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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): April 30, 1997
CASA OLE RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
TEXAS 0-28234 76-0493269
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
1135 Edgebrook
Houston, Texas 77034
(Address of principal executive offices)
(713) 943-7574
(Registrant's Telephone No.)
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ITEM 5. OTHER EVENTS.
On April 30, 1997, Casa Ole Restaurants, Inc. (the "Registrant") entered
into a non-binding letter of intent with Monterey's Acquisition Corp.
("Monterey's") and River Associates, LLC to purchase all of the outstanding
capital stock of Monterey's from River Associates, LLC and the other
shareholders of Monterey's for a total consideration of approximately
$11,000,000, which would consist of the Registrant's assumption of
approximately $7,000,000 of senior and subordinated debt and the Registrant's
payment to the Monterey's shareholders of approximately $4,000,000 in cash.
The purchase price payable by the Registrant will be subject to adjustments
based on the outstanding debt and working capital deficit of Monterey's at the
time of the closing of the acquisition.
The transaction is subject to the negotiation and execution of a
definitive purchase agreement, and the parties presently contemplate that the
transaction will be completed in July or August, 1997.
Monterey's owns and operates a total of twenty-six Mexican restaurants
in Texas and Oklahoma, principally under the names "Monterey's Tex-Mex Cafe(R)"
and "Monterey's Little Mexico(R)".
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
2 Non-binding letter of intent dated April 29, 1997 between
Casa Ole Restaurants, Inc., Monterey's Acquisition Corp.
and River Associates, LLC.
20 Press release issued May 2, 1997.
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SIGNATURES
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 hereunto duly authorized.
CASA OLE RESTAURANTS, INC.
Dated: May 7, 1997 By: /s/ STACY M. RIFFE
-----------------------------------
Printed Name: STACY M. RIFFE
-------------------------
Title: Vice President, Chief Financial
Officer
---------------------------------
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
2 Non-binding letter of intent dated April 29, 1997 between Casa
Ole Restaurants, Inc., Monterey's Acquisition Corp. and River
Associates, LLC.
20 Press release issued May 2, 1997.
</TABLE>
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EXHIBIT 2
April 29, 1997
River Associates, LLC / Monterey's Acquisition Corp.
633 Chestnut Street, Suite 1640
Chattanooga, TN 37450
Ladies and Gentlemen:
Casa Ole Restaurants, Inc. ("Purchaser") is pleased to submit the
following proposal, which when accepted by you as set forth below, will
constitute our agreement ("Letter Agreement") with Monterey's Acquisition Corp.
("Company"), and River Associates, LLC and all other equity owners of the
Company (collectively, "Sellers"), the sole shareholders of the Company,
regarding the acquisition (the "Acquisition") by Purchaser of 100% of the
capital stock of the Company.
1. PURCHASE PRICE. The Acquisition will be structured as a purchase by
Purchaser of all the outstanding capital stock of the Company or, at the
option of Purchaser, a merger of the Company with a wholly owned
subsidiary of Purchaser. As part of such structure, Purchaser would
assume all liabilities of the Company and agree to refinance the
existing debt of the Company totaling $7,006,000 as of March 30, 1997
consisting of $2,356,000 of senior debt and $4,650,000 of subordinated
debt. Purchaser will assume the net working capital deficit incurred in
the ordinary course of business to the extent discussed in Item 2 below.
The aggregate consideration (the "Purchase Price") for the outstanding
capital stock of the Company will be $4 million in cash.
2. The Purchase Price will be subject to
(1) an adjustment based on the outstanding debt as of the closing
date and
(2) an adjustment based on the working capital deficit as of the
closing date.
To the extent the debt at closing is greater or less than the sum of
$7,006,000, the Purchase Price will be adjusted upward or downward
accordingly. To the extent the working capital deficit is greater or
less than $750,000 plus (i) management fees payable to River Associates,
LLC immediately prior to closing (approximately $300,000), and plus (ii)
expenditures and accruals related to the opening of the
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Baytown store not included in the above-referenced working capital
deficit (approximately $425,000), the Purchase Price will be adjusted
upward or downward accordingly.
3. DEFINITIVE PURCHASE AGREEMENT. Upon your execution of this Letter
Agreement, we will promptly begin to draft a definitive purchase
agreement (the "Definitive Agreement") consistent with the terms of this
Letter Agreement and which will contain standard representations,
warranties, covenants and indemnifications.
4. TIMING; DUE DILIGENCE; EXCLUSIVITY. Our intent is to complete our
legal, accounting, and business due diligence and arrange financing
commitments as promptly as practicable and in any event within 90 days
from the date you sign and return this Letter Agreement to us.
Consistent with this intent, you agree that, for the period from the
date we receive a copy of this Letter Agreement signed by you through
the 90th day thereafter (the "Termination Date"), the Company and Seller
will not, and will cause their affiliates, directors, officers,
employees, representatives and agents (the "Company Representatives")
not to, directly or indirectly, solicit or initiate or enter into
discussions or transactions with, or encourage, or provide any
information to, any corporation, partnership or other entity or group
(other than to us or our designees) concerning any sale of ownership
interests and/or assets. To the extent satisfactory progress is being
made towards a closing, Sellers will agree to one 30-day extension of
the 90-day deadline. You represent that neither you nor any of your
affiliates are bound by any agreement with respect to any such
transaction other than as contemplated by this Letter Agreement. You
also agree to notify us immediately upon receipt of any inquiries from
any entity or group with respect to any potential transaction involving
the Company and/or its assets.
5. CONDITIONS. Our conditions to closing include (a) the absence of any
material adverse change in the business, assets, condition or prospects
of the Company; (b) our ability to conduct such due diligence as we deem
reasonably appropriate and our ability to approve the results of that
due diligence; (c) our satisfaction with the resolution of any problems
or concerns discovered by us during our due diligence; (d) receipt of
all required consents and approvals; (e) the execution of mutually
satisfactory documentation for the Acquisition, including the Definitive
Agreement; (f) receipt of satisfactory financing commitments and
subsequent definitive documentation of such commitments; and (g) other
conditions customary to transactions of this type.
6. CONDUCT OF BUSINESS. Prior to the execution of the Definitive
Agreement, the Company will conduct its business only in the ordinary
course, consistent with past practice, and will use commercially
reasonable efforts to maintain the value of its business as a going
concern. The Company will not, without our prior written consent, (a)
increase any compensation or benefit arrangement for any employee or
officer other than in the ordinary course, consistent with past
practice, (b) shift any business activities from the Company to any
other entities, whether owned by the Sellers or third parties, (c) sell
any material assets of the Company, (d) effect any changes to its
capital structure, including without limitation entering into any
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commitments to issue shares of the Company, (e) make any distributions
or pay any dividends to the Company's shareholders or (f) undertake or
perform any act that would adversely affect the goodwill of the Company,
the Company's relationship with its employees and customers, or the
Company's prospects. Nothing herein will prevent, however the Company
from paying accrued fees owed to River Associates, LLC.
7. EXPENSES. Each party will bear their own expenses in connection with
the transactions contemplated hereby. For the purposes of the preceding
sentence, if the transactions contemplated hereby are completed, all
expenses of the Company will be borne by the Sellers. The Sellers will
also be solely responsible for any expenses related to professional
service providers and/or brokers retained by either the Company or the
Sellers to assist in the Acquisition or in the sale process. To the
extent that any expenses of the Sellers are actually paid by the Company
after the closing, the Purchase Price will be adjusted accordingly.
8. CONFIDENTIALITY; INFORMATION; ANNOUNCEMENTS. The Confidentiality
Agreement between the parties will remain in full force and effect. You
agree to provide us, and our investors and lenders, including legal and
other representatives, with access to the Company and all information
that any of them reasonably requests. Pending closing of the
transaction, none of the parties will make any public statements about
such transaction without the consent of each other party, except as
required by applicable law, in which case the language of any such
statement shall, to the extent practicable, be mutually agreed to by the
parties which agreement shall not be unreasonably withheld.
9. MISCELLANEOUS. Except with respect to the obligations set forth in
paragraphs 4, 6, 7, 8, 9, and 10 of this Letter Agreement, this Letter
Agreement is not intended to be a binding contract. The parties shall
not be legally obligated by any of the terms hereof, other than
paragraphs 4, 6, 7, 8, 9, and 10 hereof, unless and until the terms of
this Letter Agreement are embodied in definitive documentation in form
and substance satisfactory to the parties, and executed and delivered by
them. This Letter Agreement shall terminate if such definitive
documentation shall not have been executed and delivered on or prior to
the Termination Date, provided that such termination shall not relieve
any party of liability for breach prior to such termination. In
addition, if during the course of further negotiations or in our conduct
of due diligence, we discover information about the Company which
concerns the basis on which we are pursuing this transaction, or we are
unable to agree with the Company and/or the Sellers on terms in the
definitive documentation, either party reserves the right to terminate
any further discussions and negotiations immediately upon notice to the
other party, at which time this Letter Agreement shall terminate among
us. This Letter Agreement constitutes the entire agreement among you,
us and/or any of our respective affiliates, and supersedes all prior or
contemporaneous communications, agreements, and understandings, written
or oral, with respect to the Acquisition, and may be signed in
counterparts, all of which shall constitute the same agreement, shall be
governed by the domestic substantive laws of Texas, and shall
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bind and inure to the benefit of the parties and their respective
successors and assigns.
10. EXECUTION. If the foregoing is in accordance with your understanding,
please sign this Letter Agreement in the space indicated below and
return it to us by facsimile for receipt not later than 5:00 p.m. (Texas
time) on April 30, 1997, whereupon paragraphs 4, 6, 7, 8, 9, and 10 of
this Letter Agreement will become a binding agreement among the parties.
In addition, please send an original executed counterpart of this Letter
Agreement to us by overnight courier. The proposal contained herein
will expire unless we have received this Letter Agreement signed by you
within the time period provided above or sooner, if rejected.
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Very truly yours,
Casa Ole Restaurants, Inc.
By: /s/ Louis P. Neeb
---------------------------------------
Title: Chairman and Chief Executive Officer
The foregoing is hereby agreed to and accepted this 30 day of April, 1997:
River Associates, LLC / Monterey's Acquisition Corp.
By: /s/ Mike D. Brookshire
-------------------------------------
Name: Mike D. Brookshire
-------------------------------
Title: Secretary
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EXHIBIT 20
FOR IMMEDIATE RELEASE
Contact: Casa Ole Restaurants, Inc.
Patrick A. Morris, President
Stacy M. Riffe, Chief Financial Officer
(713) 943-7574
CASA OLe RESTAURANTS, INC.
ANNOUNCES LETTER OF INTENT TO ACQUIRE MONTEREY'S
(NASDAQ: CASA)
Houston, Texas (May 2, 1997) - Casa Ole Restaurants, Inc. today announced that
it has entered into a non-binding letter of intent with Monterey's Acquisition
Corp. to purchase the stock of Monterey's for a combination of cash and an
assumption of debt for total consideration of approximately $11 million. With
corporate offices in Houston, Monterey's Acquisition Corp. owns and operates a
total of 26 Mexican restaurants in Texas and Oklahoma principally under the
names "Monterey's Tex-Mex Cafe(R)" and "Monterey's Little Mexico(R)". Both of
these Monterey's concepts appeal to the lower-priced, value-oriented segment of
the Tex-Mex restaurant market also served by Casa Ole. Included in the
Monterey's restaurants are three casual dining Tortuga's Cantinas.
"Considering the similarities of the concepts and their mutual appeal to the
value-oriented consumer, this proposed acquisition holds an abundance of
opportunities for us," stated Louis P. Neeb, Chairman of Casa Ole Restaurants,
Inc. "By selectively converting certain of the Monterey's to Casa Ole
restaurants we would become more media efficient in Houston, our largest
market. With some of Monterey's highest volume stores located in Oklahoma, we
would have a solid entry into what has been a targeted growth market for Casa
Ole. And, of course, there are trading areas where we would continue to
operate as Monterey's or Little Mexico. Finally, Tortuga's is a casual dining
concept which may have expansion potential in markets and trading areas not
targeted for the Casa Ole concept."
Larry Forehand, the founder of Casa Ole and a past executive of Monterey's
added, "I feel like the past and present are coming together to provide a
future synergy that years ago I never would have imagined possible. Having
spent a significant portion of my life dedicated to both of these concepts, I
can tell you that this proposed acquisition is a 'natural'".
Pat Morris, President and COO of Casa Ole added, "There's a lot of work to be
done to make this transition as smooth as possible. We have always taken great
pride in Casa Ole being a company dedicated to taking care of its people. We
won't lose that perspective if this transaction is completed and we merge the
people from the Monterey's organization into Casa Ole." Curt Glowacki, Senior
Vice President of Operations for Monterey's
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Acquisition Corp. added "Casa Ole is a dynamic, family-oriented company all of
us at Monterey's would be proud to be a part of. We plan to make the most out
of the growth opportunities this proposed combination provides."
Mr. Neeb also stated that, "This proposed transaction is consistent with our
strategy to promote shareholder value through a combination of new unit
development and selective strategic acquisitions. This approach should allow
us to achieve our annual growth objectives at a time when our new restaurant
development has been challenged by delays in site negotiations, permitting and
construction." He added that, "Although our existing restaurant sales trends
remain positive, we expect to miss street earnings per share estimates for the
first quarter by a few cents due to the slower than expected pace of new
restaurant development and some new unit sales shortfalls. We believe that
shareholder value is best served when potentially costly real estate decisions
are not forced by expectations. To better implement our real estate
strategies, we have recently added a director of real estate and development
with extensive experience in the restaurant industry. We believe he should be
able to expedite the opening process and initiate systems to sustain our
anticipated growth rate."
Earnings for the Company's first quarter, which ended April 18, will be
released on or about May 20.
Casa Ole currently operates or franchises 47 family, Mexican restaurants,
primarily in Texas and Louisiana. The company owns 18 restaurants and
currently has under construction two in Texas and one in Idaho. The company
headquarters is in Houston, Texas.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). Such forward-looking statements involve known and unknown
risks, uncertainties and other facts which may cause the actual results,
performance or achievements of Casa Ole Restaurants, Inc., its area developers,
market partners, franchisees and Casa Ole restaurants to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among
others, the following: general economic and business conditions; competition;
success of operating initiatives; development and operating costs; area
developers' adherence to development schedules; advertising and promotional
efforts; brand awareness; adverse publicity; acceptance of new product
offerings; consumer trial and frequency; availability, locations and terms of
sites for store development; changes in business strategy or development plans;
quality of management; availability, terms and development of capital; business
abilities and judgment of personnel; availability of qualified personnel; food,
labor and employee benefit costs; changes in, or the failure to comply with
government regulations; regional weather conditions; construction schedules;
and other factors referenced in the Company's 1996 Annual Report and Form 10-K.
The use in this release of such words as "believes", "anticipates", "expects",
"intends" and similar expressions are intended to identify forward-looking
statements, but are not the exclusive means of identifying such statements. The
success of the Company is dependent on the efforts of the Company, its
employees and its area developers, market partners and franchisees and the
manner in which they operate and develop stores.
