-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HCMe8NfWCIZQjq+7cOUwRv0kTEb8Qb/klhQK6DEtOnFIT8Y0HsdDd7yYEmY9t4jv PKvZ2NqfCbUsL+cO/eAKHQ== 0000891082-97-000006.txt : 19970714 0000891082-97-000006.hdr.sgml : 19970714 ACCESSION NUMBER: 0000891082-97-000006 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970711 FILED AS OF DATE: 19970711 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TACO CABANA INC CENTRAL INDEX KEY: 0000891082 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 742201241 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-20716 FILM NUMBER: 97639310 BUSINESS ADDRESS: STREET 1: 8918 TESORO DRIVE STREET 2: SUITE 200 CITY: SAN ANTONIO STATE: TX ZIP: 78217-6219 BUSINESS PHONE: 2108040990 MAIL ADDRESS: STREET 1: 3309 SAN PEDRO AVE CITY: SAN ANTONIO STATE: TX ZIP: 78212 DEF 14A 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ X ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to 240.1a-11(c) or 240.1a-12 Taco Cabana, Inc. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (check the appropriate box): [ X ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: (set forth amount on which the filing is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount previously paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: Taco Cabana, Inc. 8918 Tesoro Dr., Suite 200 San Antonio, Texas 78217 Notice of Annual Meeting of Stockholders August 12, 1997 TO THE STOCKHOLDERS OF TACO CABANA, INC.: Notice is hereby given that the Annual Meeting of Stockholders of Taco Cabana, Inc., a Delaware corporation (the "Company"), will be held at the Harvey Hotel, 4545 W. John Carpenter Freeway, Irving, Texas, on Tuesday, August 12, 1997, at 10:00 a.m., Central Daylight Time for the following purposes: 1.) To elect five directors. 2.) To vote upon a proposal to amend the Taco Cabana 1994 Stock Option Plan (the "1994 Option Plan") to increase the number of shares of the Company's Common Stock authorized for issuance under the 1994 Option Plan from 500,000 shares to 1,250,000 shares. 3.) To transact such other business as may properly come before the meeting or any adjournment thereof. The Board of Directors has fixed the close of business on Monday, June 30, 1997 as the record date for the determination of stockholders entitled to vote at the meeting. We hope that you will be able to attend the meeting in person, but if you are unable to do so, please fill in, sign and promptly mail back the enclosed proxy form, using the return envelope provided. If for any reason you should subsequently change your plans, you can of course revoke the proxy at any time before it is actually voted. BY ORDER OF THE BOARD OF DIRECTORS David G. Lloyd Secretary San Antonio, Texas July 11, 1997 TACO CABANA, INC. PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD AUGUST 12, 1997 THE MEETING This Proxy Statement is furnished to the stockholders of Taco Cabana, Inc., a Delaware corporation, in connection with the solicitation of proxies by the Board of Directors of the Company for use at the Annual Meeting of Stockholders to be held Tuesday, August 12, 1997 (the "Meeting"). This Proxy Statement, the accompanying proxy, and the Company's Annual Report are being sent or given to the stockholders of the Company on or about July 11, 1997. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of the Company's Common Stock is necessary to constitute a quorum at the Meeting. Pursuant to applicable Delaware law, only votes cast "for" a matter constitute affirmative votes. Votes "withheld" or abstaining from voting are counted for quorum purposes, but since they are not cast "for" a particular matter, they will have the same effect as negative votes or votes "against" a particular matter. In deciding all questions, a holder of Common Stock is entitled to one vote, in person or by proxy, for each share held on the record date. Proxies in the form enclosed will be voted at the Meeting, if properly executed, returned to the Company prior to the Meeting and not revoked. A proxy may be revoked at any time before it is voted by giving written notice of revocation to the Secretary of the Company prior to the convening of the Meeting, or by presenting another proxy card with a later date. If you attend the Meeting and desire to vote in person, you may request that your previously submitted proxy card not be used. The record date for stockholders entitled to vote at the Meeting is June 30, 1997. At the close of business on June 30, 1997, the Company had issued and outstanding and entitled to vote at the Meeting 15,346,537 shares of Common Stock (excluding 360,000 shares of treasury stock). As of June 30, 1997, the directors and executive officers of the Company owned a total of 95,367 shares of the Company's Common Stock, or approximately 0.6% of the total number of shares outstanding and entitled to vote at the Meeting. PRINCIPAL STOCKHOLDERS The following table sets forth certain information concerning the beneficial ownership of the Company's Common Stock as of May 30, 1997, by: (i) each person known by the Company to be the beneficial owner of more than 5% of its Common Stock, (ii) each named executive officer of the Company, (iii) each director and director nominee of the Company, and (iv) all directors and executive officers as a group. Unless otherwise indicated, each of the stockholders has sole voting and investment power with respect to the shares beneficially owned. Name Shares Beneficially Owned -------------------------- ------------------------- Number Percent ----------- ---------- Stephen V. Clark (1) 80,000 * James A. Eliasberg(2) 188,750 1.2% David G. Lloyd(3) 31,800 * William J. Nimmo 3,817 * Richard Sherman(4) 73,003 * Cecil Schenker(5) 93,503 * Lionel Sosa (6) - - Massachusetts Financial Services Co. (7) 1,305,370 8.1% Smith Barney Inc., Smith Barney Holdings,Inc. Travelers Group Inc. (8) 2,190,801 13.6% Dimensional Fund Advisors, Inc. (9) 995,564 6.2% Crown Capital Management,Ltd. (10) 364,900 2.3% Crown-Glynn Advisors, Ltd. (10) 490,750 3.1% Glynn Capital Management(10) 855,650 5.5% Crown Advisors, Ltd. (10) 855,650 5.5% David Bellet (10) 855,650 5.5% John Walter Glynn, Jr. (10) 855,650 5.5% Chester A. Siuda (10) 855,650 5.5% Jeffrey S. Hamren (10) 858,650 5.5% Daryl Messinger (10) 855,650 5.5% Margaret S. McNamara (10) 857,650 5.5% Steve Rosston (10) 855,650 5.5% All directors and officers as a group (6 persons)(11) 470,873 2.9% * Less than 1% (1) Includes 80,000 shares subject to presently exercisable options (or those exercisable within 60 days). Excludes 120,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). (2) Includes 104,000 shares subject to presently exercisable options (or those exercisable within 60 days). Excludes 120,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). (3) Includes 25,000 shares issuable pursuant to presently exercisable options (or those exercisable within 60 days). Excludes 75,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). (4) Represents shares subject to presently exercisable options (or those exercisable within 60 days). Excludes 24,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). (5) Represents shares subject to presently exercisable options (or those exercisable within 60 days). Excludes 24,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). (6) Mr. Sosa is a nominee for director. (7) Based upon Schedule 13G, filed jointly in February 1996, and amended in February 1997, indicating beneficial ownership as stated in the table, and shared dispositive power as to all shares beneficially owned. Included in the joint filing were Massachusetts Financial Services Company ("MFS"), indicating beneficial ownership of 1,305,370 shares and sole dispositive power as to 1,305,370 shares and MFS Series Trust II - MFS Emerging Growth Fund ("MEG"), indicating 962,395 shares beneficially owned by MFS as well as MEG. Address: 500 Boylston Street, Boston, Massachusetts 02116. (8) Based on Schedule 13G, filed jointly in October 1995, and amended in January 1997, indicating beneficial ownership as stated in the table. Included in the joint filing were Smith Barney Inc. ("SB"), indicating shared voting and dispositive power as to 1,415,801 shares, and sole voting and dispositive power as to 0 shares; Smith Barney Holdings Inc. ("SB Holdings"), indicating shared voting and dispositive power as to 2,190,801, and sole voting and dispositive power as to 0 shares; and Travelers Group Inc. ("TRV"), indicating shared voting and dispositive power as to 2,190,801, and sole voting and dispositive power as to 0 shares. Address: 388 Greenwich Street, New York, New York 10013. (9) Based on Schedule 13G, filed in February 1997, indicating beneficial ownership and sole dispositive power as stated in the table and sole voting power as to 665,464 shares. Address: 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401. (10) Based on Schedule 13G, filed in February 1997, indicating beneficial ownership as stated in the table and shared voting power, sole dispositive power and shared dispositive power as indicated below: Shared Voting Sole Dispositive Shared Dispositive Name Power Power Power - --------------------------------- ------------- ---------------- -------- Crown Capital Management, Ltd.(a) 364,900 - 364,900 Crown-Glynn Advisors,Ltd.(a) 490,750 - 490,750 Glynn Capital Management(b) 855,650 - 855,650 Crown Advisors, Ltd.(a) 855,650 - 855,650 David Bellet (c) 855,650 - 855,650 John Walter Glynn, Jr.(b) 855,650 - 855,650 Chester A. Suida (a) 855,650 - 855,650 Jeffrey S. Hamren (a) 855,650 3,000 855,650 Daryl Messinger (b) 855,650 - 855,650 Margaret S. McNamara (a) 855,650 2,000 855,650 Steve Rosston (b) 855,650 - 855,650
Address: (a) 67 East Park Place, 8th floor, Morristown, NJ 07960; (b) 3000 Sand Hill Road, Building 4, Suite 235, Menlo Park, CA 94025: (c ) 60 East 42nd Street, New York, NY 10165. (11) Includes 375,506 shares subject to presently exercisable options (or those exercisable within 60 days). Excludes 363,000 shares issuable pursuant to options which are not currently exercisable (or exercisable within 60 days). PROPOSAL 1 ELECTION OF DIRECTORS At the Annual Meeting five directors are to be elected by plurality of the votes cast by the holders of the shares of outstanding Common Stock of the Company. Under applicable Delaware law, in tabulating the vote, broker nonvotes will be disregarded and have no effect on the outcome of the vote. Each outstanding share of Common Stock entitles the holder thereof to one vote with respect to the election of the five director positions to be filled at this meeting. The nominees for director are Stephen V. Clark, William J. Nimmo, Richard Sherman, Cecil Schenker and Lionel Sosa. All of the nominees, except Lionel Sosa, are presently directors of the Company. For information concerning the backgrounds of such nominees, see "Directors and Executive Officers" on page 6. The enclosed Proxy, if properly signed and returned will be voted FOR the election of these five nominees unless authority to vote is withheld. The Board of Directors has no reason to believe that any of such nominees will be unable to serve if elected. In the event any of such nominees become unavailable for election, votes will be cast, pursuant to authority granted by the enclosed Proxy, for such substitute nominee as may be designated by the Board of Directors. All directors will hold office until the annual meeting of stockholders to be held in 1998 and until their successors have been duly elected and qualified, unless prior to such meeting a director resigns or his directorship otherwise becomes vacant. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ELECTION OF THE DIRECTOR NOMINEES. Directors and Executive Officers The directors and executive officers of the Company and their respective ages are as follows: Name Age Position ------------------- ---- ------------------------ Stephen V. Clark 43 Chief Executive Officer, President and Director James A. Eliasberg 39 Executive Vice President and General Counsel David G. Lloyd 34 Senior Vice President - Finance, Chief Financial Officer, Secretary and Treasurer Douglas Gammon 50 Senior Vice President - Human Resources and People William J. Nimmo 43 Director Richard Sherman 53 Director Cecil Schenker 55 Director Lionel Sosa 58 Nominee for Director Mr. Clark has served as the Company's Chief Executive Officer since November 1996, and as the President, Chief Operating Officer, and as a Director since April 1995. Prior to that, Mr. Clark was with Church's Chicken, a division of America's Favorite Chicken, for eighteen years with his final title having been Senior Vice President and Concept General Manager. He also served on the executive committee of America's Favorite Chicken and was on the Board of Directors of Church's Operators Purchasing Association. In his final position with America's Favorite Chicken, Mr. Clark was primarily responsible for the day-to-day operations of over 1100 company-owned and franchised units with aggregate sales volume in excess of $600 million. Mr. Eliasberg has served as the Company's Executive Vice President and General Counsel since April 1995. From January 1991 to April 1995, Mr. Eliasberg served as the Company's Senior Vice President and General Counsel. Prior to that, Mr. Eliasberg was engaged in the private practice of law in Southern California at the law firms of Fierstein & Sturman (March 1989 to January 1991), Hill, Wynne, Troop & Meisinger (May 1986 to February 1989) and Jones, Day, Reavis & Pogue (October 1984 to March 1986). In addition to supervising all of the Company's legal affairs, Mr. Eliasberg's responsibilities include real estate, construction and franchise development. Mr. Eliasberg is a graduate of the University of Chicago law school. Mr. Lloyd joined the Company in October 1994 as Vice President - Finance, Chief Financial Officer, Secretary and Treasurer and was promoted to Senior Vice President in May 1996. From August 1985 to October 1994, Mr. Lloyd served in various capacities with Deloitte & Touche (the Company's independent auditors), with his last position being Senior Audit Manager. Mr. Lloyd is a certified public accountant. Mr. Gammon joined the Company in March 1997 as Senior Vice President, Human Resources and People Development. From December 1989 to March 1997 Mr. Gammon served as Vice President of Human Resources at Marriott International which has over 15,000 employees in 50 states. Mr. Gammon has over 18 years of experience in the Human Resources field as well as over six years experience in restaurant operations. He was the past President for the Council of Hotel and Restaurant Trainers. Mr. Nimmo has served as a director of the Company since November 1991. Since January 1997, Mr. Nimmo has been a Partner with Halpern, Denny & Co., a venture capital firm in Boston Massachusetts. Prior to that, Mr. Nimmo served as Managing Director of Cornerstone Equity Investors, Inc., and its predecessor firm, Prudential Equity Investors, Inc., since September 1989. For the ten years prior to that, Mr. Nimmo was a Vice President of J.P. Morgan & Co. Mr. Sherman has been a director of the Company since November 1991. Mr. Sherman is a private investor and retail consultant. Mr. Sherman served as President and Chief Executive Officer of Rally's, Inc. from September 1987 to January 1991. From August 1989 to January 1991, he also served as Chairman of the Board of Rally's, Inc. Mr. Sherman currently serves as a member of the Board of Trustees of Paul Quinn College in Dallas, Texas and as a director of Reed's Jewelers, Inc., Papa John's International, Inc., and PJ America, Inc. Mr. Schenker has been a director of the Company since January 1992. Mr. Schenker is a corporate securities attorney and is the managing partner of the San Antonio, Texas office of the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., of which Mr. Schenker has been a partner, through his professional corporation since January of 1984. Akin, Gump, Strauss, Hauer & Feld, L.L.P. has regularly performed legal services for the Company. See "Compensation Committee Interlocks and Insider Participation." Mr. Schenker is also a director of Lot$ Off Corporation, formerly 50-Off Stores, Inc. Mr. Sosa, a nominee for Director, has served as the Chief Executive Officer of KJS Marketing Agency since January 1996. From 1994 to 1996 he served as Chairman of DMB&B/Americas, a network of advertising agencies in the U.S. and Latin America. In 1980 Mr. Sosa founded the agency of Sosa, Bromley, Aguilar, Noble & Associates, an advertising agency specializing in Hispanic marketing in the U.S. Mr. Sosa sold Sosa, Bromley, Aguilar, Noble & Associates in 1994. Mr. Sosa is currently a Director of the Children's Television Workshop Network. The Board of Directors has a compensation and stock option committee and an audit committee, each of which currently consists of William J. Nimmo, Richard Sherman and Cecil Schenker. The Board of Directors does not currently have a nominating committee. All directors serve for a term of one year and until their successors are duly elected. Each director who is not also an employee of the Company receives an annual retainer of $25,000, and an attendance fee of $2,500 per Board meeting for up to four meetings each year. All non-employee directors are reimbursed for their expenses. The Board of Directors met four times during 1996. Each incumbent director attended at least 75% of the aggregate number of Board meetings and meetings of Board committees of which he was a member held during 1996. The compensation and stock option committee monitors and makes recommendations to the Board with respect to compensation programs for officers and directors and administers the Company's Stock Option Plan. The compensation and stock option committee met two times during 1996. It is anticipated that, if all nominees are elected to the Board of Directors, the Board will appoint Lionel Sosa to the compensation and stock option committee and Cecil Schenker will resign from such committee. Mr. Schenker, because of his performance of legal services for the Company, does not qualify as a "Non-Employee Director" under new SEC regulations governing option plan administration. The audit committee considers the adequacy of the internal controls of the Company and the objectivity of financial reporting; meets with the independent certified public accountants and appropriate Company financial personnel about these matters; and recommends to the Board the appointment of the independent certified public accountants. The audit committee met two times in 1996. Compliance with Section 16(a) of the Securities Exchange Act of 1934 Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires each director and executive officer of the Company, and each person who owns more than 10% of a registered class of the Company's equity securities to file by specific dates with the Securities and Exchange Commission (the "SEC") initial reports of ownership and reports of change in ownership of Common Stock and other equity securities of the Company. Officers, directors and 10% stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. The Company is required to report in this report any failure of its directors and executive officers to file by the relevant due date any of these reports during the Company's fiscal year. To the Company's knowledge, all Section 16(a) filing requirements applicable to the Company's officers, directors, and 10% stockholders were complied with. EXECUTIVE COMPENSATION Executive compensation is set at levels which are sufficiently competitive with companies of similar size and type to permit the Company to attract and retain the best possible individuals. Compensation is structured to provide incentives for executive officer performance that results in continuing improvements in the Company's financial results, over both the short term and the long term. Compensation is also designed to align the interests of the Company's executives and its shareholders by providing for payment of a significant portion of incentive compensation in the form of stock options. Moreover, each executive officer's compensation is based upon both individual and Company performance. As may be seen from the Summary Compensation Table included on page 10, the compensation of executive officers consists of three principal parts, each of which is reviewed regularly by the committee. Salaries shown in the Summary Compensation Table represent the fixed portion of compensation for executive officers for the year. Changes in salary depend upon Company as well as individual performance. The bonuses shown in the Summary Compensation Table are paid in cash to executive officers and depend upon the financial and strategic accomplishments of the Company. The Committee also has discretion to modify the bonus based upon individual performance, including the individual's progress in implementing the Company's goals. The third principal component of compensation arises from the Company's grant of stock options to executive officers (the Company's Stock Option Plan actually covers several levels of employees). The Committee sets the number of options to be granted based on a variety of factors, including, principally, salary grade, Company and individual performance and individual levels of stock ownership. All options under the Plan are granted at fair market value, and therefore any value which ultimately accrues to executive officers is based entirely on the Company's performance, as perceived by investors who establish the price for the Company's Common Stock. A written employment agreement served as the principal basis of Mr. Clark's compensation during 1996. During 1996 Mr. Clark's annual salary was adjusted to reflect his responsibilities, experience, his individual performance and important contributions to the Company. On November 15, 1996, Mr. Clark was promoted to Chief Executive Officer. Respectfully submitted, THE COMPENSATION AND STOCK OPTION COMMITTEE Richard Sherman, William J. Nimmo, Cecil Schenker Summary Compensation Table. The following table sets forth certain information concerning the compensation earned during the Company's last three fiscal years by the Company's Chief Executive Officer and the Company's only two other executive officers (collectively the "named executive officers"): Summary Compensation Table Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts ----- ------- Other Secur- Annual Restrict- ities All Other Compen- ed Underly LTIP Compen- Name and Fiscal Salary Bonus sation Stock ing Payouts sation Principal Year ($) ($) ($) (1) Award(s) Options/ ($) ($) Position SARS --------- ------ ------ ------ ------- -------- -------- ------- ---------- Stephen V. 1996 233,404 - - - - - - Clark, 1995 152,455(2) 50,000 - - 200,000 - - Chief 1994 - Executive Officer, President , - Chief Operating Officer - ----------------------------------------------------------------------------------------- James A. 1996 189,235 - - - - - Eliasberg, 1995 175,025 - - - 200,000 - - Executive 1994 135,000 - - - 25,000(4) - - Vice President and General Counsel - ----------------------------------------------------------------------------------------- David G. 1996 135,138 - - - - - - Lloyd, 1995 117,605 - - - 75,000 - - Senior Vice 1994 15,769(3) - - - 25,000 - - President, Chief Financial Officer, Secretary and Treasurer
__________________ (1) Certain of the Company's executive officers receive personal benefits in addition to salary; however, the Company has concluded that the aggregate amounts of such personal benefits do not exceed the lesser of $50,000 or 10% of annual salary and bonus reported for any named executive officer. (2) Mr. Clark joined the Company in April 1995. (3) Mr. Lloyd joined the Company in October 1994. (4) Mr.Eliasberg voluntarily rescinded this option grant in January 1997. Employment Agreements. The Company has written employment agreements with Stephen Clark and James Eliasberg. The Company's agreement with Mr. Clark expires in April 1998. Mr. Clark receives a base salary of not less than $200,000 per year during the term of his contract. Additionally, Mr. Clark can be paid a bonus based on the Company's achievement of certain performance goals. Pursuant to such agreement, Mr. Clark has agreed not to participate in any manner, during his term of employment and for two years thereafter, in any business which owns a Mexican fast food restaurant or Mexican "quick service" restaurant in the Continental United States. The Company's agreement with Mr. Eliasberg expires in April 1998. Mr. Eliasberg receives a base salary of $185,000 per year during the term of his contract. Additionally, Mr. Eliasberg will be paid a bonus based on the Company's achievement of certain performance goals. Pursuant to such agreement, Mr. Eliasberg has agreed not to participate in any manner, during his term of employment and for two years thereafter, in any business which owns a Mexican fast food restaurant or Mexican "quick service" restaurant in the Continental United States. Stock Option Plans and Directors' Options Under the Taco Cabana, Inc. 1990 Stock Option Plan (the "1990 Option Plan"), amended in August 1992, and the 1994 Stock Option Plan (the "1994 Option Plan") options to purchase up to 1,500,000 and 500,000 shares, respectively, of Common Stock may be granted to employees, outside directors and consultants and advisers of the Company or any subsidiary corporation or entity. The stock is intended to permit the Company to retain and attract qualified individuals who will contribute to its overall success. Shares that by reason of the expiration of an option (other than by reason of exercise) or which are no longer subject to purchase pursuant to an option granted under an Option Plan may be reoptioned thereunder. The 1990 and 1994 Option Plans are administered by a committee of outside directors (the "Committee"). The Committee sets specific terms and conditions of options granted under the 1990 and 1994 Option Plans and administers the 1990 and 1994 Option Plans, as well as the Company's other employee benefit plans which may be in effect from time to time. The Committee currently consists of William J. Nimmo, Cecil Schenker and Richard Sherman. It is anticipated that, if all nominees are elected to the Board of Directors, the Board will appoint Lionel Sosa to the compensation and stock option committee and Cecil Schenker will resign from such committee. Mr. Schenker, because of his performance of legal services for the Company, does not qualify as a "Non-Employee Director" under new SEC regulations governing option plan administration. The Company's employees are eligible to receive either incentive stock options or nonqualified stock options or a combination of both, as the Committee determines. Non-employee participants may be granted only nonqualified stock options. Stock options may be granted for a term not to exceed ten years (five years with respect to a holder of 10% or more of the Company's shares in the case of an incentive stock option) and are not transferable other than by will or the laws of descent and distribution. Each option may be exercised within the term of the option pursuant to which it is granted (so long as the optionee, if an employee, continues to be employed by the Company). In addition, an incentive option may be exercised within 90 days after the termination of employment of the optionee (subject to any limitations in the particular option), within one year after termination in case of termination because of disability, or throughout the term of the option in the event of the optionee's death, to the extent in each case the option was exercisable at the termination date. A nonqualified stock option may be exercised for such period, but not later than the expiration date, after termination of employment, disability or death, as may be specified in the particular option. The exercise price of all incentive stock options must be at least equal to the fair market value of the Common Stock on the date of grant, or 110% of fair market value with respect to any incentive stock option issued to a holder of 10% or more of the Company's shares. Stock options may be exercised by payment in cash of the exercise price with respect to each share to be purchased, by delivering Common Stock of the Company already owned by such optionee with a market value equal to the exercise price, or by a method in which a concurrent sale of the acquired stock is arranged, with the exercise price payable in cash from such sale proceeds. The 1994 Option Plan provides that each outside director will automatically receive a grant of 3,000 nonqualified stock options each year on the fifth business day following the first public release of the Company's audited earnings report on results of operations for the preceding fiscal year. Each such option will become exercisable in whole or in part on the first anniversary of the award through the balance of its ten-year term. Subject to availability of shares allocated to the 1994 Option Plan and not already reserved for other outstanding stock options, outside directors who join the Board in the future will in addition receive an initial grant of options for 20,000 shares, which will become exercisable in five equal increments beginning on the first anniversary of the award and on each of the next four succeeding anniversary dates. Such options will be exercisable for a term of ten years. Such options will be awarded upon their appointment or election to the Board. Options, once granted and to the extent exercisable, will remain exercisable throughout their term, regardless of whether the holder continues as a director. The exercise price of the options is equal to 100% of the fair market value of a share of Common Stock at the time of grant. The 1990 Option Plan will terminate on October 14, 2000. The 1994 Option Plan will terminate on October 17, 2004. The Board of Directors may, however, terminate the 1990 and 1994 Option Plans at any time prior to such respective dates. Termination of the 1990 and 1994 Option Plans will not alter or impair, without the consent of the optionee, any of the rights or obligations pursuant to any option granted under the Option Plans. As of June 30, 1997, options for 635,158 shares of common stock had been granted under the 1990 Option Plan and were outstanding, with a weighted average exercise price of $6.35 per share, and no additional shares were available for issuance upon exercise of options which may be granted in the future. As of June 30, 1997, options for 861,842 shares had been exercised. As of June 30, 1997, options for 491,967 shares of common stock had been granted under the 1994 Option Plan and were outstanding, with a weighted average exercise price of $5.68 per share, and 8,033 additional shares were available for issuance upon exercise of options which may be granted in the future. As of June 30, 1997, no options had been exercised. The Company is proposing at the Annual Meeting to amend the number of shares authorized to be issued thereunder. See "Proposal No. 2 - Amendment to the Taco Cabana, Inc. 1994 Stock Option Plan". Stock Option Grant Table. The following table sets forth certain information concerning options granted to the named executive officers during the Company's fiscal year ended December 29, 1996: Option Grants in Last Fiscal Year Potential Realizable Value at Assumed Percent of Annual Rates of Total Option Stock PRice Grated Exercise or Appreciation Options to Employees in Base Price Expiration for Option Term(2) Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($) #(1) - ------------------ ------- --------------- ----------- ----------- -------------------- Stephen V. Clark - - - - - James A. Eliasberg - - - - - David G. Lloyd - - - - -
Stock Option Exercises and Holdings Table. The following table provides information concerning the exercise of options and value of unexercised options held by the named executive officers at December 29, 1996: Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values Shares Acquired on Value Number of Unexercised Value of Unexercised Exercise Realized Options In-the-Money Options Name (#) ($) at Fiscal Year End (#) at Fiscal Year End ($)(1) - ------------- -------- -------- ----------------------- -------------------------- Exercis- Unexercis- Exercis- Unexercis- able able able able - --------------------------------------------------------------------------------------- Stephen V. - - 40,000 160,000 $85,000 $340,000 Clark James A. - - 83,000 166,000 $160,114 $365,038 Eliasberg David G. - - 25,000 75,000 $21,570 $86,280 Lloyd
(1) Values stated are based on the last sale price of $7.31 per share of the Company's Common Stock on the NASDAQ National Market System on December 27, 1996, the last trading day of the fiscal year, and equal the aggregate amount by which the market value of the option shares exceeds the exercise price of such options at the end of the fiscal year. Compensation Committee Interlocks and Insider Participation During 1996, William J. Nimmo, Richard Sherman and Cecil Schenker served on the Company's compensation and stock option committee. Since 1987, the law firm of Akin, Gump, Strauss, Hauer & Feld, L.L.P., has regularly rendered legal services as counsel to the Company. Cecil Schenker, a director of the Company and a member of the Company's compensation and stock option committee, is the sole shareholder of Cecil Schenker, P.C., a partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P. The Company believes that the abilities of Mr. Schenker to make fair compensation decisions have not been compromised by the relationships referred to above. STOCK PERFORMANCE GRAPH Comparison of Five Year-Cumulative Total Returns Performance Graph for Taco Cabana, Inc. (GRAPH APPEARS HERE) NASDAQ Stocks (SIC 5800- Measurement NASDAQ Stock 5899 US Period Market Companies) (Fiscal Year Taco Cabana, (US Eating and Covered) Inc. Companies) drinking places - ----------- ------------ ------------ ------------ 12/31/92 122.3 116.3 117.1 12/31/93 163.8 133.5 118.7 12/30/94 83.1 130.5 85.7 12/29/95 46.2 184.5 104.4 12/27/96 67.5 227.2 101.5 Notes: A. The lines represent monthly index levels derived from compounded daily returns that include all dividends. B. The indexes are reweighted daily, using the market capitalization on the previous trading day. C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used. D. The index level for all series was set to $100.0 on 10/16/92. * The Company's Common Stock commenced trading on October 16, 1992. PROPOSAL 2 AMENDMENT TO THE TACO CABANA, INC. 1994 STOCK OPTION PLAN To ensure the continued availability of the Taco Cabana, Inc. 1994 Stock Option Plan to attract, motivate and retain employees, on June 10, 1997, the Board of Directors, unanimously approved an amendment to the 1994 Option Plan, subject to stockholder approval at the Annual Meeting, to increase the number of shares of Common Stock authorized for issuance under the 1994 Option Plan from 500,000 shares to 1,250,000 shares. The 1994 Option Plan is intended to advance the interests of the Company by providing long-term incentives to the Company's employees, directors and consultants. The 1994 Option Plan became effective upon the shareholders approval in November, 1994. The 1994 Option Plan is administered by the Compensation and Stock Option Committee (the "Committee"). The Committee will set the specific terms and conditions of options granted under the 1994 Option Plan. The Company's employees will be eligible to receive either incentive stock options or nonqualified stock options or a combination of both, as the Committee determines. Non- employee participants may be granted only nonqualified stock options. Stock options may be granted for a term not to exceed ten years (five years with respect to a holder of 10% or more of the Company's shares in the case of an incentive stock option) and are not transferable other than by will or the laws of descent and distribution. Each option may be exercised within the term of the option pursuant to which it is granted (so long as the optionee, if an employee, continues to be employed by the Company). In addition, unless a shorter period is specified in a particular option agreement, an option may be exercised within 90 days after the termination of employment of the optionee (subject to any limitations in the particular option), within one year after termination in case of termination because of disability, or throughout the term of the option in the event of the optionee's death, to the extent in each case the option was exercisable at the termination date. The exercise price of all nonqualified stock options must be at least equal to 100% of the fair market value of the Common Stock on the date of grant. The exercise price of all incentive stock options must be at least equal to 100% of the fair market value of the Common Stock on the date of grant, or 110% of the fair market value with respect to any incentive stock option issued to a holder of 10% or more of the Company's shares. Stock options may be exercised by payment in cash of the exercise price with respect to each share to be purchased or by delivering Common Stock of the Company already owned by such optionee with a market value equal to the exercise price, or by a method in which a concurrent sale of the acquired stock is arranged, with the exercise price payable in cash from such sale proceeds. The 1994 Option Plan provides that each outside director (i.e. non-employee director) will automatically receive a grant of 3,000 nonqualified stock options each year on the fifth business day following the first public release of the Company's audited earnings report on results of operations for the preceding fiscal year. Each such option will become exercisable in whole or in part on the first anniversary of the award through the balance of its ten-year term. Subject to availability of shares allocated to the 1994 Option Plan and not already reserved for other outstanding stock options, each outside director who joins the Board will in addition receive an initial grant of options for 35,000 shares, which will become exercisable in five equal increments beginning on the first anniversary of the award and on each of the next four succeeding anniversary dates. Such options will be exercisable for a term of ten years. Options, once granted and to the extent exercisable, will remain exercisable throughout their term, regardless of whether the holder continues as a director. The option exercise price of the options is equal to 100% of the fair market value of the covered shares of Common Stock at the time of grant. The 1994 Option Plan will terminate on October 17, 2004. The Board of Directors may, however, terminate the Option Plan at any time prior to such date. Termination of the 1994 Option Plan will not alter or impair, without the consent of the optionee, any of the rights or obligations pursuant to any option granted under the 1994 Option Plan. As of June 30, 1997, options to purchase a total of about 491,967 shares at a weighted average exercise price of $5.68 per share were outstanding under the 1994 Option Plan. Federal Income Tax Consequences The following is a general description of the federal income tax consequences of options granted and exercised under the Option Plan based upon present tax law which is subject to change. Each optionee should consult with his or her own tax advisor with respect to the specific tax treatment of his or her particular transactions under the Plan. Incentive Stock Options ("ISO") A participant who is granted an ISO recognizes no taxable income when the ISO is granted. Generally, no taxable income is recognized upon exercise of an ISO unless the alternative minimum tax applies as described below. Instead, a participant who exercises an ISO recognizes taxable gain or loss when he sells his shares. Any gain or loss recognized on the sale of shares acquired upon exercise of an ISO is taxed as long-term capital gain or loss if the shares have been held for more than one year after the option was exercised and for more than two years after the option was granted. In this event, the Company receives no deduction with respect to the ISO shares. Long-term capital gains of individuals presently may be taxed at lower rates than ordinary income, but the deductibility of capital losses remains subject to limitation. If the participant disposes of the shares within one year after the option was exercised or within two years after the option was granted (a "disqualifying disposition"), he recognizes ordinary income on disposition of the shares, to the extent of the difference between the fair market value on the date of exercise (or potentially up to six months thereafter if the participant is subject to Section 16 (b) of the Exchange Act) and the option price; provided, however, that in the case of a disposition where a loss, if sustained, would be recognized for tax purposes, the ordinary income recognized shall not exceed the net gain upon such disposition. Any additional gain will be taxed as capital gain. Any loss will be taxed as a capital loss. The Company generally receives a corresponding deduction in the year of disposition equal to the amount of ordinary income recognized by the participant. Effect of Alternative Minimum Tax Certain taxpayers who have significant tax preferences (and other items allowed favorable treatment for regular tax purposes) may be subject to the alternative minimum tax ("AMT"). The AMT is payable only if and to the extent that it exceeds the taxpayer's regular tax liability, and any AMT paid generally may be credited against subsequent regular tax liability. For purposes of the AMT, an ISO is treated as if it were an NSO (see below). Thus, the difference between fair market value on the date of exercise (or potentially up to six months thereafter) and the option price is included in income for AMT purposes, and the taxpayer receives a basis equal to such fair market value for subsequent AMT purposes. However, regular tax treatment (see above) will apply for AMT purposes if a disqualifying disposition, where a loss, if sustained, would be recognized, occurs in the same taxable year as the options are exercised. Nonqualified Stock Options ("NSO") The tax treatment of NSOs differs significantly from the tax treatment of ISOs. No taxable income is recognized when an NSO is granted, but upon the exercise of an NSO, the difference between the fair market value of the shares on the date of exercise and the option price is taxable as ordinary income and generally is deductible by the Company. If the participant is subject to Section 16(b) of the Exchange Act, the date for measuring taxable income potentially may be deferred for up to six months after the date of exercise (unless the optionee makes an election under Section 83(b) of the Code within 30 days after exercise), in which case the participant will be taxed currently upon exercise of the NSO in an amount equal to the excess, if any, of the fair market value of the shares at that time over the option price. Any future appreciation in the shares will be treated as capital gain upon the sale or exchange of the shares. The affirmative vote of a majority of the shares of Common Stock present and entitled to vote at the Meeting is required to approve the amendment to the Option Plan. The enclosed form of Proxy provides a means for shareholders to vote for said amendment, to vote against it or to abstain from voting with respect to it. Each Proxy received in time for the Meeting will be voted as specified therein. If a shareholder executes and returns a Proxy, but does not specify how the shares represented by such shareholder's Proxy are to be voted, such shares will be voted FOR the approval of the amendment to the Option Plan. In determining whether this proposal has received the requisite number of affirmative votes, abstentions will be counted and will have the same effect as a vote against this proposal. Broker non-votes will not be counted and will have no effect. THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE OPTION PLAN. INDEPENDENT ACCOUNTANTS The financial statements and schedules of the Company as of December 29, 1996 and for the year then ended were audited by Deloitte & Touche LLP. It is anticipated that if the nominees are elected as directors, the new Board of Directors will reappoint such firm as independent certified public accountants for the current fiscal year. A representative of Deloitte & Touche LLP will be present at the Meeting, will have an opportunity to make a statement if he or she desires to do so and will be available to respond to appropriate questions. ANNUAL REPORT The Company's Annual Report for the year ended December 29, 1996, which includes the Company's financial statements, accompanies this proxy statement, but is not incorporated as part of the proxy statement and is not to be regarded as part of the proxy solicitation material. OTHER MATTERS The Company's management knows of no other matters that may properly be, or which are likely to be, brought before the meeting. However, if any other matters are properly brought before the meeting, the persons named in the enclosed proxy, or their substitutes, will vote in accordance with their best judgment on such matters. STOCKHOLDER PROPOSALS The Company intends to conduct the next annual meeting of stockholders in approximately August 1998. Proposals by stockholders intended to be presented at the annual meeting to be held in 1998 must be received by the Company by May 1, 1998 to be included in the Company's proxy statement and form of proxy relating to that meeting. Such proposals should be addressed to the Secretary of the Company at the address indicated in this notice. COST AND METHOD OF PROXY SOLICITATION The accompanying Proxy is being solicited on behalf of the Board of Directors of the Company. The expense of preparing, printing and mailing the form of Proxy and the material used in the solicitation thereof will be borne by the Company. In addition to the use of the mails, proxies may be solicited by personal interview, telephone and telegram by directors, officers and employees of the Company. Arrangements may also be made with brokerage houses and other custodians, nominees and fiduciaries for forwarding of solicitation materials to the beneficial owners of stock held by such persons, and the Company may reimburse them for reasonable out-of- pocket expenses incurred by them in connection therewith. By Order of the Board of Directors David G. Lloyd Secretary -----END PRIVACY-ENHANCED MESSAGE-----