<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Buffets, Inc.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
<PAGE>
BUFFETS, INC.
10260 VIKING DRIVE SUITE 100
EDEN PRAIRIE, MINNESOTA 55344
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
MAY 9, 1995
To the Shareholders of Buffets, Inc.
The annual meeting of shareholders of Buffets, Inc., a Minnesota
corporation, will be held in accordance with the By-laws of the Company on
Tuesday, May 9, 1995, at 9:00 a.m. at the Company's Old Country Buffet
restaurant, 7433 Currell Boulevard, Woodbury, Minnesota, for the following
purposes:
1. Electing a board of five directors for the ensuing year;
2. Approving the proposed Buffets, Inc. 1995 Stock Option Plan;
3. Approving Deloitte & Touche LLP as independent auditors
for the Company for the current fiscal year; and
4. Transacting such other business as may properly come before the
meeting.
Only shareholders of record at the close of business on March 14, 1995
will be entitled to notice of and to vote at the annual meeting.
You are cordially invited to attend the meeting. However, whether or
not you plan to be personally present at the meeting, please mark, date and sign
the enclosed proxy and return it promptly in the enclosed envelope. If you
later desire to revoke your proxy, you may do so at any time before it is
exercised.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Diane M. Hasbargen
Diane M. Hasbargen, Secretary
Eden Prairie, Minnesota
March 28, 1995
<PAGE>
BUFFETS, INC.
10260 VIKING DRIVE SUITE 100
EDEN PRAIRIE, MINNESOTA 55344
PROXY STATEMENT
The approximate date on which this proxy statement and the
accompanying form of proxy are being first sent to shareholders is March 28,
1995.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of Directors of
Buffets, Inc., a Minnesota corporation, for use at the annual meeting of
shareholders to be held May 9, 1995. The Company will bear the cost of
preparing and mailing the proxy, proxy statement and any other material
furnished to shareholders by the Company in connection with the annual meeting.
Proxies will be solicited by use of the mails, and officers and employees of the
Company may also solicit proxies by telephone or personal contact. Officers and
employees of the Company will receive no special remuneration for any such
solicitation activities. The Company will inquire of any record holders known
to be brokers, dealers, banks or their nominees whether other persons are the
beneficial owners of shares held in their names and, if so, will take steps
necessary to supply copies of solicitation materials to such beneficial owners.
All valid proxies will be voted at the annual meeting in accordance with the
instructions set forth in the proxies.
A shareholder executing a proxy may revoke it at any time before its
exercise by filing with the Secretary of the Company, before or at the meeting,
a written instrument of revocation or a duly executed proxy bearing a later
date.
The Common Stock of the Company, par value $.01 per share, is the only
authorized and outstanding voting security of the Company. Only those holders
of the Company's Common Stock whose names appear of record on the Company's
books at the close of business on March 14, 1995 will be entitled to notice of
and to vote at the annual meeting. At the close of business on March 14, 1995,
there were 30,993,571 shares of Common Stock outstanding, each entitled to one
vote per share. Holders of Common Stock do not have cumulative voting rights.
The Annual Report of the Company, including financial statements, for
the year ended December 28, 1994 is being furnished to each shareholder with
this proxy statement.
ITEM 1: NUMBER AND ELECTION OF DIRECTORS
GENERAL
The By-laws of the Company provide that at each annual meeting the
shareholders shall determine the number of directors to constitute the Board of
Directors and shall elect such directors. Each director elected serves until
the next annual meeting of shareholders and until his or her successor is
elected and qualified.
<PAGE>
NOMINEES
The Board of Directors recommends that the shareholders set the number
of directors at five and that the nominees named below be elected as directors
of the Company for the ensuing year. It is intended that the persons named as
proxies in the enclosed form of proxy will vote the proxies received by them for
the election as directors of the nominees named in the table below except as
specifically directed otherwise. Each nominee has indicated a willingness to
serve, but in case any nominee is not a candidate at the annual meeting, for
reasons not now known to the Company, the proxies named in the enclosed form of
proxy may vote for a substitute nominee in their discretion. Information
regarding these nominees is set forth in the table below.
PRINCIPAL OCCUPATION AND BUSINESS
NAME (AGE) DIRECTOR SINCE EXPERIENCE FOR LAST FIVE YEARS
--------------------------------------------------------------------------------
Roe H. Hatlen (51) 1983 Founder of the Company; Chairman and
CEO of the Company since 1983;
President of the Company from May 1989
to September 1992; Director of Pet Food
Warehouse, Inc. since November 1993(1)
Raymond A. Lipkin (52) 1984 Owner of Lipkin Capital Management,
Inc.; managing general partner of a
number of investment partnerships from
1979 through 1993; Director of CAMAX
Manufacturing Technologies, Inc. since
April 1994, and Chairman of the Board
of that company since June 1994(2)
Alan S. McDowell (56) 1984 Private investor since 1983; Director
of Chart House Enterprises, Inc. and
AGCO Corporation (3)
Keith H. Erickson (67) 1988 Private investor since 1984; Co-owner
and director of Best Brands, Inc. from
1971 to 1984(4)
David Michael Winton (66) 1990 Managing Partner, Winton Partners
and Parsnip River Company since
early 1980s(5)
___________________________
(1) Pet Food Warehouse, Inc. is a publicly held operator of warehouse
superstores selling pet food, supplies and services.
(2) CAMAX Manufacturing Technologies, Inc. is a manufacturer of CAD/CAM
computer software.
(3) Chart House Enterprises, Inc. is a publicly held company that principally
operates Chart House restaurants and Islands restaurants; AGCO Corporation
is a publicly held farm equipment manufacturer and distributor.
(4) Best Brands, Inc. is a wholesale food distributor and manufacturer.
(5) Winton Partners and Parsnip River Company are investment partnerships.
-2-
<PAGE>
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company present in person or by proxy and entitled
to vote at the annual meeting is required for the election of each nominee. For
this purpose, a shareholder (including a broker) who does not give a proxy
authority to vote, or withholds authority to vote with respect to the election
of directors, shall not be considered present and entitled to vote on such
election. If a shareholder does not otherwise direct, the shares represented by
the proxy solicited hereby will be voted in favor of each of the above-named
nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY
VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE.
CERTAIN INFORMATION REGARDING BOARD OF DIRECTORS OF THE COMPANY
During fiscal 1994, the Board of Directors of the Company met or adopted
resolutions by written action a total of six times. During this period each
director attended 75% or more of the aggregate of the total number of Board
meetings and total number of meetings held by all committees of the Board on
which he served (including written actions). Board members who are not also
officers or employees of the Company receive a fee of $1,000 for each regular
meeting attended, $500 for each special meeting attended and a $2,000 quarterly
fee. In addition, Board members are reimbursed for travel expenses incurred in
connection with Board and committee meetings.
The Board of Directors has established an Audit Committee consisting of
Messrs. Lipkin, McDowell, Erickson and Winton. The principal functions of the
Audit Committee are to (i) recommend to the Board of Directors the independent
public accountants to act as the Company's independent auditors; (ii) discuss
with representatives of management and the independent auditors the scope and
procedures used in auditing the records of the Company; and (iii) review the
financial statements of the Company. The Audit Committee met once during fiscal
1994 with all committee members present. Audit Committee members receive a fee
of $500 for each special meeting attended.
The Company also has a Compensation and Stock Option Committee (the
"Compensation Committee") consisting of Messrs. Lipkin, McDowell, Erickson and
Winton, the non-employee directors of the Company. The principal functions of
the Compensation Committee are to review and recommend compensation for
executive personnel and to administer the Company's stock option plans. The
Compensation Committee met six times (including written actions) during fiscal
1994 with all members present. Compensation Committee members receive a fee of
$500 for each special meeting attended.
-3-
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee establishes the general compensation policies
of the Company and specific compensation for each executive officer of the
Company, and administers the Company's stock option plans. The Compensation
Committee attempts to structure the compensation packages of the executive
officers of the Company to attract and retain persons of exceptional quality and
to include effective incentives to motivate Company executives to continue the
success and growth of the Company.
The Company's executive compensation packages, the terms of which are
established early each year, consist of three principal components: (1) base
salaries, (2) cash bonuses and (3) stock options. The Compensation Committee's
basic compensation philosophy is that a significant portion of each executive
officer's compensation should be tied directly to the Company's fortunes, and it
accordingly provides cash bonuses tied to net pre-tax profits that approach and
frequently exceed each such officer's annual base compensation, and stock
options with significant long-term appreciation potential.
BASE SALARIES AND CASH BONUSES
In order to set the base salary and bonus formula for each executive
officer, including the Chairman, the Compensation Committee reviews the
financial performance of the Company over the most recently completed fiscal
year (principally revenues, net income and return on equity), the
responsibilities and performance of each individual officer and the compensation
levels of personnel with similar responsibilities at other comparable companies
within the restaurant industry. Apart from the factors described in the
preceding sentence and the comparative measure of compensation further described
below, members of the Compensation Committee also take into account various
other factors considered by them to be relevant in evaluating the performance
and appropriate compensation of each individual officer (principally the rate of
operating management turnover, the number and cost of new restaurants opened
during the preceding fiscal year, the performance of both those restaurants and
older restaurants, the level of various categories of expenses and the general
effectiveness of asset utilization). All factors are evaluated subjectively in
the sense that the Compensation Committee does not attempt as part of its
deliberations to rigorously weight, quantify or otherwise relate them to
specific levels of compensation. The Compensation Committee believes that the
inherent flexibility and administrative simplicity of this approach outweigh the
benefits of a more elaborate quantitative approach.
The Compensation Committee generally seeks to set cash compensation for
the Company's executive officers at levels that are relatively moderate, but not
uncompetitive, in comparison with other publicly held restaurant companies. To
develop comparative data for other restaurant companies, the Chairman of the
Company obtained the most recent publicly available proxy materials of 17
restaurant companies in early 1994 and presented to the Compensation Committee a
comparative analysis of cash compensation and stock option grants during the
preceding fiscal year to each of the five highest paid executive officers of
each company within this group. This compensation peer group was chosen to
provide a broadly representative cross-section of compensation practices in the
restaurant industry without regard to whether the included companies were also
included in the S&P Restaurant index, which is the peer group index included in
the Performance Graph contained elsewhere herein. (The latter index was
comprised of only five companies, all but one of which were in fact included
among the companies in the 17-company compensation peer group. Extremely large
or small companies and unprofitable companies were excluded from the
compensation peer group.)
-4-
<PAGE>
In evaluating the cash compensation to be paid to the Company's
executive officers relative to the 17-company compensation peer group described
above, the Compensation Committee focused on the aggregate total cash
compensation, including both base salaries and bonuses, as a percentage of net
income. By this measure, the Company ranked substantially below average. For
example, the aggregate cash compensation of the Company's Chairman as a
percentage of the Company's net income was approximately 53 percent of the
average figure for the highest paid executive officer of the 17-company group as
a whole. Because base salaries for the Company's executive officers had not
been increased in over three years, and in order to keep the Company's salary
structure from becoming uncompetitive with other restaurant companies,
specifically the 17 companies in the compensation peer group, the Compensation
Committee early in 1994 determined to raise the base salaries of the Chairman
by 36 percent for 1994, and the base salaries of all of its executive officers,
including the Chairman, by an average of 16 percent.
The Compensation Committee establishes the formulas for cash bonuses to
be paid to each executive officer of the Company, including the Chairman, at the
same time it determines base salaries. Each executive officer's cash bonus is
computed as a percentage of the Company's net pre-tax profits. The Compensation
Committee selects a percentage for each executive officer intended to result in
bonus compensation which, if the Company meets profit objectives, will
constitute a substantial portion of such officer's total cash compensation for
the year. These percentages historically have not been adjusted frequently, and
they were not changed for 1994 (except in the case of promotion). Rather, as
the Company has become larger and more profitable, the size of each executive
officer's bonus has increased.
The Compensation Committee selects higher percentages for more senior
executive officers, in part to reflect higher base salaries, but also to ensure
that a greater portion of such officers' total cash compensation is exposed to
the risk of Company performance. Accordingly, in 1994, the cash bonus paid to
the Chairman represented approximately 58% of his total 1994 cash compensation,
and the aggregate bonuses paid to all of the executive officers of the Company
as a group, including the Chairman, represented approximately 53% of the group's
total 1994 cash compensation.
STOCK OPTION PROGRAM
The Compensation Committee believes that compensation through the
Company's stock option program, which provides the opportunity for stock
ownership (and significant long-term appreciation in value), should represent
the most significant component of executive officer compensation. The
Compensation Committee believes that the historical strength of the growth in
value of the Company's stock has helped to distinguish the Company's
compensation package from those offered by other restaurant chains and has
contributed significantly to the success of its efforts to attract, retain and
motivate management employees at all levels. In addition, the Compensation
Committee believes that the use of such a stock option program is the most
effective means to align the long-term interests of its executive officers with
those of the Company's shareholders.
The Company's stock option plans authorize the Compensation Committee to
award key employees, including the Chairman and the other executive officers,
options to purchase Common Stock of the Company. The option plans provide the
Compensation Committee with broad discretion to determine the recipients of such
awards and the terms of the options awarded. The Compensation Committee has
exercised such discretion in implementing a program of annual stock option
grants to Company employees. The annual grant program, which has been in place
for the past three years, consists of annual grants of specified numbers of
options to employees in specified job positions, ranging from 500 for restaurant
level and certain administrative employees to 15,000 for the Chairman, 10,000
for each Executive Vice President, and 5,000 for each Vice President of the
Company. The Compensation Committee has established the number of options to
be granted to each executive employee
-5-
<PAGE>
after considering the same factors considered in setting base salary
and bonuses, as well as additional factors such as the number of options
available under the Company's stock option plans and the historical
performance of the Company's stock. The number established for various
levels of executive employees generally increases with their authority
and responsibility for Company affairs. Grants are made at the time a person
first qualifies for options under the program (for example, when promoted to
a new position) and then again annually in each succeeding year. Employees
may receive two option grants in any fiscal year in which they have been
promoted. The annual grant program is subject to change from time to time by
the Compensation Committee.
In addition to the annual grant program, the Compensation Committee has
made in the past, and may make in the future, further stock option grants to
employees, including executive officers. Except in cases of promotions, no
grants other than pursuant to the Compensation Committee's annual grant program
were made to executive officers of the Company in fiscal 1994. Additional
information about stock option awards made to the executive officers of the
Company is set forth in the tables below.
In reviewing the extent to which its compensation objectives were
attained in fiscal 1994, the Compensation Committee identified certain
disappointing trends in the Company's operations. In response to these trends,
as well as to the unexpected death of a member of the Company's management team,
the Board of Directors of the Company implemented structural changes to and a
reduction in the overall number of the Company's executive officers in late 1994
and early 1995. The trends also impacted compensation paid to the Company's
executive officers, primarily in the value of stock based compensation granted
in 1994 and in prior years. The Compensation Committee believes that its
approach to compensation, as represented by the different components of each
executive's compensation package, and the resulting levels of compensation paid
to the Company's executive officers continues to be appropriate.
OTHER ANNUAL COMPENSATION
The Company also provides certain executive officers (including the
Chairman) with automobile allowances and pays certain travel expenses. In
addition, the Company occasionally defrays moving expenses of executive officers
(as well as other management employees) when such a move is made at the
Company's request. The Compensation Committee considers such payments, which
are administered by the Company, to be incidental to the primary compensation
objectives described above, and the amounts of such payments are for the most
part unrelated to Company performance. Such payments to the Chairman amounted
to an aggregate of $4,335 in fiscal 1994.
-6-
<PAGE>
POLICY AS TO NONDEDUCTIBLE COMPENSATION
Other than the recommendation of the Board of Directors of the Company
regarding the proposed 1995 Stock Option Plan limiting the maximum number of
shares that may be awarded to any employee under the Plan in any calendar year
to 100,000 shares, which amendment is intended to preserve the Company's tax
deduction for awards granted under the Plan (see "Approval of 1995 Stock Option
Plan"), the Compensation Committee currently does not have a policy with respect
to Internal Revenue Code section 162(m), which was enacted in 1993 and limits
the deductibility of compensation over $1,000,000 paid by a company to its
executive officers, because it is unlikely that such limits will apply to
compensation paid by the Company to the Chairman (who is the Company's Chief
Executive Officer) or any other of the Company's executive officers for the
current year.
Raymond A. Lipkin
Alan S. McDowell
Keith H. Erickson
David Michael Winton
-7-
<PAGE>
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash and noncash
compensation for each of the last three fiscal years awarded to or earned by the
Chief Executive Officer and each of the other four highest paid executive
officers of the Company at the end of fiscal 1994, and by two additional former
executive officers who served during a portion of fiscal 1994:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------------------------------------------
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------------------------- -----------------
NAME AND PRINCIPAL OTHER ANNUAL SHARES UNDERLYING ALL OTHER
POSITION[S] YEAR SALARY BONUS COMPENSATION OPTIONS(#)(1) COMPENSATION($)
----------------------- ---- ------ ----- ------------ ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen, Chairman 1994 $140,615 $194,585 (2) 15,000 0
of the Board and Chief 1993 110,000 172,658 (2) 75,000 0
Executive Officer 1992 110,000 128,009 (2) 30,000 0
Rick H. White, Executive 1994 73,846 77,833 (2) 10,000 0
Vice President of 1993 65,000 69,063 (2) 33,000 0
Operations(3) 1992 55,651 49,093 (2) 10,000 0
Clark C. Grant, Executive 1994 63,827 77,833 (2) 5,000 0
Vice President of 1993 60,000 66,060 (2) 25,000 0
Finance and 1992 60,000 51,203 (2) 10,000 0
Administration(4)
Jean C. Rostollan, 1994 58,827 68,104 (2) 5,000 0
Executive Vice President 1993 51,300 57,803 (2) 25,000 0
of Purchasing(5) 1992 45,000 44,119 (2) 10,000 0
Craig V. Abraham, Vice 1994 64,800 77,833 (2) 5,000 0
President of Construction 1993 64,800 66,060 (2) 25,000 0
1992 64,800 51,203 (2) 10,000 0
Joseph A. Conti, Sr., 1994 120,038 155,668 (2) 12,500 $11,667(8)
former President and 1993 105,000 138,126 (2) 62,500 0
Chief Operating 1992 90,667 102,407 $43,479(7) 50,000 0
Officer(6)
Nicholas P. Moran, Jr., 1994 73,846 77,833 (2) 10,000 0
former Vice President of 1993 65,000 69,063 (2) 25,000 0
Operations(9) 1992 55,352 55,723 (2) 18,000 0
<FN>
_________________________________
(1) Adjusted to reflect a two-for-one stock split effected in May 1993.
(2) Disclosure not called for by applicable Securities and Exchange Commission
rules because the aggregate amount of other annual compensation,including
perquisites and other personal benefits, does not exceed the lesser of
$50,000 or 10% of the officer's total salary and bonus.
(3) Position held since December 1994. From September 1992 to December 1994 Mr.
White served as a Vice President of Operations. From June 1990 to September
1992 Mr. White served as a Regional Director of Operations. Amounts shown
indicate compensation paid for service to the Company in all capacities.
-8-
<PAGE>
(4) Position held since December 1994. From January 1991 to December 1994 Mr.
Grant served as Vice President of Finance. Amounts shown indicate
compensation paid for service to the Company in all capacities.
(5) Position held since December 1994. From September 1992 to December 1994 Ms.
Rostollan served as Vice President of Purchasing and Distribution. From
January 1991 to September 1992 Ms. Rostollan served as Vice President of
Purchasing and Marketing. Amounts shown indicate compensation paid for
service to the Company in all capacities.
(6) Position held from September 1992 to December 1994. From July 1991 to
September 1992 Mr. Conti served as Executive Vice President of Operations.
Amounts shown indicate compensation paid for service to the Company in all
capacities.
(7) Includes $41,813 paid to Mr. Conti in fiscal year 1992 as reimbursement for
moving and other relocation-related expenses.
(8) Payment made in connection with cessation of Mr. Conti's employment
pursuant to a separation agreement between Mr. Conti and the Company. Under
this agreement, the Company has agreed to make payments to Mr. Conti
aggregating $140,000, to continue Mr. Conti's health and life insurance
benefits for a period of six months following the termination of Mr.
Conti's employment, and to indemnify Mr. Conti and advance expenses to
Mr. Conti in a manner consistent with the Company's Articles of
Incorporation and By-laws. In exchange, Mr. Conti has agreed to release the
Company from claims against the Company arising from Mr. Conti's employment
(or the termination thereof) and to observe restrictions on competition
with the Company, solicitation of the Company's employees and the use or
disclosure of the Company's confidential information.
(9) Position held from September 1992 until the position of Vice President of
Operations was eliminated in December 1994. From December 1994 to March
1995, Mr. Moran served in an untitled capacity reporting directly to the
Company's Chairman. From June 1991 to September 1992 Mr. Moran served as
Regional Director of Operations. Amounts shown indicate compensation paid
for service to the Company in all capacities.
</TABLE>
-9-
<PAGE>
OPTIONS GRANTED IN FISCAL 1994
The following table sets forth, as to each executive officer or former
executive officer named in the Summary Compensation Table, certain information
with respect to stock options granted during the fiscal year ended December 28,
1994.
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
----------------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------------------------------ VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SHARES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
------------------------ ---------- -------------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen 15,000 2.12% $24.625 3/11/04 $226,190 $578,962
Rick H. White 5,000 .71 24.250 1/24/04 76,253 193,241
5,000 .71 24.625 3/11/04 75,397 192,987
Clark C. Grant 5,000 .71 24.625 3/11/04 75,397 192,987
Jean C. Rostollan 5,000 .71 24.625 3/11/04 75,397 192,987
Craig V. Abraham 5,000 .71 24.625 3/11/04 75,397 192,987
Joseph A. Conti, Sr.(2) 12,500 1.77 24.625 12/02/94 188,491 482,468
Nicholas P. Moran, Jr.(3) 5,000 .71 24.250 6/2/95 76,253 193,241
5,000 .71 24.625 6/2/95 75,397 192,987
______________________________
<FN>
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
(2) Due to the cessation of Mr. Conti's employment with the Company, all of the
options granted in fiscal 1994 expired without becoming exercisable.
(3) Due to the cessation of Mr. Moran's employment with the Company, not more
than 20% of the options granted in fiscal 1994 are scheduled to become
exercisable prior to expiration.
</TABLE>
-10-
<PAGE>
These options were granted under the Company's 1988 Stock Option Plan as
discussed in "Compensation Committee Report on Executive Compensation--Stock
Option Program" set forth above. Such options have ten year terms, have exercise
prices per share equal to fair market value, as determined under the Plan, of a
share of Common Stock on the date of grant, and are exercisable in 20%
increments on the five anniversary dates after the date of grant. Such options
are exercisable only while the named executive is an employee of the Company or,
if such officer 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, during a limited period after cessation of such officer's
employment (and then only to the extent such options were exercisable
immediately prior to such cessation), the duration of which period ranges from 3
months to one year depending on the timing of and reason for such cessation.
Such options expire when they cease to become exercisable. Such options are
automatically accelerated (and become exercisable in full) in the event of a
friendly or hostile "change in control" of the Company. A "change in control"
will result if certain changes in the Board of Directors, certain concentrations
of voting power or certain mergers, sales of corporate assets or similar
transactions occur. The grants to each named executive are conditioned upon such
officer agreeing not to compete with the Company during such officer's
employment and for a period of two years thereafter.
ADDITIONAL INFORMATION ABOUT OPTIONS
The following table sets forth, as to each executive officer or former
executive officer named in the Summary Compensation Table, certain information
with respect to stock options exercised during the last fiscal year and
unexercised options held as of the end of the fiscal year.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END (#) FISCAL YEAR-END (1)
ACQUIRED VALUE ----------------------------- -----------------------------
ON REALIZED (2)
NAME EXERCISE (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------------------ ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen 0 0 267,000 228,000 $296,250 $74,063
Rick H. White 15,000 $270,355 19,900 52,600 15,228 10,138
Clark C. Grant 9,000 177,000 18,000 44,500 24,188 38,719
Jean C. Rostollan 0 0 35,028 43,000 80,747 35,500
Craig V. Abraham 35,784 299,472 14,142 57,574 0 35,500
Joseph A. Conti, Sr. 21,000 342,490 94,000 (3) 30,950 (3)
Nicholas P. Moran, Jr. 0 0 30,200 52,800 23,250 15,500
____________________________
<FN>
(1) Market value of underlying securities at year-end minus the exercise price.
(2) Market value of underlying securities on date of exercise minus the
exercise price.
(3) All options which were not exercisable as of December 2, 1994, the date Mr.
Conti's employment with the Company ceased, expired without becoming
exercisable.
</TABLE>
-11-
<PAGE>
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return, assuming
the reinvestment of all dividends, on the Common Stock of the Company for the
last five fiscal years with the cumulative total return on the Standard & Poor's
500 Stock Index and the Standard & Poor's Restaurant Index for the same periods.
[GRAPH]
<TABLE>
<CAPTION>
Fiscal Year
1989 1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX $100.00 $ 96.90 $126.42 $136.05 $149.76 $151.74
BUFFETS, INC. 100.00 111.36 290.91 298.85 468.18 179.55
RESTAURANTS 100.00 87.11 117.48 150.50 175.69 175.15
</TABLE>
-12-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SUMMARY OF OWNERSHIP
The following table shows ownership of the Common Stock of the Company
as of March 14, 1995 (unless otherwise indicated), by each person who, to the
knowledge of the Company, owned beneficially more than five percent of such
stock, by each director, by each executive officer or former executive officer
named in the Summary Compensation Table and by all directors and officers as a
group. Shares are held directly with sole investment and voting power unless
otherwise indicated.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF INDIVIDUAL APPROXIMATE
OR IDENTITY OF GROUP NUMBER OF SHARES PERCENT
------------------------------ ---------------- -----------
<S> <C> <C>
Roe H. Hatlen 1,741,166 (1) 5.6%
10260 Viking Drive #100
Eden Prairie, MN 55344
Rick H. White 30,610 (2) *
Clark C. Grant 55,466 (3) *
Jean C. Rostollan 61,338 (4) *
Craig V. Abraham 27,676 (5) *
Joseph A. Conti, Sr. 10 (6) *
Nicholas P. Moran, Jr. 41,210 (7) *
Raymond A. Lipkin 20,300 (8) *
Alan S. McDowell 272,680 (9) *
Keith H. Erickson 457,302 1.5
David Michael Winton 1,403,025 (10) 4.5
4422 IDS Center
80 South 8th Street
Minneapolis, MN 55402
Putnam Investments, Inc. 1,848,820 (11) 6.0
One Post Office Square
Boston, MA 02109
General American 2,712,843 (12) 8.8
Investors Company, Inc.
450 Lexington Avenue
New York, NY 10017
Massachusetts Financial 2,112,300 (13) 6.8
Services Company
500 Boylston Street
Boston, MA 02116
All directors, executive 4,151,431 (1)(2)(3)(4)(5) 13.2
officers and former (6)(7)(8)(9)(10)(14)
executive officers as a
group (13 persons)
________________________________
<FN>
* Less than one percent.
(Footnotes on following page)
-13-
<PAGE>
(1) Includes 132,026 shares owned of record by members of Mr. Hatlen's family
sharing his household and 182,244 shares owned of record by Mr. Hatlen's
wife as trustee for their children, as to all of which Mr. Hatlen disclaims
beneficial ownership, and 81,000 shares owned of record by the Hatlen
Foundation (of which Mr. Hatlen is an officer) and 285,000 shares subject
to stock options exercisable within 60 days.
(2) Includes 10 shares owned by Mr. White's wife, as to which Mr. White
disclaims beneficial ownership, and 25,950 shares subject to stock options
exercisable within 60 days.
(3) Includes 10 shares owned by Mr. Grant's wife, as to which Mr. Grant
disclaims beneficial ownership, 5,850 shares owned of record by Mr. Grant
as custodian for his children and 35,000 shares subject to stock options
exercisable within 60 days.
(4) Includes 10 shares owned by Ms. Rostollan's husband and 50,528 shares
subject to stock options exercisable within 60 days.
(5) Includes 10 shares owned by Mr. Abraham's wife, as to which Mr. Abraham
disclaims beneficial ownership, and 27,642 shares subject to stock options
exercisable within 60 days.
(6) Comprised of 10 shares owned by Mr. Conti's wife, as to which Mr. Conti
disclaims beneficial ownership.
(7) Comprised of 10 shares owned by Mr. Moran's wife, as to which Mr. Moran
disclaims beneficial ownership, and 41,200 shares subject to options
exercisable within 60 days.
(8) Includes 300 shares owned of record by Mr. Lipkin as custodian for his
daughter.
(9) Includes 19,680 shares owned of record by Mr. McDowell's daughter and son
and 17,000 shares owned of record by the McDowell Foundation (of which Mr.
McDowell is an officer), as to all of which Mr. McDowell disclaims
beneficial ownership.
(10) Includes 1,351,874 shares over which Mr. Winton shares both voting and
investment discretion as a general partner of Parsnip River Company, and
50,467 shares over which Mr. Winton shares voting and investment power over
as trustee of certain trusts for the benefit of his children.
(11) Putnam Investment Management, Inc. and The Putnam Advisory Company, Inc.
(together with their parent corporations, Putnam Investments, Inc. and
Marsh & McLennan Companies, Inc.) are considered beneficial owners in the
aggregate of 1,848,820 shares of the Company's outstanding Common Stock,
with shared power to vote 306,425 of the shares and shared power to dispose
of all of the shares. The shares were acquired for investment purposes by
such investment managers for certain of their advisory clients. The
information relating to the share ownership of Putnam Companies, Inc. has
been derived from the Schedule 13G dated March 8, 1995 filed by Putnam
Investments, Inc., on behalf of itself and Marsh & McLennan Companies,
Inc., The Putnam Management Company, Inc. and The Putnam Advisory Company,
Inc., with the Securities and Exchange Commission.
(12) General American Investors Company, Inc., has sole power to vote 1,625,180
of such shares, shared power to vote 959,872 of such shares, sole power to
dispose of 1,752,971 of such shares and shared power to dispose of 959,872
of such shares. The information relating to the share ownership of General
American Investors Company, Inc. has been derived from the Schedule 13G
dated February 10, 1995 filed by General American Investors Company, Inc.
with the Securities and Exchange Commission.
(13) Massachusetts Financial Services Company has sole power to vote 2,015,600
of such shares and sole power to dispose of 2,112,300 of such shares. The
information relating to the share ownership of General American
InvestorsCompany, Inc. has been derived from Schedule 13G dated February 6,
1995 filed by Massachusetts Financial Services Company with the Securities
and Exchange Commission.
(14) Includes an aggregate of 504,868 shares subject to options held by all
executive officers, which options are currently exercisable or exercisable
within 60 days.
</TABLE>
-14-
<PAGE>
BENEFICIAL OWNERSHIP REPORTING
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file periodic reports of ownership
and changes in ownership with the Securities and Exchange Commission. Based
solely on its review of the copies of such reports received by it and of
written representations from certain reporting persons regarding filings
required to be made by such persons, the Company believes that all persons
required under Section 16(a) to file beneficial ownership reports with
respect to the Company's Common Stock during the fiscal year ended December 28,
1994 or prior years complied with all such reporting requirements except
as follows: David Michael Winton, a director of the Company, reported a
transaction occurring in November 1994 in a report covering the month of
December 1994, and Raymond A. Lipkin, also a director of the Company,
reported on his Form 5 for the fiscal year ended December 28, 1994 two
changes, one occurring in 1991 and the other in 1992, in the nature of
beneficial ownership of shares indirectly owned by him.
ITEM 2: APPROVAL OF 1995 STOCK OPTION PLAN
The Board of Directors intends to adopt the Buffets, Inc. 1995 Stock
Option Plan (the "1995 Plan") in April 1995, subject to approval by the
shareholders of the Company at the 1995 Annual Meeting. If the Plan is approved
by the shareholders, the Plan will be effective as of the date of its adoption
by the Board. The 1995 Plan is intended to assist the Company in attracting and
retaining key employees of outstanding ability, and encourage their maximum
commitment to the continued success and growth of the Company by giving them the
opportunity to share in ownership of the Company on favorable terms. In order to
achieve these purposes more uniformly and systematically, the Company's
Compensation Committee in 1990 began to make regular annual grants to restaurant
general managers and associate managers. The annual grant program was expanded
in 1991 and 1993 to cover essentially all key restaurant and administrative
management employees--including executive officers--of the Company (currently
approximately 450 persons). The current annual grant program of the Company is
described above, under "Compensation of Executive Officers--Compensation
Committee Report on Executive Compensation--Stock Option Program."
As of February 21, 1995, options for only 70,608 shares remained
available for new grants under the Company's existing 1985 and 1988 Stock Option
Plans. Therefore, the Board of Directors intends to adopt the 1995 Plan in
order to permit the Compensation Committee to continue to utilize stock
options as a major element of management compensation. For further
information about options recently granted under the Company's 1985 and 1988
Stock Option Plans, and options to be granted under the 1995 Plan, see "New
Plan Benefits" below.
In their review of the 1995 Plan, the Board of Directors and the
Compensation Committee considered the dilutive effect that adoption of the 1995
Plan and continuation of an annual grant program would have on the existing
shareholders of the Company, and concluded that the benefits of continuing such
an option program would greatly outweigh the drawbacks of dilution. The
Compensation Committee and the Board intend to continue to monitor the program
to assess its effectiveness over time. Options granted under the program to many
employees may further assist in their retention by the inclusion in their option
agreements of a provision limiting such employees' ability to accept employment
with competitors.
SUMMARY OF THE 1995 PLAN
The 1995 Plan in the form proposed to be adopted by the Board of
Directors is attached as Exhibit A, to which reference is made for a complete
statement of its provisions. The following summary of certain of its provisions
is not intended as an exhaustive discussion of the 1995 Plan and is qualified in
its entirety by reference to the 1995 Plan.
The 1995 Plan provides that both non-statutory stock options ("NSSOs")
and options that qualify as incentive stock options ("ISOs") under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"), to purchase
shares of the Company's Common Stock may be granted to key employees of the
Company or any subsidiary of the Company. For further information regarding the
tax treatment of
-15-
<PAGE>
ISOs and NSSOs, see "Tax Effects" below. Limited stock appreciation rights
("Limited Rights") also may be granted to holders of stock options under the
1995 Plan.
Unlike the Company's current plans, which contain no limit on the
number of shares for which participants may receive options, the 1995 Plan
limits to 100,000 the number of shares for which any single participant may be
granted options in any calendar year. This limitation is designed to conform the
1995 Plan to certain requirements of the Omnibus Budget Reconciliation Act of
1993 ("OBRA"), which amended the Code to limit the allowable deduction for
compensation paid to or accrued with respect to the Chief Executive Officer, and
each of the four other most highly compensated employees, of a publicly held
corporation to no more than $1 million per employee per year. Stock options
granted pursuant to a stock option plan are exempt from the deduction
limitation, provided that certain requirements are met, including the
requirement that the stock option plan specifies the maximum number of shares
subject to options that can be awarded to any single employee during a specified
period. The Company does not expect that this share limitation will affect the
number of options it will grant, as shares subject to options granted in any
single calendar year under the Company's plans have historically been
significantly below 100,000.
The 1995 Plan is administered by a committee of three persons
appointed by the Board of Directors from among the members of the Board who are
"disinterested persons" as that term is defined in Rule 16b-3(c) promulgated
under the Securities Exchange Act of 1934. The Company currently expects that
the Compensation Committee will be the committee that administers the 1995 Plan,
all of whose members are both "disinterested directors" for purposes of Rule
16b-3(c) and "outside directors" for purposes of OBRA. The Compensation
Committee decides, among other things, to which employees options should be
granted, how many options each employee receives, and whether an employee will
be granted ISOs or NSSOs, or a combination of both. In general, the Compensation
Committee makes such determinations based on such employee's job
responsibilities and on the recommendations of the executive officers of the
Company concerning individual employees' contributions (both historical and
potential) to the success of the Company.
The 1995 Plan provides that an aggregate of 1,000,000 shares of Common
Stock of the Company may be made subject to options. If an option lapses or
terminates for any reason before having been completely exercised, however, the
shares covered by the unexercised portion of the option may again be made
subject to options and Limited Rights under the 1995 Plan.
The Compensation Committee determines the exercise price for each
option, subject to certain minimum prices. The minimum exercise price for each
share covered by a NSSO is 85%, and for each share covered by an ISO is 100% (or
110% if the optionee owns more than 10% of the voting stock of the Company on
the date of grant), of the "Fair Market Value" (as defined in the 1995 Plan) of
the Common Stock on the date of grant. Fair Market Value is currently determined
by reference to the closing price of a share of Common Stock as reported on The
Nasdaq Stock Market on the date immediately preceding the date of grant. As of
March 16, 1995 such closing price of the Company's Common Stock was $9.6875 per
share.
The Compensation Committee may, in its sole discretion, make
appropriate adjustments ("Antidilutive Adjustments") in the number of shares
subject to options and in the option price per share to give effect to changes
made in the number of outstanding shares of Common Stock of the Company through
a merger, consolidation, recapitalization, reclassification, combination, stock
dividend, stock split or other relevant change.
The 1995 Plan does not specify a schedule as to when options will
become exercisable; however, there are two limitations on the exercisability
schedule. First, the Code requires that the aggregate fair market value of ISOs
that may become exercisable by any individual employee in any given year may not
exceed $100,000. Second, subject to the acceleration provisions of the 1995
Plan, the 1995 Plan requires that no option become exercisable, in whole or in
part, less than twelve months after the grant of such option.
-16-
<PAGE>
Options have been, and are expected to continue to be, granted so as to become
exercisable in 20% increments on the five anniversary dates after the date of
grant.
Paragraph 11 of the 1995 Plan provides for the automatic acceleration
of the exercisability of an option in the event of either a friendly or hostile
"Change in Control." A "Change in Control" will result if certain changes in the
Board of Directors, certain concentrations of voting power or certain mergers,
sales of corporate assets or similar transactions occur.
Paragraph 12 of the 1995 Plan enables the Board of Directors, in its
discretion, to accelerate the exercisability of the options if certain specified
"Events" are anticipated to occur. The specified "Events" which may result in
acceleration include any proposed dissolution or liquidation of the Company,
sale of substantially all of the assets of the Company, merger or consolidation
of the Company with or into any other corporation, regardless of whether the
Company is the surviving corporation, or any statutory share exchange involving
capital stock of the Company. If an Event is anticipated to be imminent, the
Compensation Committee may (i) arrange to substitute options to acquire such
numbers of shares of the voting common stock of the surviving corporation (or,
if appropriate, of the parent corporation of the Company or such surviving
corporation) as the Board of Directors deems equitable or, alternatively, to
deliver such number of shares of such stock as have, as to each option
respectively, a Fair Market Value as of the date of the Event equal to the Fair
Market Value as of the date of the Event of the Common Stock covered by the
option; or (ii) arrange to cancel such unexercised options in exchange for a
cash payment per share equal to the amount (if any) by which the cash plus fair
market value of the non-cash consideration to be received per share of Common
Stock by the shareholders of the Company upon the occurrence of the Event
exceeds the exercise price per share covered by such canceled option.
The acceleration provisions discussed above are meant to encourage
optionees to continue their employment at the Company during the uncertain
period of negotiations or the hostile contest, as the case may be. Since the
options will not be accelerated until the Change in Control actually takes
place, or until the occurrence of an Event is imminent and the Board has voted
to accelerate exercisability of the options, it will benefit the optionee to
stay in his or her position at least until that time.
The exercise rights granted under both Paragraphs 11 and 12 of the
1995 Plan are subject to adjustment if they would trigger "golden parachute"
penalties under the Code. In general, Section 280G of the Code defines
"Parachute Payment" to mean any payment (excluding payments to or from certain
qualified plans and certain other payments) in the nature of compensation to an
officer, shareholder, or highly compensated individual who performs personal
services for the corporation, which payment is contingent upon a change in the
control or ownership of the corporation, or upon a change in the ownership of a
substantial portion of the corporation's assets, if the aggregate present value
of such payments equals or exceeds three times the individual's "Base Amount"
(defined as his or her average annual taxable compensation computed over the
five-year period preceding the taxable year of the event causing the payment).
An "Excess Parachute Payment," in turn, is the amount by which a Parachute
Payment to any such individual exceeds that individual's Base Amount. Excess
Parachute Payments are subject to a 20% excise tax, payable by the optionee, and
the corporation may not deduct any Excess Parachute Payment. The 1995 Plan
provides for an automatic reduction in Parachute Payments to the maximum level
which will not trigger the "golden parachute" tax penalties. Any option or
Limited Right subject to such a reduction will be treated as if it has not yet
been exercised by the optionee and will remain outstanding subject to the terms
of the 1995 Plan.
The Limited Rights which the 1995 Plan authorizes the Compensation
Committee to grant are stock appreciation rights that are activated only upon a
Change in Control. A Limited Right allows an optionee, within 30 days after a
Change in Control, to elect to receive cash equal to the difference between the
Fair Market Value at the time of exercise and the option exercise price relating
to the underlying option (minus any amount required for tax withholding) instead
of exercising the option for the purchase of stock. A Limited Right can be
granted at any time in relation to a NSSO, but as to ISOs, it must be granted,
if at all, concurrently with the original grant of the option. A Limited Right
may not be exercised within six months of its grant, and is terminated if the
Compensation Committee declares an acceleration under Paragraph 12 of the 1995
Plan and the anticipated Event occurs. To date, the Committee has not granted
any such Limited Rights, and does not presently intend to do so in the future.
-17-
<PAGE>
To exercise an option, an optionee may elect either to pay the full
exercise price in cash or to deliver to the Company unencumbered shares of
Common Stock having a Fair Market Value on the date of exercise equal to the
purchase price of the Common Stock being purchased (commonly referred to as
"pyramiding"), or to use a combination of cash and unencumbered shares. The net
effect of tendering shares of Common Stock for payment of the option exercise
price on more than one share, and simultaneously tendering each subsequently
acquired block of shares until the entire option has been exercised, is similar
to exercising a stock appreciation right for stock rather than cash. The
simultaneous tendering of Common Stock acquired upon the exercise of an ISO is a
disqualifying disposition which will result in the option being converted into a
NSSO for tax purposes.
Delivery of shares upon the exercise of a NSSO will be subject to any
required withholding taxes relating to the income arising from the exercise of
the option. The Committee may permit the optionee to elect, subject to certain
conditions, to cover the required withholdings, in whole or in part, through a
reduction of the number of shares delivered to the optionee upon exercise or
through a subsequent return to the Company of shares delivered to the optionee.
Options granted pursuant to the 1995 Plan are non-assignable and
non-transferable except according to the laws of descent, and generally expire
if not exercised within three months after termination of the optionee's
employment with the Company, or within twelve months after termination due to
the optionee's disability or death. In the event of the optionee's death or
disability, an option becomes immediately exercisable in full. Each option will
expire ten years (five years if the option is an ISO granted to a holder of more
than 10% of the voting stock of the Company) after the date of its grant or such
date prior thereto as may be fixed by the Committee on or before the date such
option is granted.
The Board of Directors may amend, suspend or discontinue the 1995
Plan, but it may not, without approval of the Company's shareholders, (a) change
the class of employees eligible to receive options or Limited Rights; (b) except
for Antidilutive Adjustments, increase the total number of shares of Common
Stock of the Company which may be made subject to options granted under the 1995
Plan; (c) except for Antidilutive Adjustments, 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 the 1995 Plan
beyond March 31, 2005; or (f) permit the granting of options to employees who
are then members of the Committee. No amendment to the 1995 Plan can, without
the consent of the holder of the option, alter or impair any options previously
granted under the 1995 Plan.
Similarly, the Committee has reserved the discretion to modify or
terminate the annual grant program currently in effect at any time without
further action by the shareholders or directors of the Company and without
liability or obligation to any participant then eligible to receive option
grants in the future under the program, but such modification or termination
will not affect any option granted prior to such modification or termination.
NEW PLAN BENEFITS
The following table sets forth, as to each executive officer or former
executive officer named in the Summary Compensation Table, as to all current
executive officers as a group, as to all current directors who are not executive
officers as a group, and as to all employees, including all current officers who
are not executive officers, as a group, certain information with respect to
stock options which have been granted under the Company's 1985 and 1988 Stock
Option Plans in fiscal 1995, and which are proposed to be granted in such fiscal
year under the 1995 Plan in accordance with the Company's annual grant program.
All of such options granted have, and all options to be granted are expected to
have, an exercise price equal to Fair Market Value on the date of grant as
determined under the Company's 1985 and 1988 Stock Option Plans and under the
1995 Plan.
-18-
<PAGE>
1995 STOCK OPTION GRANTS
NUMBER OF COMMON SHARES
NAME OR GROUP UNDERLYING OPTIONS
------------- -----------------------
Roe H. Hatlen 15,000 (1)
Rick H. White 40,000 (2)
Clark C. Grant 25,000 (2)
Jean C. Rostollan 30,000 (2)
Craig V. Abraham 5,000 (1)
All current executive officers
as a group (6 persons) 120,000 (3)
All current directors who are
not executive officers as 0
a group
All employees, including
all current officers who are
not executive officers, as a 318,300 (5)
group (15,915 persons) (4)
____________________________________
(1) NSSOs proposed to be granted under the Company's 1985 or 1988 Stock
Option Plans, or the 1995 Plan upon shareholder approval of such plan,
in accordance with the Company's annual grant program. The exercise price
of all such options is expected to be the Fair Market Value on the date
of grant, and all such options are expected to expire ten years after the
date of grant.
(2) NSSOs granted under the Company's 1985 Stock Option Plan upon promotion of
each such officer to the level of executive vice president of the Company.
The exercise price of all such options is $10.75 per share, and all such
options expire on February 19, 2005.
(3) Includes, in addition to the grants to individual executive officers
specified in the above table, 5,000 ISOs proposed to be granted to an
executive officer under the Company's 1985 or 1988 Stock Option Plans, or
the 1995 Plan upon shareholder approval of such plan, in accordance
with the Company's annual grant program. Such options are expected to have
an exercise equal to the Fair Market Value on the date of grant, and are
expected to expire ten years after the date of grant.
(4) Of this number, approximately 14,750 are hourly restaurant employees who
are not eligible to receive grants under the Company's stock option plans.
(5) Comprised of 161,800 ISOs having an exercise price of $10.75 per share
which were granted under the Company's 1988 Stock Option Plan in February
1995, and an aggregate of 156,500 ISOs which are currently scheduled to be
granted under the Company's 1985 or 1988 Stock Option Plans, and the 1995
Plan upon shareholder approval of such plan, in the remainder of the
Company's 1995 fiscal year. All options granted and proposed to be granted
were or are expected to be granted in accordance with the Company's annual
grant program, and will expire or are expected to expire ten years after
the date of grant. A number of additional options, which number is not
presently determinable, will likely be granted in connection with
promotions and hiring of additional employees.
-19-
<PAGE>
TAX EFFECTS
If an option is an ISO, the optionee will not recognize taxable income
until the shares acquired upon exercise of the option are sold (assuming the
optionee holds onto the option shares long enough to satisfy all holding period
requirements); however, the difference between the Fair Market Value at the time
of exercise and the option exercise price will be included in the optionee's
alternative minimum taxable income. The Company will not receive a tax deduction
for shares issued upon exercise of an ISO. However, the Company does receive a
deduction for ISO shares which are disposed of without complying with holding
period requirements. These shares are treated as NSSO shares for tax purposes.
In contrast, upon exercise of a NSSO, the optionee will recognize
ordinary income equal to the difference between Fair Market Value at the time
of exercise and the option exercise price. The Company is generally entitled
to a deduction in connection with the exercise of an NSSO equal to the amount
taxable to the optionee, at the time the optionee must recognize such amount as
taxable income.
OTHER INFORMATION
The Company intends to take such actions as may be required to
register and maintain the registration of the additional Common Stock reserved
for purposes of the 1995 Plan under the Securities Act of 1933, as amended, and
any applicable state securities laws.
VOTE REQUIRED
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company present in person or by proxy and entitled
to vote at the annual meeting is required for the approval of the 1995 Plan. For
this purpose, a shareholder (including a broker) who does not give a proxy
authority to vote shall not be considered present and entitled to vote on the
1995 Plan, while a shareholder voting through a proxy who abstains with respect
to the 1995 Plan shall be considered present and entitled to vote and is in
effect a negative vote. If a shareholder does not otherwise direct, the shares
represented by the proxy solicited hereby will be voted in favor of approval of
the 1995 Plan.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE COMPANY
VOTE FOR THE APPROVAL OF THE BUFFETS, INC. 1995 STOCK OPTION PLAN DESCRIBED
ABOVE.
ITEM 3: SELECTION OF AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as
independent auditors of the Company for the year ending January 3, 1996, it
being intended that such appointment would be presented for ratification by the
shareholders. Deloitte & Touche LLP has audited the financial statements of the
Company for the fiscal year ended December 28, 1994. Deloitte & Touche LLP will
have representatives at the meeting who will have an opportunity to make a
statement and will be available to respond to appropriate questions.
In the event the shareholders do not ratify the appointment of
Deloitte & Touche LLP, the selection of other independent auditors will be
considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP.
-20-
<PAGE>
SHAREHOLDER PROPOSALS AND OTHER MATTERS
All shareholder proposals to be presented at the next annual meeting
of the Company and to be included in the Company's proxy statement and form of
proxy must be received by the Company no later than December 2, 1995. The
Company suggests that all such proposals be sent to the Company by certified
mail return receipt requested.
Please mark, sign, date and return promptly the enclosed proxy
provided. The signing of a proxy will not prevent you from attending the meeting
in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Diane M. Hasbargen
Diane M. Hasbargen, Secretary
Dated: March 28, 1995.
-21-
<PAGE>
EXHIBIT A
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
<PAGE>
[Front of proxy card]
BUFFETS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Clark C. Grant and Diane M. Hasbargen, and
each of them, with full power of substitution, as proxies to vote on behalf of
the undersigned all shares which the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of the Company to be held at the Old Country
Buffet restaurant, 7433 Currell Boulevard, Woodbury, Minnesota at 9:00 a.m. on
Tuesday, May 9, 1995, and at any adjournments thereof, with all powers the
undersigned would possess if personally present, upon the matters set forth in
the Notice of Annual Meeting and Proxy Statement, as directed on the reverse
side hereof.
Any proxy heretofore given by the undersigned with respect to such shares
is hereby revoked. Receipt of the Notice of Annual Meeting and Proxy Statement
is hereby acknowledged.
(To be Completed, Signed and Dated on Reverse Side)
<PAGE>
[Reverse of proxy card]
/X/ Please mark your votes as in this example.
Nominees: Roe H. Hatlen
Raymond A. Lipkin
Alan S. McDowell
Keith H. Erickson
D. Michael Winton
1. Election of Directors FOR WITHHOLD
/ / / /
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name below)
___________________________________________________
2. Approving the proposed Buffets, FOR AGAINST ABSTAIN
Inc. 1995 Stock Option Plan. / / / / / /
3. Approving Deloitte & Touche FOR AGAINST ABSTAIN
LLP as independent auditors / / / / / /
for the current fiscal year.
4. Transaction of such other business as may properly come before the meeting
and any adjournments thereof.
NOTE: THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, IT
WILL BE VOTED FOR ALL NOMINEES IN PROPOSAL 1, AND FOR PROPOSALS 2 AND 3. THE
PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION WITH RESPECT TO OTHER MATTERS
WHICH MAY COME BEFORE THE MEETING.
_____________________________________ _________
SIGNATURE DATE
_____________________________________ _________
SIGNATURE (SIGNATURE IF HELD JOINTLY) DATE
NOTE: Please mark, date and sign exactly as name appears hereon, including
designation as executor, trustee, etc. if applicable. A corporation must sign
in its name by the President or other authorized officer. All co-owners must
sign. PLEASE RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
