June 12, 1998
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Re: Buffets, Inc.
Ladies and Gentlemen:
On behalf of Buffets, Inc., a Minnesota corporation (the
"Company"), we hereby transmit for filing, pursuant to the
Electronic Data Gathering, Analysis and Retrieval System, a copy
of the Company's Registration Statement on Form S-8 relating to
its 1995 Stock Option Plan and Non-Employee Director Stock Option
Plan.
The applicable filing fee of $7,576.00 has been wired (CIK
reference no. 0000750274) to the Commission's account at Mellon
Bank.
Very truly yours,
/s/ Michael A. Stanchfield
----------------------------
Michael A. Stanchfield
<PAGE>
As filed with the Securities and Exchange Commission on June 16, 1998
Registration No. 333-____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- - --------------------------------------------------------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
- - --------------------------------------------------------------------------------
BUFFETS, INC.
(Exact name of registrant as specified in its charter)
Minnesota 41-1462294
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10260 Viking Drive 55344
Eden Prairie, Minnesota (Zip Code)
(Address of Principal Executive Offices)
Buffets, Inc.
1995 Stock Option Plan and
Non-Employee Director Stock Option Plan
- - --------------------------------------------------------------------------------
(Full title of the plans)
Roe H. Hatlen, Chairman Copy to:
Buffets, Inc. Douglas P. Long
10260 Viking Drive Faegre & Benson LLP
Eden Prairie, MN 55344 2200 Norwest Center
(Name and address of 90 South Seventh Street
agent for service) Minneapolis, MN 55402
(612) 942-9760
(Telephone number, including area code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
- - ----------------------- ------------------------ ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Proposed Proposed
Title of Securities Amount to be Maximum Offering Maximum Aggregate Amount of
to be Registered Registered (1) Price Per Share (2) Offering Price (2) Registration Fee
- - ----------------------- ------------------------ ----------------------- ----------------------- -----------------------
- - ----------------------- ------------------------ ----------------------- ----------------------- -----------------------
Common Stock, $.01 1,650,000
par value Shares $15.5625 $25,678,125 $7,576
- - ----------------------- ------------------------ ----------------------- ----------------------- -----------------------
========================================================================================================================
</TABLE>
(1) This Registration Statement Relates to 150,000 shares of Common Stock to be
offered under the registrant's Non-Employee Director Stock Option Plan and
1,500,000 shares to be offered under its 1995 Stock Option Plan, for which
1,000,000 shares have previously been registered on Registration Statement No.
333-01191.
(2) Estimated solely for the purpose of calculating the registration fee under
Rules 457(c) and (h)(1), based upon the average of the high and low sale prices
per share of the registrant's Common Stock on June 12, 1998, as reported on the
Nasdaq National Market System.
================================================================================
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
There are incorporated by reference in this Registration Statement
the contents of the registrant's Registration Statement No. 333-01191.
The following documents previously filed with the Securities and
Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), are, as of their respective dates,
incorporated by reference in this Registration Statement:
(a) The Annual Report on Form 10-K of Buffets, Inc. (the "Company") for
the fiscal year ended December 31, 1997 (which incorporates by reference certain
portions of the Company's 1997 Annual Report to Shareholders, including
financial statements and accompanying information, and certain portions of the
Company's definitive proxy statement for its 1998 Annual Meeting of
Shareholders);
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the fiscal year covered by the Annual Report on
Form 10-K referred to in (a) above; and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated March 27, 1986 and Amendment
No. 1 thereto dated May 11, 1992, and the Company's Registration Statement on
Form 8-A dated October 30, 1995, which contains a description of the related
Rights to Purchase Preferred Shares, together with any amendments or reports
filed for the purpose of updating those descriptions.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Registration Statement and before the filing of a post-effective amendment that
indicates that all shares of Common Stock offered have been sold or which
deregisters all shares of Common Stock then remaining unsold, shall be deemed to
be incorporated by reference in, and to be a part of, this Registration
Statement from the date of filing of those documents.
Any statement contained in a document incorporated, or deemed to be
incorporated, by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or incorporated herein by reference or in any other
subsequently filed document that is or is deemed to be incorporated by reference
herein modifies or supersedes that statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Item 4. Description of Securities.
Not Applicable.
Item 5. Interests of Named Experts and Counsel.
Not Applicable.
Item 6. Indemnification of Directors and Officers.
Section 4.01 of the Company's Restated By-Laws provides that the
Company shall indemnify its directors and officers to the full extent required
or permitted by Minnesota Statutes or by other provisions of law. Section
302A.521 of the Minnesota Statutes provides in substance that, unless prohibited
or limited by its articles of incorporation or by-laws, a corporation must
indemnify an officer or director who is made or threatened to be made a party to
a proceeding by reason of his or her capacity as an officer or director against
judgments, penalties, fines,
II-1
<PAGE>
settlements and reasonable expenses, including attorneys' fees and disbursements
incurred by such person in connection with the proceeding, if certain criteria
are met. These criteria, all of which must be met by the person seeking
indemnification, are: (a) that such person has not been indemnified by another
organization for the same judgments, penalties, fines, settlements and expenses;
(b) that such person must have acted in good faith; (c) that no improper
personal benefit was obtained by such person and that, if applicable, certain
statutory conflict of interest provisions have been satisfied; (d) that, in the
case of a criminal proceeding, such person had no reasonable cause to believe
that the conduct was unlawful; and (e) that such person acted in a manner he or
she reasonably believed was in the best interests of the corporation or, in
certain limited circumstances, not opposed to the best interests of the
corporation. The determination as to eligibility for indemnification is made by
the members of the corporation's board of directors, or a committee thereof, who
are at the time not parties to the proceedings under consideration, by special
legal counsel, by the shareholders who are not parties to the proceedings or by
a court.
Article VIII of the Company's Amended and Restated Articles of
Incorporation provides that a director shall not be liable to the Company or its
shareholders for monetary damages for breach of fiduciary duty as director,
except: (i) for any breach of the director's duty of loyalty to the Company or
its shareholders; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for dividends, stock
repurchases and other distributions made in violation of Minnesota law or for
violations of the Minnesota securities laws; (iv) for any transaction from which
the director derived an improper personal benefit; or (v) for any act or
omission occurring prior to the effective date of the provision in the Company's
Amended and Restated Articles of Incorporation limiting such liability. Article
VIII does not affect the availability of equitable remedies, such as an action
to enjoin or rescind a transaction involving a breach of fiduciary duty,
although, as a practical matter, equitable relief may not be available. Article
VIII also does not limit the liability of directors for violations of, or
relieve them from the necessity of complying with, the federal securities laws.
Item 7. Exemption from Registration Claimed.
Not Applicable.
Item 8. Exhibits.
Exhibit
4.1 Composite Amended and Restated Articles of Incorporation of
the Company (incorporated by reference to Exhibit 4.1 to
the Company's Registration Statement on Form S-3,
Registration No. 33-63694).
4.2 By-Laws of the Company (incorporated by reference to
Exhibit 3(b) to the Company's Annual Report on Form
10-K for the fiscal year ended December 29, 1993).
4.3 Form of Rights Agreement, dated as of October 24, 1995, by
and between the Company and American Stock Transfer and
Trust Company (incorporated by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated October 24, 1995).
4.4 Indenture dated as of November 27, 1995 related to 7%
Convertible Subordinated Notes of HomeTown Buffet, Inc.
due December 1, 2002 (incorporated by reference to Exhibit
4.6 to the Company's Registration Statement on Form 8-A,
dated November 8, 1996).
4.5 First Supplemental Indenture dated as of September 20, 1996
among the Company, HomeTown and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form 8-A, dated November 8, 1996).
5 Opinion of Faegre & Benson LLP.
23.1 Consent of Faegre & Benson LLP (included in Exhibit 5).
II-2
<PAGE>
23.2 Independent Auditors' Consent of Deloitte & Touche LLP.
23.3 Independent Auditors' Consent of KPMG Peat Marwick.
24 Powers of Attorney (included with signatures to this
Registration Statement).
99.1 Buffets, Inc. 1995 Stock Option Plan, as amended.
99.2 Buffets, Inc. Non-Employee Director Stock Option Plan, as
amended.
II-3
<PAGE>
Item 9. Undertakings.
A. The Company hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(a) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");
(b) To reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the
most recent post-effective amendment hereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
this Registration Statement; and
(c) To include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (A)(1)(a) and (A)(1)(b) shall not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Sections 13 or 15(d) of the Exchange Act that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Sections 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act, and will be governed by the final adjudication
of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Company certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Minneapolis, State of Minnesota, on June 8,
1998.
BUFFETS, INC.
By: /s/ Roe H. Hatlen
-----------------------------------
Roe H. Hatlen
Chairman and Chief Executive Officer
Each of the undersigned officers and directors of Buffets, Inc. hereby
appoints Roe H. Hatlen and Clark C. Grant, and each of them (with full power to
act alone), as attorneys and agents for the undersigned, with full power of
substitution, for and in the name, place, and stead of the undersigned, to sign
and file with the Securities and Exchange Commission under the Securities Act of
1933, as amended, any and all amendments (including post-effective amendments)
and exhibits to this Registration Statement and any and all applications,
instruments, or documents to be filed with the Securities and Exchange
Commission pertaining to the registration of the securities covered hereby, with
full power and authority to do and perform any and all acts and things
whatsoever requisite and necessary or desirable.
II-5
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
/s/ Roe H. Hatlen Chairman, Chief Executive Officer and June 8, 1998
- - ------------------------- Director (Principal Executive Officer)
Roe H. Hatlen
/s/ Clark C. Grant Senior Vice President of Finance and June 8, 1998
- - ------------------------- Treasurer (Principal Financial
Clark C. Grant Officer)
/s/ Marguerite C. Nesset Vice President of Accounting and June 8, 1998
- - ------------------------- Controller (Principal Accounting
Marguerite C. Nesset Officer)
/s/ Walter R. Barry, Jr. Director June 8, 1998
- - -------------------------
Walter R. Barry, Jr.
/s/ Marvin W. Goldstein Director June 8, 1998
- - -------------------------
Marvin W. Goldstein
/s/ Alan S. McDowell Director June 8, 1998
- - -------------------------
Alan S. McDowell
/s/ C. Dennis Scott Director June 8, 1998
- - -------------------------
C. Dennis Scott
/s/ Michael T. Sweeney Director June 8, 1998
- - -------------------------
Michael T. Sweeney
II-6
<PAGE>
INDEX TO EXHIBITS
Exhibit
<TABLE>
<S> <C> <C>
4.1 Composite Amended and Restated Articles of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to the Company's Registration
Statement on Form S-3, Registration
No. 33-63694)....................................................................Incorporated by reference
4.2 By-Laws of the Company (incorporated by reference to Exhibit 3(b) to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 1993)....................................................Incorporated by reference
4.3 Form of Rights Agreement, dated as of October 24, 1995, by and between
the Company and American Stock Transfer and Trust Company (incorporated
by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated October 24, 1995).....................Incorporated by reference
4.4 Indenture dated as of November 27, 1995 related to 7% Convertible
Subordinated Notes of HomeTown Buffet, Inc. due December 1, 2002
(incorporated by reference to Exhibit 4.6 to the Company's Registration
Statement on Form 8-A, dated
November 8, 1996)................................................................Incorporated by reference
4.5 First Supplemental Indenture dated as of September 20, 1996
among the Company, HomeTown and Wells Fargo Bank, N.A.
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form 8-A, dated November 8, 1996)......................Incorporated by reference
5 Opinion of Faegre & Benson LLP........................................................Filed Electronically
23.1 Consent of Faegre & Benson LLP (included in Exhibit 5)
23.2 Independent Auditors' Consent of Deloitte & Touche LLP................................Filed Electronically
23.3 Independent Auditors' Consent of KPMG Peat Marwick LLP................................Filed Electronically
24 Powers of Attorney (included with signatures to this Registration
Statement)
99.1 Buffets, Inc. Stock Option Plan, as amended...........................................Filed Electronically
99.2 Buffets, Inc. Non-Employee Director Stock Option Plan, as
amended...............................................................................Filed Electronically
</TABLE>
II-7
June 12, 1998
Buffets, Inc.
10260 Viking Drive
Eden Prairie, MN 55344
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-8 (the
"Registration Statement") relating to the offering of up to 1,650,000 shares of
Common Stock, par value $.01 per share, of Buffets, Inc. (the "Company"),
pursuant to the Buffets, Inc. 1995 Stock Option Plan, as amended, and the
Company's Non-Employee Director Stock Option Plan, as amended (collectively, the
"Plans"), we have examined such corporate records and other documents, including
the Plans, and have reviewed such matters of law, as we have deemed relevant
hereto, and, based upon such examination and review, it is our opinion that all
necessary corporate action on the part of the Company has been taken to
authorize the issuance and sale of such shares of Common Stock by the Company,
and that, when issued and sold as contemplated in the Plans, such shares will be
legally issued, fully paid and non-assessable under the current laws of the
State of Minnesota.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Faegre & Benson LLP
------------------------
FAEGRE & BENSON LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Buffets, Inc. on Form S-8 of our report dated February 11, 1998,
incorporated by reference in the Annual Report on Form 10-K of Buffets, Inc. for
the fiscal year ended December 31, 1997.
Deloitte & Touche LLP
Minneapolis, Minnesota
June 11, 1998
INDEPENDENT AUDITORS' CONSENT
KPMG Peat Marwick LLP
750 B Street
San Diego, CA 92101
June 11, 1998
Ladies and Gentlemen:
In connection with the registration statement on Form S-8 filed
by Buffets, Inc. under the Securities Act of 1933, we affirm to
the best of our knowledge and belief that during the period from
January 3, 1996, to this date, and except as set forth in such
registration statement and the related prospectus, no events have
occurred that have a material effect on the consolidated
financial statements for the year ended January 3, 1996 or which
should be disclosed in order to keep those statements from being
misleading,
Very truly yours,
BUFFETS, INC.
/s/ Roe H. Hatlen /s/ Clark C. Grant
- - ------------------------ -----------------------
Roe H. Hatlen Clark C. Grant
Chief Executive Officer Chief Financial Officer
BUFFETS, INC.
1995 STOCK OPTION PLAN
(as amended May 1998)
1. PURPOSE OF PLAN. The purpose of this Buffets, Inc.
1995 Stock Option Plan (the "Plan"), is to promote the interests of Buffets,
Inc., a Minnesota corporation (the "Company"), and its shareholders by providing
key employees of the Company and its subsidiaries, if any, with an opportunity
to acquire a proprietary interest in the Company and thereby develop a stronger
incentive to put forth maximum effort for the continued success and growth of
the Company and its subsidiaries. In addition, the opportunity to acquire a
proprietary interest in the Company will aid in attracting and retaining key
personnel of outstanding ability.
2. ADMINISTRATION OF PLAN. This Plan shall be
administered by a committee of three or more persons (the "Committee") appointed
by the Company's board of directors (the "Board"). No person shall serve as a
member of the Committee unless such person shall be a "disinterested person" as
that term is defined in Regulation 16b-3(c)(2)(i), promulgated under the
Securities Exchange Act of 1934, as amended, or any successor statute or
regulation comprehending the same subject matter. A majority of the members of
the Committee shall constitute a quorum for any meeting of the Committee, and
the acts of a majority of the members present at any meeting at which a quorum
is present or the acts unanimously approved in writing by all members of the
Committee shall be the acts of the Committee. Subject to the provisions of this
Plan, the Committee may from time to time adopt such rules for the
administration of this Plan as it deems appropriate. The decision of the
Committee on any matter affecting this Plan or the rights and obligations
arising under this Plan or any option granted hereunder or any related Limited
Right, as hereinafter defined, shall be final, conclusive and binding upon all
persons, including without limitation the Company, shareholders, employees and
optionees. To the full extent permitted by law, no member of the Committee shall
be liable for any action or determination taken or made in good faith with
respect to this Plan or any option or Limited Right granted hereunder.
It is intended that this Plan and all options granted pursuant
to it shall be administered by the Committee so as to permit this Plan and
options to comply with Exchange Act Rule 16b-3. If any provision of this Plan or
of any option would otherwise frustrate or conflict with the intent expressed in
this paragraph 2, that provision, to the extent possible, shall be interpreted
and deemed amended in the manner and to the extent determined by the Committee
to be advisable so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall be deemed void as
applicable to employees receiving options who are then subject to the reporting
requirements of Section 16 of the Exchange Act to the extent permitted by law
and in the manner deemed advisable by the Committee.
3. SHARES SUBJECT TO PLAN. The shares that may be made
subject to options granted under this Plan shall be authorized but previously
unissued shares of Common Stock (the "Common Shares") of the Company, of the par
value of $.01 per share, and they shall not exceed 2,500,000 in the aggregate,
except that, if any option lapses or terminates for any reason before such
option or the related Limited Rights, if any, have been completely exercised,
the shares covered by the unexercised portion of such option may again be made
subject to options and Limited Rights granted under this Plan. Appropriate
adjustments in the number of shares and in the option price per share may be
made by the Committee in its sole discretion to give effect to adjustments made
in the number of outstanding Common Shares of the Company through a merger,
consolidation, recapitalization, reclassification, combination, stock dividend,
stock split or other relevant change, provided that fractional shares shall be
rounded to the nearest whole share.
4. ELIGIBLE EMPLOYEES. Options may be granted under this
Plan to any key employee of the Company or any subsidiary thereof, including any
such employee who is also an officer or director of the Company or any
subsidiary thereof, who is not, on the date of grant, a member of the Committee.
5. GRANTING OF OPTIONS. Subject to the terms and
conditions of this Plan, the Committee may, from time to time prior to March 31,
2005, grant to such eligible employees as the Committee may determine options to
purchase such number of Common Shares of the Company on such terms and
conditions as the Committee may determine. No
<PAGE>
eligible employee may receive options to purchase more than 100,000 Common
Shares in the aggregate in any single year under this Plan.
In determining the employees to whom options shall be granted
and the number of Common Shares to be covered by each option, the Committee may
take into account the nature of the services rendered by the respective
employees, their present and potential contributions to the success of the
Company, and such other factors as the Committee in its sole discretion shall
deem relevant. The date and time of approval by the Committee of the granting of
an option shall be considered the date and the time of the grant of such option.
The Committee in its sole discretion may designate whether an option is to be
considered an "incentive stock option" (as that term is defined in Section 422
of the Internal Revenue Code of 1986, as amended, or any amendment thereto (the
"Code")) or a nonstatutory stock option (an option granted under this Plan that
is not intended to be an "incentive stock option"). The Committee may grant both
incentive stock options and nonstatutory stock options to the same individual.
However, where both an incentive stock option and a nonstatutory stock option
are awarded at one time, such options shall be deemed to have been awarded in
separate grants, shall be clearly identified, and in no event shall the exercise
of one such option affect the right to exercise the other such option.
6. OPTION PRICE. Subject to paragraph 8 of the Plan, the
purchase price of each Common Share subject to an option shall be fixed by the
Committee and shall be not less than 85% of the Fair Market Value (as defined
below) of a Common Share on the date of grant.
For purposes of this Plan, the "Fair Market Value" of any
share of capital stock of any company (including a Common Share of the Company)
at a specified date shall, unless otherwise expressly provided in this Plan,
mean the closing price of such share on the date immediately preceding such date
or, if no sale of shares of such Capital Stock shall have occurred on that date,
on the next preceding day on which a sale of such shares occurred, on the
composite tape for New York Stock Exchange listed shares or, if such shares are
not quoted on the composite tape for New York Stock Exchange listed shares, on
the principal United States Securities Exchange registered under the Securities
Exchange Act of 1934, as amended, on which the shares are listed, or, if such
shares are not listed on any such exchange, on The Nasdaq Stock Market or, if
such shares are not quoted on The Nasdaq Stock Market, the mean between the
closing "bid" and the closing "asked" quotation of such a share on the date
immediately preceding the date as of which such Fair Market Value is being
determined, or, if no closing bid or asked quotation is made on that date, on
the next preceding day on which a quotation is made, on the National Association
of Securities Dealers, Inc. Automated Quotations System or any system then in
use, provided that if the shares in question are not quoted on any such system,
Fair Market Value shall be what the Committee determines in good faith to be
100% of the fair market value of such a share as of the date in question.
Notwithstanding anything stated in this paragraph, if the applicable securities
exchange or system has closed for the day by the time the determination is being
made, all references in this paragraph to the date immediately preceding the
date in question shall be deemed to be references to the date in question.
7. OPTION PERIOD.
(a) No option may be exercised less than twelve months
after the date it is granted except upon the occurrence of the disability of the
holder of the option while employed by the Company or a parent or subsidiary
thereof, or the death of the holder while so employed or within three (3) months
after the termination of such employment, or upon a Change in Control as defined
in paragraph 11(b) of this Plan, or pursuant to paragraph 12(b) of this Plan. In
addition, no option may be exercised prior to such time, if any, as the
shareholders of the Company shall have approved this Plan at a duly held
shareholders' meeting of the Company and a registration statement covering the
Common Shares for which the option may be exercised shall have become effective
under the Federal Securities Act of 1933, as amended ("Shareholder Approval and
Registration"). Subject to the foregoing limitations, each option agreement
provided for in paragraph 17 hereof shall specify when the option shall become
exercisable.
(b) Subject to paragraph 8 of this Plan, each option
granted under this Plan and all rights to purchase shares thereunder shall cease
on the earliest of:
(i) Ten years after the date such option is granted
or on such date prior thereto as may be fixed by the Committee
on or before the date such option is granted;
2
<PAGE>
(ii) The expiration of the period after the
termination of the optionee's employment within which the
option is exercisable as specified in paragraph 10(b) or
10(c), whichever is applicable;
(iii) December 31, 1995, in the event that the
shareholders of the Company shall not have approved this Plan
prior to that date at a duly held shareholders' meeting; or
(iv) The date, if any, fixed for cancellation
pursuant to paragraph 12(b) of this Plan.
In no event shall any option be exercisable at any time after its original
expiration date. When an option is no longer exercisable, it shall be deemed to
have lapsed or terminated and will no longer be outstanding.
8. INCENTIVE STOCK OPTIONS. Should the Committee choose to
grant an incentive stock option, such option will be subject to the general
provisions applicable to all options granted under this Plan. In addition, the
incentive stock option shall be subject to the following specific provisions:
(a) The purchase price of each Common Share covered by the
incentive stock option shall not be less than 100% of the Fair Market Value of a
Common Share on the date of grant;
(b) At the time the incentive stock option is granted, if the
eligible employee owns, or is deemed under Section 425(d) of the Code to own,
stock of the Company (or of any parent or subsidiary of the Company) possessing
more than ten percent (10%) of the total combined voting power of all classes of
stock therein:
(i) The purchase price of each Common Share covered
by the incentive stock option shall not be less than 110% of
the Fair Market Value of a Common Share on the date of grant;
and
(ii) The term of the incentive stock option shall not
be greater than five years from the date of grant;
(c) The incentive stock option holder must remain continuously
employed by the Company, its parent or any subsidiary of the Company from the
date of the grant until the effective date of exercise, unless such exercise
occurs within the grace period, if any, allowed under paragraph 10 following
termination of employment;
(d) The aggregate Fair Market Value, determined at the time
the option is granted, of the Common Shares with respect to which incentive
stock options held by such individual first become exercisable in any calendar
year (under this Plan and all other incentive stock option plans of the option
holder's employer corporation, and its parent corporations and subsidiaries)
shall not exceed $100,000; and
(e) Any Common Shares received pursuant to the exercise of an
incentive stock option may not be sold within two years from the date of the
grant, nor within one year from the date of exercise.
If any option is not granted, exercised, or held in accordance
with the provisions set forth above in this paragraph 8, it will be considered
to be a nonstatutory stock option to the extent that it is in conflict with
these provisions.
9. MANNER OF EXERCISING OPTIONS. A person entitled to exercise
an option may, subject to its terms and conditions and the terms and conditions
of this Plan, exercise it in whole at any time, or in part from time to time, by
delivery to the Company at its principal executive office, to the attention of
its Secretary, of written notice of exercise, specifying the number of shares
with respect to which the option is being exercised, accompanied by payment in
full of the purchase price of the shares to be purchased at the time. The
purchase price of each share on the exercise of any option shall be paid in full
in cash (including check, bank draft or money order) at the time of exercise or,
at the discretion of the holder of the option, by delivery to the Company of
unencumbered Common Shares having an aggregate Fair Market Value on the date of
exercise equal to the purchase price, or by a combination of cash and such
unencumbered Common Shares. No shares
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shall be issued until full payment therefor has been made, and the granting
of an option to an individual shall give such individual no rights as a
shareholder except as to shares issued to such individual.
10. TRANSFERABILITY AND TERMINATION OF OPTIONS.
(a) During the lifetime of an individual to whom an option is
granted, only such individual or his or her guardian or legal representative may
exercise the option. No option shall be assignable or transferable by the
individual to whom it is granted otherwise than by will or the laws of descent
and distribution.
(b) During the lifetime of an optionee, an option may be
exercised only while the optionee is an employee of the Company or of a parent
or subsidiary thereof, and only if such individual has been continuously so
employed since the date the option was granted, except that, (i) as to any
individual who has been continuously employed by the Company (or a parent or
subsidiary thereof) for at least twelve full calendar months following the grant
of the option, such individual may exercise the option within three (3) months
after termination of such individual's employment to the extent that the option
was exercisable immediately prior to such individual's termination of
employment, (ii) in the case of an employee who is disabled (within the meaning
of Section 22(e)(3) of the Code) while employed, such individual or his or her
legal representative may exercise the option within one year after termination
of such individual's employment, (iii) as to any individual whose termination of
employment occurs following a Change of Control as defined in paragraph 11(b) of
this Plan, such individual may exercise the option within three (3) months after
termination, and (iv) as to any individual whose termination occurs following a
declaration pursuant to paragraph 12(b) of this Plan, such individual may
exercise the option at any time permitted by such declaration.
(c) An option may be exercised after the death of the
individual to whom it was granted, by such individual's legal representatives,
heirs or legatees, but only within one year after the death of such individual.
(d) In the event of the disability (within the meaning of
Section 22(c)(3) of the Code) or death of an employee holding an outstanding
option, any option held by such individual or his or her legal representative
that was not previously exercisable shall become immediately exercisable in full
if Shareholder Approval and Registration have been completed, and the disabled
or deceased individual shall have been continuously employed by the Company or a
parent or subsidiary thereof between the date such option was granted and the
date of such disability, or, in the event of death, a date not more than three
(3) months prior to such death. If Shareholder Approval and Registration are
completed after such date of death or disability but prior to the expiration of
the option under paragraph 7(b), the option shall become immediately exercisable
in full upon such completion of Shareholder Approval and Registration.
11. CHANGE IN CONTROL.
(a) Subject to paragraph 11(c), but anything else to the
contrary in this Plan notwithstanding, in the event of a "Change in Control" of
the Company, as defined in paragraph 11(b), an option held by a person under
this Plan that shall not have expired shall become immediately exercisable in
full, provided Shareholder Approval and Registration shall have been completed
prior to exercise of the option.
(b) A "Change in Control", for purposes of this Plan,
means:
(i) A majority of the directors of the Company shall
be persons other than persons:
(A) for whose election proxies shall have
been solicited by the Board of Directors of the
Company, or
(B) who are then serving as directors
appointed by the Board of Directors to fill vacancies
on the Board of Directors caused by death or
resignation (but not by removal) or to fill
newly-created directorships;
(ii) 30% or more of the outstanding voting stock of
the Company shall have been acquired or beneficially owned (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended, or
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any successor rule thereto) by any person (other than the
Company, a subsidiary of the Company or the person holding
the option) or group of persons (which group does not include
the person holding the option) acting in concert; or
(iii) The shareholders of the Company shall have
approved a definitive agreement or plan to
(A) merge or consolidate the Company with or
into another corporation (other than (1) a merger or
consolidation with a subsidiary of the Company or (2)
a merger in which the Company is the surviving
corporation and either (a) no outstanding voting
stock of the Company (other than fractional shares)
held by shareholders immediately prior to the merger
is converted into cash, securities, or other property
or (b) all holders of outstanding voting stock of the
Company (other than fractional shares) immediately
prior to the merger have substantially the same
proportionate ownership of the voting stock of the
Company or of its parent corporation immediately
after the merger);
(B) exchange, pursuant to a statutory
exchange of shares of voting stock of the Company
held by shareholders of the Company immediately prior
to the exchange, shares of one or more classes or
series of voting stock of the Company for cash,
securities or other property;
(C) sell or otherwise dispose of all or
substantially all of the assets of the Company (in
one transaction or a series of transactions); or
(D) liquidate or dissolve the Company;
provided, however, that if the transaction contemplated by
such definitive agreement or plan approved by the shareholders
of the Company is not actually consummated, a Change in
Control shall retroactively be deemed not to have occurred and
the acceleration of the exercise dates of options pursuant to
paragraph 11(a) shall be deemed null and void;
unless a majority of the voting stock (or the voting equity interest) of the
surviving corporation or of any corporation (or other entity) acquiring all or
substantially all of the assets of the Company (in the case of a merger,
consolidation or disposition of assets) or the Company or its parent corporation
(in the case of a statutory share exchange) is beneficially owned by the person
holding the option or a group of persons that includes the person holding the
option acting in concert.
(c) Notwithstanding paragraph 11(a) above, if the exercise of
any option or Limited Right (as defined in paragraph 13) granted to an employee
under this Plan, either alone or together with other payments in the nature of
compensation to such employee which are contingent on a change in the ownership
or effective control of the Company or in the ownership of a substantial portion
of the assets of the Company or otherwise, would result in any portion thereof
being subject to an excise tax imposed under Section 4999 (or successor
provisions) of the Code or would not be deductible in whole or in part by the
Company, an affiliate of the Company (as defined in Section 1504 (or successor
provisions) of the Code), or other person making such payments as a result of
Section 280G (or successor provisions) of the Code, such option, Limited Right
and/or such other benefits and payments shall be reduced (but not below zero) to
the largest aggregate amount that will result in no portion thereof being
subject to an excise tax or being not deductible. For such purposes:
(i) No portion of payments the receipt or enjoyment
of which an employee shall have effectively waived in writing
prior to the date of issuance of stock or distribution of a
payment hereunder shall be taken into account;
(ii) No portion of such option, Limited Right,
benefits and other payments shall be taken into account which,
in the opinion of tax counsel selected by the Company's
independent auditors and acceptable to the employee, does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) (or successor provisions) of the Code;
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<PAGE>
(iii) Such options, Limited Rights, benefits and
other payments shall be reduced only to the extent necessary
so that the total of such payments (other than those referred
to in clause (i) or (ii)) in their entirety constitute
reasonable compensation for services rendered within the
meaning of Section 280G(b)(4) (or successor provisions) of the
Code, in the opinion of the tax counsel referred to in clause
(ii), and
(iv) The value of any non-cash benefit or any
deferred payment or benefit included in such payment shall be
determined by the Company's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) (or
successor provisions) of the Code.
Any option or Limited Right not exercised or paid as a result of this paragraph
11(c), or reduced to zero as a result of the limitations imposed hereby, shall
remain outstanding in full force and effect subject to the other terms and
provisions of this Plan.
12. DISSOLUTION, LIQUIDATION, MERGER. In the event of the
proposed dissolution or liquidation of the Company or in the event of a proposed
sale of substantially all of the assets of the Company or in the event of a
proposed merger or consolidation of the Company with or into any other
corporation, regardless of whether the Company is the surviving corporation, or
a statutory share exchange involving capital stock of the Company (such
dissolution, liquidation, sale, merger, consolidation or exchange being herein
called an "Event"), the Committee may, but shall not be obligated to:
(a) If the Event is a merger or consolidation or statutory
share exchange, make appropriate provision for the protection of the outstanding
options granted under this Plan by the substitution, in lieu of such options, of
options to purchase appropriate voting common stock (the "Survivor's Stock") of
the corporation surviving any merger or consolidation or, if appropriate, the
parent corporation of the Company or such surviving corporation, or,
alternatively, by the delivery of a number of shares of the Survivor's Stock
which has a Fair Market Value as of the effective date of the Event equal to the
Fair Market Value as of such effective date of the Common Shares covered by the
option, or
(b) At least ten (10) days prior to the actual effective date
of an Event, declare, and provide written notice to each optionee of the
declaration, that each outstanding option, whether or not then exercisable,
shall be cancelled at the time of, or immediately prior to the occurrence of,
the Event (unless it shall have been exercised prior to the occurrence of the
Event) in exchange for payment to each option holder, within ten days after the
Event, of cash equal to the amount (if any), for each share covered by the
cancelled option, by which the Event Proceeds per Common Share (as hereinafter
defined) exceeds the exercise price per Common Share covered by such option,
provided that no such declaration shall be made unless Shareholder Approval and
Registration shall have been completed. At the time of the declaration provided
for in the immediately preceding sentence, except as otherwise set forth in
paragraph 11(c), each option shall immediately become exercisable in full and
each person holding an option shall have the right, during the period preceding
the time of cancellation of the option, to exercise his or her option as to all
or any part of the shares covered thereby. In the event of a declaration
pursuant to this paragraph 12(b), each outstanding option granted pursuant to
this Plan that shall not have been exercised prior to the Event shall be
cancelled at the time of, or immediately prior to, the Event, as provided in the
declaration, and this Plan shall terminate at the time of such cancellation,
subject to the payment obligations of the Company provided in this paragraph
12(b) or paragraph 13. For purposes of this paragraph, "Event Proceeds" per
share shall mean the cash plus the fair market value, as determined in good
faith by the Committee, of the non-cash consideration to be received per Common
Share by the shareholders of the Company upon the occurrence of the Event.
13. LIMITED RIGHTS. The Committee may, in its discretion, in
the circumstances set forth below, grant limited stock appreciation rights
("Limited Rights") as hereafter provided in this paragraph 13 to the holder of
any option granted hereunder (the "Related Option") with respect to all or any
portion of the shares covered by the Related Option. Each Limited Right shall
relate to a specific Related Option and may be granted at any time either
concurrently with the grant of the Related Option or (with respect to
nonstatutory stock options only) at any time the Related Option is outstanding.
Limited Rights are rights to receive cash equal to the amount
(if any) by which the Fair Market Value on the exercise date of the Common
Shares covered by the Related Option exceeds the exercise price of the Related
Option,
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which rights shall be exercisable in lieu of exercising the Related Option
(but only if and to the extent that the Related Option is exercisable) at any
time within the thirty day period after any Change in Control, as defined in
paragraph 11(b) of this Plan, regardless of whether the person holding the
Limited Right is an employee on the date of exercise, so long as the optionee
was an employee immediately preceding the Change in Control.
Notwithstanding the provisions of the immediately preceding
paragraph, no Limited Rights shall be exercised within a period of six months
after the date of grant of the Limited Rights and no Limited Rights shall be
exercised if the Committee shall previously have made the declaration provided
for in paragraph 12(b) and the Event resulting in the cancellation of all
options pursuant to paragraph 12(b) shall have occurred.
If Limited Rights are exercised, the Related Option shall no
longer be exercisable to the extent of the number of shares with respect to
which the Limited Rights were exercised. Upon the exercise or termination of a
Related Option, Limited Rights granted with respect thereto shall terminate to
the extent of the number of shares as to which the Related Option was exercised
or terminated.
A person entitled to exercise a Limited Right may, subject to
its terms and conditions and the terms and conditions of this Plan, exercise
such Limited Right in whole or in part by delivery to the Company at its
principal executive office, to the attention of its Secretary, of written notice
of an election to exercise such Limited Right specifying the number of shares
purchasable under the Related Option with respect to which the Limited Right is
being exercised. The date the Company receives the notice is the exercise date.
Upon exercise of Limited Rights, the holder shall promptly be paid an amount in
cash for each share with respect to which the Limited Rights are exercised equal
to the amount (if any) by which the Fair Market Value on the exercise date per
Common Share covered by the Related Option exceeds the option exercise price per
Common Share covered by the Related Option; provided that the Company may
withhold from any cash payment due upon exercise of a Limited Right a cash
amount sufficient to cover any required withholding taxes.
A Limited Right may not be assigned and shall be transferable
only if and to the extent that the Related Option is transferable.
14. TAX WITHHOLDING. Delivery of Common Shares upon exercise
of a nonstatutory stock option shall be subject to any required withholding
taxes. A person exercising such an option may, as a condition precedent to
receiving the Common Shares, be required to pay the Company a cash amount equal
to the amount of any required withholdings. In lieu of all or any part of such a
cash payment, the Committee may, but shall not be required to, permit the
individual to elect to cover all or any part of the required withholdings, and
to cover any additional withholdings up to the amount needed to cover the
individual's full FICA and federal, state and local income tax with respect to
income arising from the exercise of the option, through a reduction of the
number of Common Shares delivered to the person exercising the option or through
a subsequent return to the Company of shares delivered to the person exercising
the option. Unless the Committee otherwise permits, such elections are subject
to the following limitations if, and to the extent, such limitations are
necessary to comply with Exchange Act Rule 16b-3 or any successor provision:
(a) Time of election. Any such election and the related
exercise by an individual who is subject to the reporting requirements of
Section 16 ("Section 16") of the Securities Exchange Act of 1934, as amended (a
"Section 16 Individual") may be made only during certain specified time periods,
as follows:
(i) The election and the related exercise may be made
during the period beginning on the third business day
following the date of public release of the Company's
quarterly or annual financial statements and ending on the
twelfth business day following such date of public release; or
(ii) The election may be made at least six months
prior to the date as of which the amount of tax to be withheld
is determined;
provided, however, an election by such a person pursuant to clause (i) or (ii)
may not be made within six months of the date of grant of the option being
exercised unless death or disability of the individual to whom the option was
granted occurs during said six month period. Notwithstanding the foregoing, a
Section 16 Individual who tenders previously owned Shares to the
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Company in payment of the purchase price of Shares in connection with exercise
of an Option may also tender previously owned Shares to the Company in
satisfaction of any tax withholding obligations in connection with such Option
exercise without regard to the time periods set forth above. The foregoing
restrictions do not apply to any person who is not subject to the reporting
requirements of Section 16.
(b) Committee approval; revocation. The Committee's
approval of such an election by a Section 16 Individual, if given, may be
granted in advance, but is subject to revocation by the Committee at any time.
Once such an election is made by a Section 16 Individual, he or she may not
revoke it.
15. TERMINATION OF EMPLOYMENT. Neither the transfer of
employment of an individual to whom an option is granted between any combination
of the Company, a parent corporation and a subsidiary thereof, nor a leave of
absence granted to such individual and approved by the Committee, shall be
deemed a termination of employment for purposes of this Plan. The terms "parent"
or "parent corporation" and "subsidiary" as used in this Plan shall have the
meaning ascribed to "parent corporation" and "subsidiary corporation,"
respectively, in Sections 425(e) and (f) (or successor provisions) of the Code.
16. OTHER TERMS AND CONDITIONS. The Committee shall have the
power, subject to the limitations contained herein, to fix any other terms and
conditions for the grant or exercise of any option under this Plan. Nothing
contained in this Plan, or in any option granted pursuant to this Plan, shall
confer upon a person holding an option any right to continued employment by the
Company or any parent or subsidiary of the Company or limit in any way the right
of the Company or any such parent or subsidiary to terminate an employee's
employment at any time.
17. OPTION AGREEMENTS. All options granted under this Plan
shall be evidenced by a written agreement in such form or forms as the Committee
may from time to time determine, which agreement shall, among other things,
designate whether the options being granted thereunder are nonstatutory stock
options or incentive stock options under Section 422 (or successor provisions)
of the Code. All Limited Rights shall be evidenced in the written option
agreements or in written addenda thereto delivered to the grantees thereof
promptly after any grant of Limited Rights by the Committee.
18. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any
time amend, suspend or discontinue this Plan; provided, however, that no
amendment by the Board shall, without further approval of the shareholders of
the Company, (a) change the class of employees eligible to receive options or
Limited Rights; (b) except as provided in paragraph 3 hereof, increase the total
number of Common Shares of the Company which may be made subject to options
granted under this Plan; (c) except as provided in paragraph 3 hereof, change
the minimum purchase price for the exercise of an option; (d) increase the
maximum period during which options or Limited Rights may be exercised; (e)
extend the term of this Plan beyond March 31, 2005; or (f) permit the granting
of options to employees who are then members of the Committee. No amendment to
this Plan shall, without the consent of the holder of the option, alter or
impair any options previously granted under this Plan.
19. EFFECTIVE DATE. This Plan shall be effective upon
approval thereof by the Board.
8
BUFFETS, INC.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
(as amended May 1998)
1. PURPOSE. The purpose of this Non-Employee Director Stock
Option Plan (the "Plan") is to promote the interests of Buffets, Inc., a
Minnesota corporation (the "Company"), and its shareholders by providing
non-employee directors of the Company with an opportunity to acquire a
proprietary interest in the Company and thereby provide an additional incentive
to put forth maximum effort for the continued success and growth of the Company.
In addition, the opportunity to acquire a proprietary interest in the Company
will aid in attracting and retaining non-employee directors of outstanding
ability.
2. ADMINISTRATION.
(a) General. This Plan shall be administered by the Company's
Board of Directors (the "Board"). The Board shall have the power,
subject to the limitations contained in this Plan, to fix any terms and
conditions for the grant or exercise of any award under this Plan.
Subject to the provisions of this Plan, the Board may from time to time
adopt such rules for the administration of this Plan as it deems
appropriate. The decision of the Board on any matter affecting this
Plan or the rights and obligations arising under this Plan or any award
granted hereunder, shall be final, conclusive and binding upon all
persons, including without limitation the Company, shareholders and
optionees.
(b) Indemnification. To the full extent permitted by law, (i)
no member of the Board shall be liable for any action or determination
taken or made in good faith with respect to this Plan or any award
granted hereunder and (ii) the members of the Board shall be entitled
to indemnification by the Company against and from any loss incurred by
such member or person by reason of any such actions and determinations.
3. SHARES. The shares that may be made subject to options granted
under this Plan shall be authorized and unissued shares of Common Stock of the
Company, par value $.0l per share ("Shares," and each individually a "Share"),
and they shall not exceed 150,000 Shares in the aggregate, subject to adjustment
as provided in paragraph 12 below, except that if any option lapses or
terminates for any reason before such option has been completely exercised, the
Shares covered by the unexercised portion of such option may again be made
subject to options granted under this Plan.
4. ELIGIBLE PARTICIPANTS. Stock options may be granted under this
Plan to any director of the Company who is not an employee of the Company or any
parent or subsidiary thereof (a "non-employee director"). References herein to
"employed," "employment" and similar terms (except "employee") shall refer to
the providing of services as a director.
5. TERMS AND CONDITIONS OF DIRECTOR OPTIONS.
(a) Discretionary Grants. Subject to the terms and conditions
of this Plan, the Board may, from time to time during the term of this
Plan, grant to any non-employee director options to purchase such
number of Shares of the Company on such terms and conditions as the
Board may determine. In determining the non-employee directors to whom
options shall be granted and the number of Shares to be covered by each
option, the Board may take into account the nature of the services
rendered by the respective non-employee directors, their present and
potential contributions to the success of the Company, and such other
factors as the Board in its sole discretion may deem relevant. The date
and time of approval by the Board of the granting of an option shall be
considered the date and the time of the grant of such option. The
maximum number of Shares subject to options that may be granted to any
one non-employee director under the Plan in any fiscal year of the
Company (including options granted under paragraph 5(b)) may not exceed
10,000 Shares (subject to adjustment pursuant to paragraph 12 hereof).
<PAGE>
(b) Initial Options (New Director): With respect to any
non-employee director who is first elected or appointed to the Board on
a date after the date of 1997 Meeting, the Company shall grant to such
non-employee director on the day following his or her first being so
elected or appointed to the Board an option to purchase 10,000 Shares
("Initial Options"). If a non-employee director is first elected or
appointed to the Board at an annual meeting of the shareholders of the
Company, such non-employee director shall be granted an Initial Option
at such time. Subject to the limitation contained in paragraph 5(a) as
to the maximum annual aggregate grant to any one Individual, the Board
may increase or decrease the number of shares to be granted to
non-employee directors on any date pursuant to this said paragraph
5(b).
(c) Purchase Price. The purchase price of each Share subject
to an option granted pursuant to this paragraph 5 shall be 100% of the
Fair Market Value of a Share on the date of grant.
(d) Vesting. With respect to any option granted under
paragraph 5(a), the option agreement provided for in paragraph 6
relating to such option shall specify when such option shall become
exercisable. With respect to any Initial Options, such options shall be
exercisable immediately on the date of grant.
(e) Termination. Each option granted pursuant to this
Paragraph 5 shall expire, and all rights to purchase Shares thereunder
shall terminate, on the earliest of:
(i) ten years after the date such option is granted
or on such date prior thereto as may be fixed by the Board on
or before the date such option is granted;
(ii) the expiration of the period after the
termination of the optionee's service as a non-employee
director within which the option is exercisable as specified
in paragraph 9(b) (provided that the Board may, in any option
agreement provided for in paragraph 6 or by Board action with
respect to any outstanding option, extend the periods
specified in paragraph 9(b)); or
(iii) the date, if any, fixed for cancellation
pursuant to paragraph 10(c) or 11 below.
(f) Allocation of Common Shares. If as of a date on which
Initial Option or Options are to be awarded pursuant to the provisions
of this paragraph 5, the number of Shares available for issuance under
the Plan as of such date are less than the number of options to
purchase Shares that otherwise would be awarded, then the following
formula shall determine how the remaining number of Shares are to be
allocated:
(i) if only one non-employee director is to receive
an option on such date, then such non-employee director shall
receive an option to purchase Shares equal to the number of
Shares remaining.
(ii) if two or more non-employee directors are to
receive options on such date:
A. all Initial Options shall first be
awarded; if, however, the number of Shares available
is less than the number of options to purchase Shares
that would otherwise be awarded as Initial Options
then each such non-employee director eligible to
receive an Initial Option shall receive the number of
options which results from the following equation:
the whole number of Shares available divided by the
number of non-employee directors eligible to receive
such an option, provided, however, that no fractional
shares shall be awarded; and if such allocation
occurs, any remaining Shares shall not be awarded and
shall be deemed not subject to distribution for
purposes of paragraph 16; and
B. if on such date all Initial Options to be
awarded are awarded in the full amount of Shares or
if no Initial Options are to be awarded then each
non-employee director eligible for a discretionary
option grant shall receive a discretionary option to
purchase Shares in the amount that results from the
following equation: the whole number of Shares
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<PAGE>
available divided by the number of non-employee
directors eligible for discretionary options based on
the relative proportion of their intended grant of
options, provided, however, that no fractional shares
shall be awarded; and any remaining Shares shall not
be awarded and shall be deemed not subject to
distribution for purposes of paragraph 16.
6. OPTION AGREEMENTS. All options granted under this Plan shall
be evidenced by a written agreement in such form or forms as the Board may from
time to time determine.
7. FAIR MARKET VALUE. For Purposes of this Plan, the "Fair Market
Value" of a Share at a specified date shall, unless otherwise expressly provided
in this Plan, mean the closing sale price of a Share on the date immediately
preceding such date or, if no sale of Shares shall have occurred on that date,
on the next preceding day on which a sale of Shares occurred, on the Composite
Tape for New York Stock Exchange listed shares or, if Shares are not quoted on
the Composite Tape for New York Stock Exchange listed shares, on the Nasdaq
National Market or any similar system then in use or, if Shares are not included
in the Nasdaq National Market or any similar system then in use, the mean
between the closing "bid" and the closing "asked" quotation of a Share on the
date immediately preceding the date as of which such Fair Market Value is being
determined, or, if no closing bid or asked quotation is made on that date, on
the next preceding day on which a quotation is made, on the Nasdaq Small Cap
Market or any similar system then in use, provided that if the Shares in
question are not quoted on any such system, Fair Market Value shall be what the
Board determines in good faith to be 100% of the fair market value of a Share as
of the date in question. Notwithstanding anything stated in this paragraph 7, if
the applicable securities exchange or system has closed for the day by the time
the determination is being made, all references in this paragraph to the date
immediately preceding the date in question shall be deemed to be references to
the date in question.
8. MANNER OF EXERCISE OF OPTIONS. A person entitled to exercise
an option granted under this Plan may, subject to its terms and conditions and
the terms and conditions of this Plan, exercise it in whole at any time, or in
part from time to time, by delivery to the Company at its principal executive
office, to the attention of its Chief Financial Officer, of written notice of
exercise, specifying the number of Shares with respect to which the option is
being exercised. The purchase price of the Shares with respect to which an
option is being exercised shall be payable in full at the time of exercise,
provided that, to the extent permitted by law, the holder of an option may
simultaneously exercise an option and sell all or a portion of the Shares
thereby acquired pursuant to a brokerage or similar relationship and use the
proceeds from such sale to pay the purchase price of such Shares. The purchase
price of each Share on the exercise of any option shall be paid in full in cash
(including check, bank draft or money order) or, at the discretion of the person
exercising the option, by delivery to the Company of unencumbered Shares, by a
reduction in the number of Shares delivered upon exercise of the option, or by a
combination of cash and such Shares (in each case such Shares having an
aggregate Fair Market Value on the date of exercise equal to the amount of the
purchase price being paid through such delivery or reduction of Shares);
provided, however, that no person shall be permitted to pay any portion of the
purchase price with Shares if the Board, in its sole discretion, determines that
payment in such manner is undesirable. The granting of an option to a person
shall give such person no rights as a shareholder except as to Shares issued to
such person.
9. TRANSFERABILITY AND TERMINATION OF EMPLOYMENT
(a) Transferability. During the lifetime of an optionee, only
such optionee or his or her guardian or legal representative may
exercise options granted under this Plan, and no option granted under
this Plan shall be assignable or transferable by the optionee otherwise
than by will or the laws of descent and distribution or pursuant to a
domestic relations order as defined by the Code or Title I of the
Employee Retirement Income Security Act, or the rules thereunder;
provided, however, that any optionee may transfer a non-statutory stock
option granted under this Plan to a member or members of his or her
immediate family (i.e., his or her children, grandchildren and spouse)
or to one or more trusts for the benefit of such family members or
partnerships in which such family members are the only partners, if (i)
the option agreement with respect to such options expressly so provides
either at the time of initial grant or by amendment to an outstanding
option agreement and (ii) the optionee does not receive any
consideration for the transfer. Any options held by any such transferee
shall continue to be subject to the same terms and conditions that were
applicable to such options immediately prior to theft transfer and may
be exercised by such transferee only as
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and to the extent that such option has become exercisable and has not
terminated in accordance with the provisions of the Plan and the
applicable option agreement. For purposes of any provision of this
Plan relating to notice to an optionee or to vesting or termination
of an option upon the death, disability or termination of employment of
an optionee, the references to "optionee" shall mean the original
grantee of an option and not any transferee.
(b) Termination of Employment. In the event that an
optionee ceases to be employed as a non-employee director by reason of
(i) death,
(ii) disability preventing continued service,
(iii) retirement from the Board in accordance with
the policy of the Company, if any, on
retirement of non- employee directors then
in effect, or
(iv) termination of service as a non-employee
director by reason of (x) resignation at the
request of the Board (other than for gross
misconduct, as determined by the Board) (y)
the director's failure to have been
nominated for re-election to the Board
(unless such failure results from the
non-employee director's unwillingness to
continue to serve) or to have been
re-elected by the shareholders of the
Company, or
(v) the director's removal by the shareholders
of the Company
then any option granted to such optionee that was not previously
exercisable shall become immediately exercisable in full if the
optionee shall have been continuously employed by the Company or a
parent or subsidiary thereof between the date such option was granted
and the date of such termination of service and such option shall
continue to be exercisable for five years after termination of such
optionee's employment. If an optionee's employment terminates in any
manner other than as provided for in the preceding sentence, any option
granted to such optionee shall terminate immediately upon such
termination of employment.
(c) Right to Terminate Employment. Nothing contained in this
Plan, or in any option granted pursuant to this Plan, shall confer upon
any optionee any right to continued employment by the Company or limit
in any way the right of the Company to terminate such optionee's
employment at any time.
(d) Expiration Date. In no event shall any option be
exercisable at any time after the time it shall have expired in
accordance with paragraph 5(e) of this Plan. When an option is no
longer exercisable, it shall be deemed to have lapsed or terminated and
will no longer be outstanding.
10. CHANGE IN CONTROL.
(a) Subject to paragraph 10(c), but anything else to the
contrary in this Plan notwithstanding, in the event of a "Change in
Control" of the Company, as defined in paragraph 10(b), an option held
by a person under this Plan that shall not have expired shall become
immediately exercisable in full.
(b) A "Change in Control," for Purposes for this Plan, means:
(i) a majority of the directors of the Company
shall be persons that are not Continuing Directors.
"Continuing Directors" shall mean directors:
(A) for whose election proxies shall have
been solicited by the Board of Directors of the
Company, or
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(B) who are then serving as directors
appointed by the Board of Directors to fill vacancies
on the Board of Directors caused by death or
resignation but not by removal) or to fill
newly-created directorships;
(ii) 30% or more of the outstanding voting stock of
the Company shall have been acquired or beneficially owned (as
defined in Rule 13d-3 under the Exchange Act) by any person
(other than the Company, a subsidiary of the Company or the
person holding the option) or group of persons (which group
does not include the person holding the option) acting in
concert; or
(iii) The shareholders of the Company shall have
approved a definitive agreement or plan to
(A) merge or consolidate the Company with or
into another corporation (other than (1) a merger or
consolidation with a subsidiary of the Company or (2)
a merger in which the Company is the surviving
corporation and either (a) no outstanding voting
stock of the Company (other than fractional shares)
held by shareholders immediately prior to the merger
is converted into cash, securities, or other property
or (b) all holders of outstanding voting stock of the
Company (other than fractional shares) immediately
prior to the merger have substantially the same
proportionate ownership of the voting stock of the
Company or of its parent corporation immediately
after the merger);
(B) exchange, pursuant to a statutory
exchange of shares of voting stock of the Company
held by shareholders of the Company immediately prior
to the exchange, shares of one or more classes or
series of voting stock of the Company for cash
securities or other property;
(C) sell or otherwise dispose of all or
substantially all of the assets of the Company (in
one transaction or a series of transactions); or
(D) liquidate or dissolve the Company;
provided, however, that if the transaction contemplated by
such definitive agreement or plan approved by the shareholders
of the Company is not actually consummated, a Change in
Control shall retroactively be deemed not to have occurred and
the acceleration of the exercise dates of options pursuant to
paragraph 11(a) shall be deemed null and void;
unless a majority of the voting stock (or the voting equity interest)
of the surviving corporation or of any corporation (or other entity)
acquiring all or substantially all of the assets of the Company (in the
case of a merger, consolidation or disposition of assets) or the
Company or its parent corporation (in the case of a statutory share
exchange) is beneficially owned by the person holding the option or a
group of persons that includes the person holding the option acting in
concert.
(c) Cash Payment. If a Change in Control of the Company shall
occur, then, so long as a majority of the members of the Board are
Continuing Directors, the Board, in its sole discretion, and without
the consent of the holder of any option affected thereby, may determine
that some or all outstanding options shall be canceled as of the
effective date of any such Change in Control and that the holder or
holders of such canceled options shall receive, with respect to some or
all of the Shares subject to such options, as of the date of such
cancellation, cash in an amount, for each Share subject to an option,
equal to the excess of the per Share Fair Market Value of such Shares
immediately prior to such Change in Control of the Company over the
exercise price per Share of such options.
(d) Limitation on Change in Control Payments. Notwithstanding
anything in paragraph 10(a) or 10(c) above or paragraph 11 below to the
contrary, if, with respect to an optionee, the acceleration of the
exercisability of an option or the payment of cash in exchange for all
or part of an option as provided in
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paragraph 10(a) or 10(c) above or paragraph 11 (which acceleration or
payment could be deemed a "payment" within the meaning of Section
280G(b)(2) of the Code), together with any other payments which such
optionee has the right to receive from the Company or any corporation
which is a member of an "affiliated group" (as defined in Section
1504(a) of the Code without regard to Section 1504(c) of the Code) of
which the Company is a member, would constitute a "parachute payment"
(as defined in Section 280G(b)(2) of the Code), then such acceleration
of exercisability and payments pursuant to paragraph 10(a) or 10(c)
above or paragraph 11 shall be reduced to the largest amount as, in
the sole judgment of the Board, will result in no portion of such
payments being subject to the excise tax imposed by Section 4999 of
the Code.
11. DISSOLUTION, LIQUIDATION, MERGER. In the event of the proposed
dissolution or liquidation of the Company or in the event of a proposed sale of
substantially all of the assets of the Company or in the event of a proposed
merger or consolidation of the Company with or into any other corporation,
regardless of whether the Company is the surviving corporation, or a statutory
share exchange involving capital stock of the Company (such dissolution,
liquidation, sale, merger, consolidation or exchange being herein called an
"Event"), the Board may, but shall not be obligated to:
(a) if the Event is a merger or consolidation or statutory
share exchange, make appropriate provision for the protection of the
outstanding options granted under this Plan by the substitution, in
lieu of such options, of options to purchase appropriate voting common
stock (the "Survivor's Stock") of the corporation surviving any merger
or consolidation or, if appropriate, the parent corporation of the
Company or such surviving corporation, or, alternatively, by the
delivery of a number of shares of the Survivor's Stock which has a Fair
Market Value as of the effective date of the Event equal to the Fair
Market Value as of such effective date of the Shares covered by the
option, or
(b) At least ten (10) days prior to the actual effective date
of an Event, declare, and provide written notice to each optionee of
the declaration, that each outstanding option, whether or not then
exercisable, shall be canceled at the time of or immediately prior to
the occurrence of, the Event (unless it shall have been exercised prior
to the occurrence of the Event) in exchange for payment to each option
holder, within ten days after the Event, of cash equal to the amount
(if any), for each share covered by the canceled option, by which the
Event Proceeds per Share (as hereafter defined) exceeds the exercise
price per Share covered by such option. At the time of the declaration
provided for in the immediately preceding sentence, except as otherwise
set forth in paragraph 10(d), each option shall immediately become
exercisable in full and each person holding an option shall have the
right, during the period preceding the time of cancellation of the
option, to exercise his or her option as to all or any part of the
Shares covered thereby. In the event of a declaration pursuant to this
paragraph 11(b), each outstanding option granted pursuant to this Plan
that shall not have been exercised prior to the Event shall be canceled
at the time of, or immediately prior to, the Event, as provided in the
declaration, and this Plan shall terminate at the time of such
cancellation, subject to the payment obligations of the Company
provided in this paragraph 11(b). For purposes of this paragraph,
"Event Proceeds" per share shall mean the cash plus the fair market
value, as determined in good faith by the Board, of the non-cash
consideration to be received per Share by the shareholders of the
Company upon the occurrence of the Event.
12. ADJUSTMENTS. In the event of any reorganization, merger,
consolidation, recapitalization, liquidation, reclassification, stock dividend,
stock split, combination of shares, rights offering, or extraordinary dividend
or divestiture (including a spin-off), or any other change in the corporate
structure or Shares of the Company, the Board (or if the Company does not
survive any such transaction, the Board of Directors of the surviving
corporation) may, without the consent of any holder of an option, make such
adjustment as it determines in its discretion to be appropriate as to the number
and kind of securities subject to and reserved under this Plan and, in order to
prevent dilution or enlargement of rights of participants in this Plan, the
number and kind of securities issuable upon exercise of outstanding options and
the exercise price thereof.
13. COMPLIANCE WITH LEGAL REQUIREMENTS. No certificate for Shares
distributable under this Plan shall be issued and delivered unless the issuance
of such certificate complies with all applicable legal requirements
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including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended, and the Exchange
Act.
14. GOVERNING LAW. To the extent that federal laws do not
otherwise control, this Plan and all determinations made and actions taken under
this Plan shall be governed by the laws of the State of Minnesota, without
regard to the conflicts of law provisions thereof, and construed accordingly.
15. AMENDMENT AND DISCONTINUANCE OF PLAN. The Board may at any
time amend, suspend or discontinue this Plan; provided, however, that no
amendment to this Plan shall, without the consent of the holder of the option,
alter or impair any option previously granted under this Plan. To the extent
considered necessary to comply with applicable provisions of the Code, any such
amendments to this Plan may be made subject to approval by the shareholders of
the Company.
16. TERM.
(a) Effective Date. This Plan shall be effective as of
May 13, 1997.
(b) Termination. This Plan shall remain in effect until all
Shares subject to it are distributed or this Plan is terminated under
paragraph 15 above.
