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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 3, 1996
Buffets, Inc.
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(Exact name of registrant as specified in its charter)
Minnesota 0-14370 41-1462294
---------------- --------------------------- -----------------
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification Number)
10260 Viking Drive, Suite 100
Eden Prairie, Minnesota 55344
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(Address of principal executive offices) (Zip code)
(612) 942-9760
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(Registrant's telephone number)
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Item 5. OTHER EVENTS.
Buffets, Inc. (the "Company") entered into an Agreement and Plan of
Merger, dated as of June 3, 1996 (the "Merger Agreement"), with HomeTown Buffet,
Inc., a Delaware corporation ("HomeTown"), and Country Delaware, Inc., a
Delaware corporation and wholly owned subsidiary of the Company ("Sub"),
providing for the statutory merger of Sub with and into HomeTown (the "Merger")
resulting in HomeTown becoming a wholly owned subsidiary of the Company.
Under the terms of the Merger Agreement, upon consummation of the
Merger each outstanding share of HomeTown Common Stock will be converted into
1.17 shares of Common Stock, par value $.01, of the Company. Cash will be paid
in lieu of the issuance of any fractional shares. In addition, the Company
would assume certain obligations under HomeTown's outstanding 7% Subordinated
Convertible Notes.
The consummation of the Merger is subject to approval by the
shareholders of the Company and the stockholders of HomeTown, necessary
regulatory approvals and certain other conditions, all as set forth in the
Merger Agreement. The Merger Agreement contemplates that the Merger will be
accounted for as a pooling of interests and be tax free to the stockholders of
HomeTown.
The foregoing description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached hereto as an exhibit and incorporated herein by
reference.
Item 7. EXHIBITS.
2.1 Agreement and Plan of Merger, dated as of June 3, 1996, among Buffets,
Inc., Country Delaware, Inc. and HomeTown Buffet, Inc.
99.1 Press release dated June 4, 1996.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUFFETS, INC.
Date: June 6, 1996 By: /S/ CLARK C. GRANT
-----------------------------
Clark C. Grant, Executive
Vice President of Finance and
Administration
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Exhibit Index
EXHIBIT
- -------
2.1 Agreement and Plan of Merger, dated as of June 3, 1996 among Buffets,
Inc., Country Delaware, Inc. and HomeTown Buffet, Inc.
99.1 Press release dated June 4, 1996
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-------------------------------------------
AGREEMENT AND PLAN OF MERGER
-------------------------------------------
AMONG
BUFFETS, INC.
AND
COUNTRY DELAWARE, INC.
AND
HOMETOWN BUFFET, INC.
-------------------------------------------
DATED JUNE 3, 1996
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TABLE OF CONTENTS
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01. EFFECTIVE TIME OF THE MERGER . . . . . . . . . . . . . . . . . . . . . 1
1.02. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.03. EFFECTS OF THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04. DIRECTORS AND OFFICERS OF BUFFETS AND THE CONTINUING CORPORATION.. . . 2
ARTICLE II CONVERSION OF SECURITIES. . . . . . . . . . . . . . . . . . . . . 3
2.01. CONVERSION OF CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . 3
(A) CAPITAL STOCK OF SUB. . . . . . . . . . . . . . . . . . . . . . . . 3
(B) CANCELLATION OF TREASURY STOCK. . . . . . . . . . . . . . . . . . . 3
(C) EXCHANGE RATIO FOR HOMETOWN COMMON STOCK. . . . . . . . . . . . . . 3
(D) FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 4
(E) HOMETOWN STOCK OPTIONS. . . . . . . . . . . . . . . . . . . . . . . 4
2.02. EXCHANGE OF CERTIFICATES.. . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HOMETOWN . . . . . . . . . . . 6
3.01. ORGANIZATION OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 6
3.02. HOMETOWN CAPITAL STRUCTURE.. . . . . . . . . . . . . . . . . . . . . . 7
3.03. AUTHORITY, NO CONFLICT, REQUIRED FILINGS AND CONSENTS. . . . . . . . . 8
3.04. SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . 9
3.05. NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 10
3.06. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . 10
3.07. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.08. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.09. INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10. AGREEMENTS, CONTRACTS, AND COMMITMENTS . . . . . . . . . . . . . . . . 12
3.11. LITIGATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12. ENVIRONMENTAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 13
(A) HAZARDOUS SUBSTANCES. . . . . . . . . . . . . . . . . . . . . . . . 13
(B) HAZARDOUS SUBSTANCES ACTIVITIES . . . . . . . . . . . . . . . . . . 13
(C) UST'S AND AST'S.. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(D) LISTING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(E) ENVIRONMENTAL REPORTS . . . . . . . . . . . . . . . . . . . . . . . 14
(F) ENVIRONMENTAL CLAIMS, ETC.. . . . . . . . . . . . . . . . . . . . . 14
(G) COMPLIANCE WITH ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . 14
3.13. EMPLOYEE BENEFIT PLANS.. . . . . . . . . . . . . . . . . . . . . . . . 14
3.14. COMPLIANCE WITH LAWS . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.15. POOLING OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.16. INTERESTED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . 15
3.17. NO EXISTING DISCUSSIONS. . . . . . . . . . . . . . . . . . . . . . . . 16
3.18. NO SECURED DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.19. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . 16
3.20. TAX REPRESENTATION . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUFFETS AND SUB . . . . . . . . 16
4.01. ORGANIZATION OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . 17
4.02. BUFFETS CAPITAL STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . 17
4.03. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONTRACTS.. . . . . . . . 18
4.04. SEC FILINGS; FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . 19
4.05. NO UNDISCLOSED LIABILITIES . . . . . . . . . . . . . . . . . . . . . . 20
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4.06. ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . . . . . . . . . . . . . 20
4.07. TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.08. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.09. INTELLECTUAL PROPERTY. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS. . . . . . . . . . . . . . . . . 22
4.11. LITIGATION.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.12. ENVIRONMENTAL MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . 22
(A) HAZARDOUS SUBSTANCES. . . . . . . . . . . . . . . . . . . . . . . . 22
(B) HAZARDOUS SUBSTANCES ACTIVITIES.. . . . . . . . . . . . . . . . . . 23
(C) UST'S AND AST'S.. . . . . . . . . . . . . . . . . . . . . . . . . . 23
(D) LISTING.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(E) ENVIRONMENTAL REPORTS.. . . . . . . . . . . . . . . . . . . . . . . 23
(F) ENVIRONMENTAL CLAIMS, ETC.. . . . . . . . . . . . . . . . . . . . . 23
(G) COMPLIANCE WITH ENVIRONMENTAL LAWS. . . . . . . . . . . . . . . . . 23
4.13. EMPLOYEE BENEFIT PLANS.. . . . . . . . . . . . . . . . . . . . . . . . 24
4.14. COMPLIANCE WITH LAWS.. . . . . . . . . . . . . . . . . . . . . . . . . 25
4.15. POOLING OF INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.16. INTERESTED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . 25
4.17. OPINION OF FINANCIAL ADVISOR . . . . . . . . . . . . . . . . . . . . . 25
4.18. OWNERSHIP AND INTERIM OPERATIONS OF SUB. . . . . . . . . . . . . . . . 25
4.19. NO EXISTING DISCUSSIONS. . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE V CONDUCT OF BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . 25
5.01. COVENANTS OF BUFFETS AND HOMETOWN. . . . . . . . . . . . . . . . . . . 25
5.02. COOPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS . . . . . . . . . . . . . . . 28
6.01. NO SOLICITATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.02. JOINT PROXY STATEMENT; REGISTRATION STATEMENT. . . . . . . . . . . . . 29
6.03. ACCESS TO INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . 30
6.04. SHAREHOLDERS MEETINGS. . . . . . . . . . . . . . . . . . . . . . . . . 31
6.05. LEGAL CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . 31
6.06. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.07. PUBLIC DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.08. TAX-FREE REORGANIZATION. . . . . . . . . . . . . . . . . . . . . . . . 32
6.09. POOLING ACCOUNTING . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.10. AFFILIATE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.11. NASDAQ QUOTATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
6.12. STOCK PLANS AND OTHER OPTIONS. . . . . . . . . . . . . . . . . . . . . 33
6.13. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.14. BROKERS OR FINDERS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
6.15. EMPLOYEE BENEFITS; EMPLOYEE ISSUES . . . . . . . . . . . . . . . . . . 35
6.16. REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.17. SUPPLEMENTAL INDENTURE . . . . . . . . . . . . . . . . . . . . . . . . 35
6.18. NOTIFICATION OF CERTAIN MATTERS. . . . . . . . . . . . . . . . . . . . 35
6.19. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. . . . . . . . . . . . . . . 36
6.20. CONTINUING INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE VII CONDITIONS TO MERGER . . . . . . . . . . . . . . . . . . . . . . 36
7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER . . . . . . 36
(A) SHAREHOLDER APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . 36
(B) HSR ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(C) APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(D) REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . . . . . . . 37
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(E) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. . . . . . . . . . . . . . 37
(F) POOLING LETTER. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(G) NASDAQ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(H) DELOITTE & TOUCHE COMFORT LETTER. . . . . . . . . . . . . . . . . . 37
(I) KPMG PEAT MARWICK COMFORT LETTER. . . . . . . . . . . . . . . . . . 37
(J) BANK CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(K) TAX OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUFFETS AND SUB . . . . . . . . 38
(A) REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 38
(B) PERFORMANCE OF OBLIGATIONS OF HOMETOWN. . . . . . . . . . . . . . . 38
(C) MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 38
(D) BLUE SKY LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
(E) OPINION OF HOMETOWN'S COUNSEL . . . . . . . . . . . . . . . . . . . 38
(F) UPDATED FAIRNESS OPINION. . . . . . . . . . . . . . . . . . . . . . 39
(G) EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 39
(H) CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF HOMETOWN . . . . . . . . . . . 39
(A) REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 39
(B) PERFORMANCE OF OBLIGATIONS OF BUFFETS AND SUB . . . . . . . . . . . 39
(C) MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 39
(D) OPINION OF BUFFETS' COUNSEL . . . . . . . . . . . . . . . . . . . . 39
(E) UPDATED FAIRNESS OPINION. . . . . . . . . . . . . . . . . . . . . . 39
(F) EMPLOYMENT AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 39
(G) CONSENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE VIII TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . 40
8.01. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
8.02. EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . 41
8.03. FEES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.04. AMENDMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.05. EXTENSION; WAIVER. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS . . . . . . 43
9.02. NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.03. INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.04. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.05. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES . . . . . . . . . . . . 44
9.06. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.07. ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
9.08. KNOWLEDGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE X DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated June 3, 1996, is
by and among BUFFETS, INC., a Minnesota corporation ("BUFFETS"), COUNTRY
DELAWARE, INC., a Delaware corporation and a wholly owned subsidiary of Buffets
("Sub"), and HOMETOWN BUFFET, INC., a Delaware corporation ("HomeTown").
WHEREAS, the Boards of Directors of Buffets, Sub, and HomeTown deem it
advisable and in the best interest of each corporation and its respective
shareholders that Buffets and HomeTown combine in order to advance the long-term
business interests of Buffets and HomeTown;
WHEREAS, the strategic combination of Buffets and HomeTown shall be
effected by the terms of this Agreement through a transaction in which Sub will
merge with and into HomeTown, HomeTown will become a wholly owned subsidiary of
Buffets, and the stockholders of HomeTown will become shareholders of Buffets
(the "Merger");
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, and agreements set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
1.01. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger"), substantially
in the form attached hereto as Exhibit 1.01, shall be duly executed and
acknowledged by the Constituent Corporations (as defined in Section 1.03), and
thereafter delivered to the Secretary of State of the State of Delaware, for
filing, as provided in the General Corporation Law of the State of Delaware (the
"Delaware Law"), as soon as practicable on or after the Closing Date (as defined
in Section 1.02). The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or at
such time thereafter as is provided in the Certificate of Merger (the "Effective
Time").
1.02. CLOSING. The closing of the Merger (the "Closing") will take
place at 9:00 a.m., Minneapolis time, on a date to be specified by Buffets and
HomeTown, which shall be
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no later than the second business day after satisfaction of all the conditions
set forth in Sections 7.01, 7.02(b) and 7.03(b) (provided that the other closing
conditions set forth in Article VII have been met or waived as provided in
Article VII at or prior to the Closing) (the "Closing Date"), at the offices of
Faegre & Benson LLP, Minneapolis, Minnesota, unless another date or place is
agreed to in writing by Buffets and HomeTown. All actions taken at the Closing
shall be deemed to have been taken simultaneously at the time the last of any
such actions is taken or completed.
1.03. EFFECTS OF THE MERGER.
(a) At the Effective Time (i) the separate existence of Sub shall cease
and Sub shall be merged with and into HomeTown (Sub and HomeTown are sometimes
referred to below as the "Constituent Corporations" and HomeTown is sometimes
referred to below as the "Continuing Corporation"), (ii) the Certificate of
Incorporation of HomeTown shall be amended so that Article III, Section A of
such Certificate of Incorporation reads in its entirety as follows: "The total
number of shares of all classes of stock which the Corporation shall have
authority to issue is 1,000, all of which shall consist of Common Stock, par
value $0.01 per share," and as so amended, such Certificate of Incorporation
shall be the Certificate of Incorporation of the Continuing Corporation, and
(iii) the Bylaws of HomeTown as in effect immediately prior to the Effective
Time shall be the Bylaws of the Continuing Corporation.
(b) At and after the Effective Time, the Continuing Corporation shall
possess all the rights, privileges, powers, and franchises of a public as well
as of a private nature, and be subject to all the restrictions, disabilities,
and duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers, and franchises of each of the Constituent Corporations, and
all property, real, personal, and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock subscriptions
and all other things in action or belonging to each of the Constituent
Corporations, shall be vested in the Continuing Corporation, and all property,
rights, privileges, powers, and franchises, and all and every other interest
shall be thereafter as effectually the property of the Continuing Corporation as
they were of the Constituent Corporations, and the title to any real estate
vested by deed or otherwise, in either of the Constituent Corporations, shall
not revert or be in any way impaired; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities, and duties of the Constituent
Corporations shall thereafter attach to the Continuing Corporation, and may be
enforced against it to the same extent as if such debts and liabilities had been
incurred by it.
1.04. DIRECTORS AND OFFICERS OF BUFFETS AND THE CONTINUING CORPORATION.
(a) Buffets shall take all actions necessary to cause the full Board of
Directors of Buffets at the Effective Time to be increased to seven directors,
and to cause each of C. Dennis Scott and Dr. Christian F. Horn to be appointed
as a director of Buffets. If, prior to the Effective Time, Mr. Scott or Dr.
Horn shall be unable or unwilling to serve as an Buffets director, HomeTown
shall, by action of its Board of Directors, designate another person to serve in
such person's stead, which person shall be reasonably acceptable to Buffets.
Buffets
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shall take all actions necessary to cause the officers of Buffets after the
Effective Time to be as set forth on Exhibit 1.04(a) hereto.
(b) Buffets and HomeTown shall take all actions necessary to cause the
directors constituting the full Board of Directors of the Continuing Corporation
at the Effective Time to be Roe H. Hatlen and C. Dennis Scott. If prior to the
Effective Time, either of such persons shall be unable to serve, Buffets shall
designate a replacement.
(c) The officers and directors of Buffets and the Continuing Corporation
as designated in accordance with this Section shall hold their positions until
their resignation or removal or the election or appointment of their successors
in the manner provided by the respective charter documents and bylaws of Buffets
or the Continuing Corporation, as the case may be, and applicable law.
ARTICLE II
CONVERSION OF SECURITIES
2.01. CONVERSION OF CAPITAL STOCK. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
HomeTown Common Stock or capital stock of Sub:
(a) CAPITAL STOCK OF SUB. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $0.01 par value per share, of the
Continuing Corporation.
(b) CANCELLATION OF TREASURY STOCK. All shares of HomeTown Common
Stock that are owned by HomeTown as treasury stock shall be canceled and
retired and shall cease to exist and no stock of Buffets or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE RATIO FOR HOMETOWN COMMON STOCK. Subject to Section
2.02, each issued and outstanding share of HomeTown Common Stock (other
than shares of treasury stock) shall be converted into the right to receive
1.17 shares of Buffets Common Stock (the "Conversion Number"). The
Conversion Number shall be appropriately adjusted to reflect any stock
split, stock dividend, recapitalization, exchange, subdivision, combination
of, or other similar change (including the exercise of any Rights under the
Buffets Rights Agreement (as such terms are defined in Section 4.02(a)) in
Buffets Common Stock or HomeTown Common Stock following the date of this
Agreement. All shares of Buffets Common Stock into which the shares of
HomeTown Common Stock are converted shall be fully paid and nonassessable
and will have Rights attached thereto in accordance with the Buffets Rights
Agreement. All shares of HomeTown Common Stock, when so converted, shall
no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and holders of certificates which immediately
prior to the Effective Time represented shares of HomeTown Common Stock
(the "Certificates") shall cease to have any rights with
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respect thereto, except the right to receive the shares of Buffets Common
Stock and any cash in lieu of fractional shares of Buffets Common Stock to
be issued or paid in consideration therefor upon the surrender of the
Certificates in accordance with Section 2.02, without interest.
(d) FRACTIONAL SHARES. No scrip or fractional shares of Buffets
Common Stock shall be issued in the Merger. All fractional shares of
Buffets Common Stock to which a holder of HomeTown Common Stock immediately
prior to the Effective Time would otherwise be entitled at the Effective
Time shall be aggregated. If a fractional share results from such
aggregation, such shareholder shall be entitled after the later of (i) the
Effective Time or (ii) the surrender of such shareholder's Certificate or
Certificates, to receive from Buffets an amount in cash in lieu of such
fractional share, based on the average of the per share closing sale prices
of Buffets Common Stock on the Nasdaq National Market for the 15 trading
days immediately preceding the Closing Date (the "Average Price"). Buffets
will make available to the "Exchange Agent" (as defined in Section 2.02)
the cash necessary for the purpose of paying for fractional shares.
(e) HOMETOWN STOCK OPTIONS. At the Effective Time, all then
outstanding options to purchase HomeTown Common Stock under HomeTown's 1991
Amended Stock Incentive Plan (the "HomeTown 1991 Option Plan") and the
HomeTown Non-Plan Options (as defined in Section 3.02) will be assumed by
Buffets in accordance with Section 6.12.
2.02. EXCHANGE OF CERTIFICATES.
(a) Buffets shall authorize American Stock Transfer Company, or such other
firm as is reasonably acceptable to HomeTown, to serve as exchange agent
hereunder (the "Exchange Agent"). Promptly after the Effective Time, Buffets
shall deposit or shall cause to be deposited in trust with the Exchange Agent
certificates representing the number of whole shares of Buffets Common Stock to
which the holders of HomeTown Common Stock are entitled pursuant to this Article
II, together with cash sufficient to pay for fractional shares then known to
Buffets (such cash amounts and certificates being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions received from Buffets, deliver the number of shares of Buffets
Common Stock and pay the amounts of cash provided for in Section 2.01 out of the
Exchange Fund. Additional amounts of cash, if any, needed from time to time by
the Exchange Agent to make payments for fractional shares shall be provided by
Buffets and shall become part of the Exchange Fund. The Exchange Fund shall not
be used for any other purpose, except as provided in this Agreement, or as
otherwise agreed to by Buffets, Sub, and HomeTown prior to the Effective Time.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail and otherwise make available to each record holder who, as of the
Effective Time, was a holder of a Certificate a form of letter of transmittal
and instructions for use in effecting the surrender of the Certificate for
payment therefor and conversion thereof. Delivery shall be
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effected, and risk of loss and title to the Certificate shall pass, only upon
proper delivery of the Certificate to the Exchange Agent and the form of letter
of transmittal shall so reflect. Upon surrender to the Exchange Agent of a
Certificate, together with such letter of transmittal duly executed, the holder
of such Certificate shall be entitled to receive in exchange therefor (i) one or
more certificates as requested by the holder (properly issued, executed, and
countersigned, as appropriate) representing that number of whole shares of
Buffets Common Stock to which such holder of HomeTown Common Stock shall have
become entitled pursuant to the provisions of Section 2.01, and (ii) as to any
fractional share, a check representing the cash consideration to which such
holder shall have become entitled pursuant to Section 2.01(d) and the
Certificate so surrendered shall forthwith be canceled. No interest will be
paid or accrued on the cash payable upon surrender of the Certificate. Buffets
shall pay any transfer or other taxes required by reason of the issuance of a
certificate representing shares of Buffets Common Stock provided that such
certificate is issued in the name of the person in whose name the Certificate
surrendered in exchange therefor is registered; provided, however, that Buffets
shall not pay any transfer or other tax if the obligation to pay such tax under
applicable law is solely that of the stockholder or if payment of any such tax
by Buffets otherwise would cause the Merger to fail to qualify as a tax-free
reorganization under the Code. If any portion of the consideration to be
received pursuant to this Article II upon exchange of a Certificate (whether the
consideration to be received is a certificate representing shares of Buffets
Common Stock or a check representing cash for a fractional share) is to be
issued or paid to a person other than the person in whose name the Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
issuance and payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such exchange shall pay in advance any transfer or other taxes required by
reason of the issuance of a certificate representing shares of Buffets Common
Stock or a check representing cash for a fractional share to such other person,
or establish to the satisfaction of the Exchange Agent that such tax has been
paid or that no such tax is applicable. From the Effective Time until surrender
in accordance with this Section 2.02, each Certificate (other than Certificates
representing treasury shares of HomeTown) shall be deemed, for all corporate
purposes other than the payment of dividends or other distributions, to evidence
the ownership of the number of whole shares of Buffets Common Stock into which
such shares of HomeTown Common Stock shall have been so converted. No dividends
that are otherwise payable on Buffets Common Stock will be paid to persons
entitled to receive Buffets Common Stock until such persons surrender their
Certificates. After such surrender, there shall be paid to the person in whose
name the Buffets Common Stock shall be issued any dividends on such Buffets
Common Stock that shall have a record date on or after the Effective Time and
prior to such surrender. If the payment date for any such dividend is after the
date of such surrender, such payment shall be made on such payment date. In no
event shall the persons entitled to receive such dividends be entitled to
receive interest on such dividends. All payments in respect of shares of
HomeTown Common Stock that are made in accordance with the terms hereof shall be
deemed to have been made in full satisfaction of all rights pertaining to such
securities.
(c) In case of any lost, mislaid, stolen, or destroyed Certificate, the
holder thereof may be required, as a condition precedent to the delivery to such
holder of the consideration described in Section 2.01 and in accordance with
Section 167 of the Delaware Law, to deliver
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to Buffets a bond in such reasonable sum as Buffets may direct as indemnity
against any claim that may be made against the Exchange Agent, Buffets, or the
Continuing Corporation with respect to the Certificate alleged to have been
lost, mislaid, stolen, or destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Continuing Corporation of the shares of HomeTown Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Continuing Corporation for
transfer, they shall be canceled and exchanged for the consideration described
in Section 2.01. After the Effective Time, the shares of HomeTown Common Stock
shall be delisted from the Nasdaq National Market.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of HomeTown for six months after the Effective Time shall be
returned to Buffets, upon demand, and any holder of HomeTown Common Stock who
has not theretofore complied with Section 2.02(a) shall thereafter look only to
Buffets for issuance of the number of shares of Buffets Common Stock and other
consideration to which such holder has become entitled pursuant to Section 2.01;
provided, however, that neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of HomeTown Common Stock for any amount required to
be paid to a public official pursuant to any applicable abandoned property,
escheat, or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOMETOWN
HomeTown represents and warrants to Buffets and Sub that the statements
contained in this Article III are true and correct as of the date hereof, except
as set forth in the disclosure schedule delivered by HomeTown to Buffets on or
before the date of this Agreement (the "HomeTown Disclosure Schedule"). The
HomeTown Disclosure Schedule shall be arranged in paragraphs corresponding to
the numbered and lettered paragraphs contained in this Article III and the
disclosures in any paragraph, including appropriate cross references, shall
qualify only the corresponding paragraph in this Article III.
3.01. ORGANIZATION OF THE COMPANY. Each of HomeTown and its
Subsidiaries (as defined in Article X) is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation, has all requisite corporate power to own, lease, and operate its
property and to carry on its business as now being conducted and as proposed to
be conducted, and is duly qualified to do business and is in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, assets, financial
condition, results of operations, or prospects ("Material Adverse Effect") of
HomeTown and its Subsidiaries, taken as a whole. Except as set forth in the
HomeTown SEC Reports (as defined in Section 3.04) or Schedule 3.01 of the
HomeTown Disclosure Schedule, neither HomeTown nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture, or other business
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association or entity excluding securities in any publicly traded company held
for investment by HomeTown and comprising less than one percent of the
outstanding stock of such company.
3.02. HOMETOWN CAPITAL STRUCTURE.
(a) The authorized capital stock of HomeTown consists of 20,000,000 shares
of Common Stock, $0.01 par value ("HomeTown Common Stock"), and 5,000,000 shares
of Preferred Stock, $0.01 par value ("HomeTown Preferred Stock"). On May 31,
1996, (i) 11,615,304 shares of HomeTown Common Stock were outstanding, all of
which were validly issued, fully paid, and nonassessable, and no other shares of
HomeTown Common Stock had been issued as of such date, (ii) no shares of
HomeTown Common Stock were held in the treasury of HomeTown or by any Subsidiary
of HomeTown, (iii) 1,480,820 shares of HomeTown Common Stock were reserved for
future issuance pursuant to stock options granted and outstanding under the
HomeTown 1991 Option Plan, (iv) an aggregate of 58,333 shares of HomeTown Common
Stock were reserved for future issuance pursuant to stock options granted and
outstanding to Messrs. Scott, Wichard, Pollock and Martin, all as set forth in
the HomeTown Disclosure Schedule (the "HomeTown Non-Plan Options"), and (v)
shares of HomeTown Common Stock were reserved for future issuance pursuant to
the terms of HomeTown's outstanding 7% Convertible Subordinated Notes due 2002
(the "Notes"). Since May 14, 1996, no shares of HomeTown Common Stock have been
issued except pursuant to the exercise of options granted under the HomeTown
1991 Option Plan. None of the shares of HomeTown Preferred Stock are issued and
outstanding. Except as set forth in Schedule 3.02 of the HomeTown Disclosure
Schedule, there are no obligations, contingent or otherwise, of HomeTown or any
of its Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
HomeTown Common Stock or the capital stock of any Subsidiary or to provide funds
to or make any investment (in the form of a loan, capital contribution, or
otherwise) in any such Subsidiary or any other entity. Except as set forth in
Schedule 3.02 of the HomeTown Disclosure Schedule, all of the outstanding shares
of capital stock of each of HomeTown's Subsidiaries are duly authorized, validly
issued, fully paid, and nonassessable and all such shares are owned by HomeTown
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in HomeTown's voting rights, charges, or other encumbrances of any
nature.
(b) Except as set forth in this Section 3.02 and except for options
granted under the HomeTown 1991 Option Plan and the HomeTown Non-Plan Options,
or as reserved for future grants of options or rights under the HomeTown 1991
Option Plan, or as reserved for future issuance upon conversion of the Notes,
there are no equity securities of any class of HomeTown or any of its
Subsidiaries, or any security exchangeable into or exercisable for such equity
securities issued, reserved for issuance, or outstanding. Except as set forth
in this Section 3.02, there are no options, warrants, equity securities, calls,
rights, commitments, or agreements of any character to which HomeTown or any of
its Subsidiaries is a party or by which it is bound obligating HomeTown or any
of its Subsidiaries to issue, deliver, or sell, or cause to be issued,
delivered, or sold, additional shares of capital stock of HomeTown or any of its
Subsidiaries or obligating HomeTown or any of its Subsidiaries to grant, extend,
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accelerate the vesting of, or enter into any such option, warrant, equity
security, call, right, commitment, or agreement. HomeTown is not a party to,
nor is HomeTown aware of, any voting agreement, voting trust, proxy, or other
agreements or understandings with respect to the shares of capital stock of
HomeTown or any agreement, arrangement, or understanding providing for
registration rights with respect to any shares of capital stock of HomeTown.
(c) As of May 14, 1996, there were outstanding $41.5 million in aggregate
principal amount of Notes. As provided therein, the Notes are convertible into
HomeTown Common Stock; the conversion price of $13.65 per share set forth in
Article 13 of the indenture covering the Notes has not been adjusted in any
respect.
3.03. AUTHORITY, NO CONFLICT, REQUIRED FILINGS AND CONSENTS.
(a) HomeTown has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of HomeTown, subject only to the approval
of this Agreement and the Merger by HomeTown's stockholders under the Delaware
Law. This Agreement has been duly executed and delivered by HomeTown and
constitutes the valid and binding obligation of HomeTown, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of
creditors generally and except that the remedy of specific performance and
injunctive and other forms of equitable relief are subject to certain equitable
defenses and to the discretion of the court before which any proceedings
therefor may be brought.
(b) Except as set forth in the HomeTown Disclosure Schedule and subject to
approval of this Agreement and the Merger by HomeTown's stockholders, the
execution and delivery of this Agreement by HomeTown does not, and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of HomeTown, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both) a
default (or give rise to right of termination, cancellation, or acceleration of
any obligation or loss of any benefit) under any of the terms, conditions, or
provisions of any note, bond, mortgage, indenture, or lease or any material
contract, or other material agreement, instrument, or obligation to which
HomeTown or any of its Subsidiaries is a party or by which any of them or any of
their properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to HomeTown or any of its Subsidiaries
or any of its or their properties or assets and which is material to the
business or operations of HomeTown.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any court, administrative agency, or commission or
other governmental authority or instrumentality ("Governmental Entity"), is
required by or with respect to HomeTown or any of its Subsidiaries in connection
with the execution and delivery of this Agreement or the
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consummation of the transactions contemplated hereby, except for (i) the filing
of the pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), (ii) the filing of a
Registration Statement on Form S-4 with the Securities and Exchange Commission
("SEC") in accordance with the Securities Act of 1933, as amended (the
"Securities Act"), (iii) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (iv) the filing of the Joint Proxy
Statement (as defined in Section 6.02(a) below) with the SEC in accordance with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and (v)
such consents, approvals, orders, authorizations, registrations, declarations,
and filings as may be required under the applicable federal and state securities
laws and laws of any foreign country.
3.04. SEC FILINGS; FINANCIAL STATEMENTS.
(a) HomeTown has filed and made available to Buffets all forms, reports,
and documents required to be filed by HomeTown with the SEC since January 1,
1993 (including all exhibits, notes, and schedules thereto and documents
incorporated by reference therein) (collectively, the "HomeTown SEC Reports").
The HomeTown SEC Reports (i) at the time filed, with respect to all of the
HomeTown SEC Reports other than registration statements filed under the
Securities Act, or at the time of their respective effective dates, with respect
to registration statements filed under the Securities Act, complied as to form
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act, as the case may be, and (ii) did not at the time filed or
at the time of their respective effective dates, as the case may be (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing), contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such HomeTown SEC Reports
or necessary in order to make the statements in such HomeTown SEC Reports, in
the light of the circumstances under which they were made, not misleading. None
of HomeTown's Subsidiaries is required to file any forms, reports, or other
documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the HomeTown SEC Reports at the time filed
or at the time of their respective effective dates, as the case may be, complied
as to form in all material respects with the applicable published rules and
regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of HomeTown and its Subsidiaries at the respective dates and the consolidated
results of their operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments. HomeTown has provided Buffets with
HomeTown's unaudited consolidated financial statements as of and for the period
ended April 24, 1996; such financial statements, including any related notes,
are attached hereto as Exhibit 3.04(b) (the "Unaudited Statements"). The
Unaudited Statements comply as to form in all material respects with the
applicable published rules and regulations of the SEC with respect to financial
statements included in a report on Form 10-Q, have been prepared in accordance
with
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generally accepted accounting principles applied on a consistent basis with the
consolidated financial statements of HomeTown contained in the HomeTown SEC
Reports (except as may be included in the notes to the Unaudited Statements or
as permitted by Form 10-Q of the SEC) and fairly present the consolidated
financial position of HomeTown and its Subsidiaries at the date and the
consolidated results of their operations and cash flows for the period
indicated, except that the Unaudited Statements are subject to normal and
recurring year-end adjustments. The unaudited balance sheet of HomeTown as of
April 24, 1996 is referred to herein as the "HomeTown Balance Sheet."
3.05. NO UNDISCLOSED LIABILITIES. Except as set forth in the HomeTown
Disclosure Schedule or as otherwise disclosed in the HomeTown SEC Reports,
HomeTown and its Subsidiaries do not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on HomeTown and its Subsidiaries, taken as a
whole, other than (i) liabilities reflected in the HomeTown Balance Sheet and
(ii) normal or recurring liabilities incurred since the date of the HomeTown
Balance Sheet, in the ordinary course of business consistent with past
practices.
3.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
HomeTown Balance Sheet, HomeTown and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any material adverse
change in the financial condition, results of operations, prospects, or business
(together, a "Material Adverse Change") of HomeTown and its Subsidiaries, taken
as a whole, (ii) any damage, destruction, or loss (whether or not covered by
insurance) with respect to any property of HomeTown or any of its Subsidiaries
having a Material Adverse Effect on HomeTown and its Subsidiaries, taken as a
whole, (iii) any material change by HomeTown in its accounting methods,
principles, or practices to which Buffets has not previously consented in
writing, (iv) any revaluation by HomeTown or any of its assets having a Material
Adverse Effect on HomeTown and its Subsidiaries, taken as a whole, or (v) except
as disclosed in the HomeTown Disclosure Schedule, any other action or event that
would have required the consent of Buffets pursuant to Section 5.01 of this
Agreement had such action or event occurred after the date of this Agreement.
3.07. TAXES.
(a) Except as disclosed in the HomeTown Disclosure Schedule, all returns
and reports, including without limitation information and withholding returns
and reports (collectively, "Tax Returns"), of or relating to any foreign,
Federal, state, local or other income, premium, property, sales, excise and
other taxes of any nature whatsoever, including any interest, penalties and
additions to tax in respect thereof ("Tax" or "Taxes") heretofore required to be
filed by HomeTown or any of its Subsidiaries have been duly filed on a timely
basis. All such Tax Returns were complete and accurate in all material
respects. Each of HomeTown and its Subsidiaries has paid or has made adequate
provision for the payment of all Taxes.
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(b) Except as disclosed in the HomeTown Disclosure Schedule, as of the
date of this Agreement there are no audits or administrative proceedings, court
proceedings or claims pending against HomeTown or any of its Subsidiaries with
respect to any Taxes, no assessment, deficiency or adjustment has been asserted
or, to the knowledge of HomeTown, proposed with respect to any Tax Return of or
with respect to HomeTown or any of its Subsidiaries and there are no liens for
Taxes upon the assets or properties of HomeTown or any of its Subsidiaries,
except liens for Taxes not yet delinquent.
(c) Except as disclosed in the HomeTown Disclosure Schedule, there are not
in force any waivers of agreements, arrangements, or understandings by or with
respect to HomeTown or any of its Subsidiaries of or for an extension of time
for the assessment or payment of any Taxes. Neither HomeTown nor any of its
Subsidiaries has received a written ruling of a taxing authority relating to
Taxes or entered into a written and legally binding agreement with a taxing
authority relating to Taxes that would have a continuing effect after the
Closing Date. Except as disclosed in the HomeTown Disclosure Schedule, neither
HomeTown nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by HomeTown or any of its Subsidiaries,
and to the best knowledge of HomeTown the IRS has not proposed any such
adjustment or change in accounting method. For purposes of this Section 3.07,
the term "Subsidiaries" shall include former Subsidiaries of HomeTown for the
periods during which any such Subsidiaries were owned directly or indirectly by
HomeTown.
(d) To the best knowledge of HomeTown, each of HomeTown and its
Subsidiaries has withheld and paid all Taxes required to have been withheld and
paid in connection with amounts paid or owing to any employee, creditor,
independent contractor or other third party.
(e) Neither HomeTown nor any of its Subsidiaries has filed a consent under
Section 341 (f) of the Code. HomeTown and its Subsidiaries are not parties to
any Tax allocation or Tax sharing arrangements.
3.08. PROPERTIES. HomeTown has provided or made available to Buffets a
true and complete list of all real property owned by HomeTown or its
Subsidiaries and real property leased by HomeTown or its Subsidiaries pursuant
to leases ("Leases") as of the date hereof, and the name of the lessor, the date
of the Lease and each amendment to the Lease, and the aggregate annual rental or
other fees payable under any such Lease. All such Leases are valid and binding
in accordance with their respective terms, and HomeTown is not in default under
any such Lease.
3.09. INTELLECTUAL PROPERTY.
(a) Subject to the HomeTown Disclosure Schedule, HomeTown owns, or is
licensed or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications for
such patents, trademarks, trade names, service marks, and copyrights, or
tangible or intangible proprietary information or
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material that are necessary to conduct the business of HomeTown as currently
conducted (the "HomeTown Intellectual Property Rights"). Schedule 3.09 of the
HomeTown Disclosure Schedule lists (i) all trademarks, registered copyrights,
trade names, and service marks, which HomeTown considers to be material to its
business and included in the HomeTown Intellectual Property Rights, including
the jurisdictions in which each such HomeTown Intellectual Property Rights has
been issued or registered or in which any such application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses, and other
agreements to which HomeTown is a party and pursuant to which any person is
authorized to use any HomeTown Intellectual Property Rights, and (iii) all
material licenses, sublicenses, and other agreements to which HomeTown is a
party and pursuant to which HomeTown is authorized to use any third party
patents, trademarks, or copyrights, including software ("HomeTown Third Party
Intellectual Property Rights") that is material to its business.
(b) HomeTown is not, nor will it be as a result of the execution and
delivery of this Agreement, or the performance of its obligations under this
Agreement, in breach of any license, sublicense, or other agreements relating to
the HomeTown Intellectual Property Rights or HomeTown Third Party Intellectual
Property Rights.
(c) To HomeTown's knowledge, all patents, registered trademarks, service
marks, and copyrights held by HomeTown are valid and subsisting. Except as set
forth on Schedule 3.09 of the HomeTown Disclosure Schedule, HomeTown (i) has not
been sued in any suit, action, or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, or copyrights, or
violation of any trade secret or other proprietary right of any third party, and
(ii) has no knowledge that the conduct of its business as presently conducted
infringes any patent, trademark, service mark, copyright, trade secret, or other
proprietary right of any third party.
3.10. AGREEMENTS, CONTRACTS, AND COMMITMENTS. HomeTown has not
breached, or received in writing any claim or threat that it has breached, any
of the terms and conditions of any agreement, contract, or commitment filed as
an exhibit to HomeTown's Report on Form 10-K for the fiscal year ended
January 3, 1996 or any other agreement, contract, or commitment entered into
since January 3, 1996 which, if entered into prior to such date, would have been
required to be included as an exhibit thereto ("HomeTown Material Contracts") in
such a manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek material damages from HomeTown under any
HomeTown Material Contract. Each HomeTown Material Contract that has not
expired or been terminated is in full force and effect and is not subject to any
material default thereunder of which HomeTown is aware by any party obligated to
HomeTown pursuant to the HomeTown Material Contract.
3.11. LITIGATION. Except as described in the HomeTown SEC Reports or
in Schedule 3.11 of the HomeTown Disclosure Schedule, there are no claims,
actions, suits, investigations or proceedings pending of which it has notice or,
to the knowledge of HomeTown, threatened against or affecting HomeTown or any of
its Subsidiaries or any of their respective assets or properties, at law or in
equity, before or by any Federal, state, municipal or other
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governmental agency or authority, foreign or domestic, or before any arbitration
board or panel, wherever located, which if determined adverse to HomeTown would,
individually or in the aggregate, have a Material Adverse Effect on HomeTown and
its Subsidiaries, taken as a whole.
3.12. ENVIRONMENTAL MATTERS.
(a) HAZARDOUS SUBSTANCES. To the knowledge of HomeTown, no Hazardous
Substances have ever been buried, spilled, leaked, discharged, emitted,
generated, stored, used or released, and no Hazardous Substances are now
present, in, on, or under any restaurant premises or other non-restaurant
property that HomeTown or any of its Subsidiaries has at any time owned,
operated, occupied or leased, except for immaterial quantities stored or used by
HomeTown or such Subsidiary in the ordinary course of its business and in
accordance with all applicable Environmental Laws. "Hazardous Substance" means
any pollutant, contaminant, hazardous substance or waste, solid waste, petroleum
or any fraction thereof, or any other chemical, substance or material listed or
identified in or regulated by any Environmental Law; "Environmental Law" means
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C.
Sections 1251 to 1387, the Clean Air Act, 42 U.S.C. Section 7401 et seq., and
any other federal, state, local or other governmental statute, regulation, law
or ordinance dealing with the protection of human health, natural resources
and/or the environment; and "RCRA Hazardous Waste" means a hazardous waste, as
that term is defined in and pursuant to the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901 et seq.
(b) HAZARDOUS SUBSTANCES ACTIVITIES. To the knowledge of HomeTown, no
property that HomeTown or any of its Subsidiaries has ever owned, operated,
occupied or leased has ever been used in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and no RCRA
Hazardous Wastes have been treated, stored or disposed of there, except for
immaterial quantities stored or used by HomeTown or such Subsidiary in the
ordinary course of its business.
(c) UST'S AND AST'S. To the knowledge of HomeTown, there are not now and
never have been any underground or aboveground storage tanks or other
containment facilities of any kind on any restaurant premises or other non-
restaurant property that HomeTown or any of its Subsidiaries has ever owned,
occupied, operated or leased which contain or ever did contain any Hazardous
Substances.
(d) LISTING. To the knowledge of HomeTown, no restaurant premises or
other non-restaurant property that HomeTown or any of its Subsidiaries has ever
owned, operated, occupied or leased has ever been listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or any similar federal, state or local list,
schedule, log, inventory or database.
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(e) ENVIRONMENTAL REPORTS. HomeTown has made available to Buffets for
inspection true and complete copies of all reports, authorizations, permits,
licenses, disclosures and other documents in its possession, custody or control
describing or relating in any way to HomeTown or any of its Subsidiaries, or any
property that HomeTown or any of its Subsidiaries has ever owned, operated,
occupied or leased, which suggest that any Hazardous Substances may be present
in, on, or under any such property in material quantities or that HomeTown or
any of its Subsidiaries may have breached any Environmental Law.
(f) ENVIRONMENTAL CLAIMS, ETC. To the knowledge of HomeTown, there are
not and there never have been any requests, notices, investigations, claims,
demands, administrative proceedings, hearings, litigation or other legal
proceedings relating in any way to HomeTown or any of its Subsidiaries, or any
property that HomeTown or any of its Subsidiaries has ever owned, operated,
occupied or leased, alleging liability under, violation of or noncompliance with
any Environmental Law or any license, permit or other authorization issued
pursuant thereto. To the knowledge of HomeTown, no such matter is threatened or
impending, nor does there exist any substantial basis therefor.
(g) COMPLIANCE WITH ENVIRONMENTAL LAWS. HomeTown and each of its
Subsidiaries operates, and at all times has operated, its business in accordance
with all applicable Environmental Laws, and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary for the
lawful operation of the business of HomeTown and its Subsidiaries are in
HomeTown's or the appropriate Subsidiary's possession and are in full force and
effect. To HomeTown's knowledge, there is no threat that any such permit,
license or other authorization will be withdrawn, terminated, limited or
materially changed.
3.13. EMPLOYEE BENEFIT PLANS.
(a) There are no "employee pension benefit plans," as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or "multiemployer plans" as defined in Section 3(37) of ERISA,
maintained or contributed to by HomeTown or any of its Subsidiaries for the
benefit of their current or former employees. HomeTown has set forth on
Schedule 3.13 of the HomeTown Disclosure Schedule all "employee benefit plans"
as defined in Section 3(3) of ERISA and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance, and other
similar employee benefit plans, arrangements, and agreements, whether or not
such plans, arrangements, or agreements are "employee benefit plans", written or
otherwise, for the benefit of or relating to, any current or former employee of
HomeTown or any trade or business (whether or not incorporated) (an "ERISA
Affiliate") which is aggregated with HomeTown or any Subsidiary of HomeTown
pursuant to Section 414 of the Code (together the "HomeTown Employee Plans").
(b) With respect to each HomeTown Employee Plan, HomeTown has made
available to Buffets a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service ("IRS"), if
applicable, (ii) the plan document and summary plan description for each such
HomeTown Employee Plan, (iii) each trust agreement
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and group annuity contract, if any, relating to such HomeTown Employee Plan,
(iv) the most recent actuarial report or valuation relating to an HomeTown
Employee Plan subject to Title IV of ERISA, and (v) the most recent IRS
determination letter, where applicable.
(c) With respect to the HomeTown Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of HomeTown, there exists
no condition or set of circumstances in connection with which HomeTown could be
subject to any liability that is reasonably likely to have a Material Adverse
Effect on HomeTown and its Subsidiaries, taken as a whole, under ERISA, the
Code, or any other applicable law.
(d) With respect to the HomeTown Employee Plans, individually and in the
aggregate, there are no benefit obligations required to be funded for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting principles
on the financial statements of HomeTown.
(e) Except as set forth in Schedule 3.13 of the HomeTown Disclosure
Schedule or as disclosed in HomeTown SEC Reports filed prior to the date of this
Agreement and except as provided for in this Agreement, neither HomeTown nor any
of its Subsidiaries is party to any oral or written (i) union or collective
bargaining agreement, (ii) agreement with any officer or other key employee of
HomeTown or any of its Subsidiaries, the benefits of which are contingent, or
the terms of which are materially altered upon the occurrence of a transaction
involving HomeTown of the nature contemplated by this Agreement, (iii) agreement
with any officer of HomeTown providing any term of employment or compensation
guarantee extending for a period longer than one year from the date hereof or
for the payment of compensation in excess of $100,000 per annum, or (iv)
agreement or plan, including any stock option plan, stock appreciation right
plan, restricted stock plan, or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement.
3.14. COMPLIANCE WITH LAWS. HomeTown has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, or local statute, law, or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have a Material Adverse Effect
on HomeTown and its Subsidiaries, taken as a whole.
3.15. POOLING OF INTERESTS. To its knowledge, neither HomeTown nor any
of its Affiliates (as defined in Section 6.10) has, through the date of this
Agreement, taken or agreed to take any action which would prevent Buffets from
accounting for the business combination to be effected by the Merger as a
pooling of interests.
3.16. INTERESTED PARTY TRANSACTIONS. Except as set forth in Schedule
3.16 of the HomeTown Disclosure Schedule or in the HomeTown SEC Reports, since
the date of
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HomeTown's last proxy statement to its stockholders, no event has occurred that
would be required to be reported by HomeTown as a Certain Relationship or
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
3.17. NO EXISTING DISCUSSIONS. HomeTown is not engaged, directly or
indirectly, in any discussions or negotiations with any other party with respect
to an Acquisition Proposal (as defined in Section 6.01).
3.18. NO SECURED DEBT. Except as set forth in the HomeTown Disclosure
Schedule, there is not now any secured debt (including capitalized leases) of
HomeTown or any of its Subsidiaries, except for (i) capitalized leases of less
than $8,655,000 in the aggregate as to HomeTown and its Subsidiaries, or (ii)
capitalized leases of HomeTown or any of its Subsidiaries that are not reflected
(and should not be reflected in accordance with generally accepted accounting
principles) on the consolidated financial statements of HomeTown, and, in either
case, the existence of which does not violate the terms of any material note,
bond, indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or commitment to
which HomeTown or any of its Subsidiaries is a party or by which HomeTown or any
of its Subsidiaries or any of the assets or properties thereof is bound or
encumbered.
3.19. OPINION OF FINANCIAL ADVISOR. The financial advisor of HomeTown,
Montgomery Securities, Inc., has delivered to the Board of Directors of HomeTown
an opinion dated the date of this Agreement to the effect that the consideration
to be received by the HomeTown stockholders in the Merger is fair from a
financial point of view to the stockholders of HomeTown.
3.20 TAX REPRESENTATION. There is no plan or intention by the stockholders
of HomeTown who own 5 percent or more of the outstanding HomeTown stock, and to
the best knowledge of the management of HomeTown, there is no plan or intention
on the part of the remaining stockholders of HomeTown to sell, exchange, or
otherwise dispose of a number of shares of Buffets stock received in the
transaction that would reduce the HomeTown stockholders' ownership of Buffets
stock to a number of shares having a value, as of the Effective Time, of less
than 50 percent of the value of all of the formerly outstanding stock of
HomeTown as of the same date. For purposes of this representation, shares of
HomeTown exchanged for cash in lieu of fractional shares of Buffets stock will
be treated as outstanding HomeTown stock at the Effective Time. Moreover,
shares of HomeTown stock and shares of Buffets stock held by HomeTown
stockholders and otherwise sold, redeemed, or disposed of prior or subsequent to
the transaction will be considered in making this representation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUFFETS AND SUB
Buffets and Sub jointly and severally represent and warrant to HomeTown
that the statements contained in this Article IV are true and correct as of the
date hereof, except as set forth in the disclosure schedule delivered by Buffets
to HomeTown on or before the date of
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this Agreement (the "Buffets Disclosure Schedule"). The Buffets Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered paragraphs contained in this Article IV and the disclosure in any
paragraph, including appropriate cross references, shall qualify only the
corresponding paragraph in this Article IV.
4.01. ORGANIZATION OF THE COMPANY. Each of Buffets and its
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power to own, lease, and operate its property and to carry
on its business as now being conducted and as proposed to be conducted, and is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
Material Adverse Effect on Buffets and its Subsidiaries, taken as a whole.
Except as set forth in the Buffets SEC Reports (as defined in Section 4.04) or
Schedule 4.01 of the Buffets Disclosure Schedule, neither Buffets nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for, any
corporation, partnership, joint venture, or other business association or
entity, excluding securities in any publicly traded company held for investment
by Buffets and comprising less than one percent of the outstanding stock of such
company.
4.02. BUFFETS CAPITAL STRUCTURE.
(a) The authorized capital stock of Buffets consists of 60,000,000 shares
of Common Stock, $.01 par value ("Buffets Common Stock"), and 5,000,000 shares
of Preferred Stock, $.01 par value ("Buffets Preferred Stock"). On May 22,
1996, (i) 31,328,834 shares of Buffets Common Stock were outstanding, all of
which were validly issued, fully paid, and nonassessable, (ii) no shares of
Buffets Common Stock were held in the treasury of Buffets, (iii) an aggregate of
2,712,356 shares of Buffets Common Stock were reserved for future issuance
pursuant to stock options granted and outstanding under Buffets' 1985 Stock
Option Plan, Buffets' 1988 Stock Option Plan, and Buffets' 1995 Stock Option
Plan (collectively, the "Buffets Option Plans") and 10,000 shares of Buffets
Common Stock were reserved for future issuance pursuant to stock options granted
and outstanding to a director of Buffets (the "Director Options"), and (iv) an
aggregate of 600,000 shares of Buffets' Series A Junior Participating Preferred
Shares ("Buffets Junior Preferred Stock") were reserved for future issuance
pursuant to the Rights Agreement, dated as of October 4, 1995, between Buffets
and American Stock Transfer & Trust Company, as Rights Agent (the "Buffets
Rights Agreement"), under which each outstanding share of Buffets Common Stock
has attached to its certain rights ("Rights"), including rights under certain
circumstances to purchase one one-hundredth of a share of Buffets Junior
Preferred Stock at $65.00, at the date hereof, subject to adjustment. All
shares of Buffets Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid,
and nonassessable, and will have Rights attached thereto in accordance with the
Buffets Rights Agreement. There are no obligations, contingent or otherwise, of
Buffets or any of its Subsidiaries to repurchase, redeem, or otherwise acquire
any shares of Buffets Common Stock or the capital stock of any Subsidiary or to
provide funds to or make any investment (in the form of a loan, capital
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contribution, or otherwise) in any such Subsidiary or any other entity other
than the guarantees of bank obligations of Subsidiaries entered into in the
ordinary course of business. All of the outstanding shares of capital stock of
each of Buffets' Subsidiaries is duly authorized, validly issued, fully paid,
and nonassessable and all such shares are owned by Buffets or another Subsidiary
free and clear of all security interests, liens, claims, pledges, agreements,
limitations in Buffets' voting rights, charges or other encumbrances of any
nature.
(b) Except as set forth in this Section 4.02 and except for options
granted under the Buffets Option Plans and the Director Options, or as reserved
for future grants of options under the Buffets Option Plans, or for the shares
of Buffets Junior Preferred Stock reserved for issuance under the Buffets Rights
Agreement, there are no equity securities of any class of Buffets or any of its
Subsidiaries, or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance, or outstanding. Except as set forth
in this Section 4.02, there are no options, warrants, equity securities, calls,
rights, commitments, or agreements of any character to which Buffets or any of
its Subsidiaries is a party or by which it is bound obligating Buffets or any of
its Subsidiaries to issue, deliver, or sell, or cause to be issued, delivered,
or sold, additional shares of capital stock of Buffets or any of its
Subsidiaries or obligations of Buffets or any of its Subsidiaries to grant,
extend, accelerate the vesting of, or enter into any such option, warrant,
equity security, call, right, commitment, or agreement. Buffets is not a party
to, nor is Buffets aware of, any voting agreement, voting trust, proxy, or other
agreements or understandings relating to any shares of capital stock of Buffets
or any agreement, arrangement, or understanding providing for registration
rights with respect to any shares of capital stock of Buffets.
4.03. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONTRACTS.
(a) Buffets has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation of
the transactions contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Buffets, subject only to the approval
of the Buffets Voting Proposal (as defined in Section 6.04) by Buffets'
shareholders. This Agreement has been duly executed and delivered by Buffets
and constitutes the valid and binding obligation of Buffets, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, or other similar laws affecting the rights of
creditors generally and except that the remedy of specific performance and
injunctive relief and other forms of equitable defenses are subject to the
discretion of the court before which any proceedings therefor may be brought.
(b) Except as set forth in the Buffets Disclosure Schedule, the execution
and delivery of this Agreement by Buffets does not, and the consummation of the
transactions contemplated by this Agreement will not, (i) conflict with, or
result in any violation or breach of any provision of the Articles of
Incorporation or Bylaws of Buffets, (ii) result in any violation or breach of,
or constitute (with or without notice or lapse of time, or both) a default (or
give rise to a right of termination, cancellation, or acceleration of any
obligation or loss of any material benefit) under any of the terms, conditions,
or provisions of any note, bond,
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mortgage, indenture, or lease or any material contract or other material
agreement, instrument, or obligation to which Buffets or any of its Subsidiaries
is a party or by which any of them or any of their properties or assets may be
bound, or (iii) conflict or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule, or regulation applicable
to Buffets or any of its Subsidiaries or their properties or assets and which is
material to the business or operations of Buffets.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any Governmental Entity, is required by or with
respect to Buffets or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of the pre-merger notification
report under the HSR Act, (ii) the filing of a Form S-4 Registration Statement
with the SEC in accordance with the Securities Act, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (iv)
the filing of the Joint Proxy Statement with the SEC in accordance with the
Exchange Act, and (v) such consents, approvals, orders, authorizations,
registrations, declarations, and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country.
4.04. SEC FILINGS; FINANCIAL STATEMENTS.
(a) Buffets has filed and made available to HomeTown all forms, reports,
and documents required to be filed by Buffets with the SEC since January 1, 1993
(including all exhibits, notes, and schedules thereto and documents incorporated
by reference therein) (collectively, the "Buffets SEC Reports"). The Buffets
SEC Reports (i) at the time filed, with respect to all of the Buffets SEC
Reports other than registration statements filed under the Securities Act, or at
the time of their respective effective dates, with respect to registration
statements filed under the Securities Act, complied as to form in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and (ii) did not at the time filed or at the time of
their respective effective dates, as the case may be (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Buffets SEC Reports or necessary in
order to make the statements in such Buffets SEC Reports, in the light of the
circumstances under which they were made, not misleading. None of Buffets'
Subsidiaries is required to file any forms, reports, or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Buffets SEC Reports at the time filed
complied as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly presented the consolidated financial position
of Buffets and its Subsidiaries at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are
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subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount. The unaudited balance sheet of Buffets as of
April 24, 1996 is referred to herein as the "Buffets Balance Sheet."
4.05. NO UNDISCLOSED LIABILITIES. Except as set forth in the Buffets
Disclosure Schedule or as otherwise disclosed in the Buffets SEC Reports,
Buffets and its Subsidiaries do not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which individually or in the aggregate would reasonably be expected
to have a Material Adverse Effect on Buffets and its Subsidiaries, taken as a
whole, other than (i) liabilities reflected in the Buffets Balance Sheet and
(ii) normal or recurring liabilities incurred since the date of the Buffets
Balance Sheet in the ordinary course of business consistent with past practices.
Sub will have no liabilities assumed by HomeTown and will not transfer to
HomeTown any assets subject to liabilities.
4.06. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Buffets Balance Sheet, Buffets and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any Material Adverse
Change in Buffets and its Subsidiaries, taken as a whole; (ii) any damage,
destruction, or loss (whether or not covered by insurance) with respect to any
property of Buffets or any of its Subsidiaries having a Material Adverse Effect
on Buffets and its Subsidiaries, taken as whole; (iii) any material change by
Buffets in its accounting methods, principles, or practices; (iv) any
revaluation by Buffets of any of its assets having a Material Adverse Effect on
Buffets and its Subsidiaries, taken as a whole; or (v) except as disclosed in
the Buffets Disclosure Schedule any other action or event that would have
required the consent of HomeTown pursuant to Section 5.01 of this Agreement had
such action or event occurred after the date of this Agreement.
4.07. TAXES.
(a) Except as disclosed in the Buffets Disclosure Schedule, all Tax
Returns, of or relating to any Tax heretofore required to be filed by Buffets or
any of its Subsidiaries have been duly filed on a timely basis. All such Tax
Returns were complete and accurate in all material respects. Each of Buffets
and its Subsidiaries has paid or has made adequate provision for the payment of
all Taxes.
(b) Except as disclosed in the Buffets Disclosure Schedule, as of the date
of this Agreement there are no audits or administrative proceedings, court
proceedings or claims pending against Buffets or any of its Subsidiaries with
respect to any Taxes, no assessment, deficiency or adjustment has been asserted
or, to the knowledge of Buffets, proposed with respect to any Tax Return of or
with respect to Buffets or any of its Subsidiaries and there are no liens for
Taxes upon the assets or properties of Buffets or any of its Subsidiaries,
except liens for Taxes not yet delinquent.
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(c) Except as disclosed in the Buffets Disclosure Schedule, there are not
in force any waivers of agreements, arrangements, or understandings by or with
respect to Buffets or any of its Subsidiaries of or for an extension of time for
the assessment or payment of any Taxes. Neither Buffets nor any of its
Subsidiaries has received a written ruling of a taxing authority relating to
Taxes or entered into a written and legally binding agreement with a taxing
authority relating to Taxes that would have a continuing effect after the
Closing Date. Except as disclosed in the Buffets Disclosure Schedule, neither
Buffets nor any of its Subsidiaries is required to include in income any
adjustment pursuant to Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by Buffets or any of its Subsidiaries, and
to the best knowledge of Buffets the IRS has not proposed any such adjustment or
change in accounting method. For purposes of this Section 4.07, the term
"Subsidiaries" shall include former Subsidiaries of Buffets for the periods
during which any such Subsidiaries were owned directly or indirectly by Buffets.
(d) To the best knowledge of Buffets, each of Buffets and its Subsidiaries
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, creditor, independent
contractor or other third party.
(e) Neither Buffets nor any of its Subsidiaries has filed a consent under
Section 341 (f) of the Code.
4.08. PROPERTIES. Buffets has provided or made available to HomeTown a
true and complete list of all property owned by Buffets and its Subsidiaries and
real property leased by Buffets or its Subsidiaries pursuant to Leases as of the
date hereof, the name of the lessor, the date of the Lease and each amendment to
the Lease, and the aggregate annual rental or other fee payable under any such
Lease. All such Leases are valid and binding in accordance with their
respective terms, and Buffets is not in default under any of such Leases.
4.09. INTELLECTUAL PROPERTY.
(a) Subject to the Buffets Disclosure Schedule, Buffets owns, or is
licensed or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications for
such patents, trademarks, trade names, service marks and copyrights, and
tangible or intangible proprietary information or material that are necessary to
conduct the business of Buffets as currently conducted (the "Buffets
Intellectual Property Rights"). Schedule 4.09 of the Buffets Disclosure
Schedule lists (i) all trademarks, registered copyrights, trade names, and
service marks which Buffets considers to be material to its business and
included in the Buffets Intellectual Property Rights, including the
jurisdictions in which each such Buffets Intellectual Property Right has been
issued or registered or in which any such application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses, and other
agreements to which Buffets is a party and pursuant to which any person is
authorized to use any Buffets Intellectual Property Rights, and (iii) all
material licenses, sublicenses, and other agreements to which Buffets is a party
and pursuant to which Buffets is authorized to use any third party patents,
trademarks or
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copyrights, including software ("Buffets Third Party Intellectual Property
Rights") that is material to its business.
(b) Buffets is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense, or other agreement relating to
the Buffets Intellectual Property Rights or Buffets Third Party Intellectual
Property Rights.
(c) To Buffets' knowledge, all patents, registered trademarks, service
marks, and copyrights held by Buffets are valid and subsisting. Except as set
forth on Schedule 4.09 of the Buffets Disclosure Schedule, Buffets (i) has not
been sued in any suit, action, or proceeding which involves a claim of
infringement of any patents, trademarks, service marks, or copyrights, or
violation of any trade secret or other proprietary right of any third party; and
(ii) has no knowledge that the conduct of its business as presently conducted
infringes any patent, trademark, service mark, copyright, trade secret, or other
proprietary right of any third party.
4.10. AGREEMENTS, CONTRACTS AND COMMITMENTS. Buffets has not breached,
or received in writing any claim or threat that it has breached, any of the
terms or conditions of any material agreement, contract, or commitment filed as
an exhibit to Buffets' Report on Form 10-K for the fiscal year ended January 3,
1996 or any other agreement, contract, or commitment entered into since
January 3, 1996 which, if entered into prior to such date, would have been
required to be included as an exhibit thereto ("Buffets Material Contracts") in
such a manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek material damages from Buffets under any
Buffets Material Contract. Each Buffets Material Contract that has not expired
or been terminated is in full force and effect and is not subject to any
material default thereunder of which Buffets is aware by any party obligated to
Buffets pursuant to the Buffets Material Contract.
4.11. LITIGATION. Except as described in the Buffets SEC Reports or in
Schedule 4.11 of the Buffets Disclosure Schedule, there are no claims, actions,
suits, investigations or proceedings pending of which it has notice or, to the
knowledge of Buffets, threatened against or affecting Buffets or any of its
Subsidiaries or any of their respective assets or properties, at law or in
equity, before or by any Federal, state, municipal or other governmental agency
or authority, foreign or domestic, or before any arbitration board or panel,
wherever located, which if determined adverse to Buffets would, individually or
in the aggregate, have a Material Adverse Effect on Buffets and its
Subsidiaries, taken as a whole.
4.12. ENVIRONMENTAL MATTERS.
(a) HAZARDOUS SUBSTANCES. To the knowledge of Buffets, no Hazardous
Substances have ever been buried, spilled, leaked, discharged, emitted,
generated, stored, used or released, and no Hazardous Substances are now
present, in, on, or under any restaurant premises or other non-restaurant
property that Buffets or any of its Subsidiaries has at any time owned,
operated, occupied or leased, except for immaterial quantities stored or used by
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Buffets or such Subsidiary in the ordinary course of its business and in
accordance with all applicable Environmental Laws.
(b) HAZARDOUS SUBSTANCES ACTIVITIES. To the knowledge of Buffets, no
property that Buffets or any of its Subsidiaries has ever owned, operated,
occupied or leased has ever been used in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and no RCRA
Hazardous Wastes have been treated, stored or disposed of there, except for
immaterial quantities stored or used by Buffets or such Subsidiary in the
ordinary course of its business.
(c) UST'S AND AST'S. To the knowledge of Buffets, there are not now and
never have been any underground or aboveground storage tanks or other
containment facilities of any kind on any restaurant premises or other non-
restaurant property that Buffets or any of its Subsidiaries has ever owned,
occupied, operated or leased which contain or ever did contain any Hazardous
Substances.
(d) LISTING. To the knowledge of Buffets, no restaurant premises or other
non-restaurant property that Buffets or any of its Subsidiaries has ever owned,
operated, occupied or leased has ever been listed on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System or any similar federal, state or local list, schedule, log,
inventory or database.
(e) ENVIRONMENTAL REPORTS. Buffets has made available to HomeTown for
inspection true and complete copies of all reports, authorizations, permits,
licenses, disclosures and other documents in its possession, custody or control
describing or relating in any way to Buffets or any of its Subsidiaries, or any
property that Buffets or any of its Subsidiaries has ever owned, operated,
occupied or leased, which suggest that any Hazardous Substances may be present
in, on, or under any such property in material quantities or that Buffets or any
of its Subsidiaries may have breached any Environmental Law.
(f) ENVIRONMENTAL CLAIMS, ETC. To the knowledge of Buffets, there are not
and there never have been any requests, notices, investigations, claims,
demands, administrative proceedings, hearings, litigation or other legal
proceedings relating in any way to Buffets or any of its Subsidiaries, or any
property that Buffets or any of its Subsidiaries has ever owned, operated,
occupied or leased, alleging liability under, violation of or noncompliance with
any Environmental Law or any license, permit or other authorization issued
pursuant thereto. To the knowledge of Buffets, no such matter is threatened or
impending, nor does there exist any substantial basis therefor.
(g) COMPLIANCE WITH ENVIRONMENTAL LAWS. Buffets and each of its
Subsidiaries operates, and at all times has operated, its business in accordance
with all applicable Environmental Laws, and all licenses, permits and other
authorizations required pursuant to any Environmental Law and necessary for the
lawful operation of the business of Buffets and its Subsidiaries are in Buffets'
or the appropriate Subsidiary's possession and are in full force
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and effect. To Buffets' knowledge, there is no threat that any such permit,
license or other authorization will be withdrawn, terminated, limited or
materially changed.
4.13. EMPLOYEE BENEFIT PLANS.
(a) There are no "employee pension benefit plans," as defined in Section
3(2) of ERISA, or "multiemployer plans" as defined in Section 3(37) of ERISA,
maintained or contributed to by Buffets or any of its Subsidiaries for the
benefit of their current or former employees. Buffets has set forth on Schedule
4.13 of the Buffets Disclosure Schedule all employee benefit plans (as defined
in Section 4(4) of ERISA) and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance, and other
similar employee benefit plans, arrangements, and agreements, whether or not
such plans, arrangements, or agreements are "employee benefit plans", written or
otherwise, for the benefit of or relating to, any current or former employee of
Buffets or any ERISA Affiliate of Buffets, or any Subsidiary of Buffets which is
aggregated with Buffets pursuant to Section 414 of the Code (together, the
"Buffets Employee Plans").
(b) With respect to each Buffets Employee Plan, Buffets has made available
to HomeTown a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS, (ii) the plan document and summary plan description
for each such Buffets Employee Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Buffets Employee Plan, and (iv) the
most recent actuarial report or valuation relating to an Buffets Employee Plan
subject to Title IV of ERISA, and (v) the most recent IRS determination letter,
where applicable.
(c) With respect to the Buffets Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Buffets, there exists
no condition or set of circumstances in connection with which Buffets could be
subject to any liability that is reasonably likely to have a Material Adverse
Effect on Buffets and its Subsidiaries, taken as whole, under ERISA, the Code,
or any other applicable law.
(d) With respect to the Buffets Employee Plans, individually and in the
aggregate, there are no benefit obligations required to be funded for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting principles,
on the financial statements of Buffets.
(e) Except as set forth in Schedule 4.13 of the Buffets Disclosure
Schedule or as disclosed in Buffets SEC Reports filed prior to the date of this
Agreement, and except as provided for in this Agreement, neither Buffets nor any
of its Subsidiaries is a party to any oral or written (i) union or collective
bargaining agreement, (ii) agreement with any officer or other key employee of
Buffets or any of its Subsidiaries, the benefits of which are contingent or the
terms of which are materially altered, upon the occurrence of a transaction
involving Buffets of the nature contemplated by this Agreement, (iii) agreement
with any officer or other employee of Buffets providing any term of employment
or compensation guarantee extending for a period longer than one year from the
date hereof or for the payment of compensation in
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excess of $150,000 per annum, or (iv) agreement or plan, including any stock
option plan, stock appreciation right plan, restricted stock plan, or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
4.14. COMPLIANCE WITH LAWS. Buffets has complied with, is not in
violation of, and has not received any notices of violation with respect to, any
federal, state, or local statute, law, or regulation with respect to the conduct
of its business, or the ownership or operation of its business, except for
failures to comply or violations which would not have a Material Adverse Effect
on Buffets and its Subsidiaries, taken as a whole.
4.15. POOLING OF INTERESTS. To its knowledge, neither Buffets nor any
of its Affiliates has, through the date of this Agreement, taken or agreed to
take any action which would prevent Buffets from accounting for the business
combination to be effected by the Merger as a pooling of interests.
4.16. INTERESTED PARTY TRANSACTIONS. Except as set forth in Schedule
4.16 of the Buffets Disclosure Schedule or in the Buffets SEC Reports, since the
date of Buffets' last proxy statement to its shareholders, no event has occurred
that would be required to be reported by Buffets as a Certain Relationship or
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
4.17. OPINION OF FINANCIAL ADVISOR. The financial advisor of Buffets,
Piper Jaffray Inc., has delivered to the Board of Directors of Buffets an
opinion dated the date of this Agreement to the effect that the Conversion
Number is fair from a financial point of view to Buffets and its shareholders.
4.18. OWNERSHIP AND INTERIM OPERATIONS OF SUB. All outstanding capital
stock of Sub is owned by Buffets. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in no
other business activities, and has conducted its operations only as contemplated
by this Agreement.
4.19. NO EXISTING DISCUSSIONS. Buffets is not engaged, directly or
indirectly, in any discussions or negotiations with any other party with respect
to an Acquisition Proposal (as defined in Section 6.01).
ARTICLE V
CONDUCT OF BUSINESS
5.01. COVENANTS OF BUFFETS AND HOMETOWN. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, Buffets and HomeTown each agrees as to
itself and its respective Subsidiaries (except to the extent that the other
party shall otherwise consent in writing), to carry on its
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business in the usual, regular, and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform other
obligations when due, and, to the extent consistent with such business, to use
all reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, to keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, franchisees, distributors, licensors, licensees, and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time. Buffets and
HomeTown shall each promptly notify the other of any event or occurrence not in
the ordinary course of business of Buffets or HomeTown, respectively. Except as
expressly contemplated by this Agreement, subject to Section 6.01, each of
Buffets and HomeTown shall not (and shall not permit any of its respective
Subsidiaries to), without the prior written consent of the other party:
(a) Accelerate, amend, or change the period of exercisability of
options or restricted stock granted under any employee stock plan of such
party or otherwise or authorize cash payments in exchange for any options
granted under any of such plans except as required by the terms of such
plans or any related agreements or other agreements in effect as of the
date of this Agreement;
(b) Transfer or license to any person or entity or otherwise extend,
amend, or modify any rights to the HomeTown Intellectual Property Rights,
in the case of HomeTown, or the Buffets Intellectual Property Rights, in
the case of Buffets, other than in the ordinary course of business
consistent with past practices;
(c) Declare or pay any dividends on or make any other distributions
(whether in cash, stock, or property) in respect of any of its capital
stock or split, combine, or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of,
or in substitution for shares of capital stock of such party, or purchase
or otherwise acquire, directly or indirectly, any shares of its capital
stock;
(d) Issue, deliver, or sell or authorize or propose the issuance,
delivery, or sale of, or purchase or propose the purchase of, any shares of
its capital stock or securities convertible into shares of its capital
stock, or subscriptions, rights, warrants, or options to acquire, or other
agreements or commitments of any character obligating it to issue, any such
shares or other convertible securities, other than the grant of options to
employees in a manner consistent with past practices and pursuant to
currently existing stock option plans, the issuance of shares upon the
exercise of options outstanding as of the date hereof, and the issuance of
shares upon conversation of the Notes;
(e) Acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial equity interest in or substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association, or other
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business organization or division, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
business of such party and its Subsidiaries, taken as a whole;
(f) Except for ordinary course food sales, sell, lease, license, or
otherwise dispose of any of its properties or assets which are material,
individually or in the aggregate, to the business of such party and its
Subsidiaries, taken as a whole;
(g) (i) Increase or agree to increase the compensation payable or to
become payable to its officers or employees, except for increases in salary
or wages of employees other than officers of Buffets or HomeTown in
accordance with past practices, (ii) increase or agree to increase the
compensation payable or to become payable to officers of Buffets or
HomeTown or grant any additional severance or termination pay to, or enter
into any employment or severance agreements with such officers, (iii) grant
any severance or termination pay to, or enter into any employment or
severance agreement with, any employee, except in accordance with past
practices, (iv) enter into any collective bargaining agreement, (v) except
for an aggregate of $75,000 that may be paid to the outside directors of
HomeTown, establish, adopt, enter into, or amend any bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
deferred compensation, employment, termination, severance, or other plan,
trust, fund, policy, or arrangement for the benefit of any directors,
officers, or employees, or (vi) establish any new executive employee
position;
(h) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable, other than
revaluations that the auditors for such entity require in accordance with
generally accepted accounting principles or in the ordinary course of
business;
(i) Incur, except pursuant to existing credit agreements, any
indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or warrants or rights to acquire any debt
securities of such party or any of its Subsidiaries or guarantee any debt
securities of others, or voluntarily prepay any outstanding indebtedness;
(j) Amend or propose to amend its charter documents or Bylaws, except
as contemplated by this Agreement; or
(k) Make any capital expenditure or commitment for which it is not
contractually bound at the date hereof except (i) expenditures and
commitments incurred in the ordinary course in connection with restaurant
construction and development and restaurant remodeling, and (ii) other
capital expenditures and commitments not to exceed $1 million in the
aggregate, in the case of HomeTown, or $3 million, in the case of Buffets.
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(l) Take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (k) above, or any action which is
reasonably likely to make any of such party's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.
5.02. COOPERATION. Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Buffets and HomeTown shall confer
on a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations and shall promptly provide the other party and its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger, and the transactions contemplated
hereby and thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
6.01. NO SOLICITATION.
(a) Neither HomeTown nor Buffets shall directly or indirectly, through any
officer, director, employee, representative, or agent thereof or of any of their
respective Subsidiaries, (i) solicit, initiate, or encourage any inquiries or
proposals that constitute, or could reasonably be expected to lead to, a
proposal or offer for a merger, consolidation, business combination, sale of
substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer), or similar transaction involving HomeTown
or any of its Subsidiaries or Buffets or any of its Subsidiaries, as the case
may be, other than the transactions contemplated by this Agreement (any of the
foregoing inquiries or proposals being referred to in this Agreement as an
"Acquisition Proposal"), (ii) engage in negotiations or discussions concerning,
or provide any non-public information to any person or entity relating to, any
Acquisition Proposal, or (iii) agree to, approve, or recommend any Acquisition
Proposal; provided, however, that nothing contained in this Agreement shall
prevent HomeTown or Buffets, or their respective Boards of Directors, from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to the shareholders, if and
only to the extent that (1) the Board of Directors determines in good faith
after consultation with outside legal counsel that such action is necessary for
it to comply with its fiduciary duties to shareholders under applicable law and
(2) prior to furnishing such non-public information to, or entering into
discussions or negotiations with, such person or entity, the Board of Directors
receives from such person or entity an executed confidentiality agreement with
terms no more favorable to such party than those contained in the
Confidentiality and Nondisclosure Agreement dated February 5, 1996 between
Buffets and HomeTown (the "Confidentiality Agreement") or (B) complying with
Rule 14e-2 or Rule 14d-9 promulgated under the Exchange Act with regard to an
Acquisition Proposal.
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(b) HomeTown shall notify Buffets and Buffets shall notify HomeTown
immediately (and no later than 24 hours) after receipt by HomeTown (or its
advisors) or Buffets (or its advisors), as the case may be, of any Acquisition
Proposal or any request for non-public information in connection with an
Acquisition Proposal or for access to the properties, books, or records thereof
by any person or entity that informs HomeTown or Buffets, as the case may be,
that it is considering making, or has made, an Acquisition Proposal. Such
notice by either HomeTown or Buffets shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry, or contact.
6.02. JOINT PROXY STATEMENT; REGISTRATION STATEMENT.
(a) As promptly as practical after the execution of this Agreement,
Buffets and HomeTown shall prepare and file with the SEC a joint proxy
statement/prospectus to be sent to the shareholders of Buffets and HomeTown in
connection with the meeting of Buffets' shareholders (the "Buffets Shareholders'
Meeting") and HomeTown's stockholders (the "HomeTown Stockholders' Meeting") to
consider the Merger (the "Joint Proxy Statement"), and Buffets shall prepare and
file with the SEC a registration statement on Form S-4 pursuant to which the
shares of Buffets Common Stock to be issued as a result of the Merger will be
registered with the SEC (the "Registration Statement"), in which the Joint Proxy
Statement will be included as a prospectus. Buffets and HomeTown shall use all
reasonable efforts to cause the Registration Statement to become effective as
soon after such filing as practical. The Joint Proxy Statement shall include
the recommendation of the Board of Directors of HomeTown in favor of this
Agreement and the Merger and the recommendation of the Board of Directors of
Buffets in favor of the issuance of shares of Buffets Common Stock pursuant to
the Merger, provided that the Board of Directors of either HomeTown or Buffets
may withdraw such recommendation if (i) such Board of Directors shall have
determined in good faith, after consultation with its outside legal counsel,
that the withdrawal of such recommendation is necessary for such Board of
Directors to comply with its fiduciary duties under applicable law or
(ii) HomeTown has been advised by Montgomery Securities, Inc. or Buffets has
been advised by Piper Jaffray Inc. that Montgomery Securities, Inc., in the case
of HomeTown, or Piper Jaffray Inc., in the case of Buffets, would be unable, as
of the date of such advice, to issue an opinion substantially to the effect set
forth in Section 3.18 and Section 4.17, respectively. Buffets and HomeTown
shall make all other necessary filings with respect to the Merger under the
Securities Act and the Exchange Act and the rules and regulations thereunder.
(b) HomeTown shall take such action as may be necessary to insure that (i)
the information to be supplied by HomeTown for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared effective
by the SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading, and (ii) the
information supplied by HomeTown for inclusion in the Joint Proxy Statement
shall not, on the date the Joint Proxy Statement is first mailed to shareholders
of HomeTown or Buffets,
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at the time of the HomeTown Stockholders' Meeting and the Buffets Shareholders'
Meeting, and at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement not
false or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the HomeTown Stockholders' Meeting or Buffets Shareholders' Meeting
which has become false or misleading. If at any time prior to the Effective
Time any event relating to HomeTown or any of its Affiliates, officers, or
directors should be discovered by HomeTown which should be set forth in an
amendment to the Registration Statement or a supplement to the Joint Proxy
Statement, HomeTown shall promptly so inform Buffets.
(c) Buffets shall take such action as may be necessary to insure that (i)
the information supplied by Buffets for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading, and (ii) the
information supplied by Buffets for inclusion in the Joint Proxy Statement shall
not on the date the Joint Proxy Statement is first mailed to shareholders of
Buffets or HomeTown, at the time of the Buffets Shareholders' Meeting and
HomeTown Shareholders' Meeting, and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it shall be
made, is false or misleading with respect to any material fact, or omit to state
any material fact necessary in order to make the statements made in the Joint
Proxy Statement not false or misleading, or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Buffets Shareholders' Meeting or HomeTown
Shareholders' Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Buffets or any of its
Affiliates, officers, or directors should be discovered by Buffets which should
be set forth in an amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, Buffets shall promptly so inform HomeTown.
6.03. ACCESS TO INFORMATION. Upon reasonable notice and to the extent
permitted under applicable law and the provisions of agreements to which Buffets
or HomeTown, as the case may be, is a party, HomeTown and Buffets shall each
(and shall cause each of their respective Subsidiaries to) afford to the
officers, employees, accountants, counsel, and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments, and
records and, during such period, each of HomeTown and Buffets shall (and shall
cause each of their respective Subsidiaries to) furnish promptly to the other
(a) a copy of each report, schedule, registration statement, and other document
filed or received by it during such period pursuant to the requirements of
federal securities laws and (b) all other information concerning its business,
properties, and personnel as such other party may reasonably request. Unless
otherwise required by law, the parties will hold any such information which is
non-public in confidence in accordance with the Confidentiality Agreement. No
information or knowledge
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obtained in any investigation pursuant to this Section 6.03 shall affect or be
deemed to modify a representation or warranty construed in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
6.04. SHAREHOLDERS MEETINGS. HomeTown and Buffets each shall call a
meeting of its respective shareholders to be held as promptly as practicable for
the purpose of voting, in the case of HomeTown, upon this Agreement and the
Merger and, in the case of Buffets, upon the issuance of shares of Buffets
Common Stock pursuant to the Merger (the "Buffets Voting Proposal"). Subject to
Sections 6.01 and 6.02, HomeTown and Buffets will, through their respective
Boards of Directors, recommend to their respective shareholders approval of such
matters and will coordinate and cooperate with respect to the timing of such
meetings and shall use their best efforts to hold such meetings on the same day
and as soon as practicable after the date hereof. Subject to Section 6.02, each
party shall use all reasonable efforts to solicit from its shareholders proxies
in favor of such matters.
6.05. LEGAL CONDITIONS TO MERGER. Subject to Section 6.01, each of
Buffets and HomeTown will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with respect to
the Merger (which actions shall include, without limitation, furnishing all
information required under the HSR Act and in connection with approvals of or
filings with any other Governmental Entity) and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon either of them or any of their Subsidiaries in connection with the
Merger. Each of Buffets and HomeTown will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order, or approval of, or any
exemption by, any Governmental Entity or other public third party, required to
be obtained or made by Buffets, HomeTown, or any of their Subsidiaries in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
6.06. PAYMENT OF TAXES.
(a) HomeTown shall pay prior to the Effective Time (i) all Taxes required
to be paid prior to that day, and (ii) shall withhold with respect to its
employees all federal and state income taxes, FICA, FUTA, and other Taxes
required to be withheld.
(b) Buffets shall pay prior to the Effective Time (i) all Taxes required
to be paid prior to that day, and (ii) shall withhold with respect to its
employees all federal and state income taxes, FICA, FUTA, and other Taxes
required to be withheld.
6.07. PUBLIC DISCLOSURE. Any public disclosures by Buffets or HomeTown
with respect to the Merger or this Agreement, or with respect to anything
involving or referring to the other, shall be made in accordance with the terms
of the Confidentiality Agreement.
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6.08. TAX-FREE REORGANIZATION.
(a) Buffets and HomeTown shall each use its best efforts to cause the
Merger to be treated as a reorganization within the meaning of Section 368(a) of
the Code.
(b) To the extent permitted under applicable tax laws, the Merger shall be
reported as a reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(E) of the Code in all federal, state, and local tax returns
after the Effective Time.
(c) Buffets will cause HomeTown to hold following the Merger at least 90%
of the fair market value of its net assets and at least 70% of the fair market
value of its gross assets, and at least 90% of the fair market value of Sub's
net assets and 70% of the fair market value of Sub's gross assets held
immediately prior to the Merger. For purposes of this subsection (c), amounts
paid by HomeTown or Sub to HomeTown Shareholders who receive cash or other
property, to pay reorganization expenses, and in connection with redemptions and
distributions (except for regular, normal distributions) will be treated as
assets of HomeTown or Sub, respectively, immediately prior to the Merger.
(d) Following the Merger, Buffets will cause HomeTown to continue its
historic business or use a significant portion of its business assets in a
business.
(e) Following the Merger, Buffets will cause HomeTown not to issue
additional shares of HomeTown stock to any person other than Buffets.
(f) Buffets has no present intention to reacquire, following the Merger,
any of its stock issued in the Merger.
(g) Following the Merger, Buffets will not liquidate HomeTown, merge
HomeTown with or into another corporation, sell or dispose of HomeTown stock
(except for transfers to other corporations controlled by Buffets), or cause
HomeTown to sell or dispose of any of its assets or the assets acquired from
Sub, except for dispositions in the ordinary course of business or transfers to
corporations controlled by HomeTown.
(h) Buffets, Sub, HomeTown and the stockholders of HomeTown will pay their
respective expenses, if any, incurred in connection with the Merger.
(i) No indebtedness between Buffets and HomeTown or between Sub and
HomeTown was issued, acquired or will be settled at a discount.
(j) At the Effective Time, Buffets will not own, nor will it have owned
during the past five years, any stock of HomeTown.
(k) At the Effective Time, none of Buffets, HomeTown or Sub is an
investment company as defined Section 368(a)(2)(F)(iii) and (iv) of the Code.
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6.09. POOLING ACCOUNTING. Buffets and HomeTown shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Buffets and HomeTown shall use
its best efforts to cause its respective Affiliates (i) not to take any action
that would adversely affect the ability of Buffets to account for the business
combination to be effected by the Merger as a pooling of interests and (ii) to
sign and deliver to Buffets a customary "pooling letter" in form and substance
agreed upon by HomeTown and Buffets.
6.10. AFFILIATE AGREEMENTS. Within two weeks of the date of this
Agreement, HomeTown will provide Buffets with a list of those persons who are,
in HomeTown's reasonable judgment, "affiliates" of HomeTown within the meaning
of Rule 145 (each such person who is an "affiliate" of HomeTown within the
meaning of Rule 145 is referred to as an "Affiliate") promulgated under the
Securities Act ("Rule 145"). HomeTown shall provide Buffets such information
and documents as Buffets shall reasonably request for purposes of reviewing such
list and shall notify Buffets in writing regarding any change in the identity of
its Affiliates prior to the Closing Date. HomeTown shall use its best efforts
to deliver or cause to be delivered to Buffets by July 1, 1996 (and in any case
shall deliver to Buffets prior to the Effective Time) from each of the
Affiliates of HomeTown, an executed Affiliate Agreement, in form and substance
satisfactory to Buffets and HomeTown, by which each Affiliate of HomeTown agrees
to comply with the applicable requirements of Rule 145 ("Affiliate Agreement").
Buffets shall be entitled to place appropriate legends on the certificates
evidencing any Buffets Common Stock to be received by such Affiliates of
HomeTown pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Buffets Common Stock,
consistent with the terms of the Affiliate Agreements.
6.11. NASDAQ QUOTATION. Buffets shall use its best efforts to cause the
shares of Buffets Common Stock to be issued in the Merger to be approved for
quotation on the Nasdaq National Market, subject to official notice of issuance,
prior to the Closing Date.
6.12. STOCK PLANS AND OTHER OPTIONS.
(a) At the Effective Time, each outstanding option to purchase shares of
HomeTown Common Stock (a "HomeTown Stock Option") under the HomeTown 1991 Option
Plan, whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under the HomeTown
1991 Stock Option Plan, the same number of shares of Buffets Common Stock as the
holder of such HomeTown Stock Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time, at the price per share set forth in the HomeTown
Stock Option, divided by the Conversion Number, rounded to the nearest full
cent; provided, however, that in the case of any HomeTown Stock Option to which
Section 422 of the Code applies ("incentive stock options"), the option price,
the number of shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order to comply
with Section 424(a) of the Code.
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(b) As soon as practicable after the Effective Time, Buffets shall deliver
to the participants in the HomeTown 1991 Option Plan an appropriate notice
setting forth such participant's rights pursuant thereto and the grants made
prior to the Effective Time pursuant to the HomeTown 1991 Option Plan shall
continue in effect on the same terms and conditions (subject to the adjustments
required by this Section 6.12 after giving effect to the Merger). Buffets shall
comply with the terms of the HomeTown 1991 Option Plan to ensure, to the extent
required by, and subject to the provisions of, the HomeTown 1991 Option Plan,
that HomeTown Stock Options which qualified as incentive stock options prior to
the Effective Time continue to qualify as incentive stock options after the
Effective Time.
(c) Buffets shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buffets Common Stock for delivery
under the HomeTown 1991 Option Plan assumed in accordance with this Section
6.12. As soon as practicable after the Effective Time, Buffets shall file a
registration statement on Form S-8 (or any successor or other appropriate forms)
with respect to the shares of Buffets Common Stock subject to such options and
shall use its best efforts to maintain the effectiveness of such registration
statement for so long as such options remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Exchange Act, where applicable, Buffets
shall administer the HomeTown 1991 Option Plan assumed pursuant to this Section
6.12 in a manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
(d) At the Effective Time, each of the HomeTown Non-Plan Options, whether
vested or unvested, shall be deemed to constitute an option to acquire, on the
same terms and conditions as were applicable under the agreements covering the
HomeTown Non-Plan Options, the same number of shares of Buffets Common Stock as
the holder of such HomeTown Non-Plan Option would have been entitled to receive
pursuant to the Merger had such holder exercised such option in full immediately
prior to the Effective Time, at the price per share set forth in such HomeTown
Non-Plan Option, divided by the Conversion Number and rounded to the nearest
full cent. As soon as practicable after the Effective Time, Buffets shall
deliver to the holders of the HomeTown Non-Plan Options an appropriate notice
setting forth such holder's rights pursuant thereto. Buffets shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Buffets Common Stock for delivery under the HomeTown Non-Plan Options.
6.13. CONSENTS. Each of Buffets and HomeTown shall use all reasonable
efforts to obtain all necessary consents, waivers, and approvals under any of
Buffets' or HomeTown's material agreements, contracts, licenses, or leases in
connection with the Merger.
6.14. BROKERS OR FINDERS. Each of Buffets and HomeTown represents, as to
itself, its Subsidiaries and its Affiliates, that no agent, broker, investment
banker, financial advisor, or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement except Montgomery
Securities, Inc., whose fees and expenses will be paid by HomeTown in accordance
with HomeTown's agreement with such firm (a copy of which has
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been delivered by HomeTown to Buffets prior to the date of this Agreement), and
Piper Jaffray Inc., whose fees and expenses will be paid by Buffets in
accordance with Buffets' agreement with such firm (a copy of which has been
delivered by Buffets prior to the date of this Agreement.)
6.15 EMPLOYEE BENEFITS; EMPLOYEE ISSUES. Following the Effective Time,
all employees of HomeTown shall be given credit for their periods of service
with HomeTown as if such service were with Buffets in determining their
eligibility for inclusion in, and the level of benefits granted after the
Effective Time under, Buffets' employee benefit plans. HomeTown's employees
shall be eligible for grants of stock options after the Effective Time under
Buffets' 1995 Stock Incentive Plan on the same terms as Buffets' employees. In
connection with the Merger, HomeTown may enter into severance obligations up to
an aggregate amount not to exceed $1.2 million with its corporate employees
(such severance obligations shall generally be in accordance with the terms of
that HomeTown Memorandum dated May 30, 1996 from Mike Shader to Kerry Kramp).
In addition, following the Effective Time, the HomeTown corporate employees
identified in that letter dated June 3, 1996 of the Chairman of Buffets to the
Chairman of HomeTown shall be entitled to the severance benefits in the amount
set forth therein and in accordance therewith. If requested by Buffets, after
consultation with HomeTown, HomeTown shall deliver to its employees and others
appropriate notices under the federal Worker Adjustment and Retraining
Notification Act.
6.16 REPORTS. From and after the Effective Time and so long as necessary
in order to permit HomeTown's Affiliates to sell the Buffets shares of Common
Stock received by them as a result of the Merger pursuant to Rule 145 and, to
the extent applicable, Rule 144 under the Securities Act, Buffets will use its
best efforts to file on a timely basis all reports required to be filed by it
pursuant to Section 13 or 15(d) of the Exchange Act, referred to in paragraph
(c)(1) of Rule 144 under the Securities Act (or, if applicable, Buffets will use
its best efforts to make publicly available the information regarding itself
referred to in paragraph (c)(2) of Rule 144).
6.17 SUPPLEMENTAL INDENTURE. In accordance with the terms thereof, Buffets
and HomeTown will execute and deliver, on or prior to the Effective Time, a
supplemental indenture or assumption agreement with respect to the Notes in
order to reflect the consummation of the transactions contemplated hereby.
6.18 NOTIFICATION OF CERTAIN MATTERS. HomeTown will give prompt notice to
Buffets upon discovery thereof, and Buffets will give prompt notice to HomeTown
upon discovery thereof, of (a) the occurrence, or failure to occur, of any event
which occurrence or failure would be likely to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at any time from the date hereof to the Effective Time, and (b) any
material failure of HomeTown or Buffets, or any director, officer, employee,
agent or representative thereof, to comply with or satisfy any covenant,
condition, or agreement to be complied with or satisfied by it hereunder.
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6.19 ADDITIONAL AGREEMENTS; REASONABLE EFFORTS. Subject to the terms and
conditions of this Agreement, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, subject to the appropriate vote of shareholders of Buffets and
HomeTown described in Section 6.04, including cooperating fully with the other
party. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
the Continuing Corporation with full title to all properties, assets, rights,
approvals, immunities, and franchises of either of the Constituent Corporations,
the proper officers and directors of each party to this Agreement shall take all
such necessary action.
6.20 CONTINUING INDEMNIFICATION. After the Closing, Buffets shall guaranty
the obligations of HomeTown to indemnify its present and former directors and
officers and Bradley J. Thies, General Counsel of HomeTown, to the extent of,
and in accordance with, the Bylaws of HomeTown as in effect on the date of this
Agreement and the Delaware Law and, with respect to Mr. Thies, in accordance
with the resolution of the Board of Directors of HomeTown adopted at a meeting
thereof on May 10, 1994 . Subject to the Delaware Law, HomeTown's Bylaws
relating to indemnification shall not be amended in a manner which adversely
affects the rights of any party entitled to indemnification thereunder. The
provisions of this Section 6.20 are intended to be for the benefit of, and shall
be enforceable by, each indemnified party.
ARTICLE VII
CONDITIONS TO MERGER
7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) SHAREHOLDER APPROVAL. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of
HomeTown as may be required by law, by the rules of the Nasdaq National
Market, and by any applicable provisions of its certificate of
incorporation or Bylaws, and the Buffets Voting Proposal shall have been
approved by the requisite vote of the shareholders of Buffets as may be
required by law, by the rules of the Nasdaq National Market, and by any
applicable provisions of its articles of incorporation or Bylaws.
(b) HSR ACT. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(c) APPROVALS. There shall have been obtained permits, consents and
approvals of securities or "blue sky" commissions or agencies of any
jurisdiction and of other governmental bodies or agencies that may
reasonably be deemed necessary so
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that the consummation of the Merger and the other transactions contemplated
hereby will be in compliance with applicable laws.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceedings seeking a stop order. The Joint Proxy
Statement shall have been delivered to the shareholders of HomeTown and
Buffets in accordance with the requirements of the Securities Act and the
Exchange Act.
(e) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction, or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger or
limiting or restricting Buffets' conduct or operation of the business of
Buffets or HomeTown after the Merger shall have been issued, nor shall any
proceeding brought by a domestic administrative agency or commission or
other domestic Governmental Entity seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation, or
order enacted, entered, enforced, or deemed applicable to the Merger which
makes the consummation of the Merger illegal.
(f) POOLING LETTER. Buffets and HomeTown shall have received a
letter from Deloitte & Touche LLP dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time and addressed to
Buffets and HomeTown, stating that the business combination to be effected
by the Merger will qualify as a pooling of interests transaction under
generally accepted accounting principles and that such qualification will
not be affected by the exercise, after the Effective Time, by any holders
of Notes of any repurchase rights they may have under Article 14 of the
Indenture covering the Notes. Buffets and HomeTown also shall have
received a letter from KPMG Peat Marwick LLP dated the date of the Joint
Proxy Statement and confirmed in writing at the Effective Time, stating
that they are not aware of any conditions that would preclude HomeTown from
being pooled with Buffets.
(g) NASDAQ. The shares of Buffets Common Stock to be issued in the
Merger shall have been approved for quotation on the Nasdaq National
Market.
(h) DELOITTE & TOUCHE COMFORT LETTER. On the date of the Joint Proxy
Statement and the Buffets prospectus constituting a part of the
Registration Statement, Buffets and HomeTown shall have received a letter
(in form and substance as is customary in a registered public offering)
from Deloitte & Touche, independent public accountants of Buffets, dated as
of such date, in connection with such accountants' review of certain data
and information contained in the Registration Statement and the Joint Proxy
Statement.
(i) KPMG PEAT MARWICK COMFORT LETTER. On the date of the Joint Proxy
Statement and the Buffets prospectus constituting a part of the
Registration Statement,
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HomeTown and Buffets shall have received a letter (in form and substance as
is customary in a registered public offering) from KPMG Peat Marwick,
independent public accountants of HomeTown, dated as of such date, in
connection with such accountants' review of certain data and information
contained in the Registration Statement and the Joint Proxy Statement.
(j) BANK CONSENT. Buffets shall have received all necessary consents
and waivers from the Banks under the Second Amended and Restated Credit
Agreement dated as of April 30, 1996 required thereunder in connection with
this Merger Agreement and the transactions contemplated hereby.
(k) TAX OPINIONS. HomeTown shall have received the opinion of Stoel
Rives LLP, and Buffets shall have received the opinion of Faegre & Benson
LLP, to the effect the Merger will be treated for federal income tax
purposes as a tax-free reorganization within the meaning of Section 368(a)
of the Code.
7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS OF BUFFETS AND SUB. The
obligations of Buffets and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived in
writing exclusively by Buffets and Sub.
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
HomeTown set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement; and Buffets shall have received a
certificate signed on behalf of HomeTown by the chief executive officer and the
chief financial officer of HomeTown to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF HOMETOWN. HomeTown shall have performed
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Closing Date; and Buffets shall have received
a certificate signed on behalf of HomeTown by the chief executive officer and
the chief financial officer of HomeTown to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, HomeTown
and its Subsidiaries, taken as a whole, shall not have experienced or suffered a
Material Adverse Change.
(d) BLUE SKY LAWS. Buffets shall have received all state securities or
"Blue Sky" permits and other authorizations necessary to issue shares of Buffets
Common Stock pursuant to the Merger.
(e) OPINION OF HOMETOWN'S COUNSEL. Buffets shall have received written
opinions of counsel to HomeTown dated as of the Closing Date, substantially to
the effect set forth in Exhibit 7.02(d) hereto.
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(f) UPDATED FAIRNESS OPINION. On the date of the Joint Proxy Statement,
the Buffets Board shall have received from Piper Jaffray Inc. a written update,
dated as of such date, confirming the opinion referred to in Section 4.17.
(g) EMPLOYMENT AGREEMENT. Buffets and Kerry A. Kramp shall have entered
into an employment agreement substantially in the form of Exhibit 7.02(g)
hereto.
(h) CONSENTS. HomeTown shall have obtained all necessary consents,
waivers, and approvals required under any of HomeTown's material agreements,
contracts, and licenses and shall have obtained all necessary consents, waivers,
and approvals required under at least 95% of the total number of HomeTown's
restaurant leases.
7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF HOMETOWN. The obligation
of HomeTown to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, exclusively by
HomeTown.
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Buffets and Sub set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement; and HomeTown shall have
received a certificate signed on behalf of Buffets by the chief executive
officer and the chief financial officer of Buffets to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF BUFFETS AND SUB. Buffets and Sub shall
have performed in all material respects all obligations required to be performed
by them under this Agreement at or prior to the Closing Date, and HomeTown shall
have received a certificate signed on behalf of Buffets by the chief executive
officer and the chief financial officer of Buffets to such effect.
(c) MATERIAL ADVERSE CHANGE. Since the date of this Agreement, Buffets
and its Subsidiaries, taken as a whole, shall not have experienced or suffered a
Material Adverse Change.
(d) OPINION OF BUFFETS' COUNSEL. HomeTown shall have received written
opinions of counsel to Buffets and general counsel of Buffets dated as of the
Closing Date, substantially to the effect set forth in Exhibit 7.03(d) hereto.
(e) UPDATED FAIRNESS OPINION. On the date of the Joint Proxy Statement,
the HomeTown Board shall have received from Montgomery Securities, Inc. a
written update, dated as of such date, confirming the opinion referred to in
Section 3.18.
(f) EMPLOYMENT AGREEMENT. Buffets and Kerry A. Kramp shall have entered
into an employment agreement substantially in the form of Exhibit 7.02(g)
hereto.
(g) CONSENTS. Buffets shall have obtained all necessary consents,
waivers, and appeals required under any of Buffets' material agreements,
contracts, and licenses and shall have obtained all necessary consents, waivers,
and approvals required under at least 95% of the total number of Buffets'
restaurant leases.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.01. TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, by written notice by the terminating party to the other
party, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of HomeTown or Buffets:
(a) by mutual written consent of Buffets and HomeTown; or
(b) by either Buffets or HomeTown if the Merger shall not have been
consummated by December 31, 1996 (provided that the right to terminate this
Agreement under this Section 8.01(b) shall not be available to a party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date); or
(c) by either Buffets or HomeTown if a court of competent
jurisdiction or other Governmental Entity shall have issued a nonappealable
final order, decree, or ruling or taken any other action, in each case
having the effect of permanently restraining, enjoining, or otherwise
prohibiting the Merger, except, if the party relying on such order, decree,
or ruling or other action has not complied with its obligations under
Section 6.05 of this Agreement; or
(d) by Buffets or HomeTown, if, at the Buffets Shareholders' Meeting
or HomeTown Stockholders' Meeting (including any adjournment or
postponement thereof), the requisite vote of the shareholders of Buffets in
favor of the Buffets Voting Proposal or the stockholders of HomeTown in
favor of this Agreement and the Merger shall not have been obtained; or
(e) by Buffets, if (i) the Board of Directors of HomeTown shall have
withdrawn or modified its recommendation of this Agreement or the Merger in
a manner adverse to Buffets or shall have resolved to do any of the
foregoing; (ii) the Board of Directors of HomeTown shall have recommended
to the stockholders of HomeTown an Alternative Transaction (as defined in
Section 8.03(e)); or (iii) a tender offer or exchange offer for 15% or more
of the outstanding shares of HomeTown Common Stock is commenced (other than
by Buffets or an Affiliate of Buffets) and the Board of Directors of
HomeTown recommends that the stockholders of HomeTown tender their shares
in such tender or exchange offer; or
(f) by HomeTown, if (i) the Board of Directors of Buffets shall have
withdrawn or modified its recommendation of the Buffets Voting Proposal in
a manner adverse to HomeTown or shall have resolved to do any of the
foregoing; (ii) the Board of Directors of Buffets shall have recommended to
the shareholders of Buffets an Alternative Transaction (as defined in
Section 8.03(e)) or (iii) a tender offer or exchange offer for 15% or more
of the outstanding shares of Buffets Common Stock is
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commenced (other than by HomeTown or an Affiliate of HomeTown) and the
Board of Directors of Buffets recommends that the shareholders of Buffets
tender their shares in such tender or exchange offer; or
(g) by Buffets or HomeTown, if there has been a material breach of
any representation, warranty, covenant, or agreement on the part of the
other party set forth in this Agreement, which breach shall not have been
cured, in the case of a representation or warranty, prior to the Closing
or, in the case of a covenant or agreement, within 10 business days
following receipt by the breaching party of written notice of such breach
from the other party.
8.02 EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 8.01, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of Buffets, HomeTown, Sub
or their respective officers, directors, shareholders, or Affiliates, except as
set forth in Section 8.03; provided that the provisions of Section 8.03 of this
Agreement shall remain in full force and effect and survive any termination of
this Agreement.
8.03 FEES AND EXPENSES.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, whether or not the
Merger is consummated; provided, however, that Buffets and HomeTown shall share
equally all fees and expenses, other than attorneys' fees, incurred in relation
to the printing and filing of the Joint Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements.
(b) HomeTown shall pay Buffets a termination fee of $1,500,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Buffets pursuant to Section
8.01(e);
(ii) the termination of this Agreement by Buffets pursuant to Section
8.01(g) after a breach by HomeTown of this Agreement; or
(iii) the termination of this Agreement by Buffets or HomeTown
pursuant to Section 8.01(d) as a result of the failure to receive the
requisite vote for approval of this Agreement and the Merger by the
stockholders of HomeTown at the HomeTown Stockholders' Meeting .
(c) Buffets shall pay HomeTown a termination fee of $1,500,000 upon the
earliest to occur of the following events:
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(i) the termination of this Agreement by HomeTown pursuant to
Section 8.01(f); or
(ii) the termination of this Agreement by HomeTown pursuant to
Section 8.01(g) after a breach by Buffets of this Agreement; or
(iii) the termination of this Agreement by Buffets or HomeTown
pursuant to Section 8.01(d) as a result of the failure to receive the
requisite vote for approval of the Buffets Voting Proposal by the
shareholders of Buffets at the Buffets Shareholders' Meeting.
(d) The expenses and fees, if applicable, payable pursuant to this Article
VIII shall be paid within one business day after the event giving rise to the
obligation to pay such amount; provided that, in no event shall Buffets or
HomeTown, as the case may be, be required to pay the expenses and fees, if
applicable, to the other, if, immediately prior to the termination of this
Agreement, the party to receive the expenses and fees, if applicable, was in
material breach of its obligations under this Agreement.
(e) As used in this Agreement, "Alternative Transaction" means either (i)
a transaction pursuant to which any person (or group of persons) other than
Buffets or its Affiliates (a "Third Party') acquires more than 15% of the
outstanding shares of HomeTown Common Stock pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving HomeTown pursuant to which any Third Party acquires more than 15% of
the outstanding equity securities of HomeTown or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of HomeTown, and the entity
surviving any merger or business combination including any of them) of HomeTown
having a fair market value (as determined by the Board of Directors of Buffets
in good faith) equal to more than 15% of the fair market value of all the assets
of HomeTown, and its Subsidiaries, taken as a whole, immediately prior to such
transaction, or (iv) any public announcement of a proposal, plan, or intention
to do any of the foregoing or any agreement to engage in any of the foregoing.
8.04 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the shareholders of HomeTown or of Buffets, but, after any such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
8.05 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
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herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement of a
party hereto to any such extension or waiver shall be valid only if set forth in
a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS. None of
the representations, warranties, and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the agreements contained in Sections 1.04, 2.01, 6.07, 6.08,
6.09, 6.12, 6.15, 6.16, 6.19, 6.20 and 8.03, the last sentence of Section 8.04
and Article IX, and the agreements of the Affiliates of HomeTown delivered
pursuant to Sections 6.09 and 6.10. The Confidentiality Agreement shall survive
the execution and delivery of this Agreement.
9.02 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed), or mailed by registered or certified mail (return receipt requested)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Buffets or Sub, to:
Buffets, Inc.
10260 Viking Drive
Eden Prairie, MN 55344
Attention: Chairman
with a required copy to (which alone shall not constitute notice):
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Douglas P. Long
(b) if to HomeTown, to:
HomeTown, Inc.
9171 Towne Centre Drive, Suite 575
San Diego, CA 92122
Attention: Chairman
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with a required copy to (which alone shall not constitute notice):
Stoel Rives LLP
Standard Insurance Center
900 SW Fifth Avenue, Suite 2300
Portland, OR 87204
Attention: John J. Halle
9.03 INTERPRETATION. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include,"
"includes," or "including" are used in this Agreement they shall be deemed to be
followed by the words "without limitation." The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
phrases "the date of this Agreement," "the date hereof," and terms of similar
import, unless the context otherwise requires, shall be deemed to refer to the
date set forth in the first paragraph of this Agreement.
9.04 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.05 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) (a) constitute
the entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof,
and (b) except as specifically provided herein are not intended to confer upon
any person other than the parties hereto any rights or remedies hereunder.
9.06 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW.
9.07 ASSIGNMENT. Neither this Agreement nor any of the rights, interests,
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by the parties and their
respective successors and assigns.
9.08 KNOWLEDGE. All references in this Agreement to knowledge of a
corporation shall be deemed to mean knowledge of any one or more of its
executive officers.
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ARTICLE X
DEFINITIONS
As used in this Agreement, the term "Subsidiary" shall mean, with respect
to any party, corporation, or other organization, whether incorporated or
unincorporated, of which (i) such party or any other Subsidiary of such party is
a general partner (excluding partnerships, the general partnership interests of
which held by such party or any Subsidiary of such party do not have a majority
of the voting interest in such partnership) or (ii) at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization is directly or
indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
-45-
<PAGE>
IN WITNESS WHEREOF, Buffets, Sub, and HomeTown have caused this Agreement
to be signed by their respective officers thereunto duly authorized as of the
date first written above.
BUFFETS, INC.
By: /S/ ROE H. HATLEN
----------------------------------
Its: CHIEF EXECUTIVE OFFICER
-----------------------------
COUNTRY DELAWARE, INC.
By: /S/ ROE H. HATLEN
----------------------------------
Its: CHIEF EXECUTIVE OFFICER
-----------------------------
HOMETOWN BUFFET, INC.
By: /S/ C. DENNIS SCOTT
----------------------------------
Its: CHAIRMAN
-----------------------------
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<PAGE>
[LOGO] [LOGO]
Buffets, Inc. HomeTown Buffet, Inc.
10260 Viking Drive 9171 Towne Centre Drive, Suite 575
Eden Prairie, MN 55344 San Diego, CA 92122
Contact: Clark C. Grant Contact: Glenn E. Glasshagel
E.V.P. of Finance, Treasurer V.P. of Finance, CFO, Treasurer
------------- F O R I M M E D I A T E R E L E A S E -------------
June 4, 1996
BUFFETS, INC. AND HOMETOWN BUFFET, INC.
SIGN DEFINITIVE MERGER AGREEMENT
Eden Prairie, Minnesota and San Diego, California . . . . . Buffets, Inc.
(NASDAQ: BOCB), and HomeTown Buffet, Inc. (NASDAQ: HTBB), today jointly
announced that they have signed a definitive agreement to combine the two
companies through the merger of HomeTown Buffet, Inc. with a newly-formed,
wholly-owned subsidiary of Buffets, Inc.
The definitive agreement provides for all HomeTown shareholders to receive 1.17
shares of Buffets common stock for each share of HomeTown common stock that they
own. In addition, Buffets would assume certain obligations under HomeTown's
outstanding 7% Subordinated Convertible Notes, including the issuance of Buffets
common stock upon conversion thereof; approximately $41.5 million in principal
amount of the Notes are currently outstanding.
Completion of the merger is subject to approvals by both the Buffets and
HomeTown shareholders, various regulatory approvals and certain other
conditions. It is expected that the merger will be accounted for as a pooling
of interests, be tax free to HomeTown shareholders and be completed by the end
of the year.
The merger will reunite the two co-founders of Buffets and will create the
twenty-fifth largest U.S. restaurant chain, with combined sales of $661 million
in 1995. Roe H. Hatlen will continue as the Chairman and Chief Executive
Officer of Buffets after the merger. C. Dennis Scott, the Chairman and Chief
Executive Officer of HomeTown, will serve as Vice Chairman and Chief Operating
Officer of Buffets after the merger. The corporate headquarters of Buffets will
continue to be located in Minneapolis, Minnesota.
Commenting on the merger, Roe H. Hatlen, Chairman and CEO of Buffets, said "This
is a strategic combination in which the two companies should mutually benefit.
We believe there are synergies and energies in this combination that will
enhance our prospects for future growth and further strengthen our position as
one of the leading restaurant chains in the nation. We expect the financial
impact of the merger to be dilutive in 1996 and additive to earnings in
subsequent years as the full benefits of the merger are realized."
<PAGE>
(Buffets, Inc. / HomeTown Buffet, Inc. Press Release 6/4/96 - Page 2 of 2)
C. Dennis Scott, Chairman and CEO of HomeTown Buffet, Inc., said that he was
"very much looking forward to again working with Roe," adding that the, "merger
presents exceptional opportunities. Now we all need to pitch in and take
advantage of the opportunities."
Buffets currently operates 252 and franchises six Old Country Buffet
restaurants, HomeTown operates 74 HomeTown Buffets, two Roadhouse Grills and
franchises 19 HomeTown Buffets. The combined entity will operate restaurants in
32 states.
This press release contains forward-looking statements, including statements
regarding the impact that a merger could have on dilution and earnings. Factors
that may affect actual results to differ materially include the timeliness in
which the transaction is consummated and the extent to which synergies are
achieved as a merged entity.
In an effort to enhance the timeliness and efficiency of its stockholder
communications, Buffets, Inc. offers automated shareholder information
toll-free. You can hear selected information by calling 1-888-731-9401.
Alternatively to receive a release via fax, please call "Company News On-Call"
1-800-758-5804 extension 122825 or on the Internet at:
http://www.prnewswire.com/cnoc/exec/menu?/122825
Shareholders of HomeTown Buffet, Inc. may request information directed to the
attention of Glenn E. Glasshagel, V.P. of Finance, CFO, Treasurer, HomeTown
Buffet, Inc., (619) 546-9096.
