<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of
The Securities Exchange Act of 1934
For Quarter Ended: Commission File Number
October 4, 1995 0-14370
BUFFETS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
(State of incorporation) (I.R.S. Employer Identification No.)
10260 Viking Drive, Eden Prairie, MN 55344
(Address of principal executive offices)
(612) 942-9760
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of November 7, 1995
----- ----------------------------------
Common Stock, $.01 par value 31,160,769 shares
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets-
December 28, 1994 and October 4, 1995 . . 3
Consolidated Statements of Earnings-
Forty Weeks ended October 5, 1994
and October 4, 1995 and Twelve Weeks
ended October 5, 1994 and
October 4, 1995 . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows-
Forty Weeks ended October 5, 1994
and October 4, 1995 . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION . . . . . . . . . . . . 10
2
<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 28, OCTOBER 4,
1994 1995
------------ ----------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 6,822 $ 11,615
Receivable from landlords . . . . . . . . . . . . . . . . . 4,291 1,928
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . 2,438 2,827
Notes receivable. . . . . . . . . . . . . . . . . . . . . . 133 78
Other current assets. . . . . . . . . . . . . . . . . . . . 1,587 2,775
Deferred income taxes . . . . . . . . . . . . . . . . . . . 5,249 6,368
-------- --------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . 20,520 25,591
-------- --------
PROPERTY AND EQUIPMENT:
Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,936 5,761
Building. . . . . . . . . . . . . . . . . . . . . . . . . . 8,013 13,679
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . 141,261 159,136
Leasehold improvements. . . . . . . . . . . . . . . . . . . 95,852 112,035
-------- --------
249,062 290,611
Less accumulated depreciation and amortization. . . . . . 65,962 83,245
-------- --------
183,100 207,366
GOODWILL, net of accumulated amortization of $1,046 and
$1,218, respectively. . . . . . . . . . . . . . . . . . . . 4,319 4,727
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . 587 505
-------- --------
$208,526 $238,189
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . . . $ 21,757 $ 21,870
Accrued payroll and related benefits. . . . . . . . . . . . 10,308 12,158
Accrued rents . . . . . . . . . . . . . . . . . . . . . . . 7,685 8,792
Accrued sales taxes . . . . . . . . . . . . . . . . . . . . 1,998 2,636
Other accrued expenses. . . . . . . . . . . . . . . . . . . 6,584 9,626
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . 356 1,593
-------- --------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . 48,688 56,675
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . 7,000 5,000
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES . . . . . . . . 544 640
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . 10,772 11,507
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; 5,000 shares
authorized; none issued and outstanding
Common stock, $.01 par value; 60,000 shares
authorized; issued and outstanding 30,939 and
31,129 shares, respectively. . . . . . . . . . . . . . . . 309 311
Additional paid-in capital. . . . . . . . . . . . . . . . . 49,158 50,906
Retained earnings . . . . . . . . . . . . . . . . . . . . . 92,055 113,150
-------- --------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . . . . . 141,522 164,367
-------- --------
$208,526 $238,189
-------- --------
-------- --------
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED TWELVE WEEKS ENDED
------------------------- -------------------------
OCTOBER 5, OCTOBER 4, OCTOBER 5, OCTOBER 4,
1994 1995 1994 1995
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
<S> <C> <C> <C> <C>
RESTAURANT SALES . . . . . . . . . $311,922 $386,425 $100,512 $125,053
RESTAURANT COSTS:
Food costs . . . . . . . . . . . 106,355 135,134 33,927 43,797
Labor costs . . . . . . . . . . 81,625 107,965 25,518 34,297
Direct and occupancy costs . . . 70,015 87,936 23,983 28,680
-------- -------- -------- --------
Total restaurant costs . . . . . 257,995 331,035 83,428 106,774
-------- -------- -------- --------
RESTAURANT PROFITS . . . . . . . . 53,927 55,390 17,084 18,279
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES . . . . 23,185 21,696 7,522 7,662
-------- -------- -------- --------
30,742 33,694 9,562 10,617
OTHER INCOME (EXPENSE) NET . . . . 695 329 271 211
-------- -------- -------- --------
EARNINGS BEFORE INCOME TAXES . . . 31,437 34,023 9,833 10,828
INCOME TAXES . . . . . . . . . . . 12,371 12,928 3,735 4,113
-------- -------- -------- --------
NET EARNINGS . . . . . . . . . . . $ 19,066 $ 21,095 $ 6,098 $ 6,715
-------- -------- -------- --------
-------- -------- -------- --------
NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE . . . . . $.60 $.67 $.19 $.21
-------- -------- -------- --------
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
OUTSTANDING . . . . . . . . . . . 31,702 31,289 31,510 31,404
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FORTY WEEKS ENDED
-------------------------
OCTOBER 5, OCTOBER 4,
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . $19,066 $21,095
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . 14,653 18,987
Tax benefit from early disposition of common stock . . . . . 1,018 199
Deferred income taxes . . . . . . . . . . . . . . . . . . . 594 (384)
Changes in assets and liabilities:
Inventory . . . . . . . . . . . . . . . . . . . . . . . . (471) (389)
Other current assets . . . . . . . . . . . . . . . . . . . (1,975) (1,128)
Other assets . . . . . . . . . . . . . . . . . . . . . . . (300) 99
Accounts payable . . . . . . . . . . . . . . . . . . . . . 4,048 113
Accrued payroll and related benefits . . . . . . . . . . . 1,213 1,850
Other accrued expenses . . . . . . . . . . . . . . . . . . 4,989 4,787
Income taxes currently payable . . . . . . . . . . . . . . 1,053 1,237
------- -------
Total adjustments . . . . . . . . . . . . . . . . . . . 24,822 25,371
------- -------
Net cash provided by operating activities. . . . . . . . 43,888 46,466
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of retirements
and net receipts from landlords . . . . . . . . . . . . . . . (52,116) (46,207)
Cash receipts from landlords . . . . . . . . . . . . . . . . . 5,369 4,983
------- -------
Net cash used in investing activities . . . . . . . . . (46,747) (41,224)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of employee's stock options . . . . . . 1,934 1,551
Payments of long-term debt . . . . . . . . . . . . . . . . . . (2,000)
------- -------
Net cash provided by (used in) financing
activities . . . . . . . . . . . . . . . . . . . . . . . 1,934 (449)
------- -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . (925) 4,793
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . 12,193 6,822
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . $11,268 $11,615
------- -------
------- -------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (Net of capitalized interest of $39 and
$264 in 1994 and 1995, respectively). . . . . . . . . . . . . $ 3 $ 99
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 9,706 10,492
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
BUFFETS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the
financial position of Buffets, Inc. and subsidiaries as of October 4,
1995 and the results of operations for the twelve weeks ended October
5, 1994 and October 4, 1995 and the results of operations and cash
flows for the forty weeks ended October 5, 1994 and October 4, 1995.
2. These statements should be read in conjunction with the Notes to
Consolidated Financial Statements contained in the Company's Annual
Report on Form 10-K for the fiscal year ended December 28, 1994 and
with Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing on pages 7 thru 9 of this quarterly
report.
6
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The Company operates on a fifty-two or fifty-three week fiscal year, which ends
on the Wednesday nearest December 31. The Company's first quarter consists of
sixteen weeks; all other quarters include only twelve weeks. When a fifty-three
week year occurs, the Company's fourth quarter consists of thirteen weeks.
RESULTS OF OPERATIONS
TWELVE WEEKS ENDING OCTOBER 4, 1995
RESTAURANT SALES. Restaurant sales of $125.1 million during the third quarter
of 1995 represented a 24.4% increase over sales of $100.5 million for the
comparable period of 1994, primarily due to sales generated by new restaurants.
Four new restaurants opened and one restaurant closed in the third quarter of
1995, bringing the total number of Company-owned restaurants to 233 at the end
of the quarter. Average weekly sales per restaurant for the third quarter of
1995 increased 1.0% to $44,850 from $44,399 in the comparable period of 1994.
Comparable restaurant sales for the quarter were down 1.2% for comparable
periods. The Company's price increases have been nominal.
RESTAURANT COSTS. As a percentage of restaurant sales, total restaurant costs
increased to 85.4% for the third quarter of 1995 from 83.0% for the third
quarter of 1994. Food costs as a percentage of restaurant sales increased to
35.0% from 33.7%, primarily due to the roll out of new menu items, which
increased the variety of selections, particularly in fruits and vegetables;
labor costs increased to 27.4% in 1995 from 25.4% in 1994 primarily due to
increased staffing and higher wage rates of hourly employees due to the
Company's introduction of a customer service program in the first quarter of
1995 and a one time credit of $1.5 million in 1994 for better than anticipated
workers compensation experience. Direct and occupancy costs decreased to 23.0%
from 23.9% in the prior year primarily due to a charge of $1.5 million in 1994
as a provision for the cost of closing two under-performing restaurants.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses as a percentage of restaurant sales decreased to 6.1% in
the third quarter of 1995 from 7.5% in the third quarter of 1994. Such expenses
in absolute terms increased to $7.7 million for the third quarter of 1995 from
$7.5 million for the comparable quarter of 1994. Advertising costs as a
percentage of restaurant sales for the period increased to 2.1% in 1995 from .9%
in 1994.
7
<PAGE>
INCOME TAXES. Income taxes remained constant at 38.0% of earnings before taxes
for the comparable quarters.
FORTY WEEKS ENDING OCTOBER 4, 1995.
RESTAURANT SALES. For the first forty weeks of 1995, restaurant sales increased
23.9% to $386.4 million from $311.9 million in 1994, primarily due to the
addition of new restaurants. The Company opened 26 restaurants in the first
forty weeks of 1995 as compared to 22 in the first forty weeks of 1994. The
average weekly sales per restaurant decreased .5% to $43,000 from $43,197 in
1994. Comparable restaurant sales were down 2.3%. The Company's price increases
have been nominal.
RESTAURANT COSTS. Restaurant costs for the forty weeks in 1995 increased to
$331.0 from $258.0 million in 1994. As a percentage of sales, restaurant costs
increased to 85.7% in 1995 from 82.7% in 1994. Food costs increased to 35.0%
from 34.1% due primarily to increases in the costs of fruits, vegetables,
general groceries, bakery and dessert items; labor costs increased to 27.9% from
26.2% due to increased staffing and higher wage rates of hourly employees
resulting from the introduction of a customer service program; and direct and
occupancy costs increased to 22.8% from 22.4% in 1995 and 1994, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. For the forty weeks of 1995,
selling, general and administrative expenses decreased to $21.7 million from
$23.2 million in 1994. As a percentage of sales, selling, general and
administrative expenses decreased to 5.6% in 1995 from 7.4% in 1994. $941,000 of
this decrease was due to reduced advertising. Advertising expenses as a
percentage of sales was 1.0% in 1995 compared to 1.5% in 1994. The Company
expects advertising expenses for the current year as a percentage of sales to be
less than 1%.
INCOME TAXES. Income taxes were 38.0% of earnings before taxes for the forty
weeks in 1995 compared to 39.4% in the comparable forty weeks of 1994, resulting
from lower effective tax rates.
LIQUIDITY AND CAPITAL RESOURCES
The Company has an unsecured $40 million revolving line of credit. The
Company is required to pay a quarterly commitment fee equal to 1/4 of 1% per
annum of the unused balance. On June 30, 1998, providing no default or event of
default has occurred and is continuing, the line of credit is convertible, at
the Company's option, to a three year term loan, maturing on June 30, 2001. As
of October 4, 1995, the Company had borrowings of $5 million outstanding under
this credit line.
8
<PAGE>
The Company continues to require substantial amounts of capital to fund its
growth. The Company currently expects to open approximately 36 to 38 new
restaurants during 1995, with 33 already opened at November 8, 1995. The
Company expects to spend an aggregate of approximately $21 to $24 million during
the remainder of 1995 on its restaurants being opened in 1995, depending on the
level of contributions obtained from landlords for leasehold improvements and
the amount of land purchased for free standing buildings. The Company
anticipates that, as it further pursues the development of freestanding
locations, the cost per location and related cash requirements will increase
substantially over prior years and these costs will not be offset by landlord
contributions that typically have been associated with strip mall locations.
The capital expenditure required for a freestanding location can be over 100%
greater than for a mall location. The Company estimates that approximately 18%
of 1995 new locations will be purchased freestanding units, and that
approximately another 27% will be freestanding leased units. Sources of capital
for these restaurant development and remodeling projects are anticipated to be
funds provided by operations, credit received from trade suppliers, landlord
contributions to leasehold improvements and current bank financing. The Company
believes that these sources will be adequate to finance operations and the
additional restaurants and remodeling costs included in the Company's restaurant
development plans for the next twelve months. However, in order to remain
prepared for further significant growth in future years, the Company will
continue to evaluate its financing needs and seek additional funding if
appropriate.
9
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
IN RE BUFFETS, INC. SECURITIES LITIGATION, United States
District Court for the District of Minnesota, Master No. 3-94-
1447. This action is a consolidation of four separate lawsuits.
The first lawsuit was commenced by ZSA Asset Allocation Fund and
ZSA Equity Fund on or about November 7, 1994. Three other
substantially similar actions were filed shortly thereafter by
alleged shareholders Marc Kushner, Trustee for Service Lamp Corp.
Profit Sharing Plan, Jerrine Fernandes, and John J. Nuttall. By
Pretrial Order No. 1, entered in early January 1995, the District
Court ordered that the four lawsuits be consolidated into the
single pending action and that plaintiffs serve and file a
Consolidated Amended Class Action Complaint (the "Complaint"),
which was served on or about January 31, 1995. The Complaint is
against the Company and several of its officers and directors.
In the Complaint, plaintiffs seek to represent a putative class
consisting of all persons and entities (excluding defendants and
certain others) who purchased shares of the Company's Common
Stock during the period commencing October 26, 1993 and ending
October 25, 1994 (the "Class Period").
The Complaint alleges that the defendants made misrepresentations
and omissions of material fact during the Class Period with
respect to the Company's operations and restaurant development
activities, as a result of which the price of the Company's stock
allegedly was artificially inflated during the Class Period. The
Complaint further alleges that certain defendents made sales of
Common Stock of the Company during the Class Period while in
possession of material undisclosed information about the
Company's operations and restaurant development activities. The
Complaint alleges that the defendents' conduct violated the
Securities Exchange Act of 1934 and seeks compensatory damages in
an unspecified amount, prejudgment interest, and an award of
attorneys' fees, costs and expenses. On March 14, 1995 the
defendants filed a joint motion to dismiss the Complaint. This
motion was briefed and argued by the parties. On August 9, 1995
Magistrate Judge John M. Mason issued his Report and
Recommendation recommending to the District Court that the
Complaint be dismissed without prejudice. Plaintiffs have
appealed this Report and Recommendation to United States District
Judge Michael J. Davis. Defendants have responded by urging the
District Court to accept the recommendation to dismiss the
Complaint but to make the dismissal with prejudice. The parties
currently are awaiting a
10
<PAGE>
determination by the District Court regarding this appeal from
the Report and Recommendation. Management of the Company
believes that the action is without merit and intends to defend
it vigorously. Although the outcome of this proceeding cannot be
predicted with certainty, the Company's management believes that
while the outcome may have a material effect on earnings in a
particular period, the outcome should not have a material effect
on the financial condition of the Company.
Item 2. Changes in Securities
On October 24, 1995, the Board of Directors of the Company
declared a dividend of one preferred share purchase right (a
"Right") for each outstanding Common Share of the par value of
$.01 per share of the Company. The dividend is payable on
November 13, 1995 to shareholders of record on that date. The
description and terms of the Rights are set forth in a Rights
Agreement (the"Rights Agreement"), dated as of October 24, 1995
between the Company and the American Stock Transfer and Trust
Company, as Rights Agent. Reference is made to the Company's
report on Form 8-K filed on November 1, 1995 for a description of
the Rights and a copy of the Rights Agreement.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On October 24, 1995 the Board of Directors of the Company
appointed Walter R. Barry, Jr. as an additional board member to
serve until the next election.
Item 6. Exhibits and reports on Form 8-K
a) Exhibits
4 (a) Composite Amended and Restated Articles
of Incorporation (1)
4 (b) By-laws of the Company (2)
4 (c) Form of Rights Agreement, dated as of
October 24, 1995 between the Company
and the American Stock Transfer & Trust
Company, as Rights Agent. (3)
11
<PAGE>
10(a) 1985 Stock Option Plan (4)
10(b) 1988 Stock Option Plan (5)
10(c) Amended and Restated Credit Agreement by
and between First Bank National
Association and the Company
dated as of April 16, 1993(1)
10(d) Amendment No. 1 to Amended and Restated
Credit Agreement dated as of June 29, 1993
between the Company and First Bank
National Association (6)
10(e) Letter dated July 8, 1993 from First Bank
National Association to the Company
amending Amended and Restated Credit
Agreement (6)
10(f) Amendment No. 2 to Amended and Restated
Credit Agreement dated as of March
24, 1994 between the Company and
First Bank National Association (7)
10(g) Amendment No. 3 to Amended and Restated
Credit Agreement dated as of April 8,
1994 between the Company and First Bank
National Association (10)
10(h) Amendment No. 4 to Amended and Restated
Credit Agreement dated as of June 30, 1994
between the Company and First Bank
National Association (8)
10(i) Separation Agreement and Release dated
March 2, 1995 between the Company and
Joseph A. Conti, Sr.(9)
10(j) Amendment to No. 5 to Amended and Restated
Credit Agreement dated as of August 4,
1995 between the Company and First Bank
National Association (10)
10(k) 1995 Stock Option Plan.
27) Financial Data Schedule
b) There were no reports on Form 8-K filed during the twelve weeks
ended October 4, 1995. The Company filed a Report on Form 8-K on
November 1, 1995 relating to the Rights and the Rights Agreement.
______________________________
12
<PAGE>
(1) Incorporated by reference to Exhibits to the Registration
Statement on Form S-3 dated June 2, 1993 (Registration No.
33-63694.)
(2) Incorporated by reference to Exhibits to Annual Report on Form
10-K for fiscal year ended December 29, 1993.
(3) Incorporated by reference to Exhibits to Current Report on Form
8-K, dated October 24, 1995.
(4) Incorporated by reference to Exhibits to the Registration
Statement on Form S-1 of the Company, File No. 33-171.
(5) Incorporated by reference to Exhibits to Annual Report on Form
10-K for fiscal year ended December 30, 1992.
(6) Incorporated by reference to Exhibits to the Quarterly Report
on Form 10-Q for the quarter ended July 14, 1993.
(7) Incorporated by reference to Exhibits to the Quarterly Report
on Form 10-Q for the quarter ended April 20, 1994.
(8) Incorporated by reference to Exhibits to the Quarterly Report
on Form 10-Q for the quarter ended July 13, 1994.
(9) Incorporated by reference to Exhibits to Annual Report on Form
10-K for the fiscal year ended December 28, 1994.
(10)Incorporated by reference to Exhibits to the Quarterly Report
on Form 10-Q for the quarter ended July 12, 1995.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUFFETS, INC.
(Registrant)
November 13, 1995
/s/ Roe H. Hatlen
--------------------------
Roe H. Hatlen
Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)
/s/ Clark C. Grant
--------------------------
Clark C. Grant
Executive Vice President of
Finance and Administration
and Treasurer
(Principal Financial
Officer)
/s/ Marguerite C. Nesset
--------------------------
Marguerite C. Nesset
Vice President and
Controller(Principal
Accounting Officer)
14
<PAGE>
EXHIBIT INDEX
Exhibits Page
-------- ----
10(k) 1995 Stock Option Plan. . . . . . . . . . . . .Filed Electronically
27 Financial Data Schedule . . . . . . . . . . . .Filed Electronically
- --------------------
<PAGE>
EXHIBIT 10(K)
BUFFETS, INC.
1995 STOCK OPTION PLAN
1. PURPOSE OF PLAN. The purpose of this Buffets, Inc. 1995 Stock
Option Plan (the "Plan"), is to promote the interests of Buffets, Inc., a
Minnesota corporation (the "Company"), and its shareholders by providing key
employees of the Company and its subsidiaries, if any, with an opportunity to
acquire a proprietary interest in the Company and thereby develop a stronger
incentive to put forth maximum effort for the continued success and growth of
the Company and its subsidiaries. In addition, the opportunity to acquire a
proprietary interest in the Company will aid in attracting and retaining key
personnel of outstanding ability.
2. ADMINISTRATION OF PLAN. This Plan shall be administered by a
committee of three or more persons (the "Committee") appointed by the
Company's Board of Directors (the "Board"). No person shall serve as a member
of the Committee unless such person shall be a "disinterested person" as that
term is defined in Rule 16b-3(c)(2)(i), promulgated under the Securities
Exchange Act of 1934, as amended, or any successor statute or regulation
comprehending the same subject matter (the "Exchange Act"). A majority of the
members of the Committee shall constitute a quorum for any meeting of the
Committee, and the acts of a majority of the members present at any meeting
at which a quorum is present or the acts unanimously approved in writing by
all members of the Committee shall be the acts of the Committee. Subject to
the provisions of this Plan, the Committee may from time to time adopt such
rules for the administration of this Plan as it deems appropriate. The
decision of the Committee on any matter affecting this Plan or the rights and
obligations arising under this Plan or any option granted hereunder or any
related Limited Right, as defined in paragraph 13, shall be final, conclusive
and binding upon all persons, including without limitation the Company,
shareholders, employees and optionees. To the full extent permitted by law,
no member of the Committee shall be liable for any action or determination
taken or made in good faith with respect to this Plan or any option or
Limited Right granted hereunder.
It is intended that this Plan and all options granted pursuant to
it shall be administered by the Committee so as to permit this Plan and
options to comply with Rule 16b-3, promulgated under the Exchange Act
("Rule 16b-3"). If any provision of this Plan or of any option would otherwise
frustrate or conflict with the intent expressed in this paragraph 2, that
provision, to the extent possible, shall be interpreted and deemed amended in
the manner and to the extent determined by the Committee to be advisable so
as to avoid such conflict. To the extent of any remaining irreconcilable
conflict with such intent, the provision shall be deemed void as applicable
to employees receiving options who are then subject to the reporting
requirements of Section 16 of the Exchange Act to the extent permitted by law
and in the manner deemed advisable by the Committee.
3. SHARES SUBJECT TO PLAN. The shares that may be made subject to
options granted under this Plan shall be authorized but previously unissued
shares of Common Stock (the "Common Shares") of the Company, of the par value of
$.01 per share, and they shall not exceed 1,000,000 in the aggregate, except
that, if any option lapses or terminates for any reason before such option or
the related Limited Rights, if any, have been completely exercised, the shares
covered by the unexercised portion of such option may again be made subject to
options and Limited Rights granted under this Plan. Appropriate adjustments in
the number of shares and in the option price per share may be made by the
Committee in its sole discretion to give effect to adjustments made in the
number of outstanding Common Shares of the Company through a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split or other relevant change, provided that fractional shares shall be
rounded to the nearest whole share.
<PAGE>
4. ELIGIBLE EMPLOYEES. Options may be granted under this Plan to any
key employee of the Company or any subsidiary thereof, including any such
employee who is also an officer or director of the Company or any subsidiary
thereof, who is not, on the date of grant, a member of the Committee.
5. GRANTING OF OPTIONS. Subject to the terms and conditions of this
Plan, the Committee may, from time to time on or before March 31, 2005, grant to
such eligible employees as the Committee may determine options to purchase such
number of Common Shares of the Company on such terms and conditions as the
Committee may determine. No eligible employee may receive options to purchase
more than 100,000 Common Shares in the aggregate in any single year under this
Plan.
In determining the employees to whom options shall be granted and the
number of Common Shares to be covered by each option, the Committee may take
into account the nature of the services rendered by the respective employees,
their present and potential contributions to the success of the Company, and
such other factors as the Committee in its sole discretion shall deem relevant.
The date and time of approval by the Committee of the granting of an option
shall be considered the date and the time of the grant of such option. The
Committee in its sole discretion may designate whether an option is to be
considered an "incentive stock option" (as that term is defined in Section 422
of the Internal Revenue Code of 1986, as amended, or any amendment thereto (the
"Code")) or a nonstatutory stock option (an option granted under this Plan that
is not intended to be an "incentive stock option"). The Committee may grant both
incentive stock options and nonstatutory stock options to the same individual.
However, where both an incentive stock option and a nonstatutory stock option
are awarded at one time, such options shall be deemed to have been awarded in
separate grants, shall be clearly identified, and in no event shall the exercise
of one such option affect the right to exercise the other such option.
6. OPTION PRICE. Subject to paragraph 8 of the Plan, the purchase
price of each Common Share subject to an option shall be fixed by the Committee
and shall be not less than 85% of the Fair Market Value (as defined below) of a
Common Share on the date of grant.
For purposes of this Plan, the "Fair Market Value" of any share of
capital stock of any company (including a Common Share of the Company) at a
specified date shall, unless otherwise expressly provided in this Plan, mean the
closing price of such share on the date immediately preceding such date or, if
no sale of shares of such Capital Stock shall have occurred on that date, on the
next preceding day on which a sale of such shares occurred, on the composite
tape for New York Stock Exchange listed shares or, if such shares are not quoted
on the composite tape for New York Stock Exchange listed shares, on the
principal United States Securities Exchange registered under the Securities
Exchange Act of 1934, as amended, on which the shares are listed, or, if such
shares are not listed on any such exchange, on The Nasdaq Stock Market or, if
such shares are not quoted on The Nasdaq Stock Market, the mean between the
closing "bid" and the closing "asked" quotation of such a share on the date
immediately preceding the date as of which such Fair Market Value is being
determined, or, if no closing bid or asked quotation is made on that date, on
the next preceding day on which a quotation is made, on the National Association
of Securities Dealers, Inc. Automated Quotations System or any system then in
use, provided that if the shares in question are not quoted on any such system,
Fair Market Value shall be what the Committee determines in good faith to be
100% of the fair market value of such a share as of the date in question.
Notwithstanding anything stated in this paragraph, if the applicable securities
exchange or system has closed for the day by the time the determination is being
made, all references in this paragraph to the date immediately preceding the
date in question shall be deemed to be references to the date in question.
7. OPTION PERIOD.
(a) No option may be exercised less than twelve months after the date
it is granted except upon the occurrence of the disability of the holder of the
option while employed by the Company or a parent or subsidiary thereof, or the
death of the holder while so employed or within three (3) months after the
termination of
A-2
<PAGE>
such employment, or upon a Change in Control as defined in paragraph 11(b) of
this Plan, or pursuant to paragraph 12(b) of this Plan. In addition, no option
may be exercised prior to such time, if any, as the shareholders of the Company
shall have approved this Plan at a duly held shareholders' meeting of the
Company and a registration statement covering the Common Shares for which the
option may be exercised shall have become effective under the Federal Securities
Act of 1933, as amended ("Shareholder Approval and Registration"). Subject to
the foregoing limitations, each option agreement provided for in paragraph 17
hereof shall specify when the option shall become exercisable.
(b) Subject to paragraph 8 of this Plan, each option granted under
this Plan and all rights to purchase shares thereunder shall cease on the
earliest of:
(i) Ten years after the date such option is granted or on such
date prior thereto as may be fixed by the Committee on or before the
date such option is granted;
(ii) The expiration of the period after the termination of the
optionee's employment within which the option is exercisable as
specified in paragraph 10(b) or 10(c), whichever is applicable;
(iii) December 31, 1995, in the event that the shareholders of
the Company shall not have approved this Plan prior to that date at
a duly held shareholders' meeting; or
(iv) The date, if any, fixed for cancellation pursuant to
paragraph 12(b) of this Plan.
In no event shall any option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
8. INCENTIVE STOCK OPTIONS. Should the Committee choose to grant an
incentive stock option, such option will be subject to the general provisions
applicable to all options granted under this Plan. In addition, the incentive
stock option shall be subject to the following specific provisions:
(a) The purchase price of each Common Share covered by the incentive
stock option shall not be less than 100% of the Fair Market Value of a Common
Share on the date of grant;
(b) At the time the incentive stock option is granted, if the
eligible employee owns, or is deemed under Section 424(d) of the Code to own,
stock of the Company (or of any parent or subsidiary of the Company) possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock therein:
(i) The purchase price of each Common Share covered by the
incentive stock option shall not be less than 110% of the Fair Market
Value of a Common Share on the date of grant; and
(ii) The term of the incentive stock option shall not be greater
than five years from the date of grant;
(c) The incentive stock option holder must remain continuously
employed by the Company, its parent or any subsidiary of the Company from the
date of the grant until the effective date of exercise, unless such exercise
occurs within the grace period, if any, allowed under paragraph 10 following
termination of employment;
A-3
<PAGE>
(d) The aggregate Fair Market Value, determined at the time the
option is granted, of the Common Shares with respect to which incentive stock
options held by such individual first become exercisable in any calendar year
(under this Plan and all other incentive stock option plans of the option
holder's employer corporation, and its parent corporations and subsidiaries)
shall not exceed $100,000; and
(e) Any Common Shares received pursuant to the exercise of an
incentive stock option may not be sold within two years from the date of the
grant, nor within one year from the date of exercise.
If any option is not granted, exercised, or held in accordance with
the provisions set forth above in this paragraph 8, it will be considered to be
a nonstatutory stock option to the extent that it is in conflict with these
provisions.
9. MANNER OF EXERCISING OPTIONS. A person entitled to exercise an
option may, subject to its terms and conditions and the terms and conditions of
this Plan, exercise it in whole at any time, or in part from time to time, by
delivery to the Company at its principal executive office, to the attention of
its Treasurer, of written notice of exercise, specifying the number of shares
with respect to which the option is being exercised, accompanied by payment in
full of the purchase price of the shares to be purchased at the time. The
purchase price of each share on the exercise of any option shall be paid in full
in cash (including check, bank draft or money order) at the time of exercise or,
at the discretion of the holder of the option, by delivery to the Company of
unencumbered Common Shares having an aggregate Fair Market Value on the date of
exercise equal to the purchase price, or by a combination of cash and such
unencumbered Common Shares. No shares shall be issued until full payment
therefor has been made, and the granting of an option to an individual shall
give such individual no rights as a shareholder except as to shares issued to
such individual.
10. TRANSFERABILITY AND TERMINATION OF OPTIONS.
(a) During the lifetime of an individual to whom an option is
granted, only such individual or his or her guardian or legal representative may
exercise the option. No option shall be assignable or transferable by the
individual to whom it is granted otherwise than by will or the laws of descent
and distribution.
(b) During the lifetime of an optionee, an option may be exercised
only while the optionee is an employee of the Company or of a parent or
subsidiary thereof, and only if such individual has been continuously so
employed since the date the option was granted, except that, (i) as to any
individual who has been continuously employed by the Company (or a parent or
subsidiary thereof) for at least twelve full calendar months following the grant
of the option, such individual may exercise the option within three (3) months
after termination of such individual's employment to the extent that the option
was exercisable immediately prior to such individual's termination of
employment, (ii) in the case of an employee who is disabled (within the meaning
of Section 22(e)(3) of the Code) while employed, such individual or his or her
legal representative may exercise the option within one year after termination
of such individual's employment, (iii) as to any individual whose termination of
employment occurs following a Change of Control as defined in paragraph 11(b) of
this Plan, such individual may exercise the option within three (3) months after
termination, and (iv) as to any individual whose termination occurs following a
declaration pursuant to paragraph 12(b) of this Plan, such individual may
exercise the option at any time permitted by such declaration.
(c) An option may be exercised after the death of the individual to
whom it was granted, by such individual's legal representatives, heirs or
legatees, but only within one year after the death of such individual.
(d) In the event of the disability (within the meaning of Section
22(e)(3) of the Code) or death of an employee holding an outstanding option, any
option held by such individual or his or her legal representative
A-4
<PAGE>
that was not previously exercisable shall become immediately exercisable in full
if Shareholder Approval and Registration have been completed, and the disabled
or deceased individual shall have been continuously employed by the Company or a
parent or subsidiary thereof between the date such option was granted and the
date of such disability, or, in the event of death, a date not more than three
(3) months prior to such death. If Shareholder Approval and Registration are
completed after such date of death or disability but prior to the expiration of
the option under paragraph 7(b), the option shall become immediately exercisable
in full upon such completion of Shareholder Approval and Registration.
11. CHANGE IN CONTROL.
(a) Subject to paragraph 11(c), but anything else to the contrary in
this Plan notwithstanding, in the event of a "Change in Control" of the Company,
as defined in paragraph 11(b), an option held by a person under this Plan that
shall not have expired shall become immediately exercisable in full, provided
Shareholder Approval and Registration shall have been completed prior to
exercise of the option.
(b) A "Change in Control", for purposes of this Plan, means:
(i) A majority of the directors of the Company shall be persons
other than persons:
(A) for whose election proxies shall have been solicited by
the Board of Directors of the Company, or
(B) who are then serving as directors appointed by the
Board of Directors to fill vacancies on the Board of Directors
caused by death or resignation (but not by removal) or to fill
newly-created directorships;
(ii) 30% or more of the outstanding voting stock of the Company
shall have been acquired or beneficially owned (as defined in Rule
13d-3 under the Exchange Act) by any person (other than the Company,
a subsidiary of the Company or the person holding the option) or
group of persons (which group does not include the person holding the
option) acting in concert; or
(iii) The shareholders of the Company shall have approved a
definitive agreement or plan to
(A) merge or consolidate the Company with or into another
corporation (other than (1) a merger or consolidation with a
subsidiary of the Company or (2) a merger in which the Company is
the surviving corporation and either (a) no outstanding voting
stock of the Company (other than fractional shares) held by
shareholders immediately prior to the merger is converted into
cash, securities, or other property or (b) all holders of
outstanding voting stock of the Company (other than fractional
shares) immediately prior to the merger have substantially the
same proportionate ownership of the voting stock of the Company
or of its parent corporation immediately after the merger);
(B) exchange, pursuant to a statutory exchange of shares of
voting stock of the Company held by shareholders of the Company
immediately prior to the exchange, shares of one or more classes
or series of voting stock of the Company for cash, securities or
other property;
(C) sell or otherwise dispose of all or substantially all of
the assets of the Company (in one transaction or a series of
transactions); or
A-5
<PAGE>
(D) liquidate or dissolve the Company;
PROVIDED, HOWEVER, that if the transaction contemplated by such
definitive agreement or plan approved by the shareholders of the
Company is not actually consummated, a Change in Control shall
retroactively be deemed not to have occurred and the acceleration of
the exercise dates of options pursuant to paragraph 11(a) shall be
deemed null and void;
unless a majority of the voting stock (or the voting equity interest) of the
surviving corporation or of any corporation (or other entity) acquiring all or
substantially all of the assets of the Company (in the case of a merger,
consolidation or disposition of assets) or the Company or its parent corporation
(in the case of a statutory share exchange) is beneficially owned by the person
holding the option or a group of persons that includes the person holding the
option acting in concert.
(c) Notwithstanding paragraph 11(a) above, if the exercise of any
option or Limited Right (as defined in paragraph 13) granted to an employee
under this Plan, either alone or together with other payments in the nature of
compensation to such employee which are contingent on a change in the ownership
or effective control of the Company or in the ownership of a substantial portion
of the assets of the Company or otherwise, would result in any portion thereof
being subject to an excise tax imposed under Section 4999 (or successor
provisions) of the Code or would not be deductible in whole or in part by the
Company, an affiliate of the Company (as defined in Section 1504 (or successor
provisions) of the Code), or other person making such payments as a result of
Section 280G (or successor provisions) of the Code, such option, Limited Right
and/or such other benefits and payments shall be reduced (but not below zero) to
the largest aggregate amount that will result in no portion thereof being
subject to an excise tax or being not deductible. For such purposes:
(i) No portion of payments the receipt or enjoyment of which
an employee shall have effectively waived in writing prior to the
date of issuance of stock or distribution of a payment hereunder
shall be taken into account;
(ii) No portion of such option, Limited Right, benefits and
other payments shall be taken into account which, in the opinion
of tax counsel selected by the Company's independent auditors and
acceptable to the employee, does not constitute a "parachute
payment" within the meaning of Section 280G(b)(2) (or successor
provisions) of the Code;
(iii) Such options, Limited Rights, benefits and other
payments shall be reduced only to the extent necessary so that
the total of such payments (other than those referred to in
clause (i) or (ii)) in their entirety constitute reasonable
compensation for services rendered within the meaning of Section
280G(b)(4) (or successor provisions) of the Code, in the opinion
of the tax counsel referred to in clause (ii); and
(iv) The value of any non-cash benefit or any deferred
payment or benefit included in such payment shall be determined
by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) (or successor
provisions) of the Code.
Any option or Limited Right not exercised or paid as a result of this paragraph
11(c), or reduced to zero as a result of the limitations imposed hereby, shall
remain outstanding in full force and effect subject to the other terms and
provisions of this Plan.
12. DISSOLUTION, LIQUIDATION, MERGER. In the event of the proposed
dissolution or liquidation of the Company or in the event of a proposed sale of
substantially all of the assets of the Company or
A-6
<PAGE>
in the event of a proposed merger or consolidation of the Company with or
into any other corporation, regardless of whether the Company is the
surviving corporation, or a statutory share exchange involving capital stock
of the Company (such dissolution, liquidation, sale, merger, consolidation or
exchange being herein called an "Event"), the Committee may, but shall not be
obligated to:
(a) If the Event is a merger or consolidation or statutory share
exchange, make appropriate provision for the protection of the outstanding
options granted under this Plan by the substitution, in lieu of such options, of
options to purchase appropriate voting common stock (the "Survivor's Stock") of
the corporation surviving any merger or consolidation or, if appropriate, the
parent corporation of the Company or such surviving corporation, or,
alternatively, by the delivery of a number of shares of the Survivor's Stock
which has a Fair Market Value as of the effective date of the Event equal to the
Fair Market Value as of such effective date of the Common Shares covered by the
option, or
(b) At least ten (10) days prior to the actual effective date of an
Event, declare, and provide written notice to each optionee of the declaration,
that each outstanding option, whether or not then exercisable, shall be canceled
at the time of, or immediately prior to the occurrence of, the Event (unless it
shall have been exercised prior to the occurrence of the Event) in exchange for
payment to each option holder, within ten days after the Event, of cash equal to
the amount (if any), for each share covered by the canceled option, by which the
Event Proceeds per Common Share (as hereinafter defined) exceeds the exercise
price per Common Share covered by such option, provided that no such declaration
shall be made unless Shareholder Approval and Registration shall have been
completed. At the time of the declaration provided for in the immediately
preceding sentence, except as otherwise set forth in paragraph 11(c), each
option shall immediately become exercisable in full and each person holding an
option shall have the right, during the period preceding the time of
cancellation of the option, to exercise his or her option as to all or any part
of the shares covered thereby. In the event of a declaration pursuant to this
paragraph 12(b), each outstanding option granted pursuant to this Plan that
shall not have been exercised prior to the Event shall be canceled at the time
of, or immediately prior to, the Event, as provided in the declaration, and this
Plan shall terminate at the time of such cancellation, subject to the payment
obligations of the Company provided in this paragraph 12(b) or paragraph 13. For
purposes of this paragraph, "Event Proceeds" per share shall mean the cash plus
the fair market value, as determined in good faith by the Committee, of the
non-cash consideration to be received per Common Share by the shareholders of
the Company upon the occurrence of the Event.
13. LIMITED RIGHTS. The Committee may, in its discretion, in the
circumstances set forth below, grant limited stock appreciation rights ("Limited
Rights") as hereafter provided in this paragraph 13 to the holder of any option
granted hereunder (the "Related Option") with respect to all or any portion of
the shares covered by the Related Option. Each Limited Right shall relate to a
specific Related Option and may be granted at any time either concurrently with
the grant of the Related Option or (with respect to nonstatutory stock options
only) at any time the Related Option is outstanding.
Limited Rights are rights to receive cash equal to the amount (if any)
by which the Fair Market Value on the exercise date of the Common Shares covered
by the Related Option exceeds the exercise price of the Related Option, which
rights shall be exercisable in lieu of exercising the Related Option (but only
if and to the extent that the Related Option is exercisable) at any time within
the thirty day period after any Change in Control, as defined in paragraph 11(b)
of this Plan, regardless of whether the person holding the Limited Right is an
employee on the date of exercise, so long as the optionee was an employee
immediately preceding the Change in Control.
Notwithstanding the provisions of the immediately preceding paragraph,
no Limited Rights shall be exercised within a period of six months after the
date of grant of the Limited Rights and no Limited Rights shall
A-7
<PAGE>
be exercised if the Committee shall previously have made the declaration
provided for in paragraph 12(b) and the Event resulting in the cancellation
of all options pursuant to paragraph 12(b) shall have occurred.
If Limited Rights are exercised, the Related Option shall no longer be
exercisable to the extent of the number of shares with respect to which the
Limited Rights were exercised. Upon the exercise or termination of a Related
Option, Limited Rights granted with respect thereto shall terminate to the
extent of the number of shares as to which the Related Option was exercised or
terminated.
A person entitled to exercise a Limited Right may, subject to its
terms and conditions and the terms and conditions of this Plan, exercise such
Limited Right in whole or in part by delivery to the Company at its principal
executive office, to the attention of its Secretary, of written notice of an
election to exercise such Limited Right specifying the number of shares
purchasable under the Related Option with respect to which the Limited Right is
being exercised. The date the Company receives the notice is the exercise date.
Upon exercise of Limited Rights, the holder shall promptly be paid an amount in
cash for each share with respect to which the Limited Rights are exercised equal
to the amount (if any) by which the Fair Market Value on the exercise date per
Common Share covered by the Related Option exceeds the option exercise price per
Common Share covered by the Related Option; provided that the Company may
withhold from any cash payment due upon exercise of a Limited Right a cash
amount sufficient to cover any required withholding taxes.
A Limited Right may not be assigned and shall be transferable only if
and to the extent that the Related Option is transferable.
14. TAX WITHHOLDING. Delivery of Common Shares upon exercise of a
nonstatutory stock option shall be subject to any required withholding taxes. A
person exercising such an option may, as a condition precedent to receiving the
Common Shares, be required to pay the Company a cash amount equal to the amount
of any required withholdings. In lieu of all or any part of such a cash payment,
the Committee may, but shall not be required to, permit the individual to elect
to cover all or any part of the required withholdings, and to cover any
additional withholdings up to the amount needed to cover the individual's full
FICA and federal, state and local income tax with respect to income arising from
the exercise of the option, through a reduction of the number of Common Shares
delivered to the person exercising the option or through a subsequent return to
the Company of shares delivered to the person exercising the option. Unless the
Committee otherwise permits, such elections are subject to the following
limitations if, and to the extent, such limitations are necessary to comply with
Rule 16b-3 or any successor provision:
(a) TIME OF ELECTION. Any such election and the related exercise by
an individual who is subject to the reporting requirements of Section 16 of
the Exchange Act (a "Section 16 Individual") may be made only during certain
specified time periods, as follows:
(i) The election and the related exercise may be made during
the period beginning on the third business day following the date of
public release of the Company's quarterly or annual financial
statements and ending on the twelfth business day following such
date of public release; or
(ii) The election may be made at least six months prior to the
date as of which the amount of tax to be withheld is determined;
PROVIDED, HOWEVER, an election by such a person pursuant to clause (i) or (ii)
may not be made within six months of the date of grant of the option being
exercised unless death or disability of the individual to whom the option
was granted occurs during said six month period. Notwithstanding the
foregoing, a Section 16 Individual who tenders previously owned Shares to the
Company in payment of the purchase price of Shares in connection with
A-8
<PAGE>
exercise of an Option may also tender previously owned Shares to the Company
in satisfaction of any tax withholding obligations in connection with such
Option exercise without regard to the time periods set forth above. The
foregoing restrictions do not apply to any person who is not subject to the
reporting requirements of Section 16 of the Exchange Act.
(b) COMMITTEE APPROVAL; REVOCATION. The Committee's approval of such
an election by a Section 16 Individual, if given, may be granted in advance, but
is subject to revocation by the Committee at any time. Once such an election is
made by a Section 16 Individual, he or she may not revoke it.
15. TERMINATION OF EMPLOYMENT. Neither the transfer of employment of
an individual to whom an option is granted between any combination of the
Company, a parent corporation and a subsidiary thereof, nor a leave of absence
granted to such individual and approved by the Committee, shall be deemed a
termination of employment for purposes of this Plan. The terms "parent" or
"parent corporation" and "subsidiary" as used in this Plan shall have the
meaning ascribed to "parent corporation" and "subsidiary corporation,"
respectively, in Sections 424(e) and (f) (or successor provisions) of the Code.
16. OTHER TERMS AND CONDITIONS. The Committee shall have the power,
subject to the limitations contained herein, to fix any other terms and
conditions for the grant or exercise of any option under this Plan. Nothing
contained in this Plan, or in any option granted pursuant to this Plan, shall
confer upon a person holding an option any right to continued employment by the
Company or any parent or subsidiary of the Company or limit in any way the right
of the Company or any such parent or subsidiary to terminate an employee's
employment at any time.
17. OPTION AGREEMENTS. All options granted under this Plan shall be
evidenced by a written agreement in such form or forms as the Committee may from
time to time determine, which agreement shall, among other things, designate
whether the options being granted thereunder are nonstatutory stock options or
incentive stock options under Section 422 (or successor provisions) of the Code.
All Limited Rights shall be evidenced in the written option agreements or in
written addenda thereto delivered to the grantees thereof promptly after any
grant of Limited Rights by the Committee.
18. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any time
amend, suspend or discontinue this Plan; PROVIDED, HOWEVER, that no amendment by
the Board shall, without further approval of the shareholders of the Company,
(a) change the class of employees eligible to receive options or Limited Rights;
(b) except as provided in paragraph 3 hereof, increase the total number of
Common Shares of the Company which may be made subject to options granted under
this Plan; (c) except as provided in paragraph 3 hereof, change the minimum
purchase price for the exercise of an option; (d) increase the maximum period
during which options or Limited Rights may be exercised; (e) extend the term of
this Plan beyond March 31, 2005; or (f) permit the granting of options to
employees who are then members of the Committee. No amendment to this Plan
shall, without the consent of the holder of the option, alter or impair any
options previously granted under this Plan.
19. EFFECTIVE DATE. This Plan shall be effective upon approval
thereof by the Board.
A-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF OCTOBER 4, 1995 AND THE CONSOLIDATED
STATEMENT OF EARNINGS FOR THE FORTY WEEK PERIOD ENDED OCTOBER 4, 1995 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1996
<PERIOD-START> DEC-29-1994
<PERIOD-END> OCT-04-1995
<CASH> 11,615
<SECURITIES> 0
<RECEIVABLES> 1,928
<ALLOWANCES> 0
<INVENTORY> 2,827
<CURRENT-ASSETS> 25,591
<PP&E> 290,611
<DEPRECIATION> 83,245
<TOTAL-ASSETS> 238,189
<CURRENT-LIABILITIES> 56,675
<BONDS> 5,000
<COMMON> 311
0
0
<OTHER-SE> 164,367
<TOTAL-LIABILITY-AND-EQUITY> 238,189
<SALES> 386,425
<TOTAL-REVENUES> 386,425
<CGS> 135,134
<TOTAL-COSTS> 331,035
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97
<INCOME-PRETAX> 34,023
<INCOME-TAX> 12,928
<INCOME-CONTINUING> 21,095
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,095
<EPS-PRIMARY> .67
<EPS-DILUTED> .67
</TABLE>
