UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 24, 1996 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____to_____
Commission File Number: 0-22402
HOMETOWN BUFFET, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0463002
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
9171 TOWNE CENTRE DRIVE, SUITE 575
SAN DIEGO, CALIFORNIA 92122
(Address of principal executive offices) (Zip Code)
(619) 546-9096
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) had been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Number of shares of Common Stock outstanding as of May 29, 1996: 11,615,304
<PAGE>
TABLE OF CONTENTS
-----------------
Item in
Form 10-Q Page No.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets-
April 24, 1996 and January 3, 1996.....................3
Consolidated Income Statements-
Sixteen Weeks Ended April 24, 1996 and
April 19, 1995 ........................................4
Consolidated Statements of Cash Flows-
Sixteen Weeks Ended April 24, 1996 and
April 19, 1995.........................................5
Notes to Consolidated Financial Statements.............6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..........7
PART II OTHER INFORMATION
Item 1. Legal Proceedings.....................................II-1
Item 5. Other Information.....................................II-1
Item 6. Exhibits and Reports on Form 8-K......................II-1
2
<PAGE>
PART I FINANCIAL INFORMATION
HOMETOWN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
April 24, January 3,
ASSETS 1996 1996
----------- ----------
(Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 2,420 $ 1,155
Short-term investments .................................. 20,834 27,828
Receivables ............................................. 2,707 2,830
Inventories ............................................. 1,162 1,094
Prepaid expenses ........................................ 1,018 865
Pre-opening costs ....................................... 1,689 1,784
-------- --------
Total current assets .................................. 29,830 35,556
Property and equipment, net ............................... 112,353 107,946
Other assets .............................................. 3,323 2,355
-------- --------
$145,506 $ 45,857
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable, trade ................................. $ 7,963 $ 12,357
Accrued expenses ........................................ 8,193 5,453
Deferred income taxes .................................... 553 542
Current portion of capital leases ....................... 2,062 2,012
Short-term debt ......................................... 1,000 2,000
-------- --------
Total current liabilities .............................. 19,771 22,364
Deferred income taxes ..................................... 1,916 1,530
Long-term portion of capital leases ....................... 6,592 7,143
Other liabilities ......................................... 1,697 1,102
Long term debt ............................................ 41,500 41,500
Stockholders' equity:
Common stock, $.01 par value. Authorized
20,000,000 shares; issued and outstanding 11,604,904
shares and 11,581,779 shares at the end of first
quarter 1996 and fiscal 1995, respectively .............. 116 116
Additional paid-in capital .............................. 62,122 62,065
Retained earnings ....................................... 11,792 10,037
-------- --------
Total stockholders' equity ............................. 74,030 72,218
-------- --------
$145,506 $145,857
======== ========
See accompanying notes to consolidated financial statements
</TABLE>
3
<PAGE>
HOMETOWN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(In thousands, except per share data)
(Unaudited)
Sixteen Weeks
Ended
-------------
April 24, April 19,
1996 1995
-------- ---------
Revenues:
Net restaurant sales ........................ $ 61,403 $ 38,334
Franchise income, net (primarily related party) 344 281
-------- --------
Total revenues ........................... 61,747 38,615
-------- --------
Costs and expenses:
Cost of restaurant sales .................... 21,974 14,029
Restaurant operating expenses:
Labor ..................................... 17,972 11,286
Occupancy and other ....................... 9,831 5,800
General and administrative expenses ......... 4,050 2,605
Depreciation and amortization ............... 4,204 2,607
-------- --------
Total costs and expenses ................. 58,031 36,327
-------- --------
Income from operations ................... 3,716 2,288
Interest expense ............................ (1,214) (180)
Interest income ............................. 399 109
Other income, net ........................... 24 1
-------- --------
Net income before taxes .................. 2,925 2,218
Income taxes ................................ 1,170 821
-------- --------
Net income ............................... $ 1,755 $ 1,397
======== ========
Net income per common and
common equivalent share ................ $ 0.15 $ 0.12
======== ========
Weighted average common and common
equivalent shares outstanding ............. 12,051 11,935
======== ========
See accompanying notes to consolidated financial statements.
4
<PAGE>
HOMETOWN BUFFET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Sixteen
Weeks Ended
-----------
April 24, April 19,
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................. $ 1,755 $ 1,397
Adjustments to reconcile net income to cash provided (used) by operating
activities:
Depreciation and amortization ........................... 4,204 2,607
Amortization of premium/discount on investments ......... (179) (71)
Changes in assets and liabilities:
Receivables ........................................... 123 1,901
Inventories ........................................... (68) (133)
Prepaid expenses ...................................... (153) (249)
Pre-opening costs ..................................... (615) (533)
Other assets .......................................... (1,009) 132
Accounts payable, trade ............................... (4,394) (3,907)
Accrued expenses .................................... 2,740 184
Deferred taxes ...................................... 397 411
Other Liabilities ..................................... 595 72
-------- --------
Net cash provided by operating activities ........... 3,575 1,811
-------- --------
Cash flows from (used in) investing activities:
Purchase of investments .................................... (57,583) (3,673)
Proceeds from sale of investments .......................... 64,577 6,178
Purchase of property and equipment ......................... (7,860) (12,689)
-------- --------
Net cash used in investing activities ............... (866) (10,184)
-------- --------
Cash flows from (used in) financing activities:
Sale of common stock ....................................... 57 25
Proceeds on borrowings ..................................... 2,500 14,366
Payments on borrowings ..................................... (3,500) (5,475)
Payments on capital leases ................................. (501) (297)
-------- --------
Net cash provided by (used in) financing activities . (1,444) 8,619
-------- --------
Increase in cash and cash equivalents ..................... 1,265 246
Cash and cash equivalents at beginning of period ........... 1,155 85
-------- --------
Cash and cash equivalents at end of period ................. $ 2,420 $ 331
======== ========
Supplemental disclosure of cash flow information: Cash paid for:
Interest .................................................. $ 237 $ 180
======== ========
Income taxes .............................................. $ 805 $ 890
======== ========
See accompanying notes to consolidated financial statements
</TABLE>
5
<PAGE>
HOMETOWN BUFFET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of Management, the accompanying unaudited consolidated
Financial Statements contain all adjustments, which are of a normal
recurring nature, necessary to present fairly the financial position
as of April 24, 1996 and the results of operations and cash flows for
the sixteen weeks ended April 24, 1996 and April 19, 1995. The results
of operations for the sixteen weeks are not necessarily indicative of
the results for the entire fiscal year ending January 1, 1997.
These financial statements have been prepared by HomeTown Buffet, Inc.
(the "Company") pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such regulations, although the
Company believes the disclosures provided are adequate to prevent the
information presented from being misleading.
These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's
Annual Report for the fiscal year ended January 3, 1996.
2. Primary and fully diluted net income per share are computed using the
weighted average number of common and dilutive common equivalent
shares assumed to be outstanding during the period. Common equivalent
shares consist of options to purchase common shares. The treasury
stock method was used to calculate the common equivalent number of
shares from options.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
HomeTown Buffet, Inc. (the "Company") operates and franchises scatter
bar buffet restaurants under the name "HomeTown Buffet." As of April 24,
1996, the Company had 74 Company-owned HomeTown Buffet restaurants in
operation in 11 states and 19 franchised restaurants in eight states. The
Company also operates two Roadhouse Grill steakhouse restaurants, located
in two states.
During the 1996 first quarter the Company acquired the minority
interest in its one remaining 80 percent-owned joint venture. The 10
restaurants in that joint venture are now part of the Company-owned
operations. The Company acquired the 20 percent minority interest in the
joint venture for $950,000 and the forgiveness of a $200,000 loan (plus
accrued interest) that the Company made to its joint venture partner to
finance the initial purchase of the joint venture partner's minority
interest.
The Company's fiscal year ends on the Wednesday nearest December 31
and is comprised of fifty-two or fifty-three weeks divided into four
quarters of sixteen, twelve, twelve, and twelve or thirteen weeks,
respectively.
7
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship to total
revenues, unless otherwise indicated, of certain income statement data. The
table also sets forth certain restaurant data for the periods indicated.
<TABLE>
<CAPTION>
Sixteen Weeks Ended
-------------------
April 24, April 19,
1996 1995
--------- ---------
<S> <C> <C>
Income Statement Data:
Revenues:
Net restaurant sales................................... 99.4% 99.3%
Franchise income, net.................................. 0.6 0.7
----- -----
Total revenues................................... 100.0 100.0
===== =====
Costs and expenses:
Cost of restaurant sales(1)............................ 35.8 36.6
Restaurant operating expenses:
Labor(1)............................................. 29.3 29.4
Occupancy and other(1)............................... 16.0 15.1
General and administrative expenses.................... 6.6 6.7
Depreciation and amortization.......................... 6.8 6.8
Income from operations........................... 6.0 5.9
Interest expense....................................... -2.0 -0.5
Interest income........................................ 0.6 0.3
Other income, net...................................... 0.0 0.0
Net income before taxes.......................... 4.7 5.7
Income taxes........................................... 1.9 2.1
Net income....................................... 2.8% 3.6%
Restaurant Data:
Company-owned restaurants.............................. 76 49
Franchised restaurants................................. 19 17
----- -----
Total restaurants...................................... 95 63
===== =====
Average weekly net sales during the period $53,018 $53,639
Total number of operating weeks during the period 1,153 711
- - ------------------------------
<FN>
(1) As a percentage of net restaurant sales.
</FN>
</TABLE>
8
<PAGE>
SIXTEEN WEEKS ENDED APRIL 24, 1996 COMPARED TO SIXTEEN WEEKS ENDED
APRIL 19, 1995
- - ------------------------------------------------------------------
Net restaurant sales. Net restaurant sales increased $23,069,000
(60.2%) to $61,403,000 for the sixteen week period ended April 24, 1996
(the "1996 first quarter") from $38,334,000 for the sixteen week period
ended April 19, 1995 (the "1995 first quarter"). This increase was largely
the result of the addition of 27 new HomeTown Buffet restaurants since the
1995 first quarter.
Average weekly net sales per restaurant decreased $621 (1.2%) to
$53,018 for the 1996 first quarter from $53,639 for the 1995 first quarter.
The Company is unable to predict if average weekly sales in the remaining
quarters of fiscal 1996 will equal or exceed those in the prior fiscal
quarters.
Franchise income. Net franchise income increased $63,000 (18.3%) in
the 1996 first quarter compared to the 1995 first quarter, primarily due to
the addition of two restaurants that opened in fiscal 1995 that were open
for the entire 1996 first quarter. Franchise income declined to 0.6% of
total revenues in the 1996 first quarter from 0.7% in the 1995 first
quarter primarily because of the lower growth in franchised restaurant
revenues as compared to Company-owned restaurant revenues. The Company
expects this trend to continue.
Costs and expenses. Cost of restaurant sales increased $7,718,000
(55.0%) during the 1996 first quarter compared to the 1995 first quarter,
but as a percentage of net restaurant sales declined to 35.8% in the 1996
first quarter from 36.6% in the 1995 first quarter. Management believes
this decrease was due to improved purchasing, improved controls at the
operating units and in part due to a small increase in the average meal
price since the 1995 first quarter.
Restaurant operating expenses increased $10,717,000 (62.7%) during the
1996 first quarter compared to the 1995 first quarter, and as a percentage
of net restaurant sales these expenses increased to 45.3% in the 1996 first
quarter from 44.5% in the 1995 first quarter. This increase was due to
higher costs of certain supplies, including paper, as well as increased
expenditures in repairs and maintenance, and the higher rent cost in the
more recently opened locations on the East Coast.
General and administrative expenses increased $1,423,000 (54.2%) to
$4,050,000 in the 1996 first quarter from $2,627,000 in the 1995 first
quarter. As a percentage of total revenues, these expenses remained
relatively constant at 6.6% in the 1996 first quarter compared to 6.7% in
the 1995 first quarter.
Depreciation and amortization increased $1,619,000 (62.6%) in the 1996
first quarter compared to the 1995 first quarter primarily due to opening
and operation of 27 additional restaurants in the 1996 first quarter. As a
percentage of restaurant sales these expenses remained constant at 6.8%.
Interest expense. Interest expense increased $1,034,000 in the 1996
first quarter to $1,214,000 from $180,000 in the 1995 first quarter due to
increased borrowings to fund restaurant development through equipment
financing and the recent issuance of convertible subordinated notes in a
public offering in November 1995 (the "1995 Debt Offering").
9
<PAGE>
Interest income. Interest income increased $290,000 in the 1996 first
quarter to $399,000 from $109,000 in the 1995 first quarter due to
increases in excess cash. Cash available for the purchase of investment
grade, interest-bearing securities increased as a result of receipt of net
proceeds of $40.3 million from the 1995 Debt Offering.
Income taxes. Income tax expense of $1,170,000 in the 1996 first
quarter reflects an estimated annual effective tax rate of 40.0% compared
to an estimated annual effective tax rate of 37.0% in the 1995 first
quarter. The increase in the effective tax rate from the 1995 first quarter
to the 1996 first quarter was due to additional state income taxes as the
utilization of the remainder of available net operating loss carryforwards
in the 1995 first quarter.
LIQUIDITY AND CAPITAL RESOURCES
Almost all of the Company's restaurants generate cash immediately
through sales. The Company does not have significant inventory or trade
receivable (nearly all of its sales are in cash) and it generally receives
several weeks of trade credit in purchasing food and supplies.
The Company's amended credit line with Sanwa Bank of California allows
for borrowings of up to $10 million. As of April 24, 1996, the outstanding
principal balance on the credit line was $1,000,000; loans under the credit
line bear interest at the bank's reference rate (8.25% on April 24, 1996)
and the credit line expires on April 30, 1998.
The Company plans to open approximately 25 to 28 restaurants in fiscal
1996, of which 6 had been opened through April 24, 1996. The Company has
estimated capital expenditures to be approximately $50 to $55 million in
fiscal 1996, of which approximately $7.9 million had been spent through
April 24, 1996. Actual capital needs could vary significantly depending on
the number of restaurants the Company develops through the lease of space
in existing buildings as compared to the purchase or lease of building
sites and the construction of free-standing restaurants. The development
costs for a restaurant increase substantially when the Company purchases or
leases land for the building site and constructs a free-standing
restaurant. The Company expects that in fiscal 1996 a greater percentage of
the restaurant development will come through the purchase or lease of
building sites and construction of free-standing units as compared to prior
years, and that therefore the Company's average cash investment in new unit
development will be somewhat greater than in prior years.
The Company's expansion plans constitute forward-looking information.
The Company's ability to achieve its projected expansion plans will depend
on a variety of factors, many of which may be beyond the Company's control,
including the Company's ability to locate suitable restaurant sites; to
negotiate acceptable lease or purchase terms; to obtain required
governmental approvals and construct new restaurants in a timely manner; to
attract, train and retain qualified and experienced personnel and
management; to obtain adequate funds; and to continue to operate its
restaurants profitably. Locating suitable restaurant sites at acceptable
costs and on acceptable terms has become increasingly difficult due to an
improved real estate market in the Company's principal areas of planned
expansion, including California. In addition, part of the Company's growth
strategy includes expansion in the Northeast, a geographic region where the
Company has limited experience locating and
10
<PAGE>
developing sites and operating restaurants. Moreover, the Company's
construction may be delayed in the Northeast due to inclement weather
conditions and somewhat longer build-out times and more complex labor
relations than the Company experiences in the western Untied States. Due to
these factors and the others set out above, there is no assurance that the
Company will be able to continue to effectively develop or operate
additional restaurants in this region or that it will be able to expand as
planned. There is also no assurance that additional restaurants that may be
opened in the future will be profitable or that expansion will not result
in reduced sales in existing restaurants in close proximity to new
restaurants, and to the extent this reduces cash flow available for new
development and construction, it could cause the Company to fail to meet
its expansion plans. Overall, the Company's forward looking information
concerning planned expansion should be considered in light of these
factors.
The Company expects that proceeds from the 1995 Debt Offering along
with cash flows from restaurant operations, equipment financing, and
borrowings under the Company's credit line will fund planned expansion
through fiscal 1996. The Company will require additional capital to carry
out its current expansion plans beyond fiscal 1996. Various factors,
however, could cause the Company to use capital more rapidly than planned.
These factors include increased expansion, an increased number of
restaurants developed through the purchase or lease of a building site and
the construction of a free-standing building rather than through leased
in-line space, and decreased cash flows from existing or new restaurants.
Although to date the Company has developed each of its restaurants
individually, it has in the past considered expansion through the
acquisition of groups of existing restaurants (including restaurants owned
by its franchisees) and may do so again in the future. In that case the
Company might use capital more rapidly than expected. Moreover, the Company
may not be able to obtain the additional capital required to complete
projected growth. If the Company uses capital more rapidly than expected
and/or fails to obtain the additional required capital through some type of
financing, it would reduce future planned expansion, particularly beyond
fiscal 1996.
11
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 12, 1995, the Company was served with a complaint filed
in the Superior Court for the State of California on July 31, 1995. The
complaint asserts that plaintiffs were denied access to a pre-reserved
banquet room for which they had paid a deposit and that such denial was
racially motivated and done with fraud and malice. The complaint further
alleges that the Company continues to deny plaintiffs full and equal
accommodations. The complaint seeks damages of up to three times actual
damages but not less than $250, without specifying any amount of actual
damages, and further seeks exemplary and punitive damages in the amount of
$5 million. The case is still at an early stage and discovery is not yet
complete, but the Company believes the claims are without merit and expects
to defend itself vigorously.
ITEM 5. OTHER INFORMATION
HomeTown Buffet, Inc. (the "Company") entered into an Agreement and
Plan of Merger, dated as of June 3, 1996 (the "Merger Agreement"), with
Buffets, Inc., a Minnesota corporation ("Buffets") and Country Delaware,
Inc., a Delaware corporation and wholly owned subsidiary of the Buffets
("Sub"), providing for the statutory merger of Sub with and into the
Buffets (the "Merger") resulting in the Company becoming a wholly owned
subsidiary of Buffets.
Under the terms of the Merger Agreement, upon consummation of the
Merger each outstanding share of Common Stock of the Company will be
converted into 1.17 shares of Buffets Common Stock, par value $.0l. Cash
will be paid in lieu of the issuance of any fractional shares. In addition,
Buffets would assume certain obligations under the Company's outstanding 7%
Subordinated Convertible Notes.
The consummation of the Merger is subject to approval by the
stockholders of the Company and the shareholders of Buffets, necessary
regulatory approvals and certain other conditions, all as set forth in the
Merger Agreement. The Merger Agreement contemplates that the Merger will be
accounted for as a pooling of interests and will be tax free to the
stockholders of the Company.
The foregoing description of the Merger Agreement does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, which is attached hereto as an exhibit and incorporated herein
by reference.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
--------
(1)3.1 Amended and Restated Certificate of
Incorporation
(8)3.2 Amended and Restated Bylaws
II-1
<PAGE>
(1)4.1 See Article III of Exhibit 3.1 and
Articles I and V of Exhibit 3.2
(5)4.2 Form of Indenture related to 7 percent
Convertible Subordinated Notes, Due 2002
(6)4.3 Form of 7 percent Convertible
Subordinated Note due 2002
(8)10.1 1991 Stock Incentive Plan, as amended
x(1)10.2 Form of Incentive Stock Option Agreement
x(1)10.3 Nonqualified Stock Option Agreement
(8)10.4 1996 Executive Bonus Plan
(1)10.5 Form of Franchise Agreement
*(1)10.6 Multiple Unit Agreement dated October 9,
1991 between HTB Restaurants, Inc. and
the Registrant, and amendments thereto
*(1)10.7 Master Distributor Agreement dated
November 7, 1990 among Food Services of
America and S.W. Restaurants, Inc., Elm
Street Inn and Food Bar Concepts, Inc.
(predecessors in interest of the
Registrant)
*(1)10.8 Distribution Agreement dated as of
November 1, 1991 between Major-Sysco
Food Service, Inc. and the Registrant
*(1)10.9 Master Distribution Agreement dated
February 12, 1992 between Sysco Food
Services of Los Angeles, Inc. and the
Registrant
(1)10.11 Equipment Lease Agreement dated March 1,
1993 between Heller Financial, Inc. and
the Registrant
(2)10.12 Promissory Note issued by Kerry A. Kramp
to Registrant and Pledge Agreement
between Kerry A. Kramp to Registrant,
each dated August 23, 1993
*(2)10.13 HTB Ventures I, Inc. Shareholders
Agreement between Registrant and Gary A.
Zambon and related Promissory Note and
Pledge Agreement, each dated October 8,
1993.
*(2)10.14 HTB Ventures II, Inc. Shareholders
Agreement between Registrant and Daniel
A. Burns and related Promissory Note and
Pledge Agreement, each dated October 8,
1993.
(2)10.15 Distribution Agreement dated November 6,
1993 between Registrant and Allied-Sysco
Food Services, Inc. agreeing to abide by
same terms as Distribution Agreement
dated as of November 1, 1991 between
Major-Sysco Food Service, Inc. and
Registrant (see Exhibit 10.8)
(2)10.16 Promissory Note issued by Thomas F.
Hubbard to Registrant and Pledge
Agreement between Thomas F. Hubbard and
Registrant, each dated November 9, 1993.
(2)10.19 Promissory Note issued by Gary A. Zambon
to Registrant and Pledge Agreement
between Gary A. Zambon and Registrant,
each dated December 15, 1993.
(2)10.20 Loan Agreement between Carlton A.
Hargrave, Inc. and Registrant and
Guaranty of Carlton A. Hargrave relating
thereto, each dated December 20, 1993.
(7)10.21 Promissory Note dated April 13, 1995
issued by Kerry A. Kramp.
(7)10.22 Joint Venture Termination Agreement
dated April 19, 1995 between Registrant,
HTB Ventures II, Inc. and Daniel A.
Burns.
(7)10.23 Joint Venture Termination Agreement
dated February 29, 1996 between
Registrant, HTB Ventures I, Inc. and
Gary A. Zambon
(7)10.24 Line of Credit Agreement dated April 25,
1995, as amended on November 24, 1995
and March 8, 1996, between Registrant
and Sanwa Bank California.
(7)10.25 Promissory Note dated April 11, 1995
given by Carlton A. Hargrave Inc. to
Registrant and related personal
guaranty.
II-2
<PAGE>
(8)10.26 Agreement and Plan of Merger as of June
3, 1996 among Buffets, Inc., Country
Delaware, Inc. and HomeTown Buffet, Inc.
(7)21.1 List of Subsidiaries.
27 Financial Data Schedule
- - ---------------------
(1) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-1, as amended, effective September 22, 1993
(Commission Registration No. 33-67326).
* Confidential treatment for portion of this agreement has been granted
by the Commission.
(2) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-1, as amended, effective March 23, 1994
(Commission Registration No. 33-75810).
(3) Incorporated by reference from Exhibits to Registrant's Quarterly
Report on Form 10-Q for the period ended April 20, 1994 filed with the
Commission on June 1, 1994 (Commission Registration No. 0-22402).
(4) Incorporated by reference from Exhibits to Registrant's Annual Report
on Form 10-K for the period ended December 28, 1994 filed with the
Commission on March 28, 1995.
(5) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-3, as amended, effective November 19, 1995
(Commission Registration No. 33-98540).
(6) Incorporated by reference from Exhibits to Registrant's Registration
on Form 8-A effective November 19, 1995 (Commission Registration No.
0-22402).
(7) Incorporated by reference from Exhibits to Registrant's Annual Report
on Form 10-K for the period ended January 3, 1996, filed with the
Commission on April 2, 1996.
(8) Filed herewith.
x This Exhibit constitutes a management contract or compensatory plan or
arrangement.
II-4
<PAGE>
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K have been filed during the period for which
this report is filed.
II-5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HomeTown Buffet, Inc.
------------------------------------------
(Registrant)
June 10, 1996 GLENN E. GLASSHAGEL
------------------------------------------
Chief Financial and
Accounting Officer and Authorized Officer
II-6
<PAGE>
EXHIBIT INDEX
Exhibit Sequential
No. Description Page No.
(1)3.1 Amended and Restated Certificate of
Incorporation
(8)3.2 Amended and Restated Bylaws
(1)4.1 See Article III of Exhibit 3.1 and
Articles I and V of Exhibit 3.2
(5)4.2 Form of Indenture related to 7 percent
Convertible Subordinated Notes, Due 2002
(6)4.3 Form of 7 percent Convertible
Subordinated Note due 2002
(8)10.1 1991 Stock Incentive Plan, as amended
x(1)10.2 Form of Incentive Stock Option Agreement
x(1)10.3 Nonqualified Stock Option Agreement
(8)10.4 1996 Executive Bonus Plan
(1)10.5 Form of Franchise Agreement
*(1)10.6 Multiple Unit Agreement dated October 9,
1991 between HTB Restaurants, Inc. and
the Registrant, and amendments thereto
*(1)10.7 Master Distributor Agreement dated
November 7, 1990 among Food Services of
America and S.W. Restaurants, Inc., Elm
Street Inn and Food Bar Concepts, Inc.
(predecessors in interest of the
Registrant)
*(1)10.8 Distribution Agreement dated as of
November 1, 1991 between Major-Sysco
Food Service, Inc. and the Registrant
*(1)10.9 Master Distribution Agreement dated
February 12, 1992 between Sysco Food
Services of Los Angeles, Inc. and the
Registrant
(1)10.11 Equipment Lease Agreement dated March 1,
1993 between Heller Financial, Inc. and
the Registrant
II-7
<PAGE>
(2)10.12 Promissory Note issued by Kerry A. Kramp
to Registrant and Pledge Agreement
between Kerry A. Kramp to Registrant,
each dated August 23, 1993
*(2)10.13 HTB Ventures I, Inc. Shareholders
Agreement between Registrant and Gary A.
Zambon and related Promissory Note and
Pledge Agreement, each dated October 8,
1993.
*(2)10.14 HTB Ventures II, Inc. Shareholders
Agreement between Registrant and Daniel
A. Burns and related Promissory Note and
Pledge Agreement, each dated October 8,
1993.
(2)10.15 Distribution Agreement dated November 6,
1993 between Registrant and Allied-Sysco
Food Services, Inc. agreeing to abide by
same terms as Distribution Agreement
dated as of November 1, 1991 between
Major-Sysco Food Service, Inc. and
Registrant (see Exhibit 10.8)
(2)10.16 Promissory Note issued by Thomas F.
Hubbard to Registrant and Pledge
Agreement between Thomas F. Hubbard and
Registrant, each dated November 9, 1993.
(2)10.19 Promissory Note issued by Gary A. Zambon
to Registrant and Pledge Agreement
between Gary A. Zambon and Registrant,
each dated December 15, 1993.
(2)10.20 Loan Agreement between Carlton A.
Hargrave, Inc. and Registrant and
Guaranty of Carlton A. Hargrave relating
thereto, each dated December 20, 1993.
(7)10.21 Promissory Note dated April 13, 1995
issued by Kerry A. Kramp.
(7)10.22 Joint Venture Termination Agreement
dated April 19, 1995 between Registrant,
HTB Ventures II, Inc. and Daniel A.
Burns.
(7)10.23 Joint Venture Termination Agreement
dated February 29, 1996 between
Registrant, HTB Ventures I, Inc. and
Gary A. Zambon
II-8
<PAGE>
(7)10.24 Line of Credit Agreement dated April 25,
1995, as amended on November 24, 1995
and March 8, 1996, between Registrant
and Sanwa Bank California.
(7)10.25 Promissory Note dated April 11, 1995
given by Carlton A. Hargrave Inc. to
Registrant and related personal
guaranty.
(8)10.26 Agreement and Plan of Merger as of June
3, 1996 among Buffets, Inc., Country
Delaware, Inc. and HomeTown Buffet, Inc.
(7)21.1 List of Subsidiaries.
27 Financial Data Schedule
- - ---------------------
(1) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-1, as amended, effective September 22, 1993
(Commission Registration No. 33-67326).
* Confidential treatment for portion of this agreement has been granted
by the Commission.
(2) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-1, as amended, effective March 23, 1994
(Commission Registration No. 33-75810).
(3) Incorporated by reference from Exhibits to Registrant's Quarterly
Report on Form 10-Q for the period ended April 20, 1994 filed with the
Commission on June 1, 1994 (Commission Registration No. 0-22402).
(4) Incorporated by reference from Exhibits to Registrant's Annual Report
on Form 10-K for the period ended December 28, 1994 filed with the
Commission on March 28, 1995.
(5) Incorporated by reference from Exhibits to Registrant's Registration
Statement on Form S-3, as amended, effective November 19, 1995
(Commission Registration No. 33-98540).
(6) Incorporated by reference from Exhibits to Registrant's Registration
on Form 8-A effective November 19, 1995 (Commission Registration No.
0-22402).
(7) Incorporated by reference from Exhibits to Registrant's Annual Report
on Form 10-K for the period ended January 3, 1996, filed with the
Commission on April 2, 1996.
(8) Filed herewith.
x This Exhibit constitutes a management contract or compensatory plan or
arrangement.
II-9
FIRST AMENDED AND RESTATED BYLAWS
OF
HOMETOWN BUFFET, INC.
ARTICLE I
STOCKHOLDERS MEETINGS AND VOTING
1.1 Annual Meeting. The annual meeting of the stockholders shall be
held on the second Tuesday in May of each year at 1:30 p.m., unless a
different date or time is fixed by the Board of Directors and stated in the
notice of the meeting. Failure to hold an annual meeting on the stated date
shall not affect the validity of any corporate action.
1.2 Special Meetings. Special meetings of the stockholders, for any
purposes, unless otherwise prescribed by statute, may be called by the
Chairman and Chief Executive Officer or the Board of Directors and shall be
called by the Chairman and Chief Executive Officer upon the written demand
of the holders of not less than one-tenth of all the votes entitled to be
cast on any issue proposed to be considered at the meeting. The demand
shall describe the purposes for which the meeting is to be held and shall
be signed, dated and delivered to the Secretary.
1.3 Place of Meetings. Meetings of the stockholders shall be held at
any place in or out of Delaware designated by the Board of Directors. If a
meeting place is not designated by the Board of Directors, the meeting
shall be held at the Corporation's principal office.
1.4 Notice of Meetings. Written or printed notice stating the date,
time and place of the stockholders meeting and, in the case of a special
meeting or a meeting for which special notice is required by law, the
purposes for which the meeting is called, shall be delivered by the
Corporation to each stockholder entitled to vote at the meeting and, if
required by law, to any other stockholders entitled to receive notice, not
earlier than 60 days nor later than 10 days before the meeting date. If
mailed, the notice shall be deemed delivered when deposited in the United
States mail, postage prepaid, directed to the stockholder at the
stockholder's address shown in the Corporation's record of stockholders.
1.5 Waiver of Notice. A stockholder may at any time waive any notice
required by law, these Bylaws or the Certificate of Incorporation. The
waiver shall be in writing, be signed by the stockholder entitled to the
notice and be filing with the corporate records. A stockholder's attendance
at a meeting constitutes a waiver of notice of such meeting; except when
the person attends for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is
not lawfully called or convened.
<PAGE>
1.6 Fixing of Record Date.
(1) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be earlier than 60 or later than 10
days before the date of such meeting, nor more than 60 days prior to any
other action.
(2) If no record date is fixed:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the
day on which the meeting is held.
(ii)The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed.
(iii) The record date for determining stockholders for any
other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(3) A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix anew
record date for the adjourned meeting.
1.7 Stockholders List for Meeting. After a record date for a meeting
of stockholders is fixed and at least 10 days before any such meeting, the
Corporation shall prepare an alphabetical list of all stockholders entitled
to vote at the stockholder meeting. The list shall be arranged by voting
group and, within each voting group, by class or series of shares, and it
shall show the address of and number of shares held by each stockholder.
The stockholders list shall be available for inspection by any stockholder,
upon proper demand as may be required by law, for any purpose germane to
the meeting during ordinary business hours for a period of at least 10 days
prior to the meeting, at the Corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be
held. The Corporation shall make the stockholders list available at the
meeting, and any stockholder or the stockholder's agent or attorney shall
be entitled to inspect the list at any time during the meeting or any
adjournment. Refusal or failure to
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prepare or make available the stockholders list does not affect the
validity of action taken at the meeting except that upon the willful
neglect or refusal of the directors to produce such a list at any meeting
for the election of directors, they shall be ineligible for election to any
office at such meeting.
1.8 Quorum; Adjournment.
(1) Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares exists
with respect to that matter. A majority of the votes entitled to be cast on
the matter by the voting group constitutes a quorum of that voting group
for action on that matter.
(2) A majority of votes represented at the meeting, although less
than a quorum, may adjourn the meeting from time to time to a different
time and place without further notice to any stockholder of any
adjournment, except that notice is required if a new record date is or must
be set for the adjourned meeting or if the adjournment is for more than 30
days. At an adjourned meeting at which a quorum is present, any business
may be transacted that might have been transacted at the meeting originally
held.
(3) Once a share is represented for any purpose at a meeting, it
shall be present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must be
set for the adjourned meeting. A new record date must be set if the meeting
is adjourned to a date more than 120 days after the date fixed for the
original meeting.
1.9 Voting Requirements; Action Without Meeting.
(1) If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes cast
within the voting group favoring the action exceed the votes cast opposing
the action, unless a greater number of affirmative votes is required by law
or the Certificate of Incorporation. Unless otherwise provided in the
Certificate of Incorporation, directors are elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at
which a quorum is present.
(2) Action required or permitted by law to be taken at a
stockholders meeting may be taken without a meeting if one or more written
consents describing the action taken, signed by the stockholders of
outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon is delivered to the Secretary for
inclusion in the minutes for filing with the corporate records. Stockholder
action taken by written consent is effective when the last stockholder
signs the consent, unless the consent specifies an earlier or
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<PAGE>
later effective date. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent
shall be effective to take the corporate action referred to therein unless
within sixty (60) days of the earliest date consent delivered in the
required manner to the Corporation, written consent signed by a sufficient
number of holders to take action are delivered to the Corporation. Prompt
notice of the taking of the corporate action without a meeting by less than
unanimous written consent shall be given to those stockholders who have not
consented in writing. If the action which is consented to is such as would
have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written
consent have been given as provided in Section 228 of the General
Corporation Law of Delaware.
1.10 Proxies. A stockholder may vote shares in person or by proxy. A
stockholder may appoint a proxy by signing an appointment form either
personally or by the stockholder's attorney-in-fact. An appointment of a
proxy is effective when received by the Secretary or other officer of the
Corporation authorized to tabulate votes, but no proxy shall be voted or
acted upon after three years from its date, unless the proxy provides for a
longer period. An appointment is revocable by the stockholder unless the
appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest sufficient in law to support an
irrevocable power.
1.11 Meeting by Telephone Conference. Stockholders may participate in
an annual or special meeting by, or conduct the meeting through, use of any
means of communications by which all stockholders participating may
simultaneously hear each other during the meeting, except that no meeting
for which a written notice is sent to stockholders may be conducted by this
means unless the notice states that participation in this manner is
permitted and describes how any stockholder desiring to participate in this
manner may notify the Corporation. Participation in a meeting by this means
shall constitute presence in person at the meeting.
ARTICLE II
BOARD OF DIRECTORS
2.1 Duties of Board of Directors. All corporate powers of the
Corporation shall be exercised by or under the authority of its Board of
Directors; the business and affairs of the Corporation shall be managed
under the direction of its Board of Directors.
2.2 Number, Term and Qualification. The number of directors of the
Corporation shall be at least 3 and no more than 9. Within this range, the
initial number of directors shall be 4, and the number of directors shall
4
<PAGE>
otherwise be determined from time to time by the Board of Directors. The
term of a director shall expire at the next annual meeting of stockholders
after his or her election. No reduction in the number of directors shall
shorten the term of any incumbent director. Despite the expiration of a
director's term, the director shall continue to serve until the director's
successor is elected and qualified or the number of directors is decreased.
Directors need not be residents of Delaware or stockholders of the
Corporation.
2.3 Regular Meetings. A regular meeting of the Board of Directors
shall be held without notice other than this Bylaw immediately after, and
at the same place as, the annual meeting of stockholders. The Board of
Directors may provide by resolution the time and place for the holding of
additional regular meetings in or out of Delaware without notice other than
the resolution.
2.4 Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the Chairman and Chief Executive Officer
or any two directors. The person or persons authorized to call special
meetings of the Board of Directors may fix any place in or out of Delaware
as the place for holding any special meeting of the Board of Directors
called by them.
2.5 Notice. Notice of the date, time and place of any special meeting
of the Board of Directors shall be given at least 24 hours prior to the
meeting by notice communicated in person, by telephone, telegraph,
teletype, other form of wire or wireless communication, mail or private
carrier. If written, notice shall be effective at the earliest of (a) when
received, (b) three days after its deposit in the United States mail, as
evidenced by the postmark, if mailed postpaid and correctly addressed, or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested and the receipt is signed by or on
behalf of the addressee. Notice by all other means shall be deemed
effective when received by or on behalf of the director. Notice of any
regular or special meeting need not describe the purposes of the meeting
unless required by law or the Certificate of Incorporation.
2.6 Waiver of Notice. A director may at any time waive any notice
required by law, these Bylaws or the Certificate of Incorporation. Except
as set forth below, the waiver must be in writing, be signed by the
director entitled to the notice, specify the meeting for which notice is
waived and be filed with the minutes or corporate records. A director's
attendance at or participation in a meeting waives any required notice to
the director of the meeting unless the director at the beginning of the
meeting, or promptly upon the director's arrival, objects to holding the
meeting or transacting business at the meeting and does not thereafter vote
for or assent to action taken at the meeting.
2.7 Quorum. A majority of the number of directors fixed in accordance
with Section 2.2 of these Bylaws shall constitute a quorum for
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<PAGE>
the transaction of business at any meeting of the Board of Directors. If
less than a quorum is present at a meeting, a majority of the directors
present may adjourn the meeting from time to time without further notice.
2.8 Manner of Acting. The act of the majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board of
Directors, unless a different number is provided by law, the Certificate of
Incorporation or these Bylaws.
2.9 Meeting by Telephone Conference; Action Without Meeting.
(1) Directors may participate in a regular or special meeting by,
or conduct the meeting through, use of any means of communications by which
all directors participating may simultaneously hear each other during the
meeting. Participation in a meeting by this means shall constitute presence
in person at the meeting.
(2) Any action that is required or permitted to be taken at a
meeting of the Board of Directors may be taken without a meeting if one or
more written consents describing the action taken are signed by all of the
directors entitled to vote on the matter and included in the minutes of
proceedings of the Board of Directors. The action shall be effective when
the last director signs the consent, unless the consent specifies an
earlier or later effective date.
2.10 Vacancies. Any vacancy on the Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be
filled by the stockholders, the Board of Directors, the remaining directors
if less than a quorum (by the vote of a majority thereof) or by a sole
remaining director. Any vacancy not filled by the directors shall be filled
by election at an annual meeting or at a special meeting of stockholders
called for that purpose. A vacancy that will occur at a specified later
date, by reason of a resignation or otherwise, may be filled before the
vacancy occurs, but the new director may not take office until the vacancy
occurs.
2.11 Compensation. By resolution of the Board of Directors, the
directors may be paid reasonable compensation for services as directors and
their expenses of attending meetings of the Board of Directors.
2.12 Presumption of Assent. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors shall be
deemed to have assented to the action taken at the meeting unless (a) the
director's dissent or abstention from the action is entered in the minutes
of the meeting, (b) the director delivers a written notice of dissent or
abstention to the action to the presiding officer of the meeting before any
adjournment or to the Corporation immediately after the adjournment of the
meeting or (c) the director objects at the beginning of the meeting or
promptly upon the director's arrival to the holding of the meeting or
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transacting business at the meeting. The right to dissent or abstain is not
available to a director who voted in favor of the action.
2.13 Removal. The stockholders may remove one or more directors with
or without cause at a meeting called expressly for that purpose, unless the
Certificate of Incorporation provides for removal for cause only.
2.14 Resignation. Any director may resign by delivering written notice
to the Board of Directors, its chairperson or the Corporation. Unless the
notice specifies a later effective date, a resignation notice shall be
effective upon the earlier of (a) receipt, (b) five days after its deposit
in the United States mails, if mailed postpaid and correctly addressed, or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by
addressee. Once delivered, a resignation notice is irrevocable unless
revocation is permitted by the Board of Directors.
ARTICLE III
COMMITTEES OF THE BOARD
3.1 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, create one or more committees and appoint
members of the Board of Directors to serve on them. Each committee shall
have two or more members. The creation of a committee and appointment of
members to it must be approved by a majority of all directors in office
when the action is taken. Subject to any limitation imposed by the Board of
Directors or by law, each committee may exercise all the authority of the
Board of Directors in the management of the Corporation. A committee may
not take any action that a committee is prohibited from taking by the
General Corporation Law of Delaware.
3.2 Changes of Size and Function. Subject to the provisions of law,
the Board of Directors shall have the power at any time to change the
number of committee members, fill committee vacancies, change any committee
members and change the functions and terminate the existence of a
committee.
3.3 Conduct of Meetings. Each committee shall conduct its meetings in
accordance with the applicable provisions of these Bylaws relating to
meetings and action without meetings of the Board of Directors. Each
committee shall adopt any further rules regarding its conduct, keep minutes
and other records and appoint subcommittees and assistants as it deems
appropriate.
3.4 Compensation. By resolution of the Board of Directors, committee
members may be paid reasonable compensation for services on committees and
their expenses of attending committee meetings.
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ARTICLE IV
OFFICERS
4.1 Appointment. The Board of Directors at its first meeting following
its election each year shall appoint a Chairman and Chief Executive Officer
from among its members and a Secretary. The Board of Directors or the
Chairman and Chief Executive Officer may appoint any other officers,
assistant officers and agents it or he deems appropriate. Any two or more
offices may be held by the same person.
4.2 Compensation. The Corporation may pay its officers reasonable
compensation for their services as fixed from time to time by the Board of
Directors or by the Chairman and Chief Executive Officer with respect to
officers appointed by such officer.
4.3 Term. The term of office of all officers commences upon their
appointment and continues until their successors are appointed or until
their resignation or removal.
4.4 Removal. Any officer or agent appointed by the Board of Directors
or the Chairman and Chief Executive Officer may be removed by the Board of
Directors at any time with or without cause. Any officer or agent appointed
by the Chairman and Chief Executive Officer may be removed by the Chairman
and Chief Executive Officer at any time with or without cause.
4.5 Chairman of the Board and Chief Executive Officer. The Chairman of
the Board and Chief Executive Officer, who shall be appointed from among
the members of the Board of Directors, shall preside at all meetings of the
Board of Directors and perform any duties and responsibilities prescribed
from time to time by the Board of Directors.
4.6 Vice Chairman. The Chairman and Chief Executive Officer or the
Board of Directors may appoint a Vice Chairman of the Board from among the
members of the Board of Directors, to assist in carrying out the duties of
the Chairman of the Board. The Vice Chairman shall perform the duties and
responsibilities prescribed from time to time by the Board of Directors or
the Chairman and Chief Executive Officer.
4.7 President and Chief Operating Officer. Subject to the direction
and control of the Chairman and Chief Executive Officer and the Board of
Directors, the President and Chief Operating Officer shall perform any
duties and responsibilities prescribed from time to time by the Board of
Directors or the Chairman and Chief Executive Officer.
4.8 Vice Presidents. Each Vice President shall perform the duties and
responsibilities prescribed by the Board of Directors or the Chairman and
Chief Executive Officer. The Board of Directors or the Chairman and Chief
Executive Officer may confer a special title upon a Vice President.
8
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4.9 Secretary.
(1) The Secretary shall record and keep the minutes of all
meetings of the directors and stockholders in one or more books provided
for that purpose and perform any duties prescribed by the Board of
Directors or the Chairman and Chief Executive Officer.
(2) Any assistant secretary shall have the duties prescribed from
time to time by the Board of Directors, the Chairman and Chief Executive
Officer or the Secretary. In the absence or disability of the Secretary,
the Secretary's duties shall be performed by an assistant secretary.
4.10 Treasurer. The Treasurer shall have charge and custody and be
responsible for all funds and securities of the Corporation and shall have
other duties as prescribed from time to time by the Board of Directors or
the Chairman and Chief Executive Officer.
ARTICLE V
INDEMNIFICATION
The Corporation shall indemnify any current or former director or
officer and may indemnify any current or former employee or agent of the
Corporation to the fullest extent not prohibited by law, who is made, or
threatened to be made, a party to an action, suit or proceeding, whether
civil, criminal, administrative, investigative or other (including an
action, suit or proceeding by or in the right of the Corporation) by reason
of the fact that such person is or was a director, officer, employee or
agent of the Corporation or a fiduciary within the meaning of the Employee
Retirement Income Security Act of 1974 with respect to any employee benefit
plan of the Corporation, or serves or served at the request of the
Corporation as a director, officer, employee or agent, or as a fiduciary of
an employee benefit plan, of another corporation, partnership, joint
venture, trust or other enterprise. The Corporation shall pay for or
reimburse the reasonable expenses incurred by any such current or former
director or officer and may pay for or reimburse the reasonable expenses
incurred by any such current or former employee or agent in any such
proceeding in advance of the final disposition of the proceeding if the
person sets forth in writing (i) the person's good faith belief that the
person is entitled to indemnification under this Article and (ii) the
person's agreement to repay all advances if it is ultimately determined
that the person is not entitled to indemnification under this Article. No
amendment to these Bylaws that limits the Corporation's obligation to
indemnify any person shall have any effect on such obligation for any act
or omission that occurs prior to the later to occur of the effective date
of the amendment or the date notice of the amendment is given to the
person. This Article shall not be deemed exclusive of any other provisions
for indemnification or advancement of expenses of directors, officers,
employees, agents and fiduciaries that may be included in the Certificate
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of Incorporation or any statute, bylaw, agreement, general or specific
action of the Board of Directors, vote of stockholders or other document or
arrangement.
ARTICLE VI
ISSUANCE OF SHARES
6.1 Adequacy of Consideration. Before the Corporation issues shares,
the Board of Directors shall determine that the consideration received or
to be received for the shares to be issued is adequate. The authorization
by the Board of Directors of the issuance of shares for stated
consideration shall evidence a determination by the Board that such
consideration is adequate.
6.2 Certificates for Shares.
(1) Certificates representing shares of the Corporation shall be
in any form determined by the Board of Directors consistent with the
requirements of the General Corporation Law of Delaware and these Bylaws.
The certificates shall be signed, either manually or in facsimile, by two
officers of the Corporation, at least one of whom shall be the Chairman and
Chief Executive Officer or President and Chief Operating Officer, and may
be sealed with the seal of the Corporation, if any, or a facsimile thereof.
All certificates for shares shall be consecutively numbered or otherwise
identified. The signatures of officers upon a certificate may be facsimiles
if the certificate is countersigned by a transfer agent or any assistant
transfer agent or registered by a registrar, other than the Corporation
itself or an employee of the Corporation.
(2) Every certificate for shares of stock that are subject to any
restriction on transfer or registration of transfer pursuant to the
Certificate of Incorporation, the Bylaws, securities laws, a stockholders
agreement or any agreement to which the Corporation is a party shall have
conspicuously noted on the face or back of the certificate either the full
text of the restriction or a statement of the existence of the restriction
and that the Corporation retains a copy of the full text. Every certificate
issued when the either the full text of the restriction or a statement of
the existence of the restriction and that the Corporation retains a copy of
the full text. Every certificate issued when the Corporation is authorized
to issue more than one class or series within a class of shares shall set
forth on its face or back either (a) a summary of the designations,
relative rights, preferences and limitations of the shares of each class
and the variations in rights, preferences and limitations for each series
authorized to be issued and the authority of the Board of Directors to
determine variations for future series or (b) a statement of the existence
of those designations, relative rights, preferences and limitations and a
statement that the Corporation will furnish a copy thereof to the holder of
the certificate upon written request and without charge.
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(3) All certificates surrendered to the Corporation for transfer
shall be canceled. The Corporation shall not issue a new certificate for
previously issued shares until the former certificate or certificates for
those shares are surrendered and canceled; except that in case of a lost,
destroyed or mutilated certificate, a new certificate may be issued on
terms prescribed by the Board of Directors.
6.3 Transfer Agent and Registrar. The Board of Directors may from time
to time appoint one or more transfer agents and one or more registrars for
the shares of the Corporation, with powers and duties determined by the
Board of Directors.
6.4 Officer Ceasing to Act. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when
the certificate is issued, the certificate is nevertheless valid.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND OTHER INSTRUMENTS
7.1 Contracts. Except as otherwise provided by law, the Board of
Directors may authorize any officers or agents to execute and deliver any
contract or other instrument in the name of and on behalf of the
Corporation, and this authority may be general or confined to specific
instances. In addition, except as prohibited by law or the Board of
Directors, the Chairman and Chief Executive Officer may authorize any
officers or agents to, execute and deliver any contract or other instrument
in the name of and on behalf of the Corporation.
7.2 Loans. The Corporation shall not borrow money and no evidence of
indebtedness for borrowed money shall be issued in its name unless
authorized by the Board of Directors. This authority may be general or
confined to specific instances.
7.3 Checks, Drafts, Etc. All checks, drafts or other orders for the
payment of money and notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed in the manner and by the officers
or agents of the Corporation designated by the Board of Directors or the
Chairman and Chief Executive Officer.
7.4 Deposits. All funds of the Corporation not otherwise employed
shall be deposited to the credit of the Corporation in those banks, trust
companies or other depositories as the Board of Directors or officers of
the Corporation designated by the Board of Directors select, or be invested
as authorized by the Board of Directors.
ARTICLE VIII
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MISCELLANEOUS PROVISIONS
8.1 Severability. A determination that any provision of these Bylaws
is for any reason inapplicable, invalid, illegal or otherwise ineffective
shall not affect or invalidate any other provision of these Bylaws.
8.2 Amendments. These Bylaws may be amended or repealed and new Bylaws
may be adopted by the Board of Directors or the stockholders of the
Corporation.
Adopted: 12/19/95
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[Date]
12
HOMETOWN BUFFET, INC.
1991 STOCK INCENTIVE PLAN, AS AMENDED
1. Purpose.
The purpose of this Stock Incentive Plan (the "Plan") is to
enable HomeTown Buffet, Inc. (the "Company") to attract and retain the
services of selected employees, officers, directors and other key
contributors (including consultants and non-employee agents) of the Company
or any subsidiary of the Company. Notwithstanding the foregoing, grants to
Non-Employee Directors (as defined in subparagraph 12.1) of options or
other awards under the Plan shall be made solely in accordance with the
provisions of paragraph 12.
2. Shares Subject to the Plan.
Subject to adjustment as provided below, the shares to be
offered under the Plan shall consist of Common Stock of the Company, and
the total number of shares of Common Stock that may be issued under the
Plan shall not exceed 800,000 shares. The shares issued under the Plan may
be authorized and unissued shares or reacquired shares. If an option or
stock appreciation right granted under the Plan expires, terminates or is
cancelled, the unissued shares subject to such option or stock appreciation
right shall again be available under the Plan. If shares sold or awarded as
a bonus under the Plan are forfeited to the Company or repurchased by the
Company, the number of shares forfeited or repurchased shall again be
available under the Plan.
3. Effective Date and Duration of Plan.
3.1 Effective Date. The Plan shall become effective
as of April 10, 1991.
3.2 Duration. The Plan shall continue in effect until all
shares available for issuance under the Plan have been issued and all
restrictions on such shares have lapsed. The Board of Directors may suspend
or terminate the Plan at any time except with respect to options and shares
subject to restrictions then outstanding under the Plan. Termination shall
not affect any outstanding option, any right of the Company to repurchase
shares or the forfeitability of shares issued under the Plan.
4. Administration.
4.1 Board of Directors. The Plan shall be
administered by the Board of Directors of the Company, which
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shall determine and designate from time to time the individuals to whom
awards shall be made, the amount of the awards and the other terms and
conditions of the awards. Subject to the provisions of the Plan, the Board
of Directors may from time to time adopt and amend rules and regulations
relating to administration of the Plan, advance the lapse of any waiting
period, accelerate any exercise date, waive or modify any restriction
applicable to shares (except those restrictions imposed by law) and make
all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The
interpretation and construction of the provisions of the Plan and related
agreements by the Board of Directors shall be final and conclusive. The
Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of such expediency.
4.2 Committee. The Board of Directors may delegate to a
committee of the Board of Directors or specified officers of the Company,
or both (the "Committee") any or all authority for administration of the
Plan. If authority is delegated to a Committee, all references to the Board
of Directors in the Plan shall mean and relate to the Committee except (i)
as otherwise provided by the Board of Directors, (ii) that only the Board
of Directors may amend or terminate the Plan as provided in paragraphs 3
and 16 and (iii) that a Committee including officers of the Company shall
not be permitted to grant options to persons who are officers of the
Company.
5. Types of Awards; Eligibility.
The Board of Directors may, from time to time, take the
following actions, separately or in combination, under the Plan: (i) grant
Incentive Stock Options, as defined in Section 422A of the Internal Revenue
Code of 1986, as amended (the "Code"), as provided in paragraphs 6.1 and
6.2; (ii) grant options other than Incentive Stock Options ("Non-Statutory
Stock Options") as provided in paragraphs 6.1 and 6.3; (iii) award stock
bonuses as provided in paragraph 7; (iv) sell shares subject to
restrictions as provided in paragraph 8; (v) grant stock appreciation
rights as provided in paragraph 9; (vi) grant cash bonus rights as provided
in paragraph 10; and (vi) grant foreign qualified awards as provided in
paragraph 11. Any such awards may be made to employees, including employees
who are officers or directors, directors, and to non-employees (including
consultants) who the Board of Directors believes have made or will make an
important contribution to the Company or its subsidiaries; provided,
however, that only employees of the Company, or its
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subsidiaries, shall be eligible to receive Incentive Stock Options under
the Plan. The Board of Directors shall select the individuals to whom
awards shall be made and shall specify the action taken with respect to
each individual to whom an award is made. At the discretion of the Board of
Directors, an individual may be given an election to surrender an award in
exchange for the grant of a new award.
6. Option Grants.
6.1 General Rules Relating to Options.
(a) Terms of Grant. The Board of Directors may grant
options under the Plan. With respect to each option grant, the Board
of Directors shall determine the number of shares subject to the
option, the option price, the period of the option, the time or times
at which the option may be exercised and whether the option is an
Incentive Stock Option or a Non-Statutory Stock Option.
(b) Exercise of Options. Except as provided in paragraph
6.1(d) or as determined by the Board of Directors, no option granted
under the Plan may be exercised unless at the time of such exercise
the optionee is employed by or in the service of the Company or any
subsidiary of the Company and shall have been so employed or provided
such service continuously since the date such option was granted.
Absence on leave or on account of illness or disability under rules
established by the Board of Directors shall not, however, be deemed
an interruption of employment or service for this purpose. Unless
otherwise determined by the Board of Directors, vesting of options
shall not continue during an absence on leave (including an extended
illness) or on account of disability. Except as provided in
paragraphs 6.1(d) and 14, options granted under the Plan may be
exercised from time to time over the period stated in each option in
such amounts and at such times as shall be prescribed by the Board of
Directors, provided that options shall not be exercised for
fractional shares. Unless otherwise determined by the Board of
Directors, if the optionee does not exercise an option in any one
year with respect to the full number of shares to which the optionee
is entitled in that year, the optionee's rights shall be cumulative
and the optionee may purchase those shares in any subsequent year
during the term of the option.
(c) Nontransferability. Each Incentive Stock
Option and, unless otherwise determined by the Board of
Directors, each other option granted under the Plan by its
terms shall be nonassignable and nontransferable by the
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optionee, either voluntarily or by operation of law, except by will
or by the laws of descent and distribution of the state or country of
the optionee's domicile at the time of death, and each option by its
terms shall be exercisable during the optionee's lifetime only by the
optionee.
(d) Termination of Employment or Service.
(i) General Rule. Unless otherwise determined by
the Board of Directors, in the event the employment or service
of the optionee with the Company or subsidiary terminates for
any reason other than because of physical disability or death
as provided in subparagraphs 6.1(d)(ii) and (iii), the option
may be exercised at any time prior to the expiration date of
the option or the expiration of 30 days after the date of such
termination, whichever is the shorter period, but only if and
to the extent the optionee was entitled to exercise the option
at the date of such termination.
(ii) Termination Because of Physical Disability.
Unless otherwise determined by the Board of Directors, in the
event of the termination of employment or service because of
physical disability (as that term is defined in Section
22(e)(3) of the Code), the option may be exercised at any time
prior to the expiration date of the option or the expiration of
12 months after the date of such termination, whichever is the
shorter period, but only if and to the extent the optionee was
entitled to exercise the option at the date of such
termination.
(iii) Termination Because of Death. Unless
otherwise determined by the Board of Directors, in the event of
the death of an optionee while employed by or providing service
to the Company or a parent or subsidiary, the option may be
exercised at any time prior to the expiration date of the
option or the expiration of 12 months after the date of such
death, whichever is the shorter period, but only if and to the
extent the optionee was entitled to exercise the option at the
date of such termination and only by the person or persons to
whom such optionee's rights under the option shall pass by the
optionee's will or by the laws of descent and distribution of
the state or country of domicile at the time of death.
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(iv) Amendment of Exercise Period Applicable to
Termination. The Board of Directors, at the time of grant or at
any time thereafter, may extend the 30-day and 12-month
exercise periods any length of time not later than the original
expiration date of the option, and may increase the portion of
an option that is exercisable, subject to such terms and
conditions as the Board of Directors may determine.
(v) Failure to Exercise Option. To the extent that
the option of any deceased optionee or of any optionee whose
employment or service terminates is not exercised within the
applicable period, all further rights to purchase shares
pursuant to such option shall cease and terminate.
(e) Purchase of Shares. Unless the Board of Directors
determines otherwise, shares may be acquired pursuant to an option
granted under the Plan only upon receipt by the Company of notice in
writing from the optionee of the optionee's intention to exercise,
specifying the number of shares as to which the optionee desires to
exercise the option and the date on which the optionee desires to
complete the transaction, and if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that
it is the optionee's present intention to acquire the shares for
investment and not with a view to distribution, and any other
information the Board of Directors may request. Unless the Board of
Directors determines otherwise, on or before the date specified for
completion of the purchase of shares pursuant to an option, the
optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Board of
Directors, cash that may be the proceeds of a loan from the Company)
or, with the consent of the Board of Directors, in whole or in part,
in Common Stock of the Company valued at fair market value,
restricted stock, or other contingent awards denominated in either
stock or cash, deferred compensation credits, promissory notes and
other forms of consideration. The fair market value of Common Stock
provided in payment of the purchase price shall be determined by the
Board of Directors. No shares shall be issued until full payment
therefor has been made. Each optionee who has exercised an option
shall immediately upon notification of the amount due, if any, pay to
the Company in cash amounts necessary to satisfy any applicable
federal, state and local tax withholding requirements. If additional
withholding is or becomes required beyond any amount deposited before
delivery of
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the certificates, the optionee shall pay such amount to the Company
on demand. If the optionee fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the
Company to the optionee, including salary, subject to applicable law.
Upon the exercise of an option, the number of shares reserved for
issuance under the Plan shall be reduced by the number of shares
issued upon exercise of the option, less the number of shares
surrendered in payment of the option exercise.
6.2 Incentive Stock Options. Incentive Stock
Options shall be subject to the following additional terms and
conditions:
(a) Limitation on Amount of Grants. No employee may be
granted Incentive Stock Options under the Plan if the aggregate fair
market value, on the date of grant, of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time
by that employee during any calendar year under the Plan and under
any other incentive stock option plan (within the meaning of Section
422A of the Code) of the Company or any parent or subsidiary of the
Company exceeds $100,000.
(b) Limitations on Grants to 10 Percent Shareholders. An
Incentive Stock Option may be granted under the Plan to an employee
possessing more than 10 percent of the total combined voting power of
all classes of stock of the Company or of any parent or subsidiary of
the Company only if the option price is at least 110 percent of the
fair market value of the Common Stock subject to the option on the
date it is granted, as described in paragraph 6.2(d), and the option
by its terms is not exercisable after the expiration of five years
from the date it is granted.
(c) Duration of Options. Subject to paragraphs 6.1(b) and
6.2(b), Incentive Stock Options granted under the Plan shall continue
in effect for the period fixed by the Board of Directors, except that
no Incentive Stock Option shall be exercisable after the expiration
of 10 years from the date it is granted.
(d) Option Price. The option price per share shall be
determined by the Board of Directors at the time of grant. Except as
provided in paragraph 6.2(b), the option price shall not be less than
100 percent of the fair market value of the Common Stock covered by
the Incentive Stock Option at the date the option is granted. The
fair market value shall be determined by the Board of Directors.
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(e) Limitation on Time of Grant. No Incentive Stock
Option shall be granted on or after the tenth anniversary of the
effective date of the Plan.
(f) Conversion of Incentive Stock Options. The
Board of Directors may at any time without the consent of
the optionee convert an Incentive Stock Option to a
Non-Statutory Stock Option.
6.3 Non-Statutory Stock Options. Non-Statutory
Stock Options shall be subject to the following additional
terms and conditions:
(a) Option Price. The option price for Non-Statutory
Stock Options shall be determined by the Board of Directors at the
time of grant. The option price may be less than the fair market
value of the shares on the date of grant. The fair market value of
shares covered by a Non-Statutory Stock Option shall be determined by
the Board of Directors.
(b) Duration of Options. Non-Statutory Stock Options
granted under the Plan shall continue in effect for the period fixed
by the Board of Directors.
7. Stock Bonuses.
The Board of Directors may award shares under the Plan as stock
bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Board of Directors. The
restrictions may include restrictions concerning transferability and
forfeiture of the shares awarded, together with such other restrictions as
may be determined by the Board of Directors. The Board of Directors may
require the recipient to sign an agreement as a condition of the award. The
agreement may contain any terms, conditions, restrictions, representations
and warranties required by the Board of Directors. The certificates
representing the shares awarded shall bear any legends required by the
Board of Directors. The Company may require any recipient of a stock bonus
to pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
recipient fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the recipient,
including salary or fees for services, subject to applicable law. Upon the
issuance of a stock bonus, the number of shares reserved for issuance under
the Plan shall be reduced by the number of shares issued.
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8. Restricted Stock.
The Board of Directors may issue shares under the Plan for such
consideration (including promissory notes and services) as determined by
the Board of Directors, which consideration may be less than fair market
value of the Common Stock at the time of issuance. Shares issued under the
Plan shall be subject to the terms, conditions and restrictions determined
by the Board of Directors. The restrictions may include restrictions
concerning transferability, repurchase by the Company and forfeiture of the
shares issued, together with such other restrictions as may be determined
by the Board of Directors. All Common Stock issued pursuant to this
paragraph 8 shall be subject to a purchase agreement, which shall be
executed by the Company and the prospective recipient of the shares prior
to the delivery of certificates representing such shares to the recipient.
The purchase agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Board of Directors. The
certificates representing the shares shall bear any legends required by the
Board of Directors. The Company may require any purchaser of restricted
stock to pay to the Company in cash upon demand amounts necessary to
satisfy any applicable federal, state or local tax withholding
requirements. If the purchaser fails to pay the amount demanded, the
Company may withhold that amount from other amounts payable by the Company
to the purchaser, including salary, subject to applicable law. Upon the
issuance of restricted stock, the number of shares reserved for issuance
under the Plan shall be reduced by the number of shares issued.
9. Stock Appreciation Rights.
9.1 Grant. Stock appreciation rights may be granted under the
Plan by the Board of Directors, subject to such rules, terms, and
conditions as the Board of Directors prescribes.
9.2 Exercise.
(a) Each stock appreciation right shall entitle the
holder, upon exercise, to receive from the Company in exchange
therefor an amount equal in value to the excess of the fair
market value on the date of exercise of one share of Common
Stock of the Company over its fair market value on the date of
grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value
of one share of Common Stock of the Company over the option
price per share under the option to which the stock
appreciation right
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relates), multiplied by the number of shares covered by the
stock appreciation right or the option, or portion thereof,
that is surrendered. No stock appreciation right shall be
exercisable at a time that the amount determined under this
subparagraph is negative. Payment by the Company upon exercise
of a stock appreciation right may be made in Common Stock
valued at fair market value, in cash, or partly in Common Stock
and partly in cash, all as determined by the Board of
Directors.
(b) A stock appreciation right shall be exercisable only
at the time or times established by the Board of Directors. If
a stock appreciation right is granted in connection with an
option, the following rules shall apply: (1) the stock appreci
ation right shall be exercisable only to the extent and on the
same conditions that the related option could be exercised; (2)
upon exercise of the stock appreciation right, the option or
portion thereof to which the stock appreciation right relates
terminates; and (3) upon exercise of the option, the related
stock appreciation right or portion thereof terminates.
(c) The Board of Directors may withdraw any stock
appreciation right granted under the Plan at any time and may
impose any conditions upon the exer cise of a stock
appreciation right or adopt rules and regulations from time to
time affecting the rights of holders of stock appreciation
rights. Such rules and regulations may govern the right to
exercise stock appreciation rights granted prior to adoption or
amendment of such rules and regulations as well as stock
appreciation rights granted thereafter.
(d) For purposes of this paragraph 9, the fair market
value of the Common Stock shall be as specified by the Board of
Directors.
(e) No fractional shares shall be issued upon exercise of
a stock appreciation right. In lieu thereof, cash may be paid
in an amount equal to the value of the fraction or, if the
Board of Directors shall determine, the number of shares may be
rounded downward to the next whole share.
(f) Each participant who has exercised a stock
appreciation right shall, upon notification of the amount due,
pay to the Company in cash amounts necessary to satisfy any
applicable federal, state
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and local tax withholding requirements. If the participant
fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the
participant including salary, subject to applicable law. With
the consent of the Board of Directors a participant may satisfy
this obligation, in whole or in part, by having the Company
withhold from any shares to be issued upon the exercise that
number of shares that would satisfy the withholding amount due
or by delivering Common Stock to the Company to satisfy the
withholding amount.
(g) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the
Plan shall be reduced by the number of shares issued, less the
number of shares surrendered or withheld to satisfy withholding
obligations. Cash payments of stock appreciation rights shall
not reduce the number of shares of Common Stock reserved for
issuance under the Plan.
10. Cash Bonus Rights.
10.1 Grant. The Board of Directors may grant cash bonus rights
under the Plan in connection with (i) options granted or previously
granted, (ii) stock appreciation rights granted or previously granted,
(iii) stock bonuses awarded or previously awarded and (iv) shares sold or
previously sold under the Plan. Cash bonus rights will be subject to rules,
terms and conditions as the Board of Directors may prescribe. The payment
of a cash bonus shall not reduce the number of shares of Common Stock
reserved for issuance under the Plan.
10.2 Cash Bonus Rights in Connection With Options. A cash bonus
right granted in connection with an option will entitle an optionee to a
cash bonus when the related option is exercised (or terminates in
connection with the exercise of a stock appreciation right related to the
option) in whole or in part. If an optionee purchases shares upon exercise
of an option, and does not exercise a related stock appreciation right, the
amount of the bonus shall be determined by multiplying the excess of the
total fair market value of the shares to be acquired upon the exercise over
the total option price for the shares by the applicable bonus percentage.
If the optionee exercises a related stock appreciation right in connection
with the termination of an option, the amount of the bonus shall be
determined by multiplying the total fair market value of the shares and
cash received pursuant to the exercise of the stock appreciation right by
the applicable bonus percentage. The bonus percentage applicable to a bonus
right
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shall be determined from time to time by the Board of Directors but shall
in no event exceed 75 percent.
10.3 Cash Bonus Rights in Connection With Stock Bonus. A cash
bonus right granted in connection with a stock bonus will entitle the
recipient to a cash bonus payable when the stock bonus is awarded or
restrictions, if any, to which the stock is subject lapse. If bonus stock
awarded is subject to restrictions and is repurchased by the Company or
forfeited by the holder, the cash bonus right granted in connection with
the stock bonus shall terminate and may not be exercised. The amount and
timing of payment of a cash bonus shall be determined by the Board of
Directors.
10.4 Cash Bonus Rights in Connection With Stock Purchases. A
cash bonus right granted in connection with the purchase of stock pursuant
to paragraph 8 will entitle the recipient to a cash bonus when the shares
are purchased or restrictions, if any, to which the stock is subject lapse.
Any cash bonus right granted in connection with shares purchased pursuant
to paragraph 8 shall terminate and may not be exercised in the event the
shares are repurchased by the Company or forfeited by the holder pursuant
to applicable restrictions. The amount of any cash bonus to be awarded and
timing of payment of a cash bonus shall be determined by the Board of
Directors.
10.5 Taxes. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable
federal, state and local withholding requirements.
11. Foreign Qualified Grants.
Awards under the Plan may be granted to such officers and
employees of the Company and its subsidiaries and such other persons
described in paragraph 1 residing in foreign jurisdictions as the Board of
Directors may determine from time to time. The Board of Directors may adopt
such supplements to the Plan as may be necessary to comply with the
applicable laws of such foreign jurisdictions and to afford participants
favorable treatment under such laws; provided, however, that no award shall
be granted under any such supplement with terms which are more beneficial
to the participants than the terms permitted by the Plan.
12. Option Grants to Non-Employee Directors.
12.1 Non-Discretionary Grants. Each person who is
or becomes a Non-Employee Director after September 1, 1993
shall be automatically granted an option to purchase 20,000
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shares of Common Stock on the date he or she becomes a Non-Employee
Director. A "Non-Employee Director" is a director who is not an employee of
the Company or any of its subsidiaries and has not been an employee of the
Company or any of its subsidiaries within one year of any date as of which
a determination of eligibility is made. Except as provided in this
subparagraph 12.1, no other non-discretionary grant or discretionary grant
of options or any other type of award may be made to a Non-Employee
Director under this Plan.
12.2 Exercise Price. The exercise price of an option granted
pursuant to this paragraph 12 shall be equal to the fair market value of
the Common Stock as determined in accordance with the procedure set forth
in paragraph 6.2(d).
12.3 Term of Option. The terms of each option granted pursuant
to this paragraph 12 shall be 10 years from the date of grant.
12.4 Exercisability. Until an option expires or is terminated
and except as provided in paragraphs 12.5 and 14, an option granted under
this paragraph 12 shall be exercisable according to the following schedule:
(a) 5 percent of the total number of shares covered by the option shall
become exercisable on the date of the grant and (b) an additional 5 percent
of the total number of shares covered by the option shall become
exercisable after the last day of each calendar quarter thereafter. If an
optionee does not exercise the option in any one quarter for the full
number of shares to which the optionee is entitled, the rights shall be
cumulative and the optionee may exercise the option for such shares at any
subsequent time during the term of the option.
12.5 Termination as a Director. If an optionee ceases to be a
director of the Company for any reason, including death, the option may be
exercised at any time prior to the expiration date of the option or the
expiration of 30 days (or 12 months in the event of death) after the last
day the optionee served as a director, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the option
as of the last day the optionee served as a director.
12.6 Nontransferability. Each option by its terms shall be
nonassignable and nontransferable by the optionee, either voluntarily or by
operation of law, except by will or by the laws of descent and distribution
of the state or country of the optionee's domicile at the time of death or
pursuant to a qualified domestic relations order as defined under the Code
or Title I of the Employee Retirement Income Security Act.
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12.7 Exercise of Options. Options may be exercised upon payment
of cash or shares of Common Stock of the Company in accordance with
paragraph 6.1(e). Unless otherwise determined by the Board of Directors, if
an option is exercised within six months of the date of grant, the shares
acquired upon such exercise may not be sold until six months after the date
of grant.
13. Changes in Capital Structure.
If the outstanding Common Stock of the Company is hereafter
increased or decreased or changed into or exchanged for a different number
or kind of shares or other securities of the Company or of another
corporation by reason of any recapitalization, reclassification, stock
split, combination of shares or dividend payable in shares, appropriate
adjustment shall be made by the Board of Directors in the number and kind
of shares available for awards under the Plan. In addition, the Board of
Directors shall make appropriate adjustment in the number and kind of
shares as to which outstanding options and stock appreciation rights, or
portions thereof then unexercised, shall be exercisable, so that the
optionee's proportionate interest before and after the occurrence of the
event is maintained. The Board of Directors may also require that any
securities issued in respect of or exchanged for shares issued hereunder
that are subject to restrictions be subject to similar restrictions.
Notwithstanding the foregoing, the Board of Directors shall have no
obligation to effect any adjustment that would or might result in the
issuance of fractional shares, and any fractional shares resulting from any
adjustment may be disregarded or provided for in any manner determined by
the Board of Directors. Any such adjustments made by the Board of Directors
shall be conclusive.
14. Effect of Liquidation or Reorganization.
14.1 Cash, Stock or Other Property for Stock. Except as
provided in paragraph 14.2, upon a merger, consolidation, acquisition of
property or stock, reorganization or liquidation of the Company, as a
result of which the stockholders of the Company receive cash, stock or
other property in exchange for or in connection with their shares of Common
Stock, any option granted hereunder shall terminate, but the optionee shall
have the right during a 30-day period immediately prior to any such merger,
consolidation, acquisition of property or stock, reorganization or
liquidation to exercise his or her option in whole or in part whether or
not the vesting requirements applicable to the option have been satisfied.
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14.2 Conversion of Options on Stock for Stock Exchange. If the
stockholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or
stock, separation or reorganization, all options granted hereunder shall be
converted into options to purchase shares of Exchange Stock unless the
Board of Directors, in its sole discretion, determines that any or all such
options granted hereunder shall not be converted into options to purchase
shares of Exchange Stock but instead shall terminate in accordance with the
provisions of subsection 14.1. The amount and price of converted options
shall be determined by adjusting the amount and price of the options
granted hereunder in the same proportion as used for determining the number
of shares of Exchange Stock the holders of the Common Stock receive in such
merger, consolidation, acquisition of property or stock, separation or
reorganization.
15. Corporate Mergers, Acquisitions, etc.
The Board of Directors may also grant options, stock
appreciation rights, stock bonuses and cash bonuses and issue restricted
stock 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, stock bonuses, cash bonuses and
restricted stock 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.
16. Amendment of Plan.
The Board of Directors may at any time, and from time to time,
modify or amend the Plan in such respects as it shall deem advisable
because of changes in the law while the Plan is in effect or for any other
reason. Except as provided in paragraphs 6.1(d), 13 and 14, however, no
change in an award already granted shall be made without the written
consent of the holder of such award.
17. Approvals.
The obligations of the Company under the Plan are subject to
the approval of state and federal authorities or agencies with jurisdiction
in the matter. The Company shall not be obligated to issue or deliver
Common Stock under the
14
<PAGE>
Plan if such issuance or delivery would violate applicable state or federal
securities laws.
18. Employment and Service Rights.
Nothing in the Plan or any award pursuant to the Plan shall (a)
confer upon any employee any right to be continued in the employment of the
Company or any subsidiary or interfere in any way with the right of the
Company or any subsidiary by whom such employee is employed to terminate
such employee's employment at any time, for any reason, with or without
cause, or to decrease such employee's compensation or benefits, or (b)
confer upon any person engaged by the Company any right to be retained or
employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
19. Rights as a Shareholder.
The recipient of any award under the Plan shall have no rights
as a shareholder with respect to any Common Stock until the date of issue
to the recipient of a stock certificate for such shares. Except as
otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date occurs prior to the
date such stock certificate is issued.
Date Amended Plan Adopted by Board August 3, 1993
HomeTown Buffet, Inc.
1996 EXECUTIVE BONUS PLAN
THE PLAN
- - --------
The 1996 Executive Bonus Plan is based on total consolidated income, the
"Earnings Before Income Taxes" calculation.
The components of this calculation include:
1. Results of restaurant operations.
2. General and administrative expenses.
3. Preopening expenses.
4. Interest income and/or expense.
5. Miscellaneous income and/or expense.
6. Franchise income and/or expense.
The 1996 Executive Bonus Plan starts on the first day of the first quarter
of fiscal 1996.
HOW BONUSES ARE EARNED
- - ----------------------
1. In order to earn a bonus, actual earning before income taxes must
equal or exceed 80% of the 1996 budgeted pre-tax income on a quarterly
basis.
2. If quarterly earnings before income taxes do NOT equal or exceed 80%
of the 1996 budgeted pre-tax income, no bonus is earned for the
quarter. However, if by year-end, cumulative earnings exceed the 80%
criteria, an annual bonus is earned.
HOW BONUSES ARE PAID OUT
- - ------------------------
1. 50% of the bonus earned will be paid out quarterly. The other 50% will
be paid out on cumulative earnings for the year after the end of the
fiscal year based on audited year-end results.
2. Total bonus payouts for the fiscal year are capped at 50% of current
base salary.
BONUS PLAN PARTICIPANTS
- - -----------------------
EMPLOYEE BONUS RATE*
- - -------- -----------
C. Dennis Scott 1.0
Neal L. Wichard 1.0
Kerry A. Kramp 0.5
Glenn E. Glasshagel 0.5
Ronald S. McArthur 0.5
K. Michael Shrader 0.25
David Goronkin 0.25
* - percent of pre-tax income
-------------------------------------------
AGREEMENT AND PLAN OF MERGER
-------------------------------------------
AMONG
BUFFETS, INC.
AND
COUNTRY DELAWARE, INC.
AND
HOMETOWN BUFFET, INC.
-------------------------------------------
DATED JUNE 3, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I THE MERGER.........................................................1
1.01. Effective Time of the Merger...........................................1
1.02. Closing................................................................1
1.03. Effects of the Merger..................................................2
1.04. Directors and Officers of Buffets and the Continuing Corporation.......2
ARTICLE II CONVERSION OF SECURITIES..........................................3
2.01. Conversion of Capital Stock............................................3
(a) Capital Stock of Sub..................................................3
(b) Cancellation of Treasury Stock........................................3
(c) Exchange Ratio for HomeTown Common Stock..............................3
(d) Fractional Shares.....................................................4
(e) HomeTown Stock Options................................................4
2.02. Exchange of Certificates...............................................4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF HOMETOWN.......................6
3.01. Organization of the Company............................................6
3.02. HomeTown Capital Structure.............................................7
3.03. Authority, No Conflict, Required Filings and Consents..................8
3.04. SEC Filings; Financial Statements......................................9
3.05. No Undisclosed Liabilities............................................10
3.06. Absence of Certain Changes or Events..................................10
3.07. Taxes.................................................................10
3.08. Properties............................................................11
3.09. Intellectual Property.................................................11
3.10. Agreements, Contracts, and Commitments................................12
3.11. Litigation............................................................12
3.12. Environmental Matters................................................13
(a) Hazardous Substances.................................................13
(b) Hazardous Substances Activities......................................13
(c) UST's and AST's......................................................13
(d) Listing..............................................................13
(e) Environmental Reports................................................14
(f) Environmental Claims, etc............................................14
(g) Compliance with Environmental Laws...................................14
3.13. Employee Benefit Plans................................................14
3.14. Compliance with Laws..................................................15
3.15. Pooling of Interests..................................................15
3.16. Interested Party Transactions.........................................15
3.17. No Existing Discussions...............................................16
3.18 No Secured Debt........................................................16
3.19. Opinion of Financial Advisor..........................................16
3.20 Tax Representation.....................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUFFETS AND SUB................16
4.01. Organization of the Company...........................................17
4.02. Buffets Capital Structure.............................................17
4.03. Authority; No Conflict; Required Filings and Contracts................18
4.04. SEC Filings; Financial Statements.....................................19
4.05. No Undisclosed Liabilities............................................20
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4.06. Absence of Certain Changes or Events..................................20
4.07. Taxes.................................................................20
4.08. Properties............................................................21
4.09. Intellectual Property.................................................21
4.10. Agreements, Contracts and Commitments.................................22
4.11. Litigation............................................................22
4.12. Environmental Matters................................................22
(a) Hazardous Substances.................................................22
(b) Hazardous Substances Activities......................................23
(c) UST's and AST's......................................................23
(d) Listing..............................................................23
(e) Environmental Reports................................................23
(f) Environmental Claims, etc............................................23
(g) Compliance with Environmental Laws...................................23
4.13. Employee Benefit Plans................................................24
4.14. Compliance with Laws..................................................25
4.15. Pooling of Interests..................................................25
4.16. Interested Party Transactions.........................................25
4.17. Opinion of Financial Advisor..........................................25
4.18. Ownership and Interim Operations of Sub...............................25
4.19. No Existing Discussions...............................................25
ARTICLE V CONDUCT OF BUSINESS...............................................25
5.01. Covenants of Buffets and HomeTown.....................................25
5.02. Cooperation...........................................................28
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS..............................28
6.01. No Solicitation.......................................................28
6.02. Joint Proxy Statement; Registration Statement.........................29
6.03. Access to Information.................................................30
6.04. Shareholders Meetings.................................................31
6.05. Legal Conditions to Merger............................................31
6.06. Payment of Taxes......................................................31
6.07. Public Disclosure.....................................................31
6.08. Tax-Free Reorganization...............................................32
6.09. Pooling Accounting....................................................33
6.10. Affiliate Agreements..................................................33
6.11. NASDAQ Quotation......................................................33
6.12. Stock Plans and Other Options.........................................33
6.13. Consents..............................................................34
6.14. Brokers or Finders....................................................34
6.15 Employee Benefits; Employee Issues.....................................35
6.16 Reports................................................................35
6.17 Supplemental Indenture.................................................35
6.18 Notification of Certain Matters........................................35
6.19 Additional Agreements; Reasonable Efforts..............................36
6.20 Continuing Indemnification.............................................36
ARTICLE VII CONDITIONS TO MERGER............................................36
7.01. Conditions to Each Party's Obligation To Effect the Merger............36
(a) Shareholder Approval.................................................36
(b) HSR Act..............................................................36
(c) Approvals............................................................36
(d) Registration Statement...............................................37
<PAGE>
(e) No Injunctions or Restraints; Illegality.............................37
(f) Pooling Letter.......................................................37
(g) NASDAQ...............................................................37
(h) Deloitte & Touche Comfort Letter.....................................37
(i) KPMG Peat Marwick Comfort Letter.....................................37
(j) Bank Consent............................................................38
(k) Tax Opinions............................................................38
7.02 Additional Conditions to Obligations of Buffets and Sub................38
(a) Representations and Warranties.......................................38
(b) Performance of Obligations of HomeTown...............................38
(c) Material Adverse Change..............................................38
(d) Blue Sky Laws........................................................38
(e) Opinion of HomeTown's Counsel........................................38
(f) Updated Fairness Opinion.............................................39
(g) Employment Agreement.................................................39
(h) Consents.............................................................39
7.03. Additional Conditions to Obligations of HomeTown......................39
(a) Representations and Warranties.......................................39
(b) Performance of Obligations of Buffets and Sub........................39
(c) Material Adverse Change..............................................39
(d) Opinion of Buffets' Counsel..........................................39
(e) Updated Fairness Opinion.............................................39
(f) Employment Agreement.................................................39
(g) Consents.............................................................39
ARTICLE VIII TERMINATION AND AMENDMENT......................................40
8.01. Termination...........................................................40
8.02 Effect of Termination..................................................41
8.03 Fees and Expenses......................................................41
8.04 Amendment..............................................................42
8.05 Extension; Waiver......................................................42
ARTICLE IX MISCELLANEOUS....................................................43
9.01. Nonsurvival of Representations, Warranties, and Agreements............43
9.02 Notices................................................................43
9.03 Interpretation.........................................................44
9.04 Counterparts...........................................................44
9.05 Entire Agreement; No Third Party Beneficiaries.........................44
9.06 Governing Law..........................................................44
9.07 Assignment.............................................................44
9.08 Knowledge..............................................................44
ARTICLE X DEFINITIONS.......................................................45
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), dated June 3,
1996, is by and among BUFFETS, INC., a Minnesota corporation ("BUFFETS"),
COUNTRY DELAWARE, INC., a Delaware corporation and a wholly owned
subsidiary of Buffets ("Sub"), and HOMETOWN BUFFET, INC., a Delaware
corporation ("HomeTown").
WHEREAS, the Boards of Directors of Buffets, Sub, and HomeTown deem it
advisable and in the best interest of each corporation and its respective
shareholders that Buffets and HomeTown combine in order to advance the
long-term business interests of Buffets and HomeTown;
WHEREAS, the strategic combination of Buffets and HomeTown shall be
effected by the terms of this Agreement through a transaction in which Sub
will merge with and into HomeTown, HomeTown will become a wholly owned
subsidiary of Buffets, and the stockholders of HomeTown will become
shareholders of Buffets (the "Merger");
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall
be accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants, and agreements set forth herein and
other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and intending to be legally bound, the parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.01. Effective Time of the Merger. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger"),
substantially in the form attached hereto as Exhibit 1.01, shall be duly
executed and acknowledged by the Constituent Corporations (as defined in
Section 1.03), and thereafter delivered to the Secretary of State of the
State of Delaware, for filing, as provided in the General Corporation Law
of the State of Delaware (the "Delaware Law"), as soon as practicable on or
after the Closing Date (as defined in Section 1.02). The Merger shall
become effective upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware or at such time thereafter as
is provided in the Certificate of Merger (the "Effective Time").
1.02. Closing. The closing of the Merger (the "Closing") will take
place at 9:00 a.m., Minneapolis time, on a date to be specified by Buffets
and HomeTown, which shall be no later than the second business day after
satisfaction of all the conditions set forth in
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<PAGE>
Sections 7.01, 7.02(b) and 7.03(b) (provided that the other closing
conditions set forth in Article VII have been met or waived as provided in
Article VII at or prior to the Closing) (the "Closing Date"), at the
offices of Faegre & Benson LLP, Minneapolis, Minnesota, unless another date
or place is agreed to in writing by Buffets and HomeTown. All actions taken
at the Closing shall be deemed to have been taken simultaneously at the
time the last of any such actions is taken or completed.
1.03. Effects of the Merger.
(a) At the Effective Time (i) the separate existence of Sub shall cease
and Sub shall be merged with and into HomeTown (Sub and HomeTown are
sometimes referred to below as the "Constituent Corporations" and HomeTown
is sometimes referred to below as the "Continuing Corporation"), (ii) the
Certificate of Incorporation of HomeTown shall be amended so that Article
III, Section A of such Certificate of Incorporation reads in its entirety
as follows: "The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 1,000, all of which shall
consist of Common Stock, par value $0.01 per share," and as so amended,
such Certificate of Incorporation shall be the Certificate of Incorporation
of the Continuing Corporation, and (iii) the Bylaws of HomeTown as in
effect immediately prior to the Effective Time shall be the Bylaws of the
Continuing Corporation.
(b) At and after the Effective Time, the Continuing Corporation shall
possess all the rights, privileges, powers, and franchises of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities, and duties of each of the Constituent Corporations; and all
and singular rights, privileges, powers, and franchises of each of the
Constituent Corporations, and all property, real, personal, and mixed, and
all debts due to either of the Constituent Corporations on whatever
account, as well as for stock subscriptions and all other things in action
or belonging to each of the Constituent Corporations, shall be vested in
the Continuing Corporation, and all property, rights, privileges, powers,
and franchises, and all and every other interest shall be thereafter as
effectually the property of the Continuing Corporation as they were of the
Constituent Corporations, and the title to any real estate vested by deed
or otherwise, in either of the Constituent Corporations, shall not revert
or be in any way impaired; but all rights of creditors and all liens upon
any property of either of the Constituent Corporations shall be preserved
unimpaired, and all debts, liabilities, and duties of the Constituent
Corporations shall thereafter attach to the Continuing Corporation, and may
be enforced against it to the same extent as if such debts and liabilities
had been incurred by it.
1.04. Directors and Officers of Buffets and the Continuing Corporation.
(a) Buffets shall take all actions necessary to cause the full Board of
Directors of Buffets at the Effective Time to be increased to seven
directors, and to cause each of C. Dennis Scott and Dr. Christian F. Horn
to be appointed as a director of Buffets. If, prior to the Effective Time,
Mr. Scott or Dr. Horn shall be unable or unwilling to serve as an Buffets
director, HomeTown shall, by action of its Board of Directors, designate
another person to serve in such person's stead, which person shall be
reasonably acceptable to Buffets. Buffets
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<PAGE>
shall take all actions necessary to cause the officers of Buffets after the
Effective Time to be as set forth on Exhibit 1.04(a) hereto.
(b) Buffets and HomeTown shall take all actions necessary to cause the
directors constituting the full Board of Directors of the Continuing
Corporation at the Effective Time to be Roe H. Hatlen and C. Dennis Scott.
If prior to the Effective Time, either of such persons shall be unable to
serve, Buffets shall designate a replacement.
(c) The officers and directors of Buffets and the Continuing
Corporation as designated in accordance with this Section shall hold their
positions until their resignation or removal or the election or appointment
of their successors in the manner provided by the respective charter
documents and bylaws of Buffets or the Continuing Corporation, as the case
may be, and applicable law.
ARTICLE II
CONVERSION OF SECURITIES
2.01. Conversion of Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any
shares of HomeTown Common Stock or capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock, $0.01 par value per share, of
the Continuing Corporation.
(b) Cancellation of Treasury Stock. All shares of HomeTown Common
Stock that are owned by HomeTown as treasury stock shall be canceled
and retired and shall cease to exist and no stock of Buffets or other
consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for HomeTown Common Stock. Subject to Section
2.02, each issued and outstanding share of HomeTown Common Stock (other
than shares of treasury stock) shall be converted into the right to
receive 1.17 shares of Buffets Common Stock (the "Conversion Number").
The Conversion Number shall be appropriately adjusted to reflect any
stock split, stock dividend, recapitalization, exchange, subdivision,
combination of, or other similar change (including the exercise of any
Rights under the Buffets Rights Agreement (as such terms are defined in
Section 4.02(a)) in Buffets Common Stock or HomeTown Common Stock
following the date of this Agreement. All shares of Buffets Common
Stock into which the shares of HomeTown Common Stock are converted
shall be fully paid and nonassessable and will have Rights attached
thereto in accordance with the Buffets Rights Agreement. All shares of
HomeTown Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall
cease to exist, and holders of certificates which immediately prior to
the Effective Time represented shares of HomeTown Common Stock (the
"Certificates") shall cease to have any rights with
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<PAGE>
respect thereto, except the right to receive the shares of Buffets
Common Stock and any cash in lieu of fractional shares of Buffets
Common Stock to be issued or paid in consideration therefor upon
the surrender of the Certificates in accordance with Section 2.02,
without interest.
(d) Fractional Shares. No scrip or fractional shares of Buffets
Common Stock shall be issued in the Merger. All fractional shares of
Buffets Common Stock to which a holder of HomeTown Common Stock
immediately prior to the Effective Time would otherwise be entitled at
the Effective Time shall be aggregated. If a fractional share results
from such aggregation, such shareholder shall be entitled after the
later of (i) the Effective Time or (ii) the surrender of such
shareholder's Certificate or Certificates, to receive from Buffets an
amount in cash in lieu of such fractional share, based on the average
of the per share closing sale prices of Buffets Common Stock on the
Nasdaq National Market for the 15 trading days immediately preceding
the Closing Date (the "Average Price"). Buffets will make available to
the "Exchange Agent" (as defined in Section 2.02) the cash necessary
for the purpose of paying for fractional shares.
(e) HomeTown Stock Options. At the Effective Time, all then
outstanding options to purchase HomeTown Common Stock under HomeTown's
1991 Amended Stock Incentive Plan (the "HomeTown 1991 Option Plan") and
the HomeTown Non- Plan Options (as defined in Section 3.02) will be
assumed by Buffets in accordance with Section 6.12.
2.02. Exchange of Certificates.
(a) Buffets shall authorize American Stock Transfer Company, or such
other firm as is reasonably acceptable to HomeTown, to serve as exchange
agent hereunder (the "Exchange Agent"). Promptly after the Effective Time,
Buffets shall deposit or shall cause to be deposited in trust with the
Exchange Agent certificates representing the number of whole shares of
Buffets Common Stock to which the holders of HomeTown Common Stock are
entitled pursuant to this Article II, together with cash sufficient to pay
for fractional shares then known to Buffets (such cash amounts and
certificates being hereinafter referred to as the "Exchange Fund"). The
Exchange Agent shall, pursuant to irrevocable instructions received from
Buffets, deliver the number of shares of Buffets Common Stock and pay the
amounts of cash provided for in Section 2.01 out of the Exchange Fund.
Additional amounts of cash, if any, needed from time to time by the
Exchange Agent to make payments for fractional shares shall be provided by
Buffets and shall become part of the Exchange Fund. The Exchange Fund shall
not be used for any other purpose, except as provided in this Agreement, or
as otherwise agreed to by Buffets, Sub, and HomeTown prior to the Effective
Time.
(b) As soon as practicable after the Effective Time, the Exchange Agent
shall mail and otherwise make available to each record holder who, as of
the Effective Time, was a holder of a Certificate a form of letter of
transmittal and instructions for use in effecting the surrender of the
Certificate for payment therefor and conversion thereof. Delivery shall be
-4-
<PAGE>
effected, and risk of loss and title to the Certificate shall pass, only
upon proper delivery of the Certificate to the Exchange Agent and the form
of letter of transmittal shall so reflect. Upon surrender to the Exchange
Agent of a Certificate, together with such letter of transmittal duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor (i) one or more certificates as requested by the holder
(properly issued, executed, and countersigned, as appropriate) representing
that number of whole shares of Buffets Common Stock to which such holder of
HomeTown Common Stock shall have become entitled pursuant to the provisions
of Section 2.01, and (ii) as to any fractional share, a check representing
the cash consideration to which such holder shall have become entitled
pursuant to Section 2.01(d) and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on the cash
payable upon surrender of the Certificate. Buffets shall pay any transfer
or other taxes required by reason of the issuance of a certificate
representing shares of Buffets Common Stock provided that such certificate
is issued in the name of the person in whose name the Certificate
surrendered in exchange therefor is registered; provided, however, that
Buffets shall not pay any transfer or other tax if the obligation to pay
such tax under applicable law is solely that of the stockholder or if
payment of any such tax by Buffets otherwise would cause the Merger to fail
to qualify as a tax-free reorganization under the Code. If any portion of
the consideration to be received pursuant to this Article II upon exchange
of a Certificate (whether the consideration to be received is a certificate
representing shares of Buffets Common Stock or a check representing cash
for a fractional share) is to be issued or paid to a person other than the
person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such issuance and payment that the
Certificate so surrendered shall be properly endorsed or otherwise in
proper form for transfer and that the person requesting such exchange shall
pay in advance any transfer or other taxes required by reason of the
issuance of a certificate representing shares of Buffets Common Stock or a
check representing cash for a fractional share to such other person, or
establish to the satisfaction of the Exchange Agent that such tax has been
paid or that no such tax is applicable. From the Effective Time until
surrender in accordance with this Section 2.02, each Certificate (other
than Certificates representing treasury shares of HomeTown) shall be
deemed, for all corporate purposes other than the payment of dividends or
other distributions, to evidence the ownership of the number of whole
shares of Buffets Common Stock into which such shares of HomeTown Common
Stock shall have been so converted. No dividends that are otherwise payable
on Buffets Common Stock will be paid to persons entitled to receive Buffets
Common Stock until such persons surrender their Certificates. After such
surrender, there shall be paid to the person in whose name the Buffets
Common Stock shall be issued any dividends on such Buffets Common Stock
that shall have a record date on or after the Effective Time and prior to
such surrender. If the payment date for any such dividend is after the date
of such surrender, such payment shall be made on such payment date. In no
event shall the persons entitled to receive such dividends be entitled to
receive interest on such dividends. All payments in respect of shares of
HomeTown Common Stock that are made in accordance with the terms hereof
shall be deemed to have been made in full satisfaction of all rights
pertaining to such securities.
(c) In case of any lost, mislaid, stolen, or destroyed Certificate, the
holder thereof may be required, as a condition precedent to the delivery to
such holder of the consideration
-5-
<PAGE>
described in Section 2.01 and in accordance with Section 167 of the
Delaware Law, to deliver to Buffets a bond in such reasonable sum as
Buffets may direct as indemnity against any claim that may be made against
the Exchange Agent, Buffets, or the Continuing Corporation with respect to
the Certificate alleged to have been lost, mislaid, stolen, or destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Continuing Corporation of the shares of HomeTown
Common Stock that were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Continuing
Corporation for transfer, they shall be canceled and exchanged for the
consideration described in Section 2.01. After the Effective Time, the
shares of HomeTown Common Stock shall be delisted from the Nasdaq National
Market.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of HomeTown for six months after the Effective Time shall be
returned to Buffets, upon demand, and any holder of HomeTown Common Stock
who has not theretofore complied with Section 2.02(a) shall thereafter look
only to Buffets for issuance of the number of shares of Buffets Common
Stock and other consideration to which such holder has become entitled
pursuant to Section 2.01; provided, however, that neither the Exchange
Agent nor any party hereto shall be liable to a holder of shares of
HomeTown Common Stock for any amount required to be paid to a public
official pursuant to any applicable abandoned property, escheat, or similar
law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HOMETOWN
HomeTown represents and warrants to Buffets and Sub that the statements
contained in this Article III are true and correct as of the date hereof,
except as set forth in the disclosure schedule delivered by HomeTown to
Buffets on or before the date of this Agreement (the "HomeTown Disclosure
Schedule"). The HomeTown Disclosure Schedule shall be arranged in
paragraphs corresponding to the numbered and lettered paragraphs contained
in this Article III and the disclosures in any paragraph, including
appropriate cross references, shall qualify only the corresponding
paragraph in this Article III.
3.01. Organization of the Company. Each of HomeTown and its
Subsidiaries (as defined in Article X) is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction
of its incorporation, has all requisite corporate power to own, lease, and
operate its property and to carry on its business as now being conducted
and as proposed to be conducted, and is duly qualified to do business and
is in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would have a material adverse effect on the
business, assets, financial condition, results of operations, or prospects
("Material Adverse Effect") of HomeTown and its Subsidiaries, taken as a
whole. Except as set forth in the HomeTown SEC Reports (as defined in
Section 3.04) or Schedule 3.01 of the HomeTown Disclosure Schedule, neither
HomeTown nor any of its Subsidiaries directly or indirectly owns any equity
or similar interest in, or any interest convertible into
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<PAGE>
or exchangeable or exercisable for, any corporation, partnership, joint
venture, or other business association or entity excluding securities in
any publicly traded company held for investment by HomeTown and comprising
less than one percent of the outstanding stock of such company.
3.02. HomeTown Capital Structure.
(a) The authorized capital stock of HomeTown consists of 20,000,000
shares of Common Stock, $0.01 par value ("HomeTown Common Stock"), and
5,000,000 shares of Preferred Stock, $0.01 par value ("HomeTown Preferred
Stock"). On May 31, 1996, (i) 11,615,304 shares of HomeTown Common Stock
were outstanding, all of which were validly issued, fully paid, and
nonassessable, and no other shares of HomeTown Common Stock had been issued
as of such date, (ii) no shares of HomeTown Common Stock were held in the
treasury of HomeTown or by any Subsidiary of HomeTown, (iii) 1,480,820
shares of HomeTown Common Stock were reserved for future issuance pursuant
to stock options granted and outstanding under the HomeTown 1991 Option
Plan, (iv) an aggregate of 58,333 shares of HomeTown Common Stock were
reserved for future issuance pursuant to stock options granted and
outstanding to Messrs. Scott, Wichard, Pollock and Martin, all as set forth
in the HomeTown Disclosure Schedule (the "HomeTown Non-Plan Options"), and
(v) shares of HomeTown Common Stock were reserved for future issuance
pursuant to the terms of HomeTown's outstanding 7% Convertible Subordinated
Notes due 2002 (the "Notes"). Since May 14, 1996, no shares of HomeTown
Common Stock have been issued except pursuant to the exercise of options
granted under the HomeTown 1991 Option Plan. None of the shares of HomeTown
Preferred Stock are issued and outstanding. Except as set forth in Schedule
3.02 of the HomeTown Disclosure Schedule, there are no obligations,
contingent or otherwise, of HomeTown or any of its Subsidiaries to
repurchase, redeem, or otherwise acquire any shares of HomeTown Common
Stock or the capital stock of any Subsidiary or to provide funds to or make
any investment (in the form of a loan, capital contribution, or otherwise)
in any such Subsidiary or any other entity. Except as set forth in Schedule
3.02 of the HomeTown Disclosure Schedule, all of the outstanding shares of
capital stock of each of HomeTown's Subsidiaries are duly authorized,
validly issued, fully paid, and nonassessable and all such shares are owned
by HomeTown free and clear of all security interests, liens, claims,
pledges, agreements, limitations in HomeTown's voting rights, charges, or
other encumbrances of any nature.
(b) Except as set forth in this Section 3.02 and except for options
granted under the HomeTown 1991 Option Plan and the HomeTown Non-Plan
Options, or as reserved for future grants of options or rights under the
HomeTown 1991 Option Plan, or as reserved for future issuance upon
conversion of the Notes, there are no equity securities of any class of
HomeTown or any of its Subsidiaries, or any security exchangeable into or
exercisable for such equity securities issued, reserved for issuance, or
outstanding. Except as set forth in this Section 3.02, there are no
options, warrants, equity securities, calls, rights, commitments, or
agreements of any character to which HomeTown or any of its Subsidiaries is
a party or by which it is bound obligating HomeTown or any of its
Subsidiaries to issue, deliver, or sell, or cause to be issued, delivered,
or sold, additional shares of capital stock of HomeTown or any
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of its Subsidiaries or obligating HomeTown or any of its Subsidiaries to
grant, extend, accelerate the vesting of, or enter into any such option,
warrant, equity security, call, right, commitment, or agreement. HomeTown
is not a party to, nor is HomeTown aware of, any voting agreement, voting
trust, proxy, or other agreements or understandings with respect to the
shares of capital stock of HomeTown or any agreement, arrangement, or
understanding providing for registration rights with respect to any shares
of capital stock of HomeTown.
(c) As of May 14, 1996, there were outstanding $41.5 million in
aggregate principal amount of Notes. As provided therein, the Notes are
convertible into HomeTown Common Stock; the conversion price of $13.65 per
share set forth in Article 13 of the indenture covering the Notes has not
been adjusted in any respect.
3.03. Authority, No Conflict, Required Filings and Consents.
(a) HomeTown has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of HomeTown,
subject only to the approval of this Agreement and the Merger by HomeTown's
stockholders under the Delaware Law. This Agreement has been duly executed
and delivered by HomeTown and constitutes the valid and binding obligation
of HomeTown, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally and except that
the remedy of specific performance and injunctive and other forms of
equitable relief are subject to certain equitable defenses and to the
discretion of the court before which any proceedings therefor may be
brought.
(b) Except as set forth in the HomeTown Disclosure Schedule and subject
to approval of this Agreement and the Merger by HomeTown's stockholders,
the execution and delivery of this Agreement by HomeTown does not, and the
consummation of the transactions contemplated by this Agreement will not,
(i) conflict with, or result in any violation or breach of any provision of
the Certificate of Incorporation or Bylaws of HomeTown, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to right of termination,
cancellation, or acceleration of any obligation or loss of any benefit)
under any of the terms, conditions, or provisions of any note, bond,
mortgage, indenture, or lease or any material contract, or other material
agreement, instrument, or obligation to which HomeTown or any of its
Subsidiaries is a party or by which any of them or any of their properties
or assets may be bound, or (iii) conflict with or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to HomeTown or any of its
Subsidiaries or any of its or their properties or assets and which is
material to the business or operations of HomeTown.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any court, administrative agency, or
commission or other governmental authority or instrumentality
("Governmental Entity"), is required by or with respect to HomeTown or
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any of its Subsidiaries in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the pre- merger notification report under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR
Act"), (ii) the filing of a Registration Statement on Form S-4 with the
Securities and Exchange Commission ("SEC") in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), (iii) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware, (iv) the filing of the Joint Proxy Statement (as defined in
Section 6.02(a) below) with the SEC in accordance with the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and (v) such
consents, approvals, orders, authorizations, registrations, declarations,
and filings as may be required under the applicable federal and state
securities laws and laws of any foreign country.
3.04. SEC Filings; Financial Statements.
(a) HomeTown has filed and made available to Buffets all forms,
reports, and documents required to be filed by HomeTown with the SEC since
January 1, 1993 (including all exhibits, notes, and schedules thereto and
documents incorporated by reference therein) (collectively, the "HomeTown
SEC Reports"). The HomeTown SEC Reports (i) at the time filed, with respect
to all of the HomeTown SEC Reports other than registration statements filed
under the Securities Act, or at the time of their respective effective
dates, with respect to registration statements filed under the Securities
Act, complied as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time filed or at the time of their respective
effective dates, as the case may be (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such HomeTown SEC Reports or
necessary in order to make the statements in such HomeTown SEC Reports, in
the light of the circumstances under which they were made, not misleading.
None of HomeTown's Subsidiaries is required to file any forms, reports, or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the HomeTown SEC Reports at the time
filed or at the time of their respective effective dates, as the case may
be, complied as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was
prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as
may be indicated in the notes to such financial statements or, in the case
of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
presented the consolidated financial position of HomeTown and its
Subsidiaries at the respective dates and the consolidated results of their
operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments. HomeTown has provided Buffets with
HomeTown's unaudited consolidated financial statements as of and for the
period ended April 24, 1996; such financial statements, including any
related notes, are attached hereto as Exhibit 3.04(b) (the "Unaudited
Statements"). The Unaudited Statements comply as to form in all material
respects with the applicable published rules and regulations of the SEC
with respect to
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financial statements included in a report on Form 10-Q, have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis with the consolidated financial statements of HomeTown
contained in the HomeTown SEC Reports (except as may be included in the
notes to the Unaudited Statements or as permitted by Form 10-Q of the SEC)
and fairly present the consolidated financial position of HomeTown and its
Subsidiaries at the date and the consolidated results of their operations
and cash flows for the period indicated, except that the Unaudited
Statements are subject to normal and recurring year-end adjustments. The
unaudited balance sheet of HomeTown as of April 24, 1996 is referred to
herein as the "HomeTown Balance Sheet."
3.05. No Undisclosed Liabilities. Except as set forth in the HomeTown
Disclosure Schedule or as otherwise disclosed in the HomeTown SEC Reports,
HomeTown and its Subsidiaries do not have any liabilities, either accrued
or contingent (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles),
and whether due or to become due, which individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on HomeTown
and its Subsidiaries, taken as a whole, other than (i) liabilities
reflected in the HomeTown Balance Sheet and (ii) normal or recurring
liabilities incurred since the date of the HomeTown Balance Sheet, in the
ordinary course of business consistent with past practices.
3.06. Absence of Certain Changes or Events. Since the date of the
HomeTown Balance Sheet, HomeTown and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any material adverse
change in the financial condition, results of operations, prospects, or
business (together, a "Material Adverse Change") of HomeTown and its
Subsidiaries, taken as a whole, (ii) any damage, destruction, or loss
(whether or not covered by insurance) with respect to any property of
HomeTown or any of its Subsidiaries having a Material Adverse Effect on
HomeTown and its Subsidiaries, taken as a whole, (iii) any material change
by HomeTown in its accounting methods, principles, or practices to which
Buffets has not previously consented in writing, (iv) any revaluation by
HomeTown or any of its assets having a Material Adverse Effect on HomeTown
and its Subsidiaries, taken as a whole, or (v) except as disclosed in the
HomeTown Disclosure Schedule, any other action or event that would have
required the consent of Buffets pursuant to Section 5.01 of this Agreement
had such action or event occurred after the date of this Agreement.
3.07. Taxes.
(a) Except as disclosed in the HomeTown Disclosure Schedule, all
returns and reports, including without limitation information and
withholding returns and reports (collectively, "Tax Returns"), of or
relating to any foreign, Federal, state, local or other income, premium,
property, sales, excise and other taxes of any nature whatsoever, including
any interest, penalties and additions to tax in respect thereof ("Tax" or
"Taxes") heretofore required to be filed by HomeTown or any of its
Subsidiaries have been duly filed on a timely basis. All such Tax Returns
were complete and accurate in all material respects. Each of
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HomeTown and its Subsidiaries has paid or has made adequate provision for
the payment of all Taxes.
(b) Except as disclosed in the HomeTown Disclosure Schedule, as of the
date of this Agreement there are no audits or administrative proceedings,
court proceedings or claims pending against HomeTown or any of its
Subsidiaries with respect to any Taxes, no assessment, deficiency or
adjustment has been asserted or, to the knowledge of HomeTown, proposed
with respect to any Tax Return of or with respect to HomeTown or any of its
Subsidiaries and there are no liens for Taxes upon the assets or properties
of HomeTown or any of its Subsidiaries, except liens for Taxes not yet
delinquent.
(c) Except as disclosed in the HomeTown Disclosure Schedule, there are
not in force any waivers of agreements, arrangements, or understandings by
or with respect to HomeTown or any of its Subsidiaries of or for an
extension of time for the assessment or payment of any Taxes. Neither
HomeTown nor any of its Subsidiaries has received a written ruling of a
taxing authority relating to Taxes or entered into a written and legally
binding agreement with a taxing authority relating to Taxes that would have
a continuing effect after the Closing Date. Except as disclosed in the
HomeTown Disclosure Schedule, neither HomeTown nor any of its Subsidiaries
is required to include in income any adjustment pursuant to Section 481(a)
of the Code by reason of a voluntary change in accounting method initiated
by HomeTown or any of its Subsidiaries, and to the best knowledge of
HomeTown the IRS has not proposed any such adjustment or change in
accounting method. For purposes of this Section 3.07, the term
"Subsidiaries" shall include former Subsidiaries of HomeTown for the
periods during which any such Subsidiaries were owned directly or
indirectly by HomeTown.
(d) To the best knowledge of HomeTown, each of HomeTown and its
Subsidiaries has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(e) Neither HomeTown nor any of its Subsidiaries has filed a consent
under Section 341 (f) of the Code. HomeTown and its Subsidiaries are not
parties to any Tax allocation or Tax sharing arrangements.
3.08. Properties. HomeTown has provided or made available to Buffets a
true and complete list of all real property owned by HomeTown or its
Subsidiaries and real property leased by HomeTown or its Subsidiaries
pursuant to leases ("Leases") as of the date hereof, and the name of the
lessor, the date of the Lease and each amendment to the Lease, and the
aggregate annual rental or other fees payable under any such Lease. All
such Leases are valid and binding in accordance with their respective
terms, and HomeTown is not in default under any such Lease.
3.09. Intellectual Property.
(a) Subject to the HomeTown Disclosure Schedule, HomeTown owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
patents, trademarks, trade
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names, service marks, copyrights, and any applications for such patents,
trademarks, trade names, service marks, and copyrights, or tangible or
intangible proprietary information or material that are necessary to
conduct the business of HomeTown as currently conducted (the "HomeTown
Intellectual Property Rights"). Schedule 3.09 of the HomeTown Disclosure
Schedule lists (i) all trademarks, registered copyrights, trade names, and
service marks, which HomeTown considers to be material to its business and
included in the HomeTown Intellectual Property Rights, including the
jurisdictions in which each such HomeTown Intellectual Property Rights has
been issued or registered or in which any such application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses, and other agreements to which HomeTown is a party and pursuant
to which any person is authorized to use any HomeTown Intellectual Property
Rights, and (iii) all material licenses, sublicenses, and other agreements
to which HomeTown is a party and pursuant to which HomeTown is authorized
to use any third party patents, trademarks, or copyrights, including
software ("HomeTown Third Party Intellectual Property Rights") that is
material to its business.
(b) HomeTown is not, nor will it be as a result of the execution and
delivery of this Agreement, or the performance of its obligations under
this Agreement, in breach of any license, sublicense, or other agreements
relating to the HomeTown Intellectual Property Rights or HomeTown Third
Party Intellectual Property Rights.
(c) To HomeTown's knowledge, all patents, registered trademarks,
service marks, and copyrights held by HomeTown are valid and subsisting.
Except as set forth on Schedule 3.09 of the HomeTown Disclosure Schedule,
HomeTown (i) has not been sued in any suit, action, or proceeding which
involves a claim of infringement of any patents, trademarks, service marks,
or copyrights, or violation of any trade secret or other proprietary right
of any third party, and (ii) has no knowledge that the conduct of its
business as presently conducted infringes any patent, trademark, service
mark, copyright, trade secret, or other proprietary right of any third
party.
3.10. Agreements, Contracts, and Commitments. HomeTown has not
breached, or received in writing any claim or threat that it has breached,
any of the terms and conditions of any agreement, contract, or commitment
filed as an exhibit to HomeTown's Report on Form 10-K for the fiscal year
ended January 3, 1996 or any other agreement, contract, or commitment
entered into since January 3, 1996 which, if entered into prior to such
date, would have been required to be included as an exhibit thereto
("HomeTown Material Contracts") in such a manner as would permit any other
party to cancel or terminate the same or would permit any other party to
seek material damages from HomeTown under any HomeTown Material Contract.
Each HomeTown Material Contract that has not expired or been terminated is
in full force and effect and is not subject to any material default
thereunder of which HomeTown is aware by any party obligated to HomeTown
pursuant to the HomeTown Material Contract.
3.11. Litigation. Except as described in the HomeTown SEC Reports or in
Schedule 3.11 of the HomeTown Disclosure Schedule, there are no claims,
actions, suits, investigations or proceedings pending of which it has
notice or, to the knowledge of HomeTown, threatened
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against or affecting HomeTown or any of its Subsidiaries or any of their
respective assets or properties, at law or in equity, before or by any
Federal, state, municipal or other governmental agency or authority,
foreign or domestic, or before any arbitration board or panel, wherever
located, which if determined adverse to HomeTown would, individually or in
the aggregate, have a Material Adverse Effect on HomeTown and its
Subsidiaries, taken as a whole.
3.12. Environmental Matters.
(a) Hazardous Substances. To the knowledge of HomeTown, no Hazardous
Substances have ever been buried, spilled, leaked, discharged, emitted,
generated, stored, used or released, and no Hazardous Substances are now
present, in, on, or under any restaurant premises or other non-restaurant
property that HomeTown or any of its Subsidiaries has at any time owned,
operated, occupied or leased, except for immaterial quantities stored or
used by HomeTown or such Subsidiary in the ordinary course of its business
and in accordance with all applicable Environmental Laws. "Hazardous
Substance" means any pollutant, contaminant, hazardous substance or waste,
solid waste, petroleum or any fraction thereof, or any other chemical,
substance or material listed or identified in or regulated by any
Environmental Law; "Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. Sections
1251 to 1387, the Clean Air Act, 42 U.S.C. Section 7401 et seq., and any
other federal, state, local or other governmental statute, regulation, law
or ordinance dealing with the protection of human health, natural resources
and/or the environment; and "RCRA Hazardous Waste" means a hazardous waste,
as that term is defined in and pursuant to the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq.
(b) Hazardous Substances Activities. To the knowledge of HomeTown, no
property that HomeTown or any of its Subsidiaries has ever owned, operated,
occupied or leased has ever been used in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and no RCRA
Hazardous Wastes have been treated, stored or disposed of there, except for
immaterial quantities stored or used by HomeTown or such Subsidiary in the
ordinary course of its business.
(c) UST's and AST's. To the knowledge of HomeTown, there are not now
and never have been any underground or aboveground storage tanks or other
containment facilities of any kind on any restaurant premises or other
non-restaurant property that HomeTown or any of its Subsidiaries has ever
owned, occupied, operated or leased which contain or ever did contain any
Hazardous Substances.
(d) Listing. To the knowledge of HomeTown, no restaurant premises or
other non-restaurant property that HomeTown or any of its Subsidiaries has
ever owned, operated, occupied or leased has ever been listed on the
National Priorities List, the Comprehensive
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Environmental Response, Compensation and Liability Information System or
any similar federal, state or local list, schedule, log, inventory or
database.
(e) Environmental Reports. HomeTown has made available to Buffets for
inspection true and complete copies of all reports, authorizations,
permits, licenses, disclosures and other documents in its possession,
custody or control describing or relating in any way to HomeTown or any of
its Subsidiaries, or any property that HomeTown or any of its Subsidiaries
has ever owned, operated, occupied or leased, which suggest that any
Hazardous Substances may be present in, on, or under any such property in
material quantities or that HomeTown or any of its Subsidiaries may have
breached any Environmental Law.
(f) Environmental Claims, etc. To the knowledge of HomeTown, there are
not and there never have been any requests, notices, investigations,
claims, demands, administrative proceedings, hearings, litigation or other
legal proceedings relating in any way to HomeTown or any of its
Subsidiaries, or any property that HomeTown or any of its Subsidiaries has
ever owned, operated, occupied or leased, alleging liability under,
violation of or noncompliance with any Environmental Law or any license,
permit or other authorization issued pursuant thereto. To the knowledge of
HomeTown, no such matter is threatened or impending, nor does there exist
any substantial basis therefor.
(g) Compliance with Environmental Laws. HomeTown and each of its
Subsidiaries operates, and at all times has operated, its business in
accordance with all applicable Environmental Laws, and all licenses,
permits and other authorizations required pursuant to any Environmental Law
and necessary for the lawful operation of the business of HomeTown and its
Subsidiaries are in HomeTown's or the appropriate Subsidiary's possession
and are in full force and effect. To HomeTown's knowledge, there is no
threat that any such permit, license or other authorization will be
withdrawn, terminated, limited or materially changed.
3.13. Employee Benefit Plans.
(a) There are no "employee pension benefit plans," as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or "multiemployer plans" as defined in Section 3(37) of
ERISA, maintained or contributed to by HomeTown or any of its Subsidiaries
for the benefit of their current or former employees. HomeTown has set
forth on Schedule 3.13 of the HomeTown Disclosure Schedule all "employee
benefit plans" as defined in Section 3(3) of ERISA and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance, and other similar employee benefit plans,
arrangements, and agreements, whether or not such plans, arrangements, or
agreements are "employee benefit plans", written or otherwise, for the
benefit of or relating to, any current or former employee of HomeTown or
any trade or business (whether or not incorporated) (an "ERISA Affiliate")
which is aggregated with HomeTown or any Subsidiary of HomeTown pursuant to
Section 414 of the Code (together the "HomeTown Employee Plans").
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(b) With respect to each HomeTown Employee Plan, HomeTown has made
available to Buffets a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the Internal Revenue Service ("IRS"), if
applicable, (ii) the plan document and summary plan description for each
such HomeTown Employee Plan, (iii) each trust agreement and group annuity
contract, if any, relating to such HomeTown Employee Plan, (iv) the most
recent actuarial report or valuation relating to an HomeTown Employee Plan
subject to Title IV of ERISA, and (v) the most recent IRS determination
letter, where applicable.
(c) With respect to the HomeTown Employee Plans, individually and in
the aggregate, no event has occurred, and to the knowledge of HomeTown,
there exists no condition or set of circumstances in connection with which
HomeTown could be subject to any liability that is reasonably likely to
have a Material Adverse Effect on HomeTown and its Subsidiaries, taken as a
whole, under ERISA, the Code, or any other applicable law.
(d) With respect to the HomeTown Employee Plans, individually and in
the aggregate, there are no benefit obligations required to be funded for
which contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with generally accepted
accounting principles on the financial statements of HomeTown.
(e) Except as set forth in Schedule 3.13 of the HomeTown Disclosure
Schedule or as disclosed in HomeTown SEC Reports filed prior to the date of
this Agreement and except as provided for in this Agreement, neither
HomeTown nor any of its Subsidiaries is party to any oral or written (i)
union or collective bargaining agreement, (ii) agreement with any officer
or other key employee of HomeTown or any of its Subsidiaries, the benefits
of which are contingent, or the terms of which are materially altered upon
the occurrence of a transaction involving HomeTown of the nature
contemplated by this Agreement, (iii) agreement with any officer of
HomeTown providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of $100,000 per annum, or (iv) agreement
or plan, including any stock option plan, stock appreciation right plan,
restricted stock plan, or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
3.14. Compliance with Laws. HomeTown has complied with, is not in
violation of, and has not received any notices of violation with respect
to, any federal, state, or local statute, law, or regulation with respect
to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would not have
a Material Adverse Effect on HomeTown and its Subsidiaries, taken as a
whole.
3.15. Pooling of Interests. To its knowledge, neither HomeTown nor any
of its Affiliates (as defined in Section 6.10) has, through the date of
this Agreement, taken or agreed
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to take any action which would prevent Buffets from accounting for the
business combination to be effected by the Merger as a pooling of
interests.
3.16. Interested Party Transactions. Except as set forth in Schedule
3.16 of the HomeTown Disclosure Schedule or in the HomeTown SEC Reports,
since the date of HomeTown's last proxy statement to its stockholders, no
event has occurred that would be required to be reported by HomeTown as a
Certain Relationship or Related Transaction pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
3.17. No Existing Discussions. HomeTown is not engaged, directly or
indirectly, in any discussions or negotiations with any other party with
respect to an Acquisition Proposal (as defined in Section 6.01).
3.18 No Secured Debt. Except as set forth in the HomeTown Disclosure
Schedule, there is not now any secured debt (including capitalized leases)
of HomeTown or any of its Subsidiaries, except for (i) capitalized leases
of less than $8,655,000 in the aggregate as to HomeTown and its
Subsidiaries, or (ii) capitalized leases of HomeTown or any of its
Subsidiaries that are not reflected (and should not be reflected in
accordance with generally accepted accounting principles) on the
consolidated financial statements of HomeTown, and, in either case, the
existence of which does not violate the terms of any material note, bond,
indenture, mortgage, deed of trust, lease, franchise, permit,
authorization, license, contract, instrument or other agreement or
commitment to which HomeTown or any of its Subsidiaries is a party or by
which HomeTown or any of its Subsidiaries or any of the assets or
properties thereof is bound or encumbered.
3.19. Opinion of Financial Advisor. The financial advisor of HomeTown,
Montgomery Securities, Inc., has delivered to the Board of Directors of
HomeTown an opinion dated the date of this Agreement to the effect that the
consideration to be received by the HomeTown stockholders in the Merger is
fair from a financial point of view to the stockholders of HomeTown.
3.20 Tax Representation. There is no plan or intention by the
stockholders of HomeTown who own 5 percent or more of the outstanding
HomeTown stock, and to the best knowledge of the management of HomeTown,
there is no plan or intention on the part of the remaining stockholders of
HomeTown to sell, exchange, or otherwise dispose of a number of shares of
Buffets stock received in the transaction that would reduce the HomeTown
stockholders' ownership of Buffets stock to a number of shares having a
value, as of the Effective Time, of less than 50 percent of the value of
all of the formerly outstanding stock of HomeTown as of the same date. For
purposes of this representation, shares of HomeTown exchanged for cash in
lieu of fractional shares of Buffets stock will be treated as outstanding
HomeTown stock at the Effective Time. Moreover, shares of HomeTown stock
and shares of Buffets stock held by HomeTown stockholders and otherwise
sold, redeemed, or disposed of prior or subsequent to the transaction will
be considered in making this representation.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUFFETS AND SUB
Buffets and Sub jointly and severally represent and warrant to HomeTown
that the statements contained in this Article IV are true and correct as of
the date hereof, except as set forth in the disclosure schedule delivered
by Buffets to HomeTown on or before the date of this Agreement (the
"Buffets Disclosure Schedule"). The Buffets Disclosure Schedule shall be
arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any
paragraph, including appropriate cross references, shall qualify only the
corresponding paragraph in this Article IV.
4.01. Organization of the Company. Each of Buffets and its Subsidiaries
is a corporation duly organized, validly existing, and in good standing
under the laws of the jurisdiction of its incorporation, has all requisite
corporate power to own, lease, and operate its property and to carry on its
business as now being conducted and as proposed to be conducted, and is
duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified
would have a Material Adverse Effect on Buffets and its Subsidiaries, taken
as a whole. Except as set forth in the Buffets SEC Reports (as defined in
Section 4.04) or Schedule 4.01 of the Buffets Disclosure Schedule, neither
Buffets nor any of its Subsidiaries directly or indirectly owns any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture, or other
business association or entity, excluding securities in any publicly traded
company held for investment by Buffets and comprising less than one percent
of the outstanding stock of such company.
4.02. Buffets Capital Structure.
(a) The authorized capital stock of Buffets consists of 60,000,000
shares of Common Stock, $.01 par value ("Buffets Common Stock"), and
5,000,000 shares of Preferred Stock, $.01 par value ("Buffets Preferred
Stock"). On May 22, 1996, (i) 31,328,834 shares of Buffets Common Stock
were outstanding, all of which were validly issued, fully paid, and
nonassessable, (ii) no shares of Buffets Common Stock were held in the
treasury of Buffets, (iii) an aggregate of 2,712,356 shares of Buffets
Common Stock were reserved for future issuance pursuant to stock options
granted and outstanding under Buffets' 1985 Stock Option Plan, Buffets'
1988 Stock Option Plan, and Buffets' 1995 Stock Option Plan (collectively,
the "Buffets Option Plans") and 10,000 shares of Buffets Common Stock were
reserved for future issuance pursuant to stock options granted and
outstanding to a director of Buffets (the "Director Options"), and (iv) an
aggregate of 600,000 shares of Buffets' Series A Junior Participating
Preferred Shares ("Buffets Junior Preferred Stock") were reserved for
future issuance pursuant to the Rights Agreement, dated as of October 4,
1995, between Buffets and American Stock Transfer & Trust Company, as
Rights Agent (the "Buffets Rights Agreement"), under which each outstanding
share of Buffets Common Stock has attached to its certain rights
("Rights"), including rights under certain circumstances to purchase one
one-hundredth of a share of Buffets Junior Preferred Stock at $65.00, at
the date hereof, subject to
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adjustment. All shares of Buffets Common Stock subject to issuance as
specified above, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid, and nonassessable, and will have Rights
attached thereto in accordance with the Buffets Rights Agreement. There are
no obligations, contingent or otherwise, of Buffets or any of its
Subsidiaries to repurchase, redeem, or otherwise acquire any shares of
Buffets Common Stock or the capital stock of any Subsidiary or to provide
funds to or make any investment (in the form of a loan, capital
contribution, or otherwise) in any such Subsidiary or any other entity
other than the guarantees of bank obligations of Subsidiaries entered into
in the ordinary course of business. All of the outstanding shares of
capital stock of each of Buffets' Subsidiaries is duly authorized, validly
issued, fully paid, and nonassessable and all such shares are owned by
Buffets or another Subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations in Buffets' voting rights,
charges or other encumbrances of any nature.
(b) Except as set forth in this Section 4.02 and except for options
granted under the Buffets Option Plans and the Director Options, or as
reserved for future grants of options under the Buffets Option Plans, or
for the shares of Buffets Junior Preferred Stock reserved for issuance
under the Buffets Rights Agreement, there are no equity securities of any
class of Buffets or any of its Subsidiaries, or any security exchangeable
into or exercisable for such equity securities, issued, reserved for
issuance, or outstanding. Except as set forth in this Section 4.02, there
are no options, warrants, equity securities, calls, rights, commitments, or
agreements of any character to which Buffets or any of its Subsidiaries is
a party or by which it is bound obligating Buffets or any of its
Subsidiaries to issue, deliver, or sell, or cause to be issued, delivered,
or sold, additional shares of capital stock of Buffets or any of its
Subsidiaries or obligations of Buffets or any of its Subsidiaries to grant,
extend, accelerate the vesting of, or enter into any such option, warrant,
equity security, call, right, commitment, or agreement. Buffets is not a
party to, nor is Buffets aware of, any voting agreement, voting trust,
proxy, or other agreements or understandings relating to any shares of
capital stock of Buffets or any agreement, arrangement, or understanding
providing for registration rights with respect to any shares of capital
stock of Buffets.
4.03. Authority; No Conflict; Required Filings and Contracts.
(a) Buffets has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of Buffets,
subject only to the approval of the Buffets Voting Proposal (as defined in
Section 6.04) by Buffets' shareholders. This Agreement has been duly
executed and delivered by Buffets and constitutes the valid and binding
obligation of Buffets, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium, or other
similar laws affecting the rights of creditors generally and except that
the remedy of specific performance and injunctive relief and other forms of
equitable defenses are subject to the discretion of the court before which
any proceedings therefor may be brought.
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(b) Except as set forth in the Buffets Disclosure Schedule, the
execution and delivery of this Agreement by Buffets does not, and the
consummation of the transactions contemplated by this Agreement will not,
(i) conflict with, or result in any violation or breach of any provision of
the Articles of Incorporation or Bylaws of Buffets, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination,
cancellation, or acceleration of any obligation or loss of any material
benefit) under any of the terms, conditions, or provisions of any note,
bond, mortgage, indenture, or lease or any material contract or other
material agreement, instrument, or obligation to which Buffets or any of
its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) conflict or violate any permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, or regulation applicable to Buffets or any of its
Subsidiaries or their properties or assets and which is material to the
business or operations of Buffets.
(c) No consent, approval, order, or authorization of, or registration,
declaration, or filing with, any Governmental Entity, is required by or
with respect to Buffets or any of its
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Subsidiaries in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby,
except for (i) the filing of the pre- merger notification report under the
HSR Act, (ii) the filing of a Form S-4 Registration Statement with the SEC
in accordance with the Securities Act, (iii) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, (iv) the
filing of the Joint Proxy Statement with the SEC in accordance with the
Exchange Act, and (v) such consents, approvals, orders, authorizations,
registrations, declarations, and filings as may be required under
applicable federal and state securities laws and the laws of any foreign
country.
4.04. SEC Filings; Financial Statements.
(a) Buffets has filed and made available to HomeTown all forms,
reports, and documents required to be filed by Buffets with the SEC since
January 1, 1993 (including all exhibits, notes, and schedules thereto and
documents incorporated by reference therein) (collectively, the "Buffets
SEC Reports"). The Buffets SEC Reports (i) at the time filed, with respect
to all of the Buffets SEC Reports other than registration statements filed
under the Securities Act, or at the time of their respective effective
dates, with respect to registration statements filed under the Securities
Act, complied as to form in all material respects with the applicable
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not at the time filed or at the time of their respective
effective dates, as the case may be (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such
filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Buffets SEC Reports or
necessary in order to make the statements in such Buffets SEC Reports, in
the light of the circumstances under which they were made, not misleading.
None of Buffets' Subsidiaries is required to file any forms, reports, or
other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Buffets SEC Reports at the time
filed complied as to form in all
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material respects with the applicable published rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by Form
10-Q of the SEC) and fairly presented the consolidated financial position
of Buffets and its Subsidiaries at the respective dates and the
consolidated results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or
are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount. The unaudited balance sheet of
Buffets as of April 24, 1996 is referred to herein as the "Buffets Balance
Sheet."
4.05. No Undisclosed Liabilities. Except as set forth in the Buffets
Disclosure Schedule or as otherwise disclosed in the Buffets SEC Reports,
Buffets and its Subsidiaries do not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements
in accordance with generally accepted accounting principles), and whether
due or to become due, which individually or in the aggregate would
reasonably be expected to have a Material Adverse Effect on Buffets and its
Subsidiaries, taken as a whole, other than (i) liabilities reflected in the
Buffets Balance Sheet and (ii) normal or recurring liabilities incurred
since the date of the Buffets Balance Sheet in the ordinary course of
business consistent with past practices. Sub will have no liabilities
assumed by HomeTown and will not transfer to HomeTown any assets subject to
liabilities.
4.06. Absence of Certain Changes or Events. Since the date of the
Buffets Balance Sheet, Buffets and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been (i) any Material Adverse
Change in Buffets and its Subsidiaries, taken as a whole; (ii) any damage,
destruction, or loss (whether or not covered by insurance) with respect to
any property of Buffets or any of its Subsidiaries having a Material
Adverse Effect on Buffets and its Subsidiaries, taken as whole; (iii) any
material change by Buffets in its accounting methods, principles, or
practices; (iv) any revaluation by Buffets of any of its assets having a
Material Adverse Effect on Buffets and its Subsidiaries, taken as a whole;
or (v) except as disclosed in the Buffets Disclosure Schedule any other
action or event that would have required the consent of HomeTown pursuant
to Section 5.01 of this Agreement had such action or event occurred after
the date of this Agreement.
4.07. Taxes.
(a) Except as disclosed in the Buffets Disclosure Schedule, all Tax
Returns, of or relating to any Tax heretofore required to be filed by
Buffets or any of its Subsidiaries have been duly filed on a timely basis.
All such Tax Returns were complete and accurate in all material respects.
Each of Buffets and its Subsidiaries has paid or has made adequate
provision for the payment of all Taxes.
(b) Except as disclosed in the Buffets Disclosure Schedule, as of the
date of this Agreement there are no audits or administrative proceedings,
court proceedings or claims
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pending against Buffets or any of its Subsidiaries with respect to any
Taxes, no assessment, deficiency or adjustment has been asserted or, to the
knowledge of Buffets, proposed with respect to any Tax Return of or with
respect to Buffets or any of its Subsidiaries and there are no liens for
Taxes upon the assets or properties of Buffets or any of its Subsidiaries,
except liens for Taxes not yet delinquent.
(c) Except as disclosed in the Buffets Disclosure Schedule, there are
not in force any waivers of agreements, arrangements, or understandings by
or with respect to Buffets or any of its Subsidiaries of or for an
extension of time for the assessment or payment of any Taxes. Neither
Buffets nor any of its Subsidiaries has received a written ruling of a
taxing authority relating to Taxes or entered into a written and legally
binding agreement with a taxing authority relating to Taxes that would have
a continuing effect after the Closing Date. Except as disclosed in the
Buffets Disclosure Schedule, neither Buffets nor any of its Subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of
the Code by reason of a voluntary change in accounting method initiated by
Buffets or any of its Subsidiaries, and to the best knowledge of Buffets
the IRS has not proposed any such adjustment or change in accounting
method. For purposes of this Section 4.07, the term "Subsidiaries" shall
include former Subsidiaries of Buffets for the periods during which any
such Subsidiaries were owned directly or indirectly by Buffets.
(d) To the best knowledge of Buffets, each of Buffets and its
Subsidiaries has withheld and paid all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other third party.
(e) Neither Buffets nor any of its Subsidiaries has filed a consent
under Section 341 (f) of the Code.
4.08. Properties. Buffets has provided or made available to HomeTown a
true and complete list of all property owned by Buffets and its
Subsidiaries and real property leased by Buffets or its Subsidiaries
pursuant to Leases as of the date hereof, the name of the lessor, the date
of the Lease and each amendment to the Lease, and the aggregate annual
rental or other fee payable under any such Lease. All such Leases are valid
and binding in accordance with their respective terms, and Buffets is not
in default under any of such Leases.
4.09. Intellectual Property.
(a) Subject to the Buffets Disclosure Schedule, Buffets owns, or is
licensed or otherwise possesses legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, and any
applications for such patents, trademarks, trade names, service marks and
copyrights, and tangible or intangible proprietary information or material
that are necessary to conduct the business of Buffets as currently
conducted (the "Buffets Intellectual Property Rights"). Schedule 4.09 of
the Buffets Disclosure Schedule lists (i) all trademarks, registered
copyrights, trade names, and service marks which Buffets considers to be
material to its business and included in the Buffets Intellectual Property
Rights, including the jurisdictions in which each such Buffets Intellectual
Property Right has been issued or
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registered or in which any such application for such issuance and
registration has been filed, (ii) all material licenses, sublicenses, and
other agreements to which Buffets is a party and pursuant to which any
person is authorized to use any Buffets Intellectual Property Rights, and
(iii) all material licenses, sublicenses, and other agreements to which
Buffets is a party and pursuant to which Buffets is authorized to use any
third party patents, trademarks or copyrights, including software ("Buffets
Third Party Intellectual Property Rights") that is material to its
business.
(b) Buffets is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations under this
Agreement, in breach of any license, sublicense, or other agreement
relating to the Buffets Intellectual Property Rights or Buffets Third Party
Intellectual Property Rights.
(c) To Buffets' knowledge, all patents, registered trademarks, service
marks, and copyrights held by Buffets are valid and subsisting. Except as
set forth on Schedule 4.09 of the Buffets Disclosure Schedule, Buffets (i)
has not been sued in any suit, action, or proceeding which involves a claim
of infringement of any patents, trademarks, service marks, or copyrights,
or violation of any trade secret or other proprietary right of any third
party; and (ii) has no knowledge that the conduct of its business as
presently conducted infringes any patent, trademark, service mark,
copyright, trade secret, or other proprietary right of any third party.
4.10. Agreements, Contracts and Commitments. Buffets has not breached,
or received in writing any claim or threat that it has breached, any of the
terms or conditions of any material agreement, contract, or commitment
filed as an exhibit to Buffets' Report on Form 10-K for the fiscal year
ended January 3, 1996 or any other agreement, contract, or commitment
entered into since January 3, 1996 which, if entered into prior to such
date, would have been required to be included as an exhibit thereto
("Buffets Material Contracts") in such a manner as would permit any other
party to cancel or terminate the same or would permit any other party to
seek material damages from Buffets under any Buffets Material Contract.
Each Buffets Material Contract that has not expired or been terminated is
in full force and effect and is not subject to any material default
thereunder of which Buffets is aware by any party obligated to Buffets
pursuant to the Buffets Material Contract.
4.11. Litigation. Except as described in the Buffets SEC Reports or in
Schedule 4.11 of the Buffets Disclosure Schedule, there are no claims,
actions, suits, investigations or proceedings pending of which it has
notice or, to the knowledge of Buffets, threatened against or affecting
Buffets or any of its Subsidiaries or any of their respective assets or
properties, at law or in equity, before or by any Federal, state, municipal
or other governmental agency or authority, foreign or domestic, or before
any arbitration board or panel, wherever located, which if determined
adverse to Buffets would, individually or in the aggregate, have a Material
Adverse Effect on Buffets and its Subsidiaries, taken as a whole.
4.12. Environmental Matters.
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(a) Hazardous Substances. To the knowledge of Buffets, no Hazardous
Substances have ever been buried, spilled, leaked, discharged, emitted,
generated, stored, used or released, and no Hazardous Substances are now
present, in, on, or under any restaurant premises or other non-restaurant
property that Buffets or any of its Subsidiaries has at any time owned,
operated, occupied or leased, except for immaterial quantities stored or
used by Buffets or such Subsidiary in the ordinary course of its business
and in accordance with all applicable Environmental Laws.
(b) Hazardous Substances Activities. To the knowledge of Buffets, no
property that Buffets or any of its Subsidiaries has ever owned, operated,
occupied or leased has ever been used in connection with the business of
manufacturing, storing or transporting Hazardous Substances, and no RCRA
Hazardous Wastes have been treated, stored or disposed of there, except for
immaterial quantities stored or used by Buffets or such Subsidiary in the
ordinary course of its business.
(c) UST's and AST's. To the knowledge of Buffets, there are not now and
never have been any underground or aboveground storage tanks or other
containment facilities of any kind on any restaurant premises or other
non-restaurant property that Buffets or any of its Subsidiaries has ever
owned, occupied, operated or leased which contain or ever did contain any
Hazardous Substances.
(d) Listing. To the knowledge of Buffets, no restaurant premises or
other non-restaurant property that Buffets or any of its Subsidiaries has
ever owned, operated, occupied or leased has ever been listed on the
National Priorities List, the Comprehensive Environmental Response,
Compensation and Liability Information System or any similar federal, state
or local list, schedule, log, inventory or database.
(e) Environmental Reports. Buffets has made available to HomeTown for
inspection true and complete copies of all reports, authorizations,
permits, licenses, disclosures and other documents in its possession,
custody or control describing or relating in any way to Buffets or any of
its Subsidiaries, or any property that Buffets or any of its Subsidiaries
has ever owned, operated, occupied or leased, which suggest that any
Hazardous Substances may be present in, on, or under any such property in
material quantities or that Buffets or any of its Subsidiaries may have
breached any Environmental Law.
(f) Environmental Claims, etc. To the knowledge of Buffets, there are
not and there never have been any requests, notices, investigations,
claims, demands, administrative proceedings, hearings, litigation or other
legal proceedings relating in any way to Buffets or any of its
Subsidiaries, or any property that Buffets or any of its Subsidiaries has
ever owned, operated, occupied or leased, alleging liability under,
violation of or noncompliance with any Environmental Law or any license,
permit or other authorization issued pursuant thereto. To the knowledge of
Buffets, no such matter is threatened or impending, nor does there exist
any substantial basis therefor.
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(g) Compliance with Environmental Laws. Buffets and each of its
Subsidiaries operates, and at all times has operated, its business in
accordance with all applicable Environmental Laws, and all licenses,
permits and other authorizations required pursuant to any Environmental Law
and necessary for the lawful operation of the business of Buffets and its
Subsidiaries are in Buffets' or the appropriate Subsidiary's possession and
are in full force and effect. To Buffets' knowledge, there is no threat
that any such permit, license or other authorization will be withdrawn,
terminated, limited or materially changed.
4.13. Employee Benefit Plans.
(a) There are no "employee pension benefit plans," as defined in
Section 3(2) of ERISA, or "multiemployer plans" as defined in Section 3(37)
of ERISA, maintained or contributed to by Buffets or any of its
Subsidiaries for the benefit of their current or former employees. Buffets
has set forth on Schedule 4.13 of the Buffets Disclosure Schedule all
employee benefit plans (as defined in Section 4(4) of ERISA) and all bonus,
stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance, and other similar employee benefit
plans, arrangements, and agreements, whether or not such plans,
arrangements, or agreements are "employee benefit plans", written or
otherwise, for the benefit of or relating to, any current or former
employee of Buffets or any ERISA Affiliate of Buffets, or any Subsidiary of
Buffets which is aggregated with Buffets pursuant to Section 414 of the
Code (together, the "Buffets Employee Plans").
(b) With respect to each Buffets Employee Plan, Buffets has made
available to HomeTown a true and correct copy of (i) the most recent annual
report (Form 5500) filed with the IRS, (ii) the plan document and summary
plan description for each such Buffets Employee Plan, (iii) each trust
agreement and group annuity contract, if any, relating to such Buffets
Employee Plan, and (iv) the most recent actuarial report or valuation
relating to an Buffets Employee Plan subject to Title IV of ERISA, and (v)
the most recent IRS determination letter, where applicable.
(c) With respect to the Buffets Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Buffets, there
exists no condition or set of circumstances in connection with which
Buffets could be subject to any liability that is reasonably likely to have
a Material Adverse Effect on Buffets and its Subsidiaries, taken as whole,
under ERISA, the Code, or any other applicable law.
(d) With respect to the Buffets Employee Plans, individually and in the
aggregate, there are no benefit obligations required to be funded for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of Buffets.
(e) Except as set forth in Schedule 4.13 of the Buffets Disclosure
Schedule or as disclosed in Buffets SEC Reports filed prior to the date of
this Agreement, and except as provided for in this Agreement, neither
Buffets nor any of its Subsidiaries is a party to any oral or written (i)
union or collective bargaining agreement, (ii) agreement with any officer
or
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other key employee of Buffets or any of its Subsidiaries, the benefits of
which are contingent or the terms of which are materially altered, upon the
occurrence of a transaction involving Buffets of the nature contemplated by
this Agreement, (iii) agreement with any officer or other employee of
Buffets providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of $150,000 per annum, or (iv) agreement
or plan, including any stock option plan, stock appreciation right plan,
restricted stock plan, or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
4.14. Compliance with Laws. Buffets has complied with, is not in
violation of, and has not received any notices of violation with respect
to, any federal, state, or local statute, law, or regulation with respect
to the conduct of its business, or the ownership or operation of its
business, except for failures to comply or violations which would not have
a Material Adverse Effect on Buffets and its Subsidiaries, taken as a
whole.
4.15. Pooling of Interests. To its knowledge, neither Buffets nor any
of its Affiliates has, through the date of this Agreement, taken or agreed
to take any action which would prevent Buffets from accounting for the
business combination to be effected by the Merger as a pooling of
interests.
4.16. Interested Party Transactions. Except as set forth in Schedule
4.16 of the Buffets Disclosure Schedule or in the Buffets SEC Reports,
since the date of Buffets' last proxy statement to its shareholders, no
event has occurred that would be required to be reported by Buffets as a
Certain Relationship or Related Transaction pursuant to Item 404 of
Regulation S-K promulgated by the SEC.
4.17. Opinion of Financial Advisor. The financial advisor of Buffets,
Piper Jaffray Inc., has delivered to the Board of Directors of Buffets an
opinion dated the date of this Agreement to the effect that the Conversion
Number is fair from a financial point of view to Buffets and its
shareholders.
4.18. Ownership and Interim Operations of Sub. All outstanding capital
stock of Sub is owned by Buffets. Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, has engaged in
no other business activities, and has conducted its operations only as
contemplated by this Agreement.
4.19. No Existing Discussions. Buffets is not engaged, directly or
indirectly, in any discussions or negotiations with any other party with
respect to an Acquisition Proposal (as defined in Section 6.01).
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ARTICLE V
CONDUCT OF BUSINESS
5.01. Covenants of Buffets and HomeTown. During the period from the
date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, Buffets and HomeTown each agrees
as to itself and its respective Subsidiaries (except to the extent that the
other party shall otherwise consent in writing), to carry on its business
in the usual, regular, and ordinary course in substantially the same manner
as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform other
obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, to keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, franchisees, distributors,
licensors, licensees, and others having business dealings with it, to the
end that its goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Buffets and HomeTown shall each promptly notify the other
of any event or occurrence not in the ordinary course of business of
Buffets or HomeTown, respectively. Except as expressly contemplated by this
Agreement, subject to Section 6.01, each of Buffets and HomeTown shall not
(and shall not permit any of its respective Subsidiaries to), without the
prior written consent of the other party:
(a) Accelerate, amend, or change the period of exercisability of
options or restricted stock granted under any employee stock plan of
such party or otherwise or authorize cash payments in exchange for any
options granted under any of such plans except as required by the terms
of such plans or any related agreements or other agreements in effect
as of the date of this Agreement;
(b) Transfer or license to any person or entity or otherwise
extend, amend, or modify any rights to the HomeTown Intellectual
Property Rights, in the case of HomeTown, or the Buffets Intellectual
Property Rights, in the case of Buffets, other than in the ordinary
course of business consistent with past practices;
(c) Declare or pay any dividends on or make any other
distributions (whether in cash, stock, or property) in respect of any
of its capital stock or split, combine, or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of, or in substitution for shares of
capital stock of such party, or purchase or otherwise acquire, directly
or indirectly, any shares of its capital stock;
(d) Issue, deliver, or sell or authorize or propose the issuance,
delivery, or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into shares of
its capital stock, or subscriptions, rights, warrants, or options to
acquire, or other agreements or commitments of any character obligating
it to issue, any such shares or other convertible securities, other
than the grant of
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options to employees in a manner consistent with past practices
and pursuant to currently existing stock option plans, the
issuance of shares upon the exercise of options outstanding as of
the date hereof, and the issuance of shares upon conversation of
the Notes;
(e) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial equity interest in or substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association, or other business organization
or division, or otherwise acquire or agree to acquire any assets which
are material, individually or in the aggregate, to the business of such
party and its Subsidiaries, taken as a whole;
(f) Except for ordinary course food sales, sell, lease, license,
or otherwise dispose of any of its properties or assets which are
material, individually or in the aggregate, to the business of such
party and its Subsidiaries, taken as a whole;
(g) (i) Increase or agree to increase the compensation payable or
to become payable to its officers or employees, except for increases in
salary or wages of employees other than officers of Buffets or HomeTown
in accordance with past practices, (ii) increase or agree to increase
the compensation payable or to become payable to officers of Buffets or
HomeTown or grant any additional severance or termination pay to, or
enter into any employment or severance agreements with such officers,
(iii) grant any severance or termination pay to, or enter into any
employment or severance agreement with, any employee, except in
accordance with past practices, (iv) enter into any collective
bargaining agreement, (v) except for an aggregate of $75,000 that may
be paid to the outside directors of HomeTown, establish, adopt, enter
into, or amend any bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance, or other plan, trust, fund, policy,
or arrangement for the benefit of any directors, officers, or
employees, or (vi) establish any new executive employee position;
(h) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable, other than
revaluations that the auditors for such entity require in accordance
with generally accepted accounting principles or in the ordinary course
of business;
(i) Incur, except pursuant to existing credit agreements, any
indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or warrants or rights to acquire any
debt securities of such party or any of its Subsidiaries or guarantee
any debt securities of others, or voluntarily prepay any outstanding
indebtedness;
(j) Amend or propose to amend its charter documents or Bylaws,
except as contemplated by this Agreement; or
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(k) Make any capital expenditure or commitment for which it is not
contractually bound at the date hereof except (i) expenditures and
commitments incurred in the ordinary course in connection with
restaurant construction and development and restaurant remodeling, and
(ii) other capital expenditures and commitments not to exceed $1
million in the aggregate, in the case of HomeTown, or $3 million, in
the case of Buffets.
(l) Take, or agree in writing or otherwise to take, any of the
actions described in Sections (a) through (k) above, or any action
which is reasonably likely to make any of such party's representations
or warranties contained in this Agreement untrue or incorrect in any
material respect on the date made (to the extent so limited) or as of
the Effective Time.
5.02. Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Buffets and HomeTown shall
confer on a regular and frequent basis with one or more representatives of
the other party to report operational matters of materiality and the
general status of ongoing operations and shall promptly provide the other
party and its counsel with copies of all filings made by such party with
any Governmental Entity in connection with this Agreement, the Merger, and
the transactions contemplated hereby and thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS AND COVENANTS
6.01. No Solicitation.
(a) Neither HomeTown nor Buffets shall directly or indirectly, through
any officer, director, employee, representative, or agent thereof or of any
of their respective Subsidiaries, (i) solicit, initiate, or encourage any
inquiries or proposals that constitute, or could reasonably be expected to
lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer), or similar
transaction involving HomeTown or any of its Subsidiaries or Buffets or any
of its Subsidiaries, as the case may be, other than the transactions
contemplated by this Agreement (any of the foregoing inquiries or proposals
being referred to in this Agreement as an "Acquisition Proposal"), (ii)
engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Acquisition Proposal,
or (iii) agree to, approve, or recommend any Acquisition Proposal;
provided, however, that nothing contained in this Agreement shall prevent
HomeTown or Buffets, or their respective Boards of Directors, from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited
bona fide Acquisition Proposal by such person or entity or recommending an
unsolicited bona fide written Acquisition Proposal to the shareholders, if
and only to the extent that (1) the Board of Directors determines in good
faith after consultation with outside legal counsel that such action is
necessary for it to comply with its fiduciary duties to shareholders
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under applicable law and (2) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such
person or entity, the Board of Directors receives from such person or
entity an executed confidentiality agreement with terms no more favorable
to such party than those contained in the Confidentiality and Nondisclosure
Agreement dated February 5, 1996 between Buffets and HomeTown (the
"Confidentiality Agreement") or (B) complying with Rule 14e-2 or Rule 14d-9
promulgated under the Exchange Act with regard to an Acquisition Proposal.
(b) HomeTown shall notify Buffets and Buffets shall notify HomeTown
immediately (and no later than 24 hours) after receipt by HomeTown (or its
advisors) or Buffets (or its advisors), as the case may be, of any
Acquisition Proposal or any request for non-public information in
connection with an Acquisition Proposal or for access to the properties,
books, or records thereof by any person or entity that informs HomeTown or
Buffets, as the case may be, that it is considering making, or has made, an
Acquisition Proposal. Such notice by either HomeTown or Buffets shall be
made orally and in writing and shall indicate in reasonable detail the
identity of the offeror and the terms and conditions of such proposal,
inquiry, or contact.
6.02. Joint Proxy Statement; Registration Statement.
(a) As promptly as practical after the execution of this Agreement,
Buffets and HomeTown shall prepare and file with the SEC a joint proxy
statement/prospectus to be sent to the shareholders of Buffets and HomeTown
in connection with the meeting of Buffets' shareholders (the "Buffets
Shareholders' Meeting") and HomeTown's stockholders (the "HomeTown
Stockholders' Meeting") to consider the Merger (the "Joint Proxy
Statement"), and Buffets shall prepare and file with the SEC a registration
statement on Form S-4 pursuant to which the shares of Buffets Common Stock
to be issued as a result of the Merger will be registered with the SEC (the
"Registration Statement"), in which the Joint Proxy Statement will be
included as a prospectus. Buffets and HomeTown shall use all reasonable
efforts to cause the Registration Statement to become effective as soon
after such filing as practical. The Joint Proxy Statement shall include the
recommendation of the Board of Directors of HomeTown in favor of this
Agreement and the Merger and the recommendation of the Board of Directors
of Buffets in favor of the issuance of shares of Buffets Common Stock
pursuant to the Merger, provided that the Board of Directors of either
HomeTown or Buffets may withdraw such recommendation if (i) such Board of
Directors shall have determined in good faith, after consultation with its
outside legal counsel, that the withdrawal of such recommendation is
necessary for such Board of Directors to comply with its fiduciary duties
under applicable law or (ii) HomeTown has been advised by Montgomery
Securities, Inc. or Buffets has been advised by Piper Jaffray Inc. that
Montgomery Securities, Inc., in the case of HomeTown, or Piper Jaffray
Inc., in the case of Buffets, would be unable, as of the date of such
advice, to issue an opinion substantially to the effect set forth in
Section 3.18 and Section 4.17, respectively. Buffets and HomeTown shall
make all other necessary filings with respect to the Merger under the
Securities Act and the Exchange Act and the rules and regulations
thereunder.
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(b) HomeTown shall take such action as may be necessary to insure that
(i) the information to be supplied by HomeTown for inclusion in the
Registration Statement shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material
fact or omit to state any material fact required to be stated in the
Registration Statement or necessary in order to make the statements in the
Registration Statement, in light of the circumstances under which they were
made, not misleading, and (ii) the information supplied by HomeTown for
inclusion in the Joint Proxy Statement shall not, on the date the Joint
Proxy Statement is first mailed to shareholders of HomeTown or Buffets, at
the time of the HomeTown Stockholders' Meeting and the Buffets
Shareholders' Meeting, and at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it shall
be made, is false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements made
in the Joint Proxy Statement not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the HomeTown
Stockholders' Meeting or Buffets Shareholders' Meeting which has become
false or misleading. If at any time prior to the Effective Time any event
relating to HomeTown or any of its Affiliates, officers, or directors
should be discovered by HomeTown which should be set forth in an amendment
to the Registration Statement or a supplement to the Joint Proxy Statement,
HomeTown shall promptly so inform Buffets.
(c) Buffets shall take such action as may be necessary to insure that
(i) the information supplied by Buffets for inclusion in the Registration
Statement shall not at the time the Registration Statement is declared
effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading, and (ii) the information supplied by Buffets for inclusion in
the Joint Proxy Statement shall not on the date the Joint Proxy Statement
is first mailed to shareholders of Buffets or HomeTown, at the time of the
Buffets Shareholders' Meeting and HomeTown Shareholders' Meeting, and at
the Effective Time, contain any statement which, at such time and in light
of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements made in the Joint Proxy Statement
not false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Buffets Shareholders' Meeting or HomeTown
Shareholders' Meeting which has become false or misleading. If at any time
prior to the Effective Time any event relating to Buffets or any of its
Affiliates, officers, or directors should be discovered by Buffets which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement, Buffets shall promptly so inform
HomeTown.
6.03. Access to Information. Upon reasonable notice and to the extent
permitted under applicable law and the provisions of agreements to which
Buffets or HomeTown, as the case may be, is a party, HomeTown and Buffets
shall each (and shall cause each of their respective Subsidiaries to)
afford to the officers, employees, accountants, counsel, and other
representatives of the other, access, during normal business hours during
the period prior to
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the Effective Time, to all its properties, books, contracts, commitments,
and records and, during such period, each of HomeTown and Buffets shall
(and shall cause each of their respective Subsidiaries to) furnish promptly
to the other (a) a copy of each report, schedule, registration statement,
and other document filed or received by it during such period pursuant to
the requirements of federal securities laws and (b) all other information
concerning its business, properties, and personnel as such other party may
reasonably request. Unless otherwise required by law, the parties will hold
any such information which is non-public in confidence in accordance with
the Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section 6.03 shall affect or be deemed to
modify a representation or warranty construed in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
6.04. Shareholders Meetings. HomeTown and Buffets each shall call a
meeting of its respective shareholders to be held as promptly as
practicable for the purpose of voting, in the case of HomeTown, upon this
Agreement and the Merger and, in the case of Buffets, upon the issuance of
shares of Buffets Common Stock pursuant to the Merger (the "Buffets Voting
Proposal"). Subject to Sections 6.01 and 6.02, HomeTown and Buffets will,
through their respective Boards of Directors, recommend to their respective
shareholders approval of such matters and will coordinate and cooperate
with respect to the timing of such meetings and shall use their best
efforts to hold such meetings on the same day and as soon as practicable
after the date hereof. Subject to Section 6.02, each party shall use all
reasonable efforts to solicit from its shareholders proxies in favor of
such matters.
6.05. Legal Conditions to Merger. Subject to Section 6.01, each of
Buffets and HomeTown will take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with
respect to the Merger (which actions shall include, without limitation,
furnishing all information required under the HSR Act and in connection
with approvals of or filings with any other Governmental Entity) and will
promptly cooperate with and furnish information to each other in connection
with any such requirements imposed upon either of them or any of their
Subsidiaries in connection with the Merger. Each of Buffets and HomeTown
will, and will cause its Subsidiaries to, take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order, or approval of, or any exemption by, any
Governmental Entity or other public third party, required to be obtained or
made by Buffets, HomeTown, or any of their Subsidiaries in connection with
the Merger or the taking of any action contemplated thereby or by this
Agreement.
6.06. Payment of Taxes.
(a) HomeTown shall pay prior to the Effective Time (i) all Taxes
required to be paid prior to that day, and (ii) shall withhold with respect
to its employees all federal and state income taxes, FICA, FUTA, and other
Taxes required to be withheld.
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(b) Buffets shall pay prior to the Effective Time (i) all Taxes
required to be paid prior to that day, and (ii) shall withhold with respect
to its employees all federal and state income taxes, FICA, FUTA, and other
Taxes required to be withheld.
6.07. Public Disclosure. Any public disclosures by Buffets or HomeTown
with respect to the Merger or this Agreement, or with respect to anything
involving or referring to the other, shall be made in accordance with the
terms of the Confidentiality Agreement.
6.08. Tax-Free Reorganization.
(a) Buffets and HomeTown shall each use its best efforts to cause the
Merger to be treated as a reorganization within the meaning of Section
368(a) of the Code.
(b) To the extent permitted under applicable tax laws, the Merger shall
be reported as a reorganization within the meaning of Section 368(a)(1)(A)
and Section 368(a)(2)(E) of the Code in all federal, state, and local tax
returns after the Effective Time.
(c) Buffets will cause HomeTown to hold following the Merger at least
90% of the fair market value of its net assets and at least 70% of the fair
market value of its gross assets, and at least 90% of the fair market value
of Sub's net assets and 70% of the fair market value of Sub's gross assets
held immediately prior to the Merger. For purposes of this subsection (c),
amounts paid by HomeTown or Sub to HomeTown Shareholders who receive cash
or other property, to pay reorganization expenses, and in connection with
redemptions and distributions (except for regular, normal distributions)
will be treated as assets of HomeTown or Sub, respectively, immediately
prior to the Merger.
(d) Following the Merger, Buffets will cause HomeTown to continue its
historic business or use a significant portion of its business assets in a
business.
(e) Following the Merger, Buffets will cause HomeTown not to issue
additional shares of HomeTown stock to any person other than Buffets.
(f) Buffets has no present intention to reacquire, following the
Merger, any of its stock issued in the Merger.
(g) Following the Merger, Buffets will not liquidate HomeTown, merge
HomeTown with or into another corporation, sell or dispose of HomeTown
stock (except for transfers to other corporations controlled by Buffets),
or cause HomeTown to sell or dispose of any of its assets or the assets
acquired from Sub, except for dispositions in the ordinary course of
business or transfers to corporations controlled by HomeTown.
(h) Buffets, Sub, HomeTown and the stockholders of HomeTown will pay
their respective expenses, if any, incurred in connection with the Merger.
(i) No indebtedness between Buffets and HomeTown or between Sub and
HomeTown was issued, acquired or will be settled at a discount.
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(j) At the Effective Time, Buffets will not own, nor will it have owned
during the past five years, any stock of HomeTown.
(k) At the Effective Time, none of Buffets, HomeTown or Sub is an
investment company as defined Section 368(a)(2)(F)(iii) and (iv) of the
Code.
6.09. Pooling Accounting. Buffets and HomeTown shall each use its best
efforts to cause the business combination to be effected by the Merger to
be accounted for as a pooling of interests. Each of Buffets and HomeTown
shall use its best efforts to cause its respective Affiliates (i) not to
take any action that would adversely affect the ability of Buffets to
account for the business combination to be effected by the Merger as a
pooling of interests and (ii) to sign and deliver to Buffets a customary
"pooling letter" in form and substance agreed upon by HomeTown and Buffets.
6.10. Affiliate Agreements. Within two weeks of the date of this
Agreement, HomeTown will provide Buffets with a list of those persons who
are, in HomeTown's reasonable judgment, "affiliates" of HomeTown within the
meaning of Rule 145 (each such person who is an "affiliate" of HomeTown
within the meaning of Rule 145 is referred to as an "Affiliate")
promulgated under the Securities Act ("Rule 145"). HomeTown shall provide
Buffets such information and documents as Buffets shall reasonably request
for purposes of reviewing such list and shall notify Buffets in writing
regarding any change in the identity of its Affiliates prior to the Closing
Date. HomeTown shall use its best efforts to deliver or cause to be
delivered to Buffets by July 1, 1996 (and in any case shall deliver to
Buffets prior to the Effective Time) from each of the Affiliates of
HomeTown, an executed Affiliate Agreement, in form and substance
satisfactory to Buffets and HomeTown, by which each Affiliate of HomeTown
agrees to comply with the applicable requirements of Rule 145 ("Affiliate
Agreement"). Buffets shall be entitled to place appropriate legends on the
certificates evidencing any Buffets Common Stock to be received by such
Affiliates of HomeTown pursuant to the terms of this Agreement, and to
issue appropriate stop transfer instructions to the transfer agent for the
Buffets Common Stock, consistent with the terms of the Affiliate
Agreements.
6.11. NASDAQ Quotation. Buffets shall use its best efforts to cause the
shares of Buffets Common Stock to be issued in the Merger to be approved
for quotation on the Nasdaq National Market, subject to official notice of
issuance, prior to the Closing Date.
6.12. Stock Plans and Other Options.
(a) At the Effective Time, each outstanding option to purchase shares
of HomeTown Common Stock (a "HomeTown Stock Option") under the HomeTown
1991 Option Plan, whether vested or unvested, shall be deemed to constitute
an option to acquire, on the same terms and conditions as were applicable
under the HomeTown 1991 Stock Option Plan, the same number of shares of
Buffets Common Stock as the holder of such HomeTown Stock Option would have
been entitled to receive pursuant to the Merger had such holder exercised
such option in full immediately prior to the Effective Time, at the price
per share set
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forth in the HomeTown Stock Option, divided by the Conversion Number,
rounded to the nearest full cent; provided, however, that in the case of
any HomeTown Stock Option to which Section 422 of the Code applies
("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of
exercise of such option shall be determined in order to comply with Section
424(a) of the Code.
(b) As soon as practicable after the Effective Time, Buffets shall
deliver to the participants in the HomeTown 1991 Option Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the
grants made prior to the Effective Time pursuant to the HomeTown 1991
Option Plan shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 6.12 after giving
effect to the Merger). Buffets shall comply with the terms of the HomeTown
1991 Option Plan to ensure, to the extent required by, and subject to the
provisions of, the HomeTown 1991 Option Plan, that HomeTown Stock Options
which qualified as incentive stock options prior to the Effective Time
continue to qualify as incentive stock options after the Effective Time.
(c) Buffets shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Buffets Common Stock for delivery
under the HomeTown 1991 Option Plan assumed in accordance with this Section
6.12. As soon as practicable after the Effective Time, Buffets shall file a
registration statement on Form S-8 (or any successor or other appropriate
forms) with respect to the shares of Buffets Common Stock subject to such
options and shall use its best efforts to maintain the effectiveness of
such registration statement for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be
subject to the reporting requirements under Section 16(a) of the Exchange
Act, where applicable, Buffets shall administer the HomeTown 1991 Option
Plan assumed pursuant to this Section 6.12 in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act.
(d) At the Effective Time, each of the HomeTown Non-Plan Options,
whether vested or unvested, shall be deemed to constitute an option to
acquire, on the same terms and conditions as were applicable under the
agreements covering the HomeTown Non-Plan Options, the same number of
shares of Buffets Common Stock as the holder of such HomeTown Non-Plan
Option would have been entitled to receive pursuant to the Merger had such
holder exercised such option in full immediately prior to the Effective
Time, at the price per share set forth in such HomeTown Non-Plan Option,
divided by the Conversion Number and rounded to the nearest full cent. As
soon as practicable after the Effective Time, Buffets shall deliver to the
holders of the HomeTown Non-Plan Options an appropriate notice setting
forth such holder's rights pursuant thereto. Buffets shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of Buffets Common Stock for delivery under the HomeTown Non-Plan
Options.
6.13. Consents. Each of Buffets and HomeTown shall use all reasonable
efforts to obtain all necessary consents, waivers, and approvals under any
of Buffets' or HomeTown's material agreements, contracts, licenses, or
leases in connection with the Merger.
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6.14. Brokers or Finders. Each of Buffets and HomeTown represents, as
to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor, or other firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this
Agreement except Montgomery Securities, Inc., whose fees and expenses will
be paid by HomeTown in accordance with HomeTown's agreement with such firm
(a copy of which has been delivered by HomeTown to Buffets prior to the
date of this Agreement), and Piper Jaffray Inc., whose fees and expenses
will be paid by Buffets in accordance with Buffets' agreement with such
firm (a copy of which has been delivered by Buffets prior to the date of
this Agreement.)
6.15 Employee Benefits; Employee Issues. Following the Effective Time,
all employees of HomeTown shall be given credit for their periods of
service with HomeTown as if such service were with Buffets in determining
their eligibility for inclusion in, and the level of benefits granted after
the Effective Time under, Buffets' employee benefit plans. HomeTown's
employees shall be eligible for grants of stock options after the Effective
Time under Buffets' 1995 Stock Incentive Plan on the same terms as Buffets'
employees. In connection with the Merger, HomeTown may enter into severance
obligations up to an aggregate amount not to exceed $1.2 million with its
corporate employees (such severance obligations shall generally be in
accordance with the terms of that HomeTown Memorandum dated May 30, 1996
from Mike Shader to Kerry Kramp). In addition, following the Effective
Time, the HomeTown corporate employees identified in that letter dated June
3, 1996 of the Chairman of Buffets to the Chairman of HomeTown shall be
entitled to the severance benefits in the amount set forth therein and in
accordance therewith. If requested by Buffets, after consultation with
HomeTown, HomeTown shall deliver to its employees and others appropriate
notices under the federal Worker Adjustment and Retraining Notification
Act.
6.16 Reports. From and after the Effective Time and so long as
necessary in order to permit HomeTown's Affiliates to sell the Buffets
shares of Common Stock received by them as a result of the Merger pursuant
to Rule 145 and, to the extent applicable, Rule 144 under the Securities
Act, Buffets will use its best efforts to file on a timely basis all
reports required to be filed by it pursuant to Section 13 or 15(d) of the
Exchange Act, referred to in paragraph (c)(1) of Rule 144 under the
Securities Act (or, if applicable, Buffets will use its best efforts to
make publicly available the information regarding itself referred to in
paragraph (c)(2) of Rule 144).
6.17 Supplemental Indenture. In accordance with the terms thereof,
Buffets and HomeTown will execute and deliver, on or prior to the Effective
Time, a supplemental indenture or assumption agreement with respect to the
Notes in order to reflect the consummation of the transactions contemplated
hereby.
6.18 Notification of Certain Matters. HomeTown will give prompt notice
to Buffets upon discovery thereof, and Buffets will give prompt notice to
HomeTown upon discovery thereof, of (a) the occurrence, or failure to
occur, of any event which occurrence or failure would be likely to cause
any representation or warranty contained in this Agreement to be
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untrue or inaccurate in any material respect at any time from the date
hereof to the Effective Time, and (b) any material failure of HomeTown or
Buffets, or any director, officer, employee, agent or representative
thereof, to comply with or satisfy any covenant, condition, or agreement to
be complied with or satisfied by it hereunder.
6.19 Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, subject to the appropriate
vote of shareholders of Buffets and HomeTown described in Section 6.04,
including cooperating fully with the other party. In case at any time after
the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Continuing Corporation
with full title to all properties, assets, rights, approvals, immunities,
and franchises of either of the Constituent Corporations, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
6.20 Continuing Indemnification. After the Closing, Buffets shall
guaranty the obligations of HomeTown to indemnify its present and former
directors and officers and Bradley J. Thies, General Counsel of HomeTown,
to the extent of, and in accordance with, the Bylaws of HomeTown as in
effect on the date of this Agreement and the Delaware Law and, with respect
to Mr. Thies, in accordance with the resolution of the Board of Directors
of HomeTown adopted at a meeting thereof on May 10, 1994 . Subject to the
Delaware Law, HomeTown's Bylaws relating to indemnification shall not be
amended in a manner which adversely affects the rights of any party
entitled to indemnification thereunder. The provisions of this Section 6.20
are intended to be for the benefit of, and shall be enforceable by, each
indemnified party.
ARTICLE VII
CONDITIONS TO MERGER
7.01. Conditions to Each Party's Obligation To Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the
following conditions:
(a) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the requisite vote of the stockholders of
HomeTown as may be required by law, by the rules of the Nasdaq National
Market, and by any applicable provisions of its certificate of
incorporation or Bylaws, and the Buffets Voting Proposal shall have
been approved by the requisite vote of the shareholders of Buffets as
may be required by law, by the rules of the Nasdaq National Market, and
by any applicable provisions of its articles of incorporation or
Bylaws.
(b) HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
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(c) Approvals. There shall have been obtained permits, consents
and approvals of securities or "blue sky" commissions or agencies of
any jurisdiction and of other governmental bodies or agencies that may
reasonably be deemed necessary so that the consummation of the Merger
and the other transactions contemplated hereby will be in compliance
with applicable laws.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject
of any stop order or proceedings seeking a stop order. The Joint Proxy
Statement shall have been delivered to the shareholders of HomeTown and
Buffets in accordance with the requirements of the Securities Act and
the Exchange Act.
(e) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction, or other order
issued by any court of competent jurisdiction or other legal or
regulatory restraint or prohibition preventing the consummation of the
Merger or limiting or restricting Buffets' conduct or operation of the
business of Buffets or HomeTown after the Merger shall have been
issued, nor shall any proceeding brought by a domestic administrative
agency or commission or other domestic Governmental Entity seeking any
of the foregoing be pending; nor shall there be any action taken, or
any statute, rule, regulation, or order enacted, entered, enforced, or
deemed applicable to the Merger which makes the consummation of the
Merger illegal.
(f) Pooling Letter. Buffets and HomeTown shall have received a
letter from Deloitte & Touche LLP dated the date of the Joint Proxy
Statement and confirmed in writing at the Effective Time and addressed
to Buffets and HomeTown, stating that the business combination to be
effected by the Merger will qualify as a pooling of interests
transaction under generally accepted accounting principles and that
such qualification will not be affected by the exercise, after the
Effective Time, by any holders of Notes of any repurchase rights they
may have under Article 14 of the Indenture covering the Notes. Buffets
and HomeTown also shall have received a letter from KPMG Peat Marwick
LLP dated the date of the Joint Proxy Statement and confirmed in
writing at the Effective Time, stating that they are not aware of any
conditions that would preclude HomeTown from being pooled with Buffets.
(g) NASDAQ. The shares of Buffets Common Stock to be issued in the
Merger shall have been approved for quotation on the Nasdaq National
Market.
(h) Deloitte & Touche Comfort Letter. On the date of the Joint
Proxy Statement and the Buffets prospectus constituting a part of the
Registration Statement, Buffets and HomeTown shall have received a
letter (in form and substance as is customary in a registered public
offering) from Deloitte & Touche, independent public accountants of
Buffets, dated as of such date, in connection with such accountants'
review of certain data and information contained in the Registration
Statement and the Joint Proxy Statement.
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(i) KPMG Peat Marwick Comfort Letter. On the date of the Joint
Proxy Statement and the Buffets prospectus constituting a part of the
Registration Statement, HomeTown and Buffets shall have received a
letter (in form and substance as is customary in a registered public
offering) from KPMG Peat Marwick, independent public accountants of
HomeTown, dated as of such date, in connection with such accountants'
review of certain data and information contained in the Registration
Statement and the Joint Proxy Statement.
(j) Bank Consent. Buffets shall have received all necessary
consents and waivers from the Banks under the Second Amended and
Restated Credit Agreement dated as of April 30, 1996 required
thereunder in connection with this Merger Agreement and the
transactions contemplated hereby.
(k) Tax Opinions. HomeTown shall have received the opinion of
Stoel Rives LLP, and Buffets shall have received the opinion of Faegre
& Benson LLP, to the effect the Merger will be treated for federal
income tax purposes as a tax-free reorganization within the meaning of
Section 368(a) of the Code.
7.02 Additional Conditions to Obligations of Buffets and Sub. The
obligations of Buffets and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be
waived in writing exclusively by Buffets and Sub.
(a) Representations and Warranties. The representations and warranties
of HomeTown set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement; and Buffets shall have
received a certificate signed on behalf of HomeTown by the chief executive
officer and the chief financial officer of HomeTown to such effect.
(b) Performance of Obligations of HomeTown. HomeTown shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date; and Buffets
shall have received a certificate signed on behalf of HomeTown by the chief
executive officer and the chief financial officer of HomeTown to such
effect.
(c) Material Adverse Change. Since the date of this Agreement, HomeTown
and its Subsidiaries, taken as a whole, shall not have experienced or
suffered a Material Adverse Change.
(d) Blue Sky Laws. Buffets shall have received all state securities or
"Blue Sky" permits and other authorizations necessary to issue shares of
Buffets Common Stock pursuant to the Merger.
(e) Opinion of HomeTown's Counsel. Buffets shall have received written
opinions of counsel to HomeTown dated as of the Closing Date, substantially
to the effect set forth in Exhibit 7.02(d) hereto.
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<PAGE>
(f) Updated Fairness Opinion. On the date of the Joint Proxy Statement,
the Buffets Board shall have received from Piper Jaffray Inc. a written
update, dated as of such date, confirming the opinion referred to in
Section 4.17.
(g) Employment Agreement. Buffets and Kerry A. Kramp shall have entered
into an employment agreement substantially in the form of Exhibit 7.02(g)
hereto.
(h) Consents. HomeTown shall have obtained all necessary consents,
waivers, and approvals required under any of HomeTown's material
agreements, contracts, and licenses and shall have obtained all necessary
consents, waivers, and approvals required under at least 95% of the total
number of HomeTown's restaurant leases.
7.03. Additional Conditions to Obligations of HomeTown. The obligation
of HomeTown to effect the Merger is subject to the satisfaction of each of
the following conditions, any of which may be waived, in writing,
exclusively by HomeTown.
(a) Representations and Warranties. The representations and warranties
of Buffets and Sub set forth in this Agreement shall be true and correct in
all material respects as of the date of this Agreement; and HomeTown shall
have received a certificate signed on behalf of Buffets by the chief
executive officer and the chief financial officer of Buffets to such
effect.
(b) Performance of Obligations of Buffets and Sub. Buffets and Sub
shall have performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the Closing Date,
and HomeTown shall have received a certificate signed on behalf of Buffets
by the chief executive officer and the chief financial officer of Buffets
to such effect.
(c) Material Adverse Change. Since the date of this Agreement, Buffets
and its Subsidiaries, taken as a whole, shall not have experienced or
suffered a Material Adverse Change.
(d) Opinion of Buffets' Counsel. HomeTown shall have received written
opinions of counsel to Buffets and general counsel of Buffets dated as of
the Closing Date, substantially to the effect set forth in Exhibit 7.03(d)
hereto.
(e) Updated Fairness Opinion. On the date of the Joint Proxy Statement,
the HomeTown Board shall have received from Montgomery Securities, Inc. a
written update, dated as of such date, confirming the opinion referred to
in Section 3.18.
(f) Employment Agreement. Buffets and Kerry A. Kramp shall have entered
into an employment agreement substantially in the form of Exhibit 7.02(g)
hereto.
(g) Consents. Buffets shall have obtained all necessary consents,
waivers, and appeals required under any of Buffets' material agreements,
contracts, and licenses and shall have obtained all necessary consents,
waivers, and approvals required under at least 95% of the total number of
Buffets' restaurant leases.
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ARTICLE VIII
TERMINATION AND AMENDMENT
8.01. Termination. This Agreement may be terminated at any time prior
to the Effective Time, by written notice by the terminating party to the
other party, whether before or after approval of the matters presented in
connection with the Merger by the shareholders of HomeTown or Buffets:
(a) by mutual written consent of Buffets and HomeTown; or
(b) by either Buffets or HomeTown if the Merger shall not have
been consummated by December 31, 1996 (provided that the right to
terminate this Agreement under this Section 8.01(b) shall not be
available to a party whose failure to fulfill any obligation under this
Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date); or
(c) by either Buffets or HomeTown if a court of competent
jurisdiction or other Governmental Entity shall have issued a
nonappealable final order, decree, or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining,
or otherwise prohibiting the Merger, except, if the party relying on
such order, decree, or ruling or other action has not complied with its
obligations under Section 6.05 of this Agreement; or
(d) by Buffets or HomeTown, if, at the Buffets Shareholders'
Meeting or HomeTown Stockholders' Meeting (including any adjournment or
postponement thereof), the requisite vote of the shareholders of
Buffets in favor of the Buffets Voting Proposal or the stockholders of
HomeTown in favor of this Agreement and the Merger shall not have been
obtained; or
(e) by Buffets, if (i) the Board of Directors of HomeTown shall
have withdrawn or modified its recommendation of this Agreement or the
Merger in a manner adverse to Buffets or shall have resolved to do any
of the foregoing; (ii) the Board of Directors of HomeTown shall have
recommended to the stockholders of HomeTown an Alternative Transaction
(as defined in Section 8.03(e)); or (iii) a tender offer or exchange
offer for 15% or more of the outstanding shares of HomeTown Common
Stock is commenced (other than by Buffets or an Affiliate of Buffets)
and the Board of Directors of HomeTown recommends that the stockholders
of HomeTown tender their shares in such tender or exchange offer; or
(f) by HomeTown, if (i) the Board of Directors of Buffets shall
have withdrawn or modified its recommendation of the Buffets Voting
Proposal in a manner adverse to HomeTown or shall have resolved to do
any of the foregoing; (ii) the Board of Directors of Buffets shall have
recommended to the shareholders of Buffets an Alternative Transaction
(as defined in Section 8.03(e)) or (iii) a tender offer or exchange
offer for 15% or more of the outstanding shares of Buffets Common Stock
is
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<PAGE>
commenced (other than by HomeTown or an Affiliate of HomeTown) and
the Board of Directors of Buffets recommends that the shareholders
of Buffets tender their shares in such tender or exchange offer;
or
(g) by Buffets or HomeTown, if there has been a material breach of
any representation, warranty, covenant, or agreement on the part of the
other party set forth in this Agreement, which breach shall not have
been cured, in the case of a representation or warranty, prior to the
Closing or, in the case of a covenant or agreement, within 10 business
days following receipt by the breaching party of written notice of such
breach from the other party.
8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall immediately
become void and there shall be no liability or obligation on the part of
Buffets, HomeTown, Sub or their respective officers, directors,
shareholders, or Affiliates, except as set forth in Section 8.03; provided
that the provisions of Section 8.03 of this Agreement shall remain in full
force and effect and survive any termination of this Agreement.
8.03 Fees and Expenses.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses,
whether or not the Merger is consummated; provided, however, that Buffets
and HomeTown shall share equally all fees and expenses, other than
attorneys' fees, incurred in relation to the printing and filing of the
Joint Proxy Statement (including any related preliminary materials) and the
Registration Statement (including financial statements and exhibits) and
any amendments or supplements.
(b) HomeTown shall pay Buffets a termination fee of $1,500,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by Buffets pursuant to
Section 8.01(e);
(ii) the termination of this Agreement by Buffets pursuant to
Section 8.01(g) after a breach by HomeTown of this Agreement; or
(iii) the termination of this Agreement by Buffets or HomeTown
pursuant to Section 8.01(d) as a result of the failure to receive the
requisite vote for approval of this Agreement and the Merger by the
stockholders of HomeTown at the HomeTown Stockholders' Meeting.
(c) Buffets shall pay HomeTown a termination fee of $1,500,000 upon the
earliest to occur of the following events:
(i) the termination of this Agreement by HomeTown pursuant to
Section 8.01(f); or
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<PAGE>
(ii) the termination of this Agreement by HomeTown pursuant to
Section 8.01(g) after a breach by Buffets of this Agreement; or
(iii) the termination of this Agreement by Buffets or HomeTown
pursuant to Section 8.01(d) as a result of the failure to receive the
requisite vote for approval of the Buffets Voting Proposal by the
shareholders of Buffets at the Buffets Shareholders' Meeting.
(d) The expenses and fees, if applicable, payable pursuant to this
Article VIII shall be paid within one business day after the event giving
rise to the obligation to pay such amount; provided that, in no event shall
Buffets or HomeTown, as the case may be, be required to pay the expenses
and fees, if applicable, to the other, if, immediately prior to the
termination of this Agreement, the party to receive the expenses and fees,
if applicable, was in material breach of its obligations under this
Agreement.
(e) As used in this Agreement, "Alternative Transaction" means either
(i) a transaction pursuant to which any person (or group of persons) other
than Buffets or its Affiliates (a "Third Party') acquires more than 15% of
the outstanding shares of HomeTown Common Stock pursuant to a tender offer
or exchange offer or otherwise, (ii) a merger or other business combination
involving HomeTown pursuant to which any Third Party acquires more than 15%
of the outstanding equity securities of HomeTown or the entity surviving
such merger or business combination, (iii) any other transaction pursuant
to which any Third Party acquires control of assets (including for this
purpose the outstanding equity securities of Subsidiaries of HomeTown , and
the entity surviving any merger or business combination including any of
them) of HomeTown having a fair market value (as determined by the Board of
Directors of Buffets in good faith) equal to more than 15% of the fair
market value of all the assets of HomeTown, and its Subsidiaries, taken as
a whole, immediately prior to such transaction, or (iv) any public
announcement of a proposal, plan, or intention to do any of the foregoing
or any agreement to engage in any of the foregoing.
8.04 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with
the Merger by the shareholders of HomeTown or of Buffets, but, after any
such approval, no amendment shall be made which by law requires further
approval by such shareholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
8.05 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions contained herein.
Any agreement of a party hereto to any such
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<PAGE>
extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.01. Nonsurvival of Representations, Warranties, and Agreements. None
of the representations, warranties, and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for the agreements contained in Sections 1.04, 2.01,
6.07, 6.08, 6.09, 6.12, 6.15, 6.16, 6.19, 6.20 and 8.03, the last sentence
of Section 8.04 and Article IX, and the agreements of the Affiliates of
HomeTown delivered pursuant to Sections 6.09 and 6.10. The Confidentiality
Agreement shall survive the execution and delivery of this Agreement.
9.02 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), or mailed by registered or certified mail (return
receipt requested) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Buffets or Sub, to:
Buffets, Inc.
10260 Viking Drive
Eden Prairie, MN 55344
Attention: Chairman
with a required copy to (which alone shall not constitute notice):
Faegre & Benson LLP
2200 Norwest Center
90 South Seventh Street
Minneapolis, MN 55402-3901
Attention: Douglas P. Long
(b) if to HomeTown, to:
HomeTown, Inc.
9171 Towne Centre Drive, Suite 575
San Diego, CA 92122
Attention: Chairman
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<PAGE>
with a required copy to (which alone shall not constitute notice):
Stoel Rives LLP
Standard Insurance Center
900 SW Fifth Avenue, Suite 2300
Portland, OR 87204
Attention: John J. Halle
9.03 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words
"include," "includes," or "including" are used in this Agreement they shall
be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred
to has been made available if requested by the party to whom such
information is to be made available. The phrases "the date of this
Agreement," "the date hereof," and terms of similar import, unless the
context otherwise requires, shall be deemed to refer to the date set forth
in the first paragraph of this Agreement.
9.04 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
9.05 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof, and (b) except as specifically provided herein
are not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
9.06 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF MINNESOTA WITHOUT REGARD TO ANY
APPLICABLE CONFLICTS OF LAW.
9.07 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by the parties and their respective successors and assigns.
9.08 Knowledge. All references in this Agreement to knowledge of a
corporation shall be deemed to mean knowledge of any one or more of its
executive officers.
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ARTICLE X
DEFINITIONS
As used in this Agreement, the term "Subsidiary" shall mean, with
respect to any party, corporation, or other organization, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.
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<PAGE>
IN WITNESS WHEREOF, Buffets, Sub, and HomeTown have caused this
Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
BUFFETS, INC.
By: /s/ Roe H. Hatlen
----------------------------------------
Its: Chief Executive Officer
---------------------------------
COUNTRY DELAWARE, INC.
By: /s/ Roe H. Hatlen
----------------------------------------
Its: Chief Executive Officer
---------------------------------
HOMETOWN BUFFET, INC.
By: /s/ C. Dennis Scott
----------------------------------------
Its: Chairman
---------------------------------
-46-
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<PERIOD-END> APR-24-1996
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0
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