<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement. [ ] Confidential, for use of the
Commission only (as permitted by
Rule 14a-6(e)(2).
[X] Definitive proxy statement.
[ ] Definitive additional materials.
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
BUFFETS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
BUFFETS, INC.
1460 BUFFET WAY
EAGAN, MN 55121
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MAY 9, 2000
To the Shareholders of Buffets, Inc.
The annual meeting of shareholders of Buffets, Inc., a
Minnesota corporation, will be held in accordance with the By-laws of the
Company on Tuesday, May 9, 2000, at 9:00 a.m. at the Company's Corporate
Headquarters, 1460 Buffet Way, Eagan, Minnesota, for the following purposes:
1. Electing a board of seven directors for the ensuing
year;
2. Approving the proposed Buffets, Inc. 2000 Omnibus
Stock Plan;
3. Approving Deloitte & Touche LLP as independent
auditors for the Company for the current fiscal year;
and
4. Transacting such other business as may properly come
before the meeting.
Only shareholders of record at the close of business on March
13, 2000 will be entitled to notice of and to vote at the annual meeting.
You are cordially invited to attend the meeting. However,
whether or not you plan to be personally present at the meeting, please mark,
date and sign the enclosed proxy and return it promptly in the enclosed
envelope. If you later desire to revoke your proxy, you may do so at any time
before it is exercised.
BY ORDER OF THE BOARD OF DIRECTORS
H. Thomas Mitchell, Secretary
Eden Prairie, Minnesota
March 31, 2000
<PAGE> 3
BUFFETS, INC.
1460 BUFFET WAY
EAGAN, MINNESOTA 55121
PROXY STATEMENT
The approximate date on which this proxy statement and the
accompanying form of proxy are being first sent to shareholders is March 31,
2000.
SOLICITATION AND REVOCABILITY OF PROXY
The enclosed proxy is solicited on behalf of the Board of
Directors of Buffets, Inc., a Minnesota corporation, for use at the annual
meeting of shareholders to be held on May 9, 2000. The Company will bear the
cost of preparing and mailing the proxy, proxy statement and any other material
furnished to shareholders by the Company in connection with the annual meeting.
Proxies will be solicited by use of the mails, and officers and employees of the
Company may also solicit proxies by telephone or personal contact. Officers and
employees of the Company will receive no special remuneration for any such
solicitation activities. The Company will inquire of any record holders known to
be brokers, dealers, banks or their nominees whether other persons are the
beneficial owners of shares held in their names and, if so, will take steps
necessary to supply copies of solicitation materials to such beneficial owners.
All valid proxies will be voted at the annual meeting in accordance with the
instructions set forth in the proxies.
A shareholder executing a proxy may revoke it at any time
before its exercise by filing with the Secretary of the Company, before or at
the meeting, a written instrument of revocation or a duly executed proxy bearing
a later date. A shareholder voting through a proxy who abstains with respect to
a certain proposal is considered to be present and entitled to vote on such
proposal at the meeting, and is in effect a negative vote, but a shareholder
(including a broker) who does not give a proxy authority to vote, or withholds
authority to vote, on a certain proposal shall not be considered present and
entitled to vote on such proposal.
The Common Stock of the Company, par value $.01 per share, is
the only authorized and outstanding voting security of the Company. Only those
holders of the Company's Common Stock whose names appear of record on the
Company's books at the close of business on March 13, 2000 will be entitled to
notice of and to vote at the annual meeting. At the close of business on March
13, 2000, there were 41,546,612 shares of Common Stock outstanding, each
entitled to one vote per share. Holders of Common Stock do not have cumulative
voting rights.
The Annual Report of the Company, including financial
statements, for the year ended December 29, 1999 is being furnished to each
shareholder with this proxy statement.
2
<PAGE> 4
ITEM 1: NUMBER AND ELECTION OF DIRECTORS
GENERAL
The By-laws of the Company provide that at each annual meeting
the shareholders shall determine the number of directors to constitute the Board
of Directors and shall elect such directors. Each director elected serves until
the next annual meeting of shareholders and until his or her successor is
elected and qualified.
NOMINEES
The Board of Directors recommends that the shareholders set
the number of directors at seven and that the nominees named below be elected as
directors of the Company for the ensuing year. It is intended that the persons
named as proxies in the enclosed form of proxy will vote the proxies received by
them for the election as directors of the nominees named in the table below
except as specifically directed otherwise. Each nominee has indicated a
willingness to serve, but in case any nominee is not a candidate at the annual
meeting, for reasons not now known to the Company, the proxies named in the
enclosed form of proxy may vote for a substitute nominee in their discretion.
Information regarding these nominees is set forth in the table below.
<TABLE>
<CAPTION>
NAME (AGE) DIRECTOR SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE
FOR LAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Walter R. Barry, Jr. (66) 1995 Private investor since 1985; Executive Vice
President of General Mills Inc. from June 1979 to
December 1986; Director of Interactive
Technologies Inc.(1)
Marvin W. Goldstein (56) 1997 Private investor since 1997; Executive Vice
President and Chief Operating Officer of Regis
Corporation from April 1997 to August 1997;
Chairman, Chief Executive Officer and President of
Pet Food Warehouse, Inc. from July 1995 to
December 1996; President and Chief Operating
Officer of the Department Store Division of Target
Corporation (f/k/a Dayton Hudson Corporation)
from 1992 to September 1994; Director of
Greenspring Company, Wilson's The Leather
Experts, Appliance Recycling Centers of America,
Inc. and Paper Warehouse, Inc. (2)
Roe H. Hatlen (56) 1983 Co-Founder of the Company; Chairman and Chief Executive
Officer of the Company since 1983; and President of
the Company from May 1989 to September 1992
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
NAME (AGE) DIRECTOR SINCE PRINCIPAL OCCUPATION AND BUSINESS EXPERIENCE FOR
LAST FIVE YEARS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Kerry A. Kramp (44) 2000 President of the Company since September 1996 and
Chief Operating Officer since August 1998; President
of HomeTown Buffet, Inc. ("HomeTown") from
December 1995 to September 1996 and its Chief
Operating Officer from May 1995 to September 1996;
Vice President of Operations of HomeTown from
February 1992 to December 1995.(3)
Alan S. McDowell (61) 1984 Private investor since 1983.
C. Dennis Scott (53) 1996 Co-Founder of the Company; Vice Chairman of the
Company since September 1996; Chief Operating
Officer of the Company from September 1996 to
August 1998; President of the Company from 1983 to
1989; Co-Founder of HomeTown; Director and Chief
Executive Officer of HomeTown since 1989 (3)
Michael T. Sweeney (42) 1998 President of Starbucks Coffee Company (U.K.) Ltd.
since November 1998; Chief Executive Officer of The
Minnesota Pizza Company, L.L.C. from December
1995 to November 1998; President and CEO of
Blockbuster Mid-America from September 1991 to
July 1995(4)
</TABLE>
- ---------------------------
(1) General Mills Inc. markets consumer foods.
(2) Regis Corporation is a publicly held operator and franchisor of hair
and retail product salons. Pet Food Warehouse, Inc. was a publicly held
retailer of pet supplies until its merger with Petco Animal Supplies,
Inc. in December 1996. Target Corporation (f/k/a Dayton Hudson
Corporation) is a national general merchandise company operating
Target, Mervyn's, Dayton's and Hudson's stores.
(3) HomeTown Buffet, Inc. was a publicly held operator of buffet style
restaurants until its merger with Country Delaware, Inc., a
wholly-owned subsidiary of the Company, in September 1996; it is now a
wholly-owned subsidiary of the Company.
(4) Starbucks Coffee Company (U.K.) Ltd. is a wholly-owned subsidiary of
Starbucks Corporation. The Minnesota Pizza Company is a privately held
franchisee of Papa John's pizzerias. Blockbuster Corporation is an
operator of video rental and retail stores.
4
<PAGE> 6
VOTE REQUIRED
The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock of the Company present in person or by proxy
and entitled to vote at the annual meeting is required for the election of each
nominee. If a shareholder does not otherwise direct, the shares represented by
the proxy solicited hereby will be voted in favor of each of the above-named
nominees.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS OF THE
COMPANY VOTE FOR THE ELECTION OF EACH NOMINEE NAMED ABOVE.
CERTAIN INFORMATION REGARDING
THE BOARD OF DIRECTORS OF THE COMPANY
During fiscal 1999, the Board of Directors of the Company met
seven times and otherwise conducted business by written action. During this
period each director attended 75% or more of the aggregate of the total number
of Board meetings and total number of meetings held by all committees of the
Board on which he served. Board members who are not also officers or employees
of the Company receive a fee of $1,500 for each regular meeting attended, $500
for each special meeting attended and a $3,000 quarterly fee. Non-employee
directors that are members of the Audit Committee or the Compensation Committee
receive fees for their participation on those committees as described below. The
Company does not have a standing Nominating Committee.
AUDIT COMMITTEE
The Board of Directors has an Audit Committee comprising four
independent directors, Messrs. Barry, Goldstein, McDowell and Sweeney, during
fiscal 1999. The principal functions of the Audit Committee are to (i) recommend
to the Board of Directors the independent public accountants to act as the
Company's independent auditors; (ii) discuss with representatives of management
and the independent auditors the scope and procedures used in auditing the
records of the Company; and (iii) review the financial statements of the
Company. The Audit Committee met once during fiscal 1999. Audit Committee
members receive a fee of $500 for each Committee meeting attended on a day other
than a regularly scheduled Board of Directors meeting.
COMPENSATION COMMITTEE
The Company also has a Compensation and Stock Option Committee
comprising four independent directors (the "Compensation Committee") comprised
of Messrs. Barry, Goldstein, McDowell and Sweeney. The principal functions of
the Compensation Committee are to review and recommend compensation for
executive personnel and to administer the Company's stock option plans (other
than the Director Plan (as defined below)). The Compensation Committee met six
times during fiscal 1999. Compensation Committee members receive a fee of $500
for each Committee meeting attended on a day other than a regularly scheduled
Board of Directors meeting.
5
<PAGE> 7
DIRECTOR STOCK OPTION PROGRAM
On May 13, 1997, the Board of Directors of the Company
approved the adoption of the Buffets, Inc. Non-Employee Director Stock Option
Plan (the "Director Plan"). The primary purpose of the Director Plan is to
provide for the availability of stock options to assist in the recruitment of
qualified candidates for directorship positions with the Company and,
secondarily, to compensate non-employee directors for their contributions to the
Company. On May 12, 1998, the shareholders of the Company approved the Director
Plan and authorized an increase in the number of shares available for grant from
25,000 shares to 150,000 shares. Of the 150,000 shares of the Company Common
Stock presently allocated to the Director Plan, 20,000 shares have been utilized
in two Initial Grants (as defined in the Director Plan) of 10,000 shares to each
of the two non-employee directors who joined the Board in fiscal 1997 and 1998.
No grants were made under the Director Plan during fiscal 1999.
If the Buffets, Inc. 2000 Omnibus Stock Plan is approved by
shareholders (see Item 2 below), non-employee directors will continue to
initially receive an option to purchase 10,000 shares upon becoming a director.
In addition each non-employee director would receive an option to purchase 5,000
shares immediately after each Annual Meeting of the Company, including the 2000
Annual Meeting.
OTHER DIRECTOR COMPENSATION
Directors are reimbursed for travel expenses incurred in
connection with Board and committee meetings.
COMPENSATION OF EXECUTIVE OFFICERS
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee establishes the general
compensation policies of the Company and specific compensation for each
executive officer of the Company, and administers the Company's stock option
plans. The Compensation Committee attempts to structure the compensation
packages of the executive officers of the Company to attract and retain persons
of exceptional quality and to include effective incentives to motivate Company
executives to continue the success and growth of the Company.
The Company's executive compensation packages, the terms of
which generally are established early each year, consist of three principal
components: (i) base salaries, (ii) cash bonuses and (iii) stock options. The
Compensation Committee's basic compensation philosophy is that a significant
portion of each executive officer's compensation should be tied directly to the
Company's fortunes. Cash bonuses are indexed to earnings per share, and may
approach or equal each officer's annual base compensation. Stock options with
incremental vesting provide the opportunity for long-term appreciation. The
separate compensation components are described in more detail below.
6
<PAGE> 8
BASE SALARIES
In order to set the base salary for each executive officer in
1999, including the Chief Executive Officer, the Compensation Committee reviewed
the financial performance of the Company over the most recently completed fiscal
year (principally revenues, net income and return on equity) and the
responsibilities and performance of each individual officer. These factors were
given greater consideration in 1999 than industry compensation practices in
general. All factors were evaluated subjectively in the sense that the
Compensation Committee did not attempt as part of its deliberations to
rigorously weight, quantify or otherwise relate them to specific levels of
compensation. The Compensation Committee believes that the inherent flexibility
and administrative simplicity of this approach outweigh the benefits of a more
elaborate quantitative approach.
CASH BONUSES
In 1999, the Compensation Committee established the formulas
for cash bonuses to be paid to each executive officer of the Company, including
the Chief Executive Officer, at the same time it determined base salaries,
utilizing the same criteria discussed above. Each such executive officer's cash
bonus was computed as a percentage of base salary depending on the extent of
increase in the Company's earnings per share compared to the prior fiscal year.
The Compensation Committee selected a percentage for each such executive officer
intended to result in bonus compensation which, if the Company met certain
identified profit objectives, would constitute a significant portion of such
executive officer's total cash compensation for the year, ranging from 20% to
75% of base salary depending on position. The Compensation Committee selected
higher percentages for certain senior executive officers, reflecting their
greater ability to influence Company results, and in order to ensure that a
greater portion of such officers' total cash compensation was exposed to the
risk of Company performance. The Chief Executive Officer received cash bonuses
equal to 27% of his base salary in fiscal 1999 out of a potential bonus of 60%.
The Compensation Committee subsequently awarded additional discretionary bonuses
effective as of the close of the fiscal year for officers other than the
Company's five most highly compensated officers.
EMPLOYEE STOCK OPTION PROGRAM
The Compensation Committee believes that compensation through
the Company's stock option program, which provides the opportunity for stock
ownership (and significant long-term appreciation in value), should represent
the most significant component of executive officer potential compensation. The
Compensation Committee believes that the use of such a stock option program is
the most effective means to align the long-term interests of its executive
officers with those of the Company's shareholders.
The Company's stock option plans authorize the Compensation
Committee to award key employees, including the Chief Executive Officer and the
other executive officers, options to purchase Common Stock of the Company. The
stock option plans provide the Compensation Committee with broad discretion to
determine the recipients of such awards and the terms of the
7
<PAGE> 9
options awarded. Historically, the Compensation Committee exercised this
discretion by implementing a program of annual stock option grants to Company
employees. This program consisted of annual grants of specified numbers of
options to employees in specified job positions. In 1999 this ranged from 500
options to restaurant level and certain administrative employees to 65,000
options to the Chief Executive Officer and the Vice Chairman, 50,000 options to
the President, 30,000 options to the Executive Vice President of Operations,
20,000 options to the Executive Vice President of Marketing, 15,000 options to
the Executive Vice President and Chief Administrative Officer, 10,000 options to
each other Executive Vice President, 7,500 options to each Senior Vice
President, and 5,000 options to each Vice President of the Company. The
Compensation Committee established the number of options to be granted to each
participating employee after considering the same factors considered in setting
base salary and bonuses (other than compensation studies), as well as additional
factors such as the number of options available under the Company's stock option
plans and the historical performance of the Company's stock. The number
established for various levels of participating employees generally increases
with their authority and responsibility for Company affairs. Grants were made at
the time a person first qualifies for options under the program (for example,
when promoted to a new position) and then again annually in each succeeding
year. Employees could receive two option grants in any fiscal year in which they
have been promoted. The annual stock option grant program is subject to change
from time to time by the Compensation Committee. As of January 1, 2000, the
Compensation Committee discontinued its practice of making regular grants based
principally upon position, and instead determined that until otherwise modified,
future grants will be discretionary based upon an employee's position and
performance with the Company.
In addition to the annual stock option grant program, the
Compensation Committee has made in the past, and may make in the future, further
stock option grants to employees, including executive officers. Additional
information about stock option awards made to each executive officer of the
Company named in the Summary Compensation Table is set forth in the tables
below.
The Compensation Committee believes that its approach to
compensation, as represented by the different components of each executive
officer's compensation package, and the resulting levels of compensation paid to
the Company's executive officers, continues to be appropriate.
OTHER OFFICER COMPENSATION
The Company occasionally defrays moving expenses of executive
officers (as well as other management employees) when such a move is made at the
Company's request. The Company provides certain executive officers (including
the Chief Executive Officer) with automobile allowances and pays certain travel
expenses. The Compensation Committee considers such payments, which are
administered by the Company, to be incidental to the primary compensation
objectives described above, and the amounts of such payments are for the most
part unrelated to Company performance.
The Company maintains certain broad based employee benefit
plans in which its executive officers are permitted to participate, including
retirement, term life, and health insurance
8
<PAGE> 10
plans. It also subsidizes the expense of annual executive health screenings for
each executive officer that elects to participate in this program. The Company's
retirement plan is a 401(k) plan which allows certain employees meeting
length-of-service and other eligibility criteria to make pre-tax contributions,
and in which the Company has the discretionary option to match employee
contributions in an amount less than or equal to the employee's contribution up
to a maximum of 4% of the employee's base salary. The matching contributions
made by the Company to each named executive officers' 401(k) plan accounts is
reflected in the "Summary Compensation Table" accompanying this report.
POLICY AS TO NONDEDUCTIBLE COMPENSATION
Internal Revenue Code Section 162(m) limits the deductibility of
compensation over $1,000,000 paid by a company to an executive officer. Other
than limiting the maximum number of shares that may be awarded to any employee
under the 1995 Stock Option Plan and under the proposed 2000 Omnibus Stock Plan
in any calendar year to 100,000 shares, the Compensation Committee currently
does not have a policy with respect to Section 162(m) because it is unlikely
that such limit will apply to compensation paid by the Company to any of the
Company's executive officers for at least the current year, unless payments are
required pursuant to management agreements with certain executive officers.
Walter R. Barry, Jr.
Marvin W. Goldstein
Alan S. McDowell
Michael T. Sweeney
9
<PAGE> 11
SUMMARY COMPENSATION TABLE
The following Summary Compensation Table sets forth the cash and
noncash compensation for each of the last three fiscal years awarded to or
earned by the Chief Executive Officer and each of the four other highest paid
executive officers of the Company at the end of fiscal 1999. Amounts shown
indicate compensation paid for service to the Company in all capacities.
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ------------
OTHER SHARES
NAME AND PRINCIPAL ANNUAL UNDERLYING ALL OTHER
POSITION(S) YEAR SALARY BONUS COMPENSATION(1) OPTIONS (#) COMPENSATION
- -------------------------- ---- ------ ----- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen, Chairman of the 1999 $336,724 $ 90,000 -- 65,000
Board and Chief Executive Officer 1998 250,000 117,000 -- 65,000
1997 250,000 0 -- 115,000
C. Dennis Scott, Vice Chairman 1999 346,153 90,000 -- 65,000
of the Board 1998 250,000 117,000 -- 65,000
1997 250,000 0 -- 115,000
Kerry A. Kramp, President 1999 273,942(3) 57,000 -- 50,000 $ 1,857(4)
and Chief Operating Officer(2) 1998 246,635(3) 64,375 -- 50,000 2,532(4)
1997 225,000(3) 0 -- 87,500 16,706(4)
David Goronkin, Executive 1999 198,846 31,125 -- 30,000
Vice President of Operations 1998 170,000 44,375 -- 25,750
1997 145,654 0 -- 20,000
Glenn D. Drasher, Executive 1999 184,519(6) 27,750 -- 20,000 1,216(7)
Vice President of Marketing(5) 1998 171,923(6) 25,825 -- 25,000 1,284(7)
1997 141,144 0 -- 30,000
</TABLE>
- --------------------------------
(1) The Company provides standard employee medical, dental, term life and
disability coverage to its executive officers, and subsidizes the
expense of an annual executive health screening for each officer. It
also provides company car and travel benefits to certain officers. The
value of all such "Other Annual Compensation" is less than the minimum
of $50,000 or 10% of the total cash compensation for each person
reported above.
(2) Position held since August 1998.
(3) Annual compensation for 1997, 1998 and 1999 includes amounts deferred
under the Company's 401(k) retirement savings plan.
(4) Includes $1,857 in 1999, $2,532 in 1998 and $1,212 in 1997 in Company
matching contributions to the 401(k) retirement savings plan. Includes
$15,494 for relocation expenses paid to Mr. Kramp in 1997.
(5) Position held since January 1997.
(6) Annual compensation for 1998 and 1999 include amounts deferred under
the Company's 401(k) retirement savings plan.
(7) Includes $1,216 in 1999 and $1,284 in 1998 in Company matching
contributions to the 401(k) retirement savings plan.
10
<PAGE> 12
OPTIONS GRANTED IN FISCAL 1999
The following table sets forth, as to each executive officer
named in the Summary Compensation Table, certain information with respect to
stock options granted during the fiscal year ended December 29, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- ------------------------------------------------------------------------------------------ POTENTIAL REALIZABLE VALUE AT
PERCENT OF TOTAL ASSUMED ANNUAL
NUMBER OF SHARES OPTIONS GRANTED TO EXERCISE RATES OF STOCK PRICE
UNDERLYING EMPLOYEES IN PRICE EXPIRATION APPRECIATION FOR OPTION TERM (1)
NAME OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- --------------- ----------- ------ ---- ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen 65,000 5.90% $10.81 2/22/09 $441,995 $1,120,102
C. Dennis Scott 65,000 5.90 10.81 2/22/09 441,995 1,120,102
Kerry A. Kramp 50,000 4.54 10.81 2/22/09 339,996 861,617
David Goronkin 30,000 2.72 10.81 2/22/09 203,998 516,970
Glenn D. Drasher 20,000 1.82 10.81 2/22/09 135,998 344,647
</TABLE>
- -----------------------------
(1) The 5% and 10% assumed rates of appreciation are mandated by the rules
of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of the future Common Stock price.
These options to executive officers were granted under the
Company's 1995 Stock Option Plan as discussed in "COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION--EMPLOYEE STOCK OPTION PROGRAM" set forth above. Such
options have ten year terms, have exercise prices per share equal to fair market
value, as determined under the plans, of a share of Common Stock on the
effective date of grant, and are exercisable in 50% increments on the third
anniversary date after the date of grant and 25% on the fourth and fifth date
after the date of grant. Such options are exercisable only while the named
executive officer is an employee of the Company or, if such officer has been
continuously employed by the Company (or a parent or subsidiary thereof) for at
least twelve full calendar months following the grant of the option, during a
limited period after cessation of such officer's employment, the duration of
which period ranges from three months to one year depending on the timing of and
reason for such cessation. Such options expire when they cease to become
exercisable. Such options are automatically accelerated (and become exercisable
in full) in the event of a friendly or hostile "change in control" of the
Company. A "change in control" will result if certain changes in the Board of
Directors, certain concentrations of voting power or certain mergers, sales of
corporate assets or similar transactions occur. The grants to each named
executive officer are conditioned upon such officer agreeing not to compete with
the Company during such officer's employment and for a period of two years
thereafter.
11
<PAGE> 13
ADDITIONAL INFORMATION ABOUT OPTIONS
The following table sets forth, as to each executive officer
named in the Summary Compensation Table, certain information with respect to
stock options exercised during the last fiscal year and unexercised options held
as of the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Shares Unexercised Options at Fiscal In The Money Options at
Acquired Value Year-End (#) Fiscal Year-End (2)
on Realized (1) ------------------------------ ------------------------------
Name Exercise (#) $ Exercisable Unexercisable Exercisable Unexercisable
-------- ------------ ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Roe H. Hatlen 0 $ 0 568,000 202,000 $450,375 $78,063
C. Dennis Scott 0 0 166,660 218,740 66,261 80,446
Kerry A. Kramp 0 0 159,450 195,050 197,762 53,209
David Goronkin 0 0 51,550 78,450 13,125 8,750
Glenn D. Drasher 0 0 17,000 58,000 25,500 38,250
</TABLE>
- ---------------------------
(1) Market value of underlying securities on date of exercise minus the
exercise price.
(2) Market value of underlying securities at year-end minus the exercise
price.
MANAGEMENT AGREEMENTS
As of February 15, 2000, the Company entered into Management
Agreements (the "Agreements") with each of the following named executive
officers: Roe H. Hatlen, C. Dennis Scott, Kerry A. Kramp, and David Goronkin.
The Agreements are operative only upon the occurrence of certain events relating
to a change in control of the Company. Absent a change in control, the
Agreements do not require the Company to retain the executive officers or to pay
them any specified level of compensation or benefits.
Each Agreement provides that if, within three years after a
change in control, the executive officer's employment is terminated by the
Company other than (i) for cause, (ii) on account of the death, disability or
retirement of the executive, or (iii) voluntarily by the executive (other than
voluntary terminations following events that constitute a "Constructive
Involuntary Termination" (as defined in the Agreements, and including
compensation reductions, demotions, relocations and excessive travel)), the
executive officer is entitled to receive a lump sum severance payment.
The amount of the lump sum severance payment is equal to three times the sum
of (A) the executive officer's then-current annual base salary and (B) the
greater of (i) the executive officer's annualized then-current year's bonus or
(ii) the executive officer's annual bonus in the year prior to the then-current
year. The Agreements also allow the executive officer to continue his
participation in certain insurance and other benefit plans of the Company for
three years following
12
<PAGE> 14
any such termination. If a change in control of the Company occurred and
resulted in the termination of an executive officer, giving rise to lump sum
severance payments under these Agreements as of March 1, 2000, the approximate
amounts payable to the executive officers would be as follows: Mr. Hatlen
$1,320,000, Mr. Scott $1,320,000, Mr. Kramp $1,146,000 and Mr. Goronkin
$813,375. The actual amount of the payments may be reduced in accordance with
contractual provisions tied to tax-related circumstances.
13
<PAGE> 15
PERFORMANCE GRAPH
The graph below compares the cumulative total shareholder return, assuming
the reinvestment of all dividends, on the Common Stock of the Company for the
last five fiscal years with the cumulative total return on the Standard & Poor's
500 Stock Index and the Standard & Poor's Restaurant Index for the same periods.
[LINE GRAPH]
Fiscal Year
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
- --------------------------- ----------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
S&P 500 INDEX $100 $137.58 $169.17 $225.60 $290.89 $351.12
- --------------------------- ----------- ------------- ------------- -------------- ------------- -------------
BUFFETS, INC. 100 139.24 92.41 94.94 120.89 101.27
- --------------------------- ----------- ------------- ------------- -------------- ------------- -------------
RESTAURANTS 100 149.98 148.18 159.11 249.35 253.66
- --------------------------- ----------- ------------- ------------- -------------- ------------- -------------
</TABLE>
14
<PAGE> 16
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
SUMMARY OF OWNERSHIP
The following table shows ownership of the Common Stock of the Company
as of March 13, 2000 (unless otherwise indicated), by each person who, to the
knowledge of the Company, owned beneficially more than five percent of such
stock, by each director, by each executive officer named in the Summary
Compensation Table and by all directors and executive officers as a group.
Shares are held directly with sole investment and voting power unless otherwise
indicated.
<TABLE>
<CAPTION>
APPROXIMATE
NAME AND ADDRESS OF INDIVIDUAL OR IDENTITY OF GROUP NUMBER OF SHARES PERCENT
- --------------------------------------------------------------------------------------
<S> <C> <C>
Roe H. Hatlen 1,732,700 (1) 4.1%
C. Dennis Scott 424,730 (2) 1.0
Kerry A. Kramp 194,956 (3) *
David Goronkin 55,369 (4) *
Glenn D. Drasher 25,175 (5) *
Walter R. Barry, Jr 49,124 (6) *
Marvin W. Goldstein 20,000 (7) *
Alan S. McDowell 262,180 (8) *
Michael T. Sweeney 10,500 (9) *
Massachusetts Financial Services Company 4,315,529(10) 10.4
500 Boylston Street
Boston, MA 02116
MFS Series Trust II - MFS Emerging
Growth Fund (10)
500 Boylston Street
Boston, MA 02116
</TABLE>
15
<PAGE> 17
<TABLE>
<CAPTION>
APPROXIMATE
NAME AND ADDRESS OF INDIVIDUAL OR IDENTITY OF GROUP NUMBER OF SHARES PERCENT
- -------------------------------------------------------------------------------------
<S> <C> <C>
Capital Group International, Inc. 3,136,100(11) 7.5
11100 Santa Monica Boulevard
Los Angeles, CA 90025
Capital Guardian Trust Company (11)
333 South Hope Street
Los Angeles, CA 90071
All directors and executive officers as a group (14 persons) 3,463,792(12) 8.1
</TABLE>
- --------------------------------
* Less than one percent.
(1) Includes 130,288 shares owned of record by certain members of Mr.
Hatlen's family and 93,744 shares owned of record by Mr. Hatlen's wife
as trustee for their children, as to all of which Mr. Hatlen disclaims
beneficial ownership, 16,000 shares owned of record by the Hatlen
Foundation (of which Mr. Hatlen is an officer), 150,000 shares owned of
record by Eventyr Investments Limited Partnership (of which Mr. Hatlen
is the sole general partner and a limited partner) and 571,000 shares
subject to stock options exercisable within 60 days.
(2) Includes 178,360 shares subject to stock options exercisable within 60
days.
(3) Includes 157 shares owned of record by Mr. Kramp as custodian for his
nephew and nieces, and 162,960 shares subject to stock options
exercisable within 60 days.
(4) Includes 51,550 shares subject to stock options exercisable within 60
days.
(5) Includes 25,000 shares subject to stock options exercisable within 60
days.
(6) Includes 9,000 shares subject to stock options exercisable within 60
days.
(7) Includes 10,000 shares subject to stock options exercisable within 60
days.
(8) Includes 19,680 shares owned of record by Mr. McDowell's daughter and
son and 6,500 shares owned of record by the McDowell Foundation (of
which Mr. McDowell is an officer), as to all of which Mr. McDowell
disclaims beneficial ownership.
16
<PAGE> 18
(9) Includes 500 shares owned of record by the Sweeney Family Educational
Trust, with respect to which Mr. Sweeney disclaims beneficial
ownership, and 10,000 shares subject to stock options exercisable
within 60 days.
(10) Massachusetts Financial Services Company has sole power to vote
3,897,638 of such shares and sole power to dispose of all of such
shares. These shares include 2,989,750 shares, which represent
approximately 7.2% of the Company's outstanding Common Stock, over
which MFS Series Trust II - MFS Emerging Growth Fund exercises voting
and/or dispositive power. The information relating to the beneficial
ownership of Massachusetts Financial Services Company and MFS Series
Trust II - MFS Emerging Growth Fund has been derived from the Schedule
13G/A dated February 18, 2000 filed by Massachusetts Financial Services
Company and MFS Series Trust II - MFS Emerging Growth Fund with the
Securities and Exchange Commission. The number of shares beneficially
owned by Massachusetts Financial Services Company and MFS Series Trust
II - MFS Emerging Growth Fund, respectively, is stated as of December
31, 1999.
(11) Capital Group International, Inc. is the parent holding company of a
group of investment management companies that, in the aggregate, have
the sole power to vote 2,727,600 of their reported shares and sole
power to dispose of all of their reported shares. Capital Group
International, Inc. does not itself exercise investment or voting power
over any of these shares but may be deemed to beneficially own these
shares by virtue of Rule 13d-3 under the Securities Exchange Act of
1934. These shares include 2,276,000 shares, which represent
approximately 5.5% of the Company's outstanding Common Stock, over
which Capital Guardian Trust Company exercises voting and/or
dispositive power. Capital Group International, Inc. and Capital
Guardian Trust Company disclaim beneficial ownership with respect to
all of their respective shares. The information relating to the
beneficial ownership of Capital Group International, Inc. and Capital
Guardian Trust Company has been derived from the Schedule 13G dated
February 10, 2000 filed by Capital Group International, Inc., Capital
Guardian Trust Company, Capital International Limited and Capital
International S.A. with the Securities and Exchange Commission. The
number of shares beneficially owned by Capital Group International,
Inc. and Capital Guardian Trust Company, respectively, is stated as of
December 31, 1999.
(12) Includes an aggregate of 1,316,210 shares subject to stock options
exercisable within 60 days held by all directors and executive officers
as a group.
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<PAGE> 19
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than ten
percent of the Company's Common Stock, to file periodic reports of ownership and
changes in ownership with the Securities and Exchange Commission. Based solely
on its review of the copies of such reports received by it and of written
representations from certain reporting persons regarding filings required to be
made by such persons, the Company believes that, except as set forth below, all
persons required under Section 16(a) to file beneficial ownership reports with
respect to the Company's Common Stock during the fiscal year ended December 29,
1999 or prior years complied with all such reporting requirements. Roe H.
Hatlen, CEO and Chairman, filed an amended Form 4 in November 1999; Kerry A.
Kramp, President, COO and a Director, filed an amended Form 3 in November of
1999; and Marguerite C. Nesset, Vice President of Accounting and Controller,
filed an amended Form 5 in November 1999, in each case to correct errors
contained in previously filed reports.
CERTAIN TRANSACTIONS
Since 1995, the Company has made charitable contributions aggregating
$432,192 to Minnesota Life College ("MLC"), a Minnesota nonprofit corporation.
Of this sum, $50,000 was paid in 1999. MLC is organized and operated to help
young adults with learning disabilities make the transition to independent
living. Roe H. Hatlen, the Chairman and Chief Executive Officer of the Company,
is a founder and a director of MLC; his wife, Beverly T. Hatlen, is a founder
and Chair of the Board; Marguerite C. Nesset, the Vice President of Accounting
and Controller of the Company, is the Treasurer and a director. The Company is
entitled to appoint two directors of MLC. The directors currently appointed by
the Company are Mr. Hatlen and Ms. Nesset.
Kerry A. Kramp and K. Michael Shrader, the Company's President and
Chief Operating Officer and Executive Vice President of Human Resources and
Training, respectively, were indebted to the Company during 1999 in the maximum
amounts of $169,968 and $61,997, respectively. As of March 17, 2000, the amounts
outstanding under such loans were $165,320 and $45,550, respectively. Mr.
Kramp's loan is evidenced by a promissory note in favor of the Company dated
December 31, 1996 in the principal sum of $173,904 and is secured by the pledge
by Mr. Kramp of certain Company Common Stock and stock options. The promissory
note includes loans previously made to Mr. Kramp by HomeTown Buffet, Inc. under
promissory notes dated August 23, 1993 and April 13, 1995, as well as $86,400
advanced to Mr. Kramp by the Company in 1996. Interest accrues on the unpaid
principal balance of Mr. Kramp's loan at the rate of 8% per annum. Mr. Shrader's
loan is evidenced by a promissory note in favor of HomeTown Buffet, Inc. dated
August 7, 1996 in the principal sum of $65,000 and is secured by the pledge by
Mr. Shrader of certain Company Common Stock and stock options. Interest accrues
on the unpaid principal balance of Mr. Shrader's loan at the prevailing prime
rate of USBank of Minneapolis plus 1% per annum. All of the amounts advanced to
Messrs. Kramp and Shrader in 1996 were in connection with, or in anticipation
of, the relocation of such persons to Minneapolis.
18
<PAGE> 20
ITEM 2: PROPOSAL TO APPROVE THE BUFFETS, INC.
2000 OMNIBUS STOCK PLAN
INTRODUCTION
Effective February 15, 2000, the Company's Board of Directors
authorized the adoption of the Buffets, Inc. 2000 Omnibus Stock Plan (the "2000
Plan"), which is attached as Appendix A to this Proxy Statement. At that time,
the Board directed that the Company submit the Plan to the shareholders of the
Company for approval at the next annual meeting of shareholders. If the
shareholders approve the 2000 Plan, it will be effective as of February 15,
2000.
The 1999 Stock Option Plan, for which shareholder approval was not
required, became effective upon its approval by the Board of Directors on
December 5, 1999. The Board adopted the 1999 Stock Option Plan to allow for a
sufficient number of Company shares to be available for granting options to key
employees. Officers and directors of the Company are not eligible to participate
in the 1999 Stock Option Plan. There are 400,000 shares authorized under this
plan. To date, no shares have been issued, 315,200 shares are subject to
outstanding options, and 84,800 shares remain available for issuance.
On May 9, 1995, the shareholders of the Company approved the Company's
1995 Stock Option Plan. Shareholders at the 1998 Annual Meeting of shareholders
approved amendments to increase the number of shares authorized under this plan
from 1,000,000 to 2,500,000. To date, approximately 66,057 shares have been
issued, 2,396,392 shares are subject to outstanding options, and 37,051 shares
remain available for issuance.
Effective May 13, 1997, the Company's Board of Directors approved the
adoption of the Company's Non-Employee Director Stock Option Plan. Effective
February 18, 1998, the Board authorized an increase in the number of shares that
may be made subject to options granted under this plan to 150,000. Shareholders
approved this plan at the 1998 Annual Meeting of shareholders. To date, no
shares have been issued, 20,000 shares are subject to outstanding options, and
130,000 shares remain available for issuance.
In the aggregate, including prior stock option plans, there were
approximately 5,785,150 shares subject to outstanding options or available for
issuance constitution 13.9% of total outstanding shares as of March 22, 2000. In
the event this proposal is approved by the shareholders, there will be
approximately 7,785,150 shares subject to outstanding options or available for
issuance constitution 18.7% of the total outstanding shares as of March 22,
2000.
The Compensation Committee of the Board of Directors and the Board of
Directors continue to believe that stock-based compensation programs are a key
element in achieving the Company's continued financial and operational success.
The Company's compensation programs have been
19
<PAGE> 21
designed to motivate representatives of the Company to work as a team to achieve
the corporate goal of maximizing shareholder return.
PURPOSE
The purpose of the 2000 Plan is to motivate key employees to produce a
superior return to the shareholders of the Company by offering eligible
personnel an opportunity to realize stock appreciation, by facilitating their
stock ownership, and by rewarding them for achieving a high level of corporate
financial performance. In addition, the 2000 Plan promotes the interests of the
Company and its shareholders by providing directors of the Company who are not
employees of the Company (the "Outside Directors") with an opportunity to
acquire a proprietary interest in the Company, to compensate Outside Directors
for their contributions to the Company, and to aid in attracting and retaining
Outside Directors. Options granted under the 2000 Plan to Outside Directors are
nonstatutory stock options that do not meet the requirements of Section 422 of
the Internal Revenue Code of 1986.
ADMINISTRATION
The 2000 Plan is administered by a Compensation Committee (the
"Committee"). The Committee has the authority to adopt, revise and waive rules
relating to the 2000 Plan and to determine the timing and identity of
participants, the amount of any awards, and other terms and conditions of
awards. The Committee may delegate its responsibilities under the 2000 Plan to
members of management of the Company or to others with respect to the selection
and grants of awards to employees of the Company who are not deemed to be
officers, directors or 10% shareholders of the Company under applicable Federal
securities laws. Certain grants of options and the amount and nature of the
awards to be granted to Outside Directors are automatic. Because the Plan has
two basic components, Outside Director options and discretionary options for
employees and consultants, the terms of which are substantially different, these
two separate components of the 2000 Plan are described separately below. The
descriptions set forth below are in all respects qualified by the terms of the
2000 Plan.
The regulations under Section 162(m) of the Internal Revenue Code of
1986 require that the directors who serve as members of the Committee must be
"outside directors." The 2000 Plan provides that directors serving on the
Committee may be "outside directors" within the meaning of Section 162(m). This
limitation would exclude from the Committee directors who are (i) current
employees of the Company or an affiliate, (ii) former employees of the Company
or an affiliate receiving compensation for past services (other than benefits
under a tax-qualified pension option plan), (iii) current and former officers of
the Company or an affiliate, (iv) directors currently receiving direct or
indirect remuneration from the Company or an affiliate in any capacity (other
than as a director), and (v) any other person who is otherwise considered an
"outside director" for purposes of Section 162(m). The definition of an "outside
director" under Section 162(m) is generally narrower than the definition of a
"non-employee director" under Rule 16b-3 of the Securities Exchange Act.
20
<PAGE> 22
A. AWARDS TO EMPLOYEES AND CONSULTANTS
ELIGIBILITY AND NUMBER OF SHARES
All employees of the Company and its affiliates are eligible to receive
awards under the 2000 Plan at the discretion of the Committee. Nonstatutory
stock options under the 2000 Plan also may be awarded by the Committee to
individuals or entities that are not employees but who provide services to the
Company or its affiliates in capacities such as advisers, directors, and
consultants. The Company and its affiliates presently have approximately 25,000
total employees, any or all of whom may be considered to be "key employees" in
the discretion of the Committee. However, subject to the discretion of the
Committee, approximately 1,900 employees are presently considered to be "key
employees" eligible to receive awards under the 2000 Plan.
The total number of shares of Company Common Stock available for
distribution under the 2000 Plan is 2,000,000 (subject to adjustment for future
stock splits, stock dividends and similar changes in the capitalization of the
Company). No more than 100,000 shares pursuant to a stock option or a stock
appreciation right may be granted to any one individual under the 2000 Plan in
any calendar year. Subject to this limitation, there is no limit on the number
of shares in respect of which awards may be granted by the Committee to any
person.
The 2000 Plan provides that all awards are subject to agreements
containing the terms and conditions of the awards. Such agreements will be
entered into by the recipients of the awards and the Company on or after the
time the awards are granted and are subject to amendment, including unilateral
amendment by the Company unless such amendments are determined by the Committee
to be materially adverse to the participant and are not required as a matter of
law. Any shares of Company Common Stock subject to awards under the 2000 Plan
which are not used because the terms and conditions of the awards are not met
may be reallocated as though they had not previously been awarded, unless such
shares were used to calculate the value of stock appreciation rights which have
been exercised.
TYPES OF AWARDS
The types of awards that may be granted under the 2000 Plan include
restricted and unrestricted stock, incentive and nonstatutory stock options,
stock appreciation rights, performance units, and other stock-based awards.
Subject to the restrictions described in this Proxy Statement with respect to
incentive stock options, such awards will be exercisable by the participants at
such times as are determined by the Committee. Except as noted below, during the
lifetime of a person to whom an award is granted, only that person (or that
person's legal representative) may exercise an option or stock appreciation
right, or receive payment with respect to performance units or any other award.
No award may be sold, assigned, transferred, exchanged or otherwise encumbered
other than pursuant to a qualified domestic relations order. However, the
Committee may provide
21
<PAGE> 23
(i) that an award shall be transferable to a successor in the event of a
participant's death, or (ii) that an award (other than incentive stock options)
may be transferable to members of the participant's immediate family 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 the participant does not receive
any consideration for the transfer.
In addition to the general characteristics of all of the awards
described in this Proxy Statement, the basic characteristics of each type of
award that may be granted to an employee (and in some cases, a consultant,
director, or other advisor) under the 2000 Plan are as follows:
RESTRICTED AND UNRESTRICTED STOCK, AND OTHER STOCK-BASED
AWARDS
The Committee is authorized to grant, either alone or in conjunction
with other awards, stock and stock-based awards. The Committee shall determine
the persons to whom such awards are made, the timing and amount of such awards,
and all other terms and conditions. Company Common Stock granted to participants
may be unrestricted or may contain such restrictions, including provisions
requiring forfeiture and imposing restrictions upon stock transfer, as the
Committee may determine. Unless forfeited, the recipient of restricted Common
Stock will have all other rights of a shareholder, including without limitation,
voting and dividend rights. The 2000 Plan provides that no more than 100,0000
shares in the form of restricted stock and 25,000 shares in the form of
unrestricted stock can be issued under the 2000 Plan.
INCENTIVE AND NONSTATUTORY STOCK OPTIONS
Both incentive stock options and nonstatutory stock options may be
granted to participants at such exercise prices as the Committee may determine
but not less than 100% of the fair market value (as defined in the 2000 Plan) of
the underlying stock as of the date the option is granted. Stock options may be
granted and exercised at such times as the Committee may determine, except that
unless applicable Federal tax laws are modified, (i) no incentive stock options
may be granted more than 10 years after the effective date of the 2000 Plan,
(ii) an incentive stock option shall not be exercisable more than 10 years after
the date of grant and (iii) the aggregate fair market value of the shares of
Company Common Stock with respect to which incentive stock options held by an
employee under the 2000 Plan and any other plan of the Company or any affiliate
may first become exercisable in any calendar year may not exceed $100,000.
Additional restrictions apply to an incentive stock option granted to an
individual who beneficially owns 10% or more of the outstanding shares of the
Company.
The exercise price of any outstanding stock option award may not be
adjusted or amended, including by replacement grant or other means without the
prior approval of the shareholders of the company.
22
<PAGE> 24
The purchase price for stock purchased upon the exercise of the options
may be payable in cash, in stock having a fair market value on the date the
option is exercised equal to the option price of the stock being purchased or in
a combination of cash and stock, as determined by the Committee. The Committee
may permit optionees to simultaneously exercise options and sell the stock
purchased upon such exercise pursuant to brokerage or similar relationships and
use the sale proceeds to pay the purchase price. The Committee may provide, at
or after the grant of a stock option, that a 2000 Plan participant who
surrenders shares of stock in payment of an option shall be granted a new
incentive or nonstatutory stock option covering a number of shares equal to the
number of shares so surrendered.
In addition, options may be granted under the 2000 Plan to employees of
entities acquired by the Company in substitution of options previously granted
to them by the acquired entity.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS
The value of a stock appreciation right granted to a participant is
determined by the appreciation in Company Common Stock, subject to any
limitations upon the amount or percentage of total appreciation that the
Committee may determine at the time the right is granted. The participant
receives all or a portion of the amount by which the fair market value of a
specified number of shares, as of the date the stock appreciation right is
exercised, exceeds a price specified by the Committee at the time the right is
granted. The price specified by the Committee must be at least 100% of the fair
market value of the specified number of shares of Company Common Stock to which
the right relates determined as of the date the stock appreciation right is
granted. No stock appreciation right may be exercised less than six months from
the date it is granted unless the participant dies or becomes disabled.
Performance units entitle the participant to payment in amounts determined by
the Committee based upon the achievement of specified performance targets during
a specified term. Payments with respect to stock appreciation rights and
performance units may be paid in cash, shares of Company Common Stock or a
combination of cash and shares as determined by the Committee.
ACCELERATION OF AWARDS, LAPSE OF RESTRICTIONS, FORFEITURE
The Committee may provide for the lapse of restrictions on restricted
stock or other awards, accelerated exercisability of options, stock appreciation
rights and other awards or acceleration of the term with respect to which the
achievement of performance targets for performance units is determined in the
event of a change in control of the Company, other fundamental changes in the
corporate structure of the Company, the death of the participant or such other
events as the Committee may determine. The Committee may provide that certain
awards may be exercised in certain events after the termination of employment or
death of the participant.
The Committee may condition a grant upon the participant's agreement
that in the event of certain occurrences, which may include a participant's
competition with, unauthorized disclosure of confidential information of, or
violation of the applicable business ethics policy or business policy
23
<PAGE> 25
of the Company or any of its affiliates, the awards paid to the participant
within six months prior to the termination of employment of the participant (or
their economic value) may be subject to forfeiture at the Committee's option.
ADJUSTMENTS, MODIFICATIONS, TERMINATION
The 2000 Plan gives the Committee discretion to adjust the kind and
number of shares available for awards or subject to outstanding awards, the
option price of outstanding options, and performance targets for, and payments
under, outstanding awards of performance units in the event of mergers,
recapitalizations, stock dividends, stock splits or other relevant changes.
Adjustments in performance targets and payments on performance units are also
permitted upon the occurrence of such other events as may be specified by the
Committee, which may include changes in accounting practices of the Company or
changes in the participant's title or employment responsibilities. The 2000 Plan
also gives the Board the right to terminate, suspend or modify the 2000 Plan,
except that amendments to the 2000 Plan are subject to shareholder approval if
needed to comply with the incentive stock option provisions of Federal tax laws.
Under the 2000 Plan, the Committee may cancel outstanding options and stock
appreciation rights generally in exchange for cash payments to the participants
in the event of certain dissolutions, liquidations, mergers, statutory share
exchanges or other similar events involving the Company.
AGREEMENTS
The 2000 Plan provides that all options granted under the Plan be
subject to agreements governing the terms and conditions of the awards. Such
agreements will be entered into by the Outside Directors and the Company on or
after the time the options are granted. Any shares of Common Stock subject to an
option under the 2000 Plan that are not used because the terms and conditions of
the option are not met may be reallocated under the Plan as though they had not
previously been awarded.
B. OUTSIDE DIRECTOR OPTIONS
TYPES OF AWARDS
There are two types of automatic option grants under the terms of the
2000 Plan: Initial Outside Director Options, and Annual Outside Director
Options.
INITIAL OUTSIDE DIRECTOR OPTIONS
Each Outside Director first elected or appointed to the Board on or
after May 9, 2000 is entitled to receive a single grant of an option, on the
date such director first becomes a director, to purchase 10,000 shares of Common
Stock, which can occur under either the 2000 Plan or the Company's Non-Employee
Director Plan.
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<PAGE> 26
Subject to the prior expiration of an Initial Outside Director Option
as described below, these options vest and become exercisable immediately on the
date of grant. In the event of a change in control of the Company (as defined in
the 2000 Plan), the death or permanent disability of an Outside Director, any
Initial Outside Director Option held by such individual or his or her legal
representative that was not previously exercisable shall become immediately
exercisable in full.
ANNUAL OUTSIDE DIRECTORS OPTIONS
For the 2000 Annual Meeting of shareholders and for each Annual Meeting
of shareholders thereafter during the term of the 2000 Plan, each Outside
Director serving as an Outside Director of the Company immediately following
such Annual Meeting shall be granted, by virtue of serving as an Outside
Director of the Company, a nonstatutory stock option to purchase 5,000 shares of
Common Stock under either the 2000 Plan or the Company's Non-Employee Director
Plan (each an "Annual Outside Director Option"). Such Annual Outside Directors
Options shall be deemed to be granted to each Outside Director immediately after
such Annual Meeting and shall be granted regardless of whether or not such
Outside Director previously received, or simultaneously receives, an Initial
Outside Director Option. Initial Outside Director Options and Annual Outside
Director Options together are sometimes referred to as "Outside Director
Options."
Annual Outside Director Options shall vest and become exercisable as
provided in each agreement between the Company or an affiliate and the Outside
Director. Each such option, to the extent exercisable, shall be exercisable in
whole or in part.
In the event of a change in control of the Company, the death or
permanent disability of an Outside Director, any Annual Outside Director Options
held by such individual or his or her legal representative that was not
previously exercisable shall become immediately exercisable in full.
TERMINATION OF OUTSIDE DIRECTOR OPTIONS
Each Outside Director Option granted pursuant to the 2000 Plan and all
rights to purchase Common Stock thereunder shall terminate on the earliest of:
(i) ten years after the date such option is granted;
(ii) the expiration of the period specified in the agreement
after the death or permanent disability of an Outside Director;
(iii) February 14, 2001, if the shareholders of the Company
have not approved the 2000 Plan as of or before that date at a duly held
shareholders' meeting;
(iv) the date, if any, fixed for cancellation pursuant to the
2000 Plan (e.g. in the event of a dissolution, liquidation or merger, etc.); or
25
<PAGE> 27
(v) ninety days after the date the Outside Director ceases to
be a director of the Company; provided, however, that the option shall be
exercisable during this 90-day period only to the extent that the option was
exercisable as of the date the person ceases to be an Outside Director unless
the cessation results from the director's death or permanent disability.
Notwithstanding the preceding sentence, if an Outside Director who resigns or
whose term expires then becomes a consultant or employee of the Company within
ninety days of such resignation or term expiration, the Outside Director Options
of such person shall continue in full force and effect.
In no event shall such 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.
PURCHASE PRICE AND EXERCISE OF OUTSIDE DIRECTOR OPTIONS
All Outside Director Options granted pursuant to the Plan are
nonstatutory stock options and the price per share of Common Stock subject to an
Outside Director Option is 100% of the fair market value of the Company's Common
Stock on the date of grant as defined in the 2000 Plan.
An Outside Director Option may be exercised in whole or in part by
delivery of a written notice of exercise accompanied by payment in full of the
exercise price in cash, in shares of previously acquired Common Stock having a
fair market value at the time of exercise equal to the exercise price or a
combination thereof.
During the lifetime of an Outside Director, only the Outside Director
or his or her guardian or legal representative may exercise the option. An
option may be assignable or transferable by the Outside Director to the extent
authorized by the Committee. An option may be exercised after the death or
permanent disability of the Outside Director by such individual's legal
representatives, heirs, or legatees, but only within the period specified in the
agreement relating to such Outside Director Options.
OTHER AWARDS
The Committee, in its discretion, may grant options or other Awards to
an Outside Director, but only in substitution for Outside Director Options held
by that director.
ADJUSTMENTS, MODIFICATIONS, TERMINATION
The Committee may provide for the accelerated exercisability of Outside
Director Options in the event of a change or control of the Company, other
fundamental changes in the corporate structure of the Company, the death of the
Outside Director or such other events as the Committee may determine. The
Committee may also provide that certain awards may be exercised in certain
26
<PAGE> 28
events after the termination of services of the Outside Director or the death of
the recipient.
In addition, the termination of an Outside Director's award may be
waived in the event that the Outside Director enters into a consulting or other
advisory role with the Company which may, in some cases, involve entering into a
non-compete agreement with the Company.
FEDERAL TAX CONSIDERATIONS
The Company has been advised by its counsel that awards made under the
2000 Plan generally will result in the following tax events for United States
citizens under current United States Federal income tax laws:
RESTRICTED AND UNRESTRICTED STOCK
Unless the participant files an election to be taxed under Section
83(b) of the Code, (a) the participant will not realize income upon the grant of
restricted stock, (b) the participant will realize ordinary income, and the
Company will be entitled to a corresponding deduction, when the restrictions
have been removed or expire, and (c) the amount of such ordinary income and
deduction will be the fair market value of the restricted stock on the date the
restrictions are removed or expire. If the recipient files an election to be
taxed under Section 83(b) of the Code, the tax consequences to the participant
and the Company will be determined as of the date of the grant of the restricted
stock rather than as of the date of the removal or expiration of the
restrictions.
With respect to awards of unrestricted stock, (a) the participant will
realize ordinary income and the Company will be entitled to a corresponding
deduction upon the grant of the unrestricted stock, and (b) the amount of such
ordinary income and deduction will be the fair market value of such unrestricted
stock on the date of grant.
When the participant disposes of restricted or unrestricted stock, the
difference between the amount received upon such disposition and the fair market
value of such shares on the date the recipient realizes ordinary income will be
treated as a capital gain or loss.
INCENTIVE STOCK OPTIONS
No taxable income to a participant will be realized, and the Company
will not be entitled to any related deduction, at the time any incentive stock
option is granted under the 2000 Plan. If certain statutory employment and
holding period conditions are satisfied before the participant disposes of
shares acquired pursuant to the exercise of such an option, then no taxable
income will result upon the exercise of such option and the Company will not be
entitled to any deduction in connection with such exercise. Upon disposition of
the shares after expiration of the statutory holding periods, any gain or loss
realized by a recipient will be a capital gain or loss. The Company will not be
entitled to a deduction with respect to a disposition of the shares by a
participant after the expiration of the statutory holding periods.
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Except in the event of death, if shares acquired by a participant upon
the exercise of an incentive stock option are disposed of by such participant
before the expiration of the statutory holding periods (a "disqualifying
disposition"), such participant will be considered to have realized as
compensation, taxable as ordinary income in the year of disposition, an amount,
not exceeding the gain realized on such disposition, equal to the difference
between the exercise price and the fair market value of the shares on the date
of exercise of the option. The Company will be entitled to a deduction at the
same time and in the same amount as the participant is deemed to have realized
ordinary income. Any gain realized on the disposition in excess of the amount
treated as compensation or any loss realized on the disposition will constitute
capital gain or loss, respectively. If the participant pays the option price
with shares that were originally acquired pursuant to the exercise of an
incentive stock option and the statutory holding periods for such shares have
not been met, the participant will be treated as having made a disqualifying
disposition of such shares, and the tax consequences of such disqualifying
disposition will be as described above.
The foregoing discussion applies only for regular tax purposes. For
alternative minimum tax purposes an incentive stock option will be treated as if
it were a non-statutory stock option, the tax consequences of which are
discussed below.
NONSTATUTORY STOCK OPTIONS
A participant will realize no taxable income, and the Company will not
be entitled to any related deduction, at the time any nonstatutory stock option
is granted under the 2000 Plan. At the time shares are transferred to the
participant pursuant to the exercise of a nonstatutory stock option, the
participant will realize ordinary income, and the Company will be entitled to a
deduction, equal to the excess of the fair market value of the stock on the date
of exercise over the option price. Upon disposition of the shares, any
additional gain or loss realized by the participant will be taxed as a capital
gain or loss.
STOCK APPRECIATION RIGHTS AND PERFORMANCE UNITS
Generally (a) the participant will not realize income upon the grant of
a stock appreciation right or performance unit award, (b) the participant will
realize ordinary income, and the Company will be entitled to a corresponding
deduction, in the year cash, shares of Common Stock or a combination of cash and
shares are delivered to the participant upon exercise of a stock appreciation
right or in payment of the performance unit award and (c) the amount of such
ordinary income and deduction will be the amount of cash received plus the fair
market value of the shares of common stock received on the date they are
received. The Federal income tax consequences of a disposition of unrestricted
shares received by the participant upon exercise of a stock appreciation right
or in payment of a performance unit award are the same as described above with
respect to a disposition of unrestricted shares.
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POTENTIAL LIMITATION ON COMPANY DEDUCTIONS
Section 162(m) of the Internal Revenue Code denies a deduction to any
publicly held corporation for compensation paid to certain "covered employees"
in a taxable year to the extent that compensation to such covered employee
exceeds $1 million. It is possible that compensation attributable to stock
options, when combined with all other types of compensation received by a
covered employee from the Company, may cause this limitation to be exceeded in
any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation if
the option is granted by a compensation committee comprised solely of "outside
directors" and either (i) the plan contains a per-employee limitation on the
number of shares for which options may be granted during a specified period, the
per-employee limitation is approved by the stockholders, and the exercise price
of the option is no less than the fair market value of the stock on the date of
grant, or (ii) the option is granted (or exercisable) only upon the achievement
(as certified in writing by the compensation committee) of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain, and the option is approved by stockholders.
WITHHOLDING
The 2000 Plan permits the Company to withhold from cash awards, and to
require a participant receiving Common Stock under the 2000 Plan to pay the
Company in cash, an amount sufficient to cover any required withholding taxes.
In lieu of cash, the Committee may permit a participant to cover withholding
obligations through a reduction in the number of shares delivered to such
participant or a surrender to the Company of shares then owned by the
participant.
VOTING REQUIREMENTS, RECOMMENDATION
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock of the Company entitled to vote on this item and present
in person or by proxy at the Meeting is required for approval of the 2000 Plan
and the shares authorized under the 2000 Plan. Proxies solicited by the Board
will be voted for approval of the proposal, unless shareholders specify
otherwise in their proxies.
For this purpose, a shareholder voting through a proxy who abstains
with respect to approval of the 2000 Plan is considered to be present and
entitled to vote on the approval of the 2000 Plan at the Meeting, and is in
effect a negative vote, but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on the approval of
the 2000 Plan shall not be considered present and entitled to vote on the
proposal.
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THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE BUFFETS,
INC. 2000 OMNIBUS STOCK PLAN.
ITEM 3: SELECTION OF AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending January 3, 2001,
it being intended that such appointment would be presented for ratification by
the shareholders. Deloitte & Touche LLP has audited the financial statements of
the Company for the fiscal year ended December 29, 1999. Deloitte & Touche LLP
will have representatives at the meeting who will have an opportunity to make a
statement and will be available to respond to appropriate questions.
In the event the shareholders do not ratify the appointment of
Deloitte & Touche LLP, the selection of other independent auditors will be
considered by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP.
SHAREHOLDER PROPOSALS AND OTHER MATTERS
The enclosed proxy confers upon the person or persons entitled
to vote the shares represented thereby discretionary authority to vote such
shares in accordance with their best judgment with respect to all matters which
may properly come before the meeting in addition to the scheduled items of
business, including the approval of the minutes of the prior annual meeting of
the Company's shareholders. It is intended that proxies solicited by the Board
of Directors, unless otherwise specified therein, will be voted in accordance
with the recommendations of the Board of Directors.
The Management knows of no other matters that may properly be
presented at the annual meeting, but if other matters do properly come before
the meeting, it is intended that the persons named in the proxy will vote
according to their best judgement.
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All shareholder proposals intended to be presented at the next
annual meeting of the Company in 2001 and desired to be included in the
Company's proxy statement and form of proxy for that meeting must be received by
the Company at its principal executive office no later than December 1, 2000. If
notice of any other shareholder proposal intended to be presented at that
meeting is not received by the Company on or before February 14, 2001, the proxy
solicited by the Board of Directors of the Company for use in connection with
that meeting may confer authority on the proxies named in such proxy to vote in
their discretion on such proposal without any discussion in the Company's proxy
statement for that meeting of either the proposal or how such proxies intend to
exercise their voting discretion. The Company suggests that all such proposals
be sent to the Company by certified mail, return receipt requested.
Please mark, sign, date and return promptly the enclosed proxy
provided. The signing of a proxy will not prevent you from attending the meeting
in person.
BY ORDER OF THE BOARD OF DIRECTORS
H. Thomas Mitchell, Secretary
Dated: March 31, 2000
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APPENDIX A
BUFFETS, INC.
2000 OMNIBUS STOCK PLAN
1. Purpose. The purpose of the Buffets, Inc. 2000 Omnibus Stock Plan
(the "Plan") is to motivate key personnel to produce a superior return to the
shareholders of the Company by offering such personnel an opportunity to realize
Stock appreciation, by facilitating Stock ownership and by rewarding them for
achieving a high level of corporate financial performance. The Plan is also
intended to facilitate recruiting and retaining key personnel of outstanding
ability by providing an attractive capital accumulation opportunity.
Additionally, the Plan is intended to provide Outside Directors with an
opportunity to acquire a proprietary interest in the Company, to compensate
Outside Directors for their contribution to the Company and to aid in attracting
and retaining Outside Directors.
2. Definitions.
2.1 The terms defined in this Section are used (and
capitalized) elsewhere in the Plan.
(a) "Affiliate" means any corporation that is a
"parent corporation" or "subsidiary corporation" of the
Company, as those terms are defined in Code Section 424(e) and
(f), or any successor provisions.
(b) "Agreement" means a written contract (i)
consistent with the terms of the Plan entered into between the
Company or an Affiliate and a Participant and (ii) containing
the terms and conditions of an Award in such form and not
inconsistent with this Plan as the Committee shall approve
from time to time, together with all amendments thereto, which
amendments may be unilaterally made by the Company (with the
approval of the Committee) unless such amendments are deemed
by the Committee to be materially adverse to the Participant
and not required as a matter of law.
(c) "Award" or "Awards" means a grant made under this
Plan in the form of Restricted Stock, Options, Stock
Appreciation Rights, Performance Units, Stock or any other
stock-based award.
(d) "Board" means the Board of Directors of the
Company.
(e) "Code" means the Internal Revenue Code of 1986,
as amended and in effect from time to time or any successor
statute.
(f) "Committee" means the two or more Non-Employee
Directors designated by the Board to administer the Plan under
Plan Section 3.1 and constituted so as to permit grants
thereby to comply with Exchange Act Rule 16b-3 and Code
Section 162(m).
(g) "Company" means Buffets, Inc., a Minnesota
corporation, or the successor to all or substantially all of
its businesses by merger, consolidation, purchase of assets or
otherwise.
(h) "Effective Date" means the date specified in Plan
Section 12.1.
(i) "Employee" means an employee (including an
officer or director who is also an employee) of the Company or
an Affiliate.
(j) "Event" means any of the following:
(1) The acquisition by any individual,
entity or group (within the meaning of Exchange Act
Sections 13(d)(3) or 14(d)(2)) of beneficial
ownership (within the
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meaning of Exchange Act Rule 13d-3) of 30% or more of
either (i) the then-outstanding shares of common
stock of the Company (the "Outstanding Company Common
Stock") or (ii) the combined voting power of the
then-outstanding voting securities of the Company
entitled to vote generally in the election of the
Board (the "Outstanding Company Voting Securities");
provided, however, that the following acquisitions
shall not constitute an Event:
(A) any acquisition of common stock
or voting securities of the Company directly
from the Company,
(B) any acquisition of common stock
or voting securities of the Company by the
Company or any of its wholly owned
Subsidiaries,
(C) any acquisition of common stock
or voting securities of the Company by any
employee benefit plan (or related trust)
sponsored or maintained by the Company or
any of its Subsidiaries, or
(D) any acquisition by any
corporation with respect to which,
immediately following such acquisition, more
than 70% of, respectively, the
then-outstanding shares of common stock of
such corporation and the combined voting
power of the then-outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding Company Common Stock and
Outstanding Company Voting Securities
immediately before such acquisition in
substantially the same proportions as was
their ownership, immediately before such
acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting
Securities, as the case may be;
(2) Individuals who, as of the Effective
Date, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a
majority of the Board; provided, however, that any
individual becoming a director of the Board after the
Effective Date whose election, or nomination for
election by the Company's shareholders, was approved
by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be
considered a member of the Incumbent Board, but
excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result
of an actual or threatened election contest;
(3) Approval by the shareholders of the
Company of a reorganization, merger, consolidation or
statutory exchange of Outstanding Company Voting
Securities, unless immediately following such
reorganization, merger, consolidation or exchange,
all or substantially all of the individuals and
entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately
before such reorganization, merger, consolidation or
exchange beneficially own, directly or indirectly,
more than 70% of, respectively, the then-outstanding
shares of common stock and the combined voting power
of the then-outstanding voting securities entitled to
vote generally in the election of directors, as the
case may be, of the corporation resulting from such
reorganization, merger, consolidation or exchange in
substantially the same proportions as was their
ownership, immediately before such reorganization,
merger, consolidation or exchange, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(4) Approval by the shareholders of the
Company of (i) a complete liquidation or dissolution
of the Company or (ii) the sale or other disposition
of all or
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substantially all of the assets of the Company, other
than to a corporation with respect to which,
immediately following such sale or other disposition,
more than 70% of, respectively, the then-outstanding
shares of common stock of such corporation and the
combined voting power of the then-outstanding voting
securities of such corporation entitled to vote
generally in the election of directors is then
beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who
were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately before such
sale or other disposition in substantially the same
proportion as was their ownership, immediately before
such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting
Securities, as the case may be.
Notwithstanding the above, an Event shall not be
deemed to occur with respect to a recipient of an Award if the
acquisition of the 30% or greater interest referred to in
paragraph (1) is by a group, acting in concert, that includes
that recipient of an Award or if at least 30% of the
then-outstanding common stock or combined voting power of the
then-outstanding voting securities (or voting equity
interests) of the surviving corporation or of any corporation
(or other entity) acquiring all or substantially all of the
assets of the Company shall be beneficially owned, directly or
indirectly, immediately after a reorganization, merger,
consolidation, statutory share exchange or disposition of
assets referred to in paragraphs (3) or (4) by a group, acting
in concert, that includes that recipient of an Award.
(k) "Exchange Act" means the Securities Exchange Act
of 1934, as amended and in effect from time to time, or any
successor statute.
(l) "Exchange Act Rule 16b-3" means Rule 16b-3
promulgated by the Securities and Exchange Commission under
the Exchange Act, as now in force and in effect from time to
time or any successor regulation.
(m) "Fair Market Value" as of any date means, unless
otherwise expressly provided in the Plan:
(i) the closing price of a Share on the date
immediately preceding that 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
(A) on the composite tape for New
York Stock Exchange listed shares, or
(B) if the 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 Exchange Act on which the Shares
are listed, or
(C) if the Shares are not listed on
any such exchange, on the National
Association of Securities Dealers, Inc.
Automated Quotations National Market System,
or
(ii) if clause (i) is inapplicable, the mean
between the closing "bid" and the closing "asked"
quotation of a Share on the date immediately
preceding that date, or, if no closing bid or asked
quotation is made on that date, on the next preceding
day on which a closing bid and asked quotation is
made, on the National Association of Securities
Dealers, Inc. Automated Quotations System or any
system then in use, or
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(iii) if clauses (i) and (ii) are
inapplicable, what the Committee determines in good
faith to be 100% of the fair market value of a Share
on that date, using such criteria as it shall
determine, in its sole discretion, to be appropriate
for valuation.
However, if the applicable securities exchange or
system has closed for the day at the time the event occurs
that triggers a determination of Fair Market Value, whether
the grant of an Award, the exercise of an Option or Stock
Appreciation Right or otherwise, all references in this
paragraph to the "date immediately preceding that date" shall
be deemed to be references to "that date." In the case of an
Incentive Stock Option, if this determination of Fair Market
Value is not consistent with the then current regulations of
the Secretary of the Treasury, Fair Market Value shall be
determined in accordance with those regulations. The
determination of Fair Market Value shall be subject to
adjustment as provided in Plan Section 16.
(n) "Fundamental Change" shall mean a dissolution or
liquidation of the Company, a sale of substantially all of the
assets of the Company, a 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.
(o) "Incentive Stock Option" means any Option
designated as such and granted in accordance with the
requirements of Code Section 422 or any successor provision.
(p) "Insider" as of a particular date means any
person who, as of that date is an officer of the Company as
defined under Exchange Act Rule 16a-1(f) or its successor
provision.
(q) "Non-Employee Director" means a member of the
Board who is considered a non-employee director within the
meaning of Exchange Act Rule 16b-3(b)(3) or its successor
provision and an outside director for purposes of Code Section
162(m).
(r) "Non-Statutory Stock Option" means an Option
other than an Incentive Stock Option.
(s) "Option" means a right to purchase Stock,
including both Non-Statutory Stock Options and Incentive Stock
Options.
(t) "Outside Director" means a director who is not an
Employee.
(u) "Participant" means a person or entity to whom an
Award is or has been made in accordance with the Plan.
(v) "Performance Cycle" means the period of time as
specified in an Agreement over which Performance Units are to
be earned.
(w) "Performance Units" means an Award made pursuant
to Plan Section 11.
(x) "Plan" means this Buffets, Inc. 2000 Omnibus
Stock Plan, as may be amended and in effect from time to time.
(y) "Restricted Stock" means Stock granted under Plan
Section 7 so long as such Stock remains subject to one or more
restrictions.
(z) "Section 16" or "Section 16(b)" means Section 16
or Section 16(b), respectively, of the Exchange Act or any
successor statute and the rules and regulations promulgated
thereunder as in effect and as amended from time to time.
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(aa) "Share" means a share of Stock.
(bb) "Stock" means the common stock, par value $.01
per share, of the Company.
(cc) "Stock Appreciation Right" means a right, the
value of which is determined in relation to the appreciation
in value of Shares pursuant to an Award granted under Plan
Section 10.
(dd) "Subsidiary" means a "subsidiary corporation,"
as that term is defined in Code Section 424(f), or any
successor provision.
(ee) "Successor" with respect to a Participant means
the legal representative of an incompetent Participant, and if
the Participant is deceased the estate of the Participant or
the person or persons who may, by bequest or inheritance, or
pursuant to the terms of an Award, acquire the right to
exercise an Option or Stock Appreciation Right or to receive
cash and/or Shares issuable in satisfaction of an Award in the
event of the Participant's death.
(ff) "Term" means the period during which an Option
or Stock Appreciation Right may be exercised or the period
during which the restrictions or terms and conditions placed
on Restricted Stock or any other Award are in effect.
(gg) "Transferee" means any member of the
Participant's immediate family (i.e., his or her children,
step-children, grandchildren and spouse) or one or more trusts
for the benefit of such family members or partnerships in
which such family members are the only partners.
2.2 Gender and Number. Except when otherwise indicated by the
context, reference to the masculine gender shall include, when used,
the feminine gender and any term used in the singular shall also
include the plural.
3. Administration and Indemnification.
3.1 Administration.
(a) The Committee shall administer the Plan. The
Committee shall have exclusive power to (i) make Awards, (ii)
determine when and to whom Awards will be granted, the form of
each Award, the amount of each Award (except as to the amount
of the Initial Outside Director Option and the Annual Outside
Director Option, as provided in Plan Section 9.3), and any
other terms or conditions of each Award consistent with the
Plan, and (iii) determine whether, to what extent and under
what circumstances, Awards may be settled, paid or exercised
in cash, Shares or other Awards, or other property or
canceled, forfeited or suspended. Each Award shall be subject
to an Agreement authorized by the Committee. Notwithstanding
the foregoing, the Board shall have the sole and exclusive
power to administer the Plan with respect to Awards granted to
Outside Directors, including any grants made under Plan
Section 9.3(g).
(b) Solely for purposes of determining and
administering Awards to Participants who are not Insiders, the
Committee may delegate all or any portion of its authority
under the Plan to one or more persons who are not Non-Employee
Directors.
(c) To the extent within its discretion and subject
to Plan Sections 15 and 16, other than price, the Committee
may amend the terms and conditions of any outstanding Award.
(d) It is the intent that the Plan and all Awards
granted pursuant to it shall be administered by the Committee
so as to permit the Plan and Awards to comply with Exchange
Act Rule 16b-3, except in such instances as the Committee, in
its discretion, may so provide. If any provision of the Plan
or of any Award would otherwise frustrate or conflict with the
intent
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expressed in this Section 3.1(d), that provision to the extent
possible shall be interpreted and deemed amended in the manner
determined by the Committee so as to avoid the conflict. To
the extent of any remaining irreconcilable conflict with this
intent, the provision shall be deemed void as applicable to
Insiders to the extent permitted by law and in the manner
deemed advisable by the Committee.
(e) The Committee's interpretation of the Plan and of
any Award or Agreement made under the Plan and all related
decisions or resolutions of the Board or Committee shall be
final and binding on all parties with an interest therein.
Consistent with its terms, the Committee shall have the power
to establish, amend or waive regulations to administer the
Plan. In carrying out any of its responsibilities, the
Committee shall have discretionary authority to construe the
terms of the Plan and any Award or Agreement made under the
Plan.
3.2 Indemnification. Each person who is or shall have been a
member of the Committee, or of the Board, and any other person to whom
the Committee delegates authority under the Plan, shall be indemnified
and held harmless by the Company, to the extent permitted by law,
against and from any loss, cost, liability or expense that may be
imposed upon or reasonably incurred by such person in connection with
or resulting from any claim, action, suit or proceeding to which such
person may be a party or in which such person may be involved by reason
of any action taken or failure to act, made in good faith, under the
Plan and against and from any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person
in satisfaction of any judgment in any such action, suit or proceeding
against such person, provided such person shall give the Company an
opportunity, at the Company's expense, to handle and defend the same
before such person undertakes to handle and defend it on such person's
own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such person
or persons may be entitled under the Company's Articles of
Incorporation or Bylaws, as a matter of law, or otherwise, or any power
that the Company may have to indemnify them or hold them harmless.
4. Shares Available Under the Plan.
(a) The number of Shares available for distribution
under this Plan shall not exceed 2,000,000 (subject to
adjustment pursuant to Plan Section 16).
(b) Any Shares subject to the terms and conditions of
an Award under this Plan that are not used because the terms
and conditions of the Award are not met may again be used for
an Award under the Plan. But Shares with respect to which a
Stock Appreciation Right has been exercised whether paid in
cash and/or in Shares may not again be awarded under this
Plan.
(c) Any unexercised or undistributed portion of any
terminated, expired, exchanged, or forfeited Award, or any
Award settled in cash in lieu of Shares (except as provided in
Plan Section 4(b)) shall be available for further Awards.
(d) For the purposes of computing the total number of
Shares granted under the Plan, the following rules shall apply
to Awards payable in Shares where appropriate:
(i) each Option shall be deemed to be the
equivalent of the maximum number of Shares that may
be issued upon exercise of the particular Option;
(ii) an Award (other than an Option) payable
in some other security shall be deemed to be equal to
the number of Shares to which it relates;
(iii) where the number of Shares available
under the Award is variable on the date it is
granted, the number of Shares shall be deemed to be
the maximum number of Shares that could be received
under that particular Award; and
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(iv) where two or more types of Awards (all
of which are payable in Shares) are granted to a
Participant in tandem with each other, such that the
exercise of one type of Award with respect to a
number of Shares cancels at least an equal number of
Shares of the other, each such joint Award shall be
deemed to be the equivalent of the maximum number of
Shares available under the largest single Award.
Additional rules for determining the number of Shares
granted under the Plan may be made by the Committee, as it
deems necessary or desirable.
(e) No fractional Shares may be issued under the
Plan; however, cash shall be paid in lieu of any fractional
Share in settlement of an Award.
(f) The maximum number of Shares that may be awarded
to a Participant in any calendar year in the form of Options
is 100,000 and the maximum number of Shares that may be
awarded to a Participant in any calendar year in the form of
Stock Appreciation Rights is 100,000.
5. Eligibility. Participation in the Plan shall be limited to
Employees and to individuals or entities who are not Employees but who provide
services to the Company or an Affiliate, including services provided in the
capacity of a consultant, adviser or director. The granting of Awards is solely
at the discretion of the Committee, except that Incentive Stock Options may only
be granted to Employees and Awards to Outside Directors are subject to the
limits of Section 9.3.
6. General Terms of Awards.
6.1 Amount of Award. Each Agreement shall set forth the number
of Shares of Restricted Stock, Stock or Performance Units subject to
the Agreement, or the number of Shares to which the Option subject to
the Agreement applies or with respect to which payment upon the
exercise of the Stock Appreciation Right subject to the Agreement is to
be determined, as the case may be, together with such other terms and
conditions applicable to the Award as determined by the Committee
acting in its sole discretion.
6.2 Term. Each Agreement, other than those relating solely to
Awards of Shares without restrictions, shall set forth the Term of the
Option, Stock Appreciation Right, Restricted Stock or other Award or
the Performance Cycle for the Performance Units, as the case may be.
Acceleration of the expiration of the applicable Term is permitted,
upon such terms and conditions as shall be set forth in the Agreement,
which may, but need not, include (without limitation) acceleration
resulting from the occurrence of an Event or in the event of the
Participant's death or retirement. Acceleration of the Performance
Cycle of Performance Units shall be subject to Plan Section 11.2.
6.3 Transferability. Except as provided in this Section,
during the lifetime of a Participant to whom an Award is granted, only
that Participant (or that Participant's legal representative) may
exercise an Option or Stock Appreciation Right, or receive payment with
respect to Performance Units or any other Award. No Award of Restricted
Stock (before the expiration of the restrictions), Options, Stock
Appreciation Rights or Performance Units or other Award may be sold,
assigned, transferred, exchanged or otherwise encumbered other than
pursuant to a qualified domestic relations order as defined in the Code
or Title 1 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or the rules thereunder; any attempted transfer in
violation of this Section 6.3 shall be of no effect. Notwithstanding
the immediately preceding sentence, the Committee, in an Agreement or
otherwise at its discretion, may provide (i) that the Award subject to
the Agreement shall be transferable to a Successor in the event of a
Participant's death, or (ii) that the Award (other than Incentive Stock
Options) may be transferable to a Transferee. Any Award held by a
Transferee shall continue to be subject to the same terms and
conditions that were applicable to that Award immediately before the
transfer thereof to the Transferee.
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6.4 Termination of Employment. No Option or Stock Appreciation
Right may be exercised by a Participant, all Restricted Stock held by a
Participant or any other Award then subject to restrictions shall be
forfeited, and no payment with respect to Performance Units for which
the applicable Performance Cycle has not been completed shall be made,
if the Participant's employment or other relationship with the Company
and its Affiliates shall be voluntarily terminated or involuntarily
terminated with or without cause before the expiration of the Term of
the Option, Stock Appreciation Right, Restricted Stock or other Award,
or the completion of the Performance Cycle, as the case may be, except
as, and to the extent, provided in the Agreement applicable to that
Award. An Award may be exercised by, or paid to, a Transferee or the
Successor of a Participant following the death of the Participant to
the extent, and during the period of time, if any, provided in the
applicable Agreement.
6.5 Rights as Shareholder. Each Agreement shall provide that a
Participant shall have no rights as a shareholder with respect to any
securities covered by an Award if and until the date the Participant
becomes the holder of record of the Stock, if any, to which the Award
relates.
7. Restricted Stock Awards.
(a) An Award of Restricted Stock under the Plan shall
consist of Shares subject to restrictions on transfer and
conditions of forfeiture, which restrictions and conditions
shall be included in the applicable Agreement. The Committee
may provide for the lapse or waiver of any such restriction or
condition based on such factors or criteria as the Committee,
in its sole discretion, may determine.
(b) Except as otherwise provided in the applicable
Agreement, each Stock certificate issued with respect to an
Award of Restricted Stock shall either be deposited with the
Company or its designee, together with an assignment separate
from the certificate, in blank, signed by the Participant, or
bear such legends with respect to the restricted nature of the
Restricted Stock evidenced thereby as shall be provided for in
the applicable Agreement.
(c) The Agreement shall describe the terms and
conditions by which the restrictions and conditions of
forfeiture upon awarded Restricted Stock shall lapse. Upon the
lapse of the restrictions and conditions, Shares free of
restrictive legends, if any, relating to such restrictions
shall be issued to the Participant or a Successor or
Transferee.
(d) A Participant or a Transferee with a Restricted
Stock Award shall have all the other rights of a shareholder
including, but not limited to, the right to receive dividends
and the right to vote the Shares of Restricted Stock.
(e) No more than 100,000 of the total number of
Shares available for Awards under the Plan shall be issued
during the term of the Plan as Restricted Stock. This
limitation shall be calculated pursuant to the applicable
provisions of Plan Sections 4 and 16.
8. Other Awards. The Committee may from time to time grant Stock and
other Awards under the Plan including without limitations those Awards pursuant
to which Shares are or may in the future be acquired, Awards denominated in
Stock units, securities convertible into Stock and phantom securities. The
Committee, in its sole discretion, shall determine the terms and conditions of
such Awards provided that such Awards shall not be inconsistent with the terms
and purposes of this Plan. The Committee may, at its sole discretion, direct the
Company to issue Shares subject to restrictive legends and/or stop transfer
instructions that are consistent with the terms and conditions of the Award to
which the Shares relate. No more than 25,000 of the total number of Shares
available for Awards under the Plan shall be issued during the term of the Plan
in the form of Stock without restrictions.
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9. Stock Options.
9.1 Terms of All Options.
(a) An Option shall be granted pursuant to an
Agreement as either an Incentive Stock Option or a
Non-Statutory Stock Option. The purchase price of each Share
subject to an Option shall be determined by the Committee and
set forth in the Agreement, but shall not be less than 100% of
the Fair Market Value of a Share as of the date the Option is
granted (except as provided in Plan Section 19).
(b) The purchase price of the Shares with respect to
which an Option is exercised shall be payable in full at the
time of exercise, provided that to the extent permitted by
law, the Agreement may permit some or all Participants to
simultaneously exercise Options and sell the Shares thereby
acquired pursuant to a brokerage or similar relationship and
use the proceeds from the sale as payment of the purchase
price of the Shares. The purchase price may be payable in
cash, by delivery or tender of Shares that have been owned by
the Participant for at least the preceding 180 days and having
a Fair Market Value as of the date the Option is exercised
equal to the purchase price of the Shares being purchased
pursuant to the Option, or a combination thereof, as
determined by the Committee, but no fractional Shares will be
issued or accepted.
(c) The Committee may provide, in an Agreement or
otherwise, that a Participant who exercises an Option and pays
the Option price in whole or in part with Shares then owned by
the Participant will be entitled to receive another Option
covering the same number of shares tendered and with a price
of no less than Fair Market Value on the date of grant of such
additional Option ("Reload Option"). Unless otherwise provided
in the Agreement, a Participant, in order to be entitled to a
Reload Option, must pay with Shares that have been owned by
the Participant for at least the preceding 180 days.
(d) Each Option shall be exercisable in whole or in
part on the terms provided in the Agreement. In no event shall
any Option be exercisable at any time after the expiration of
its Term. When an Option is no longer exercisable, it shall be
deemed to have lapsed or terminated.
9.2 Incentive Stock Options. In addition to the other
terms and conditions applicable to all Options:
(i) the aggregate Fair Market Value (determined as of
the date the Option is granted) of the Shares with respect to
which Incentive Stock Options held by an individual first
become exercisable in any calendar year (under this Plan and
all other incentive stock option plans of the Company and its
Affiliates) shall not exceed $100,000 (or such other limit as
may be required by the Code) if this limitation is necessary
to qualify the Option as an Incentive Stock Option and to the
extent an Option or Options granted to a Participant exceed
this limit the Option or Options shall be treated as a
Non-Statutory Stock Option;
(ii) an Incentive Stock Option shall not be
exercisable more than 10 years after the date of grant (or
such other limit as may be required by the Code) if this
limitation is necessary to qualify the Option as an Incentive
Stock Option;
(iii) the Agreement covering an Incentive Stock
Option shall contain such other terms and provisions that the
Committee determines necessary to qualify this Option as an
Incentive Stock Option; and
(iv) notwithstanding any other provision of this Plan
to the contrary, no Participant may receive an Incentive Stock
Option under the Plan if, at the time the Award is granted,
the Participant owns (after application of the rules contained
in Code Section 424(d), or its successor provision), Shares
possessing more than 10% of the total combined voting power of
all classes of
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stock of the Company or its Subsidiaries, unless (i) the
option price for that Incentive Stock Option is at least 110%
of the Fair Market Value of the Shares subject to that
Incentive Stock Option on the date of grant and (ii) that
Option is not exercisable after the date five years from the
date that Incentive Stock Option is granted.
9.3 Terms and Conditions of Outside Directors' Options.
(a) Initial Outside Directors' Options. Subject to
the terms and conditions of this Plan, any Outside Director
first elected or appointed to the Board on or after May 9,
2000 shall receive, by virtue of serving as a director of the
Company, a single grant of a Non-Statutory Stock Option to
purchase 10,000 Shares (an "Initial Outside Director Option");
provided, however, that, in lieu of the grant of an Initial
Outside Director Option to an Outside Director under this
Plan, the Board may grant such Outside Director a similar
award under the Company's Non-Employee Director Stock Option
Plan.
(b) Vesting of Initial Outside Directors' Options.
Subject to the provisions of Plan Section 9.3(e), Initial
Outside Directors' Options granted pursuant to this Plan shall
vest and become exercisable immediately on the date of grant.
Each Initial Outside Directors' Option shall be exercisable in
whole or in part.
(c) Annual Outside Director Option Grants. For the
Annual Meeting of Shareholders to be held on May 9, 2000 and
for each Annual Meeting of Shareholders thereafter during the
term of this Plan, each Outside Director serving as an Outside
Director of the Company immediately following the Annual
Meeting shall be granted, by virtue of serving as an Outside
Director of the Company, a Non-Statutory Stock Option to
purchase 5,000 Shares (an "Annual Outside Director Option");
provided, however, that, in lieu of the grant of an Annual
Outside Director Option to an Outside Director under this
Plan, the Board may grant such Outside Director a similar
award under the Company's Non-Employee Director Stock Option
Plan. Each Annual Outside Director Option shall be deemed to
be granted to each Outside Director immediately after an
Annual Meeting and shall be granted regardless of whether or
not an Outside Director previously received, or simultaneously
receives, an Initial Outside Director Option. Initial Outside
Director Options and Annual Outside Director Options together
are sometimes referred to as "Outside Director Options."
(d) Vesting of Annual Director Options. Subject to
the provisions of Plan Section 9.3(e), Annual Outside
Director Options shall vest and become exercisable as
provided in the Agreement. Each Option, to the extent
exercisable, shall be exercisable in whole or in part.
Notwithstanding anything to the contrary in this Plan, all
Annual Outside Director Options shall vest and become
exercisable in full upon the occurrence of an Event or a
proposed Fundamental Change.
(e) Termination of Initial and Annual Outside
Directors' Options. Each Outside Director Option granted
pursuant to this Plan and all rights to purchase Shares
thereunder shall terminate on the earliest of:
(i) ten years after the date that the Outside
Director Option was granted;
(ii) the expiration of the period specified in
the Agreement after the death or permanent
disability of an Outside Director;
(iii) February 14, 2001, if the shareholders of
the Company shall not have approved this
Plan as of or before that date at a duly
held shareholders' meeting; or
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(iv) ninety days after the date the Outside
Director ceases to be a director of the
Company, provided, however, that the option
shall be exercisable during this 90-day
period only to the extent the option was
exercisable as of the date the person ceases
to be an Outside Director unless the
cessation results from the director's death
or permanent disability. Notwithstanding the
preceding sentence, if an Outside Director
who resigns or whose term expires then
becomes a consultant or Employee of the
Company within ninety days of such
resignation or term expiration, the Outside
Director Options of such person shall
continue in full force and effect.
(f) Allocation of Common Shares. If as of a date on
which an Option or Options are to be awarded pursuant to the
provisions of this Section 9.3, the number of Shares
available for issuance under the Plan is less than the number
of Shares that otherwise would be subject to such Options,
then the following formula shall determine how the remaining
number of Shares are to be allocated:
(i) if only one Outside Director is to receive
an Option on the date, then that Outside
Director shall receive an Option to purchase
Shares equal to the number of Shares
remaining;
(ii) if two or more Outside Directors are to
receive Options on the date:
(1) all Initial Outside Director 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 Outside
Director Options then each Outside
Director eligible to receive an
Initial Outside Director Option
shall receive the number of Options
that results from the following
equation: the whole number of Shares
available divided by the number of
Outside 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 Plan
Section 4; and
(2) if on that date all Initial Outside
Director Options to be awarded are
awarded in the full amount or if no
Initial Outside Director Options are
to be awarded, then each Outside
Director eligible for an Annual
Outside Director Option shall
receive an Annual Outside Director
Option to purchase Shares in the
amount that results from the
following equation: the whole number
of Shares available divided by the
number of Outside Directors eligible
for an Annual Outside Director
Option, 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 Plan Section 4.
(g) Non-exclusivity of Section 9.3. The provisions of
this Section 9.3 are not intended to be exclusive; the
Committee, in its discretion, may grant Options or other
Awards to an Outside Director.
10. Stock Appreciation Rights. An Award of a Stock Appreciation Right
shall entitle the Participant (or a Successor or Transferee), subject to terms
and conditions determined by the Committee, to receive upon exercise of the
Stock Appreciation Right all or a portion of the excess of (i) the Fair Market
Value of a specified number of Shares as of the date of exercise of the Stock
Appreciation Right over (ii) a specified price that shall not
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be less than 100% of the Fair Market Value of such Shares as of the date of
grant of the Stock Appreciation Right. A Stock Appreciation Right may be granted
in connection with part or all of, in addition to, or completely independent of
an Option or any other Award under this Plan. If issued in connection with a
previously or contemporaneously granted Option, the Committee may impose a
condition that exercise of a Stock Appreciation Right cancels a pro rata portion
of the Option with which it is connected and vice versa. Each Stock Appreciation
Right may be exercisable in whole or in part on the terms provided in the
Agreement. No Stock Appreciation Right shall be exercisable at any time after
the expiration of its Term. When a Stock Appreciation Right is no longer
exercisable, it shall be deemed to have lapsed or terminated. Upon exercise of a
Stock Appreciation Right, payment to the Participant or a Successor or
Transferee shall be made at such time or times as shall be provided in the
Agreement in the form of cash, Shares or a combination of cash and Shares as
determined by the Committee. The Agreement may provide for a limitation upon the
amount or percentage of the total appreciation on which payment (whether in cash
and/or Shares) may be made in the event of the exercise of a Stock Appreciation
Right.
11. Performance Units.
11.1 Initial Award.
(a) An Award of Performance Units under the Plan
shall entitle the Participant or a Successor or Transferee to
future payments of cash, Shares or a combination of cash and
Shares, as determined by the Committee, based upon the
achievement of pre-established performance targets. These
performance targets may, but need not, include (without
limitation) targets relating to one or more of the Company's
or a group's, unit's, Affiliate's or an individual's
performance. The Agreement may establish that a portion of a
Participant's Award will be paid for performance that exceeds
the minimum target but falls below the maximum target
applicable to the Award. The Agreement shall also provide for
the timing of the payment.
(b) Following the conclusion or acceleration of each
Performance Cycle, the Committee shall determine the extent to
which (i) performance targets have been attained, (ii) any
other terms and conditions with respect to an Award relating
to the Performance Cycle have been satisfied and (iii) payment
is due with respect to an Award of Performance Units.
11.2 Acceleration and Adjustment. The Agreement may permit an
acceleration of the Performance Cycle and an adjustment of performance
targets and payments with respect to some or all of the Performance
Units awarded to a Participant, upon the occurrence of certain events,
which may, but need not include without limitation an Event, a
Fundamental Change, a recapitalization, a change in the accounting
practices of the Company, a change in the Participant's title or
employment responsibilities, the Participant's death or retirement or,
with respect to payments in Shares with respect to Performance Units, a
reclassification, stock dividend, stock split or stock combination as
provided in Plan Section 16. The Agreement also may provide for a
limitation on the value of an Award of Performance Units that a
Participant may receive.
12. Effective Date and Duration of the Plan.
12.1 Effective Date. The Plan shall become effective as of
February 15, 2000, provided that the Plan is approved by the requisite
vote of shareholders at the meeting of shareholders to be held May 9,
2000 or at any adjournment thereof.
12.2 Duration of the Plan. The Plan shall remain in effect
until all Stock subject to it shall be distributed, all Awards have
expired or lapsed, the Plan is terminated pursuant to Plan Section 15,
or February 15, 2010 (the "Termination Date"); provided, however,
Awards made before the Termination Date may be exercised, vested or
otherwise effectuated beyond the Termination Date unless limited in the
Agreement or otherwise. No Award of an Incentive Stock Option shall be
made more than 10 years after the Effective Date (or such other limit
as may be required by the Code) if this limitation is necessary to
qualify the Option as an Incentive Stock
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Option. The date and time of approval by the Committee of the granting
of an Award shall be considered the date and time at which the Award is
made or granted.
13. Plan Does Not Affect Employment Status.
(a) Status as an eligible Employee shall not be
construed as a commitment that any Award will be made under
the Plan to that eligible Employee or to eligible Employees
generally.
(b) Nothing in the Plan or in any Agreement or
related documents shall confer upon any Employee or
Participant any right to continue in the employment of the
Company or any Affiliate or constitute any contract of
employment or affect any right that the Company or any
Affiliate may have to change such person's compensation, other
benefits, job responsibilities, or title, or to terminate the
employment of such person with or without cause.
14. Tax Withholding. The Company shall have the right to withhold from
any cash payment under the Plan to a Participant or other person (including a
Successor or a Transferee) an amount sufficient to cover any required
withholding taxes. The Company shall have the right to require a Participant or
other person receiving Shares under the Plan to pay the Company a cash amount
sufficient to cover any required withholding taxes before actual receipt of
those Shares. In lieu of all or any part of a cash payment from a person
receiving Shares under the Plan, the Committee may permit the individual 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 taxes with respect to income arising from
payment of the Award, through a reduction of the number of Shares delivered or
delivery or tender return to the Company of Shares held by the Participant or
other person, in each case valued in the same manner as used in computing the
withholding taxes under the applicable laws.
15. Amendment, Modification and Termination of the Plan.
(a) The Board may at any time and from time to time terminate,
suspend or modify the Plan. Except as limited in (b) below, the
Committee may at any time alter or amend any or all Agreements under
the Plan to the extent permitted by law.
(b) No termination, suspension, or modification of the Plan
will materially and adversely affect any right acquired by any
Participant or Successor or Transferee under an Award granted before
the date of termination, suspension, or modification, unless otherwise
agreed to by the Participant in the Agreement or otherwise, or required
as a matter of law; but it will be conclusively presumed that any
adjustment for changes in capitalization provided for in Plan Sections
11.2 or 16 does not adversely affect these rights.
16. Adjustment for Changes in Capitalization. Subject to any required
action by the Company's shareholders, appropriate adjustments, so as to prevent
enlargement of rights or inappropriate dilution -- (i) in the aggregate number
and type of Shares available for Awards under the Plan, (ii) in the limitations
on the number of Shares that may be issued to an individual Participant as an
Option or a Stock Appreciation Right in any calendar year or that may be issued
in the form of Restricted Stock or Shares without restrictions, (iii) in the
number and type of Shares and amount of cash subject to Awards then outstanding,
(iv) in the Option price as to any outstanding Options and, (v) subject to Plan
Section 11.2, in outstanding Performance Units and payments with respect to
outstanding Performance Units -- may be made by the Committee in its sole
discretion to give effect to adjustments made in the number or type of Shares
through a Fundamental Change (subject to Plan Section 17), recapitalization,
reclassification, stock dividend, stock split, stock combination or other
relevant change, provided that fractional Shares shall be rounded to the nearest
whole Share.
17. Fundamental Change. In the event of a proposed Fundamental Change,
the Committee may, but shall not be obligated to:
(a) if the Fundamental Change is a merger or consolidation or
statutory share exchange, make appropriate provision for the protection
of the outstanding Options and Stock Appreciation Rights by
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the substitution of options, stock appreciation rights and appropriate
voting common stock of the corporation surviving any merger or
consolidation or, if appropriate, the parent corporation of the Company
or such surviving corporation; or
(b) at least 30 days before the occurrence of the Fundamental
Change, declare, and provide written notice to each holder of an Option
or Stock Appreciation Right of the declaration, that each outstanding
Option and Stock Appreciation Right, whether or not then exercisable,
shall be canceled at the time of, or immediately before the occurrence
of the Fundamental Change in exchange for payment to each holder of an
Option or Stock Appreciation Right, within ten days after the
Fundamental Change, of cash equal to (i) for each Share covered by the
canceled Option, the amount, if any, by which the Fair Market Value (as
defined in this Section) per Share exceeds the exercise price per Share
covered by such Option or (ii) for each Stock Appreciation Right, the
price determined pursuant to Section 10, except that Fair Market Value
of the Shares as of the date of exercise of the Stock Appreciation
Right, as used in clause (i) of Plan Section 10, shall be deemed to
mean Fair Market Value for each Share with respect to which the Stock
Appreciation Right is calculated determined in the manner hereinafter
referred to in this Section. At the time of the declaration provided
for in the immediately preceding sentence, each Stock Appreciation
Right and each Option shall immediately become exercisable in full and
each person holding an Option or a Stock Appreciation Right shall have
the right, during the period preceding the time of cancellation of the
Option or Stock Appreciation Right, to exercise the Option or the Stock
Appreciation Right in whole or in part, as the case may be. In the
event of a declaration pursuant to this Plan Section 17(b), each
outstanding Option and Stock Appreciation Right granted pursuant to the
Plan that shall not have been exercised before the Fundamental Change
shall be canceled at the time of, or immediately before, the
Fundamental Change, as provided in the declaration. Notwithstanding the
foregoing, no person holding an Option or a Stock Appreciation Right
shall be entitled to the payment provided for in this Section 17(b) if
such Option or Stock Appreciation Right shall have expired pursuant to
the Agreement. For purposes of this Section only, "Fair Market Value"
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 Share by the shareholders of the Company upon the
occurrence of the Fundamental Change.
18. Forfeitures. An Agreement may provide that if a Participant has
received or been entitled to payment of cash, delivery of Shares, or a
combination thereof pursuant to an Award within six months before the
Participant's termination of employment with the Company and its Affiliates, the
Committee, in its sole discretion, may require the Participant to return or
forfeit the cash and/or Shares received with respect to the Award (or its
economic value as of (i) the date of the exercise of Options or Stock
Appreciation Rights, (ii) the date of, and immediately following, the lapse of
restrictions on Restricted Stock or the receipt of Shares without restrictions,
or (iii) the date on which the right of the Participant to payment with respect
to Performance Units vests, as the case may be) in the event of certain
occurrences specified in the Agreement. The Committee's right to require
forfeiture must be exercised within 90 days after discovery of such an
occurrence but in no event later than 15 months after the Participant's
termination of employment with the Company and its Affiliates. The occurrences
may, but need not, include competition with the Company or any Affiliate,
unauthorized disclosure of material proprietary information of the Company or
any Affiliate, a violation of applicable business ethics policies of the Company
or Affiliate or any other occurrence specified in the Agreement within the
period or periods of time specified in the Agreement.
19. Corporate Mergers, Acquisitions, Etc. The Committee may also grant
Options, Stock Appreciation Rights, Restricted Stock or other Awards under the
Plan having terms, conditions and provisions that vary from those specified in
this Plan provided that any such awards are granted in substitution for, or in
connection with the assumption of, existing options, stock appreciation rights,
restricted stock or other award granted, awarded or issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
20. Unfunded Plan. The Plan shall be unfunded and the Company shall not
be required to segregate any assets that may at any time be represented by
Awards under the Plan. Neither the Company, its Affiliates, the Committee, nor
the Board of Directors shall be deemed to be a trustee of any amounts to be paid
under the Plan nor shall anything contained in the Plan or any action taken
pursuant to its provisions create or be construed to create a fiduciary
relationship between the Company and/or its Affiliates, and a Participant or
Successor or Transferee. To
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the extent any person acquires a right to receive an Award under the Plan, this
right shall be no greater than the right of an unsecured general creditor of the
Company.
21. Limits of Liability.
(a) Any liability of the Company to any Participant with
respect to an Award shall be based solely upon contractual obligations
created by the Plan and the Award Agreement.
(b) Except as may be required by law, neither the Company nor
any member of the Board of Directors or of the Committee, nor any other
person participating in any determination of any question under the
Plan, or in the interpretation, administration or application of the
Plan, shall have any liability to any party for any action taken, or
not taken, in good faith under the Plan.
22. Compliance with Applicable Legal Requirements. No certificate for
Shares distributable pursuant to this Plan shall be issued and delivered unless
the issuance of the certificate complies with all applicable legal requirements
including, without limitation, compliance with the provisions of applicable
state securities laws, the Securities Act of 1933, as amended and in effect from
time to time or any successor statute, the Exchange Act and the requirements of
the exchanges on which the Company's Shares may, at the time, be listed.
23. Deferrals and Settlements. The Committee may require or permit
Participants to elect to defer the issuance of Shares or the settlement of
Awards in cash under such rules and procedures as it may establish under the
Plan. It may also provide that deferred settlements include the payment or
crediting of interest on the deferral amounts.
24. Other Benefit and Compensation Programs. Payments and other
benefits received by a Participant under an Award made pursuant to the Plan
shall not be deemed a part of a Participant's regular, recurring compensation
for purposes of the termination, indemnity or severance pay laws of any country
and shall not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan, contract or similar arrangement
provided by the Company or an Affiliate unless expressly so provided by such
other plan, contract or arrangement, or unless the Committee expressly
determines that an Award or portion of an Award should be included to accurately
reflect competitive compensation practices or to recognize that an Award has
been made in lieu of a portion of competitive cash compensation.
25. Beneficiary Upon Participant's Death. To the extent that the
transfer of a Participant's Award at his or her death is permitted under an
Agreement, a Participant's Award shall be transferable at death to the estate or
to the person who acquires the right to succeed to the Award by bequest or
inheritance.
26. Change-in-Control Payments.
(a) Notwithstanding the provisions of Plan Section 17 above,
if any Award, either alone or together with other payments in the
nature of compensation to a Participant that 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 Code Section 4999, or any successor provision,
or would not be deductible in whole or in part by the Company, an
affiliate of the Company (as defined in Code Section 1504, or any
successor provision), or other person making such payments as a result
of Code Section 280G, or any successor provision, such Award and/or
such other benefits and payments shall be reduced (but not below zero)
to the largest aggregate amount as will result in no portion thereof
being subject to such an excise tax or being not so deductible.
(b) For purposes of Plan Section 26(a), (i) no portion of
payments the receipt or enjoyment of which a Participant shall have
effectively waived in writing before the date of distribution of an
Award shall be taken into account; (ii) no portion of such Award,
benefits and other payments shall be taken into account that in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to the Participant does not constitute a "parachute
payment" within the meaning of Code Section
A-15
<PAGE> 48
280G(b)(2), or any successor provision; and (iii) 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 Code Sections 280G(d)(3) and (4) or
any successor provisions;
(c) Any Award not paid as a result of this Plan Section 26 or
reduced to zero as a result of the limitations imposed hereby, shall
remain outstanding in full force and effect in accordance with the
other terms and provisions of this Plan.
27. Requirements of Law.
a) To the extent that federal laws do not otherwise control,
the Plan and all determinations made and actions taken pursuant to the
Plan shall be governed by the laws of the State of Minnesota without
regard to its conflicts-of-law principles and shall be construed
accordingly.
(b) If any provision of the Plan shall be held illegal or
invalid for any reason, the illegality or invalidity shall not effect
the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
28. Repricing; Shareholder Approval. Except as provided in Plan Section
16, neither the Board nor any committee thereof shall cause the Company to
adjust or amend the exercise price of any outstanding Award, whether through
amendment, relacement grant, or other means, without the prior approval of the
shareholders of the Company.
A-16
<PAGE> 49
[Front of proxy card]
BUFFETS, INC.
PROXY SOLICITED ON BEHALF OF BOARD OF DIRECTORS
The undersigned hereby appoints Clark C. Grant and H. Thomas Mitchell, and each
of them, with full power of substitution, as proxies to vote on behalf of the
undersigned all shares which the undersigned may be entitled to vote at the
Annual Meeting of Shareholders of the Company to be held at the Company's
Corporate Headquarters, 1460 Buffet Way, Eagan, Minnesota at 9:00 a.m. on
Tuesday, May 9, 2000, and at any adjournments thereof, with all powers the
undersigned would possess if personally present, upon the matters set forth in
the Notice of Annual Meeting and Proxy Statement, as directed on the reverse
side hereof.
Any proxy heretofore given by the undersigned with respect to such shares is
hereby revoked. Receipt of the Notice of Annual Meeting and Proxy Statement is
hereby acknowledged.
(To be Completed, Signed and Dated on Reverse Side)
<PAGE> 50
[Reverse of proxy card]
/X/ Please mark your votes as in this example.
The Board of Directors shall consist of seven members.
Nominees: Walter R. Barry, Jr. Alan S. McDowell
Marvin W. Goldstein C. Dennis Scott
Roe H. Hatlen Michael T. Sweeney
Kerry A. Kramp
1.Election of Directors FOR WITHHOLD
[ ] [ ]
(Instruction: To withhold authority to vote for any individual nominee,
write that nominee's name below)
--------------------------------------------------
2.Approving the proposed Buffets, Inc. 2000 FOR AGAINST ABSTAIN
Omnibus Stock Plan. [ ] [ ] [ ]
3.Approving Deloitte & Touche LLP as independent FOR AGAINST ABSTAIN
auditors for the current fiscal year. [ ] [ ] [ ]
4.Transaction of such other business as may properly come before the meeting
and any adjournments thereof.
NOTE: THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS
MADE, IT WILL BE VOTED FOR ALL NOMINEES IN PROPOSAL 1 AND FOR
PROPOSALS 2 AND 3. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR
DISCRETION WITH RESPECT TO OTHER MATTERS WHICH MAY COME BEFORE THE
MEETING.
------------------------------------- ---------
SIGNATURE DATE
------------------------------------- ---------
SIGNATURE (SIGNATURE IF HELD JOINTLY) DATE
NOTE: Please mark, date and sign exactly as name appears hereon, including
designation as executor, trustee, etc. if applicable. A corporation must sign in
its name by the President or other authorized officer. All co-owners must sign.
PLEASE RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
