtaining formal legal possession of the Demised Premises, and thus avoiding the necessity of the Possession Trial. Now, therefore, for valuable consideration the parties agree as follows: 1. Big Buck hereby agrees to grant to Opry Mills formal legal possession of the Demised Premises as described in the Lease (the "Grant"). The parties agree that the Demised Premises will be turned over to Opry Mills in an "as is" condition. 2. The parties agree that the Grant is solely for the purposes of allowing Opry Mills to: (a) mitigate some of the damages claimed against Big Buck; (b) attempt to re-lease the Demised Premises on behalf of Big Buck; (c) if necessary, to make necessary improvements to the Demised Premises; and (d) avoid the Possession Trial. 3. Big Buck agrees that the Grant, any attempts by Opry Mills to re-lease the Demised Premises, make any necessary improvements to the Demised Premises, and the resolution of the Possession Trial does not in any manner or way constitute a formal termination of the Lease. 4. Big Buck agrees that the Grant, any attempts by Opry Mills to re-lease the Demised Premises, make any necessary improvements to the Demised Premises, and the resolution of the Possession Trial does not in any manner or way waive, effect or impact any right or claim that: (a) Big Buck's monetary obligations under the Lease remain in full force and effect and all rent and charges payable under the Lease continue to accrue; and (b) Big Buck's obligations to pay for any work or materials for the Demised Premises, including an obligation to indemnify and defend Opry Mills from any and all claims or actions taken by any unpaid supplier, contractor or laborers which can trace their contracts through to Big Buck or its general contractor; 5. Opry Mills agrees that the Grant does not in any manner or way waive, effect or impact any claim or defense which Big Buck may have that Opry Mills, after it has obtained possession of the Demised Premises, failed to use reasonable efforts to mitigate to re-let the Demised Premises, failed to use reasonable efforts to mitigate to re-let the Demised Premises. Opry Mills does not waive any argument it has that under the terms of the Lease (Section 15.2 (c)) any failure to re-let the Demised Premises shall not affect Big Buck's liability. 6. The parties agree that entering into this Agreement has created no independent claim or cause of action, and does not constitute any admission of liability. 7. Upon the execution of this Agreement, Opry Mills will submit to the Court a Notice that the portion of the Eviction Action in which Opry Mills seeks legal possession of the Demised Premises has been resolved by agreement, thus avoiding the necessity of the Possession Trial. However, this Notice does not, as set out in paragraph 4 above, waive any right or claim of Opry Mills to Big Buck's past monetary obligations under the Lease, including all rent, charges and attorneys fees payable under the Lease. 8. Notwithstanding the Grant, the parties hereby expressly reserve any and all rights, claims or actions they have as it pertains to the Lease and the Litigation. OPRY MILLS LIMITED PARTNERSHIP By: Opry Mills, L.L.C. Its General Partner By: The Mills Limited Partnership Its Manager By: The Mills Corporation Its General Partner By: /s/ Kent Digby -------------- BIG BUCK BREWERY & STEAKHOUSE, INC.: /s/ William F. Rolinski - ------------------------------ Name: William F. Rolinski Title: President and Chief Executive Officer EX-10.64 13 a2075337zex-10_64.txt EXHIBIT 10.64 EXHIBIT 10.64 SETTLEMENT AND TERMINATION AGREEMENT This Settlement and Termination Agreement (the "Agreement") is entered into between Big Buck Brewery & Steakhouse, Inc. ("Big Buck") and Opry Mills Limited Partnership ("Opry Mills") on this 28th day of March 2002. WHEREAS, on November 9, 2000, Big Buck and Opry Mills entered into a commercial lease (the "Lease") for 20,046 square feet of space in a one-level building in Opry Mills (the "Demised Premises"). WHEREAS, disputes have arisen between the parties which resulted in the initiation of litigation by Opry Mills against Big Buck, including not only a Complaint filed in Davidson County Chancery Court (the "Complaint"), but an unlawful detainer warrant in Davidson County General Sessions Court (the "Eviction Action"), which seeks both a monetary judgment for unpaid rent and that legal possession of the Demised Premises be returned to Opry Mills. The Complaint and Eviction Action were both removed by Big Buck to Federal Court, and the consolidated action is now styled OPRY MILLS LIMITED PARTNERSHIP V. BIG BUCK BREWERY & STEAKHOUSE, INC., United States Federal Court, Middle District of Tennessee, Case No. 3:01-1417 (collectively the "Litigation"). WHEREAS, the parties entered into an Agreement on March 14, 2002, in which they agreed that Big Buck would grant to Opry Mills possession of the Demised Premises, with both parties reserving all rights and claims (the "Possession Agreement"). WHEREAS, the parties have now agreed to a full and complete resolution and settlement of all of the issues raised in the Litigation, including a payment by Big Buck to Opry Mills for a termination of the Lease and dismissal of the Litigation with prejudice. Now, therefore, for valuable consideration, the parties agree as follows: 1. Big Buck shall pay to Opry Mills a Termination Fee (the "Fee"), as described in paragraph 2 below. 2. Big Buck shall have two options for the payment of the Fee: (a) Payment to Opry Mills of the sum of two hundred thousand dollars ($200,000) (the "Payment Option 1") on or before March 29, 2002; or (b) if Payment Option 1 is not made on or before March 29, 2002, Big Buck shall pay to Opry Mills, on or before April 30, 2002, the sum of three hundred twenty five thousand dollars ($325,000) ("Payment Option 2"). The Fee will be in the form of certified funds payable to Opry Mills Limited Partnership or wire transferred in to an account to be provided by counsel for Opry Mills. 3. Except for the specific obligations set out in Paragraph 6 of this Agreement, upon the timely receipt of the Fee: (a) an Agreed Order will be submitted which will dismiss the Litigation with prejudice; (b) the Lease and obligations and duties of the parties pursuant to the Lease are and will be formally terminated, null and void; and (c) the parties do hereby release and forever discharge each other, together with any person, firm or entity with which the parties are or may heretofore have been affiliated, and their successors, assigns, officers, directors, agents, employees, and attorneys, of and from any and all manner of action or actions of any nature whatsoever related to the Lease, the Litigation and/or the Demised Premises. 4. Big Buck agrees that Opry Mill's agreement to the amount of the Fee as set forth in Paragraph 2 is a compromise and settlement of Opry Mill's total claims against Big Buck, and if the Fee is not timely paid, Opry Mills shall have the right to seek any and all damages against Big Buck in the Litigation, and can claim amounts and damages in excess of the amount of the Fee. 5. As an independent obligation, which will survive the releases set out in Paragraph 3, Big Buck agrees to, no later than April 30, 2002, provide to Opry Mills a full and complete release of lien and claims from any and all suppliers, contractors or laborers which performed any work or supplied any materials to the Demised Premises. Big Buck also agrees to indemnify, defend and hold Opry Mills harmless from any and all claims or action taken against Opry Mills, or the Demised Premises, by any unpaid supplier, contractor or laborers which performed any work or supplied any materials to the Demised Premises. To the extent that any mechanic's lien is filed against the Demised Premises and also perfected according to Tennessee law, and not released, Big Buck also agrees to, pursuant to Tennessee law, file a bond with the Davidson County Register's office to formally discharge the claimed lien. 6. This Agreement constitutes the entire settlement agreement and understanding between the Plaintiff and the Defendants concerning the subject matter hereof and supersedes and replaces all prior negotiations, proposed agreements and agreements written and oral thereto. 7. By entering into this Agreement the parties do not admit any liability. Except as required by law, the parties agree to keep the amount of the Fee paid by Big Buck confidential. OPRY MILLS LIMITED PARTNERSHIP By: Opry Mills, L.L.C. Its General Partner By: The Mills Limited Partnership Its Manager By: The Mills Corporation Its General Partner By: /s/ Kent Digby -------------- BIG BUCK BREWERY & STEAKHOUSE, INC. By: /s/ William F. Rolinski ------------------------------ Name: William F. Rolinski Title: President and Chief Executive Officer EX-10.65 14 a2075337zex-10_65.txt EXHIBIT 10.65 EXHIBIT 10.65 AMENDMENT NO. 2 TO LEASE AGREEMENT THIS AMENDMENT is made and entered into this 29th day of March, 2002, by and between Eyde Brothers Development Company ("Landlord") and Big Buck Brewery & Steakhouse, Inc. ("Tenant"). R E C I T A L S: WHEREAS, the Landlord and the Tenant entered into a Real Estate Purchase and Leaseback Agreement, dated April 11, 1997, relating to the premises, legally described therein, at 2500 28th St. SE, Grand Rapids, Michigan (the "Grand Rapids Site"); WHEREAS, the Landlord and the Tenant entered into a Lease Agreement (the "Lease Agreement"), dated April 11, 1997, pursuant to which the Landlord leases to the Tenant and the Tenant rents from the Landlord the Grand Rapids Site; WHEREAS, the Landlord and the Tenant entered into an Amendment to the Lease Agreement, dated March 27, 2000, pursuant to which the Landlord waived its right to require the Tenant to repurchase the Grand Rapids Site based upon Gross Sales (as defined in the Lease Agreement) during any of the first three Lease Years (as defined in the Lease Agreement); WHEREAS, the Landlord and the Tenant desire to enter into an agreement pursuant to which the Landlord will waive its right to require the Tenant to repurchase the Grand Rapids Site based upon Gross Sales during the Lease Years ended April 10, 2001 and April 10, 2002, and pursuant to which Section 3.3(b) of the Lease Agreement will be restated, in exchange for the receipt of good and valuable consideration, the receipt of which is hereby acknowledged; NOW, THEREFORE, in consideration of the premises and agreement set forth herein, the parties hereto agree as follows: 1. WAIVER. The Landlord waives its right to require the Tenant to repurchase the Grand Rapids Site based upon Gross Sales during the Lease Years ended April 10, 2001 and April 10, 2002. 2. REPURCHASE OBLIGATION. The first sentence of Section 3.3(b) of the Lease Agreement is restated as follows: "Commencing April 11, 2002, in the event that Gross Sales shall not exceed $1,500,000 annually for any full Lease Year during the remaining term of the Lease, then Tenant shall be obligated to repurchase the Premises from Landlord, upon Landlord's written request, within one hundred eighty (180) days after receipt of such request from Landlord." IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the date first above written. LANDLORD: TENANT: EYDE BROTHERS DEVELOPMENT BIG BUCK BREWERY & STEAKHOUSE, COMPANY INC. By /s/ Michael G. Eyde By /s/ William F. Rolinski ---------------------- ------------------------------------- Michael G. Eyde William F. Rolinski Owner President and Chief Executive Officer EX-10.66 15 a2075337zex-10_66.txt EXHIBIT 10.66 EXHIBIT 10.66 WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM 400 MONROE STREET - SUITE 320 DETROIT, MICHIGAN 48226 April 1, 2002 Big Buck Brewery & Steakhouse, Inc. P.O. Box 1430 Gaylord, Michigan 49735-0617 RE: LETTER AGREEMENT ("LETTER AGREEMENT") CONCERNING FINANCIAL COVENANTS ("COVENANTS") Gentlemen: This Letter Agreement is being written to set forth certain clarifications and modifications concerning the Covenants. All defined terms in the Loan Documents (as defined below) shall have the same meaning in this Letter Agreement. The terms of this Letter Agreement are as follows: 1. The Tangible Net Worth plus Subordinated Debt of Big Buck Brewery & Steakhouse, Inc. ("Company") shall be not less than $4,500,000 unless approved by Wayne County Employees' Retirement System ("WCERS") in its sole discretion. 2. The Company shall have until January 1, 2003 to meet the Debt Service Coverage Ratio Covenant set forth in the Loan Documents. 3. The Company shall have until January 1, 2003 to achieve the Covenant in the Loan Documents requiring current assets less current liabilities (other than subordinated debt) shall be not less than $500,000. 4. The Company shall have until January 1, 2003 to meet all other Covenants set forth in the Loan Documents unless modified by the parties in writing. 5. It is expressly acknowledged and agreed that these modifications are subject to the Company complying with all other terms of the various loan documents ("Loan Documents") between the Company and WCERS. If there shall be any default under the other terms of the Loan Documents, WCERS shall have the right to demand full compliance with the Covenants and to enforce its rights and remedies if such compliance is not satisfied by the Company. 6. The Covenants may not be further amended or modified except by a writing signed by the parties. Except as amended by this Letter Agreement, the Loan Documents are restated and republished in their entirety and remain in full force and effect. This Letter Agreement shall be governed by and construed under the laws of the State of Michigan. This Letter Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their permitted successors and assigns. If the terms of this Letter Agreement meet with your approval, please indicate by signing below. Very truly yours, WAYNE COUNTY EMPLOYEES' RETIREMENT SYSTEM By /s/ Ronald Yee ------------------------------ Its Director ------------------------- Agreed to and accepted by: Big Buck Brewery & Steakhouse, Inc. By /s/ William F. Rolinski ---------------------------------- Its: President --------------------------- EX-23 16 a2075337zex-23.txt EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We consent to the inclusion in this Annual Report on Form 10-KSB of our independent auditors' report dated April 1, 2002 on the financial statements of Big Buck Brewery & Steakhouse, Inc. for the year ended December 30, 2001. We also consent to the incorporation of our report included in this Form 10-KSB into Big Buck's previously filed Registration Statement File Nos. 333-03548, 333-29149, 333-29151, 333-34731, 333-71161, 333-91775, 333-34052 and 333-59166. /s/ Plante & Moran, LLP Grand Rapids, Michigan April 1, 2002 -----END PRIVACY-ENHANCED MESSAGE-----