<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
CASA OLE RESTAURANTS, 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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(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:
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(4) Date Filed:
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<PAGE> 2
CASA OLE RESTAURANTS, INC.
1135 EDGEBROOK DRIVE
HOUSTON, TEXAS 77034
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1997
Notice is hereby given that the Annual Meeting of Shareholders of Casa
Ole Restaurants, Inc., a Texas corporation (the "Company"), will be held at the
Company's Pasadena, Texas restaurant located at 1520 E. Southmore, Pasadena,
Texas on Wednesday, May 28, 1997 at 10:00 a.m. (Texas time) for the following
purposes:
1. To elect two directors, each to serve for a term of three
years, or until their respective successors shall have been
duly elected and shall have qualified;
2. To approve the appointment of KPMG Peat Marwick LLP as
independent auditors for fiscal 1997; and
3. To transact such other business as may properly come before
the meeting.
Only shareholders of record at the close of business on April 9, 1997,
are entitled to notice of and to vote at said meeting or any adjournment or
postponement thereof.
You are cordially invited to attend the meeting; whether or not you
expect to attend the meeting in person, however, you are urged to mark, sign,
date and mail the enclosed form of proxy promptly so that your shares of stock
may be represented and voted in accordance with your wishes and in order that
the presence of a quorum may be assured at the meeting. Your proxy will be
returned to you if you should be present at the meeting and should request its
return in writing, to be received by the Company prior to the meeting.
By Order of the Board of Directors
Stacy M. Riffe
Secretary
April 23, 1997
<PAGE> 3
CASA OLE RESTAURANTS, INC.
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 28, 1997
This statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders of Casa Ole Restaurants,
Inc., a Texas corporation (the "Company"), to be held on Wednesday, May 28,
1997 at 10:00 a.m., Texas time, at the Company's Pasadena, Texas restaurant
located at 1520 E. Southmore, Pasadena, Texas, and at any adjournment or
postponement thereof. The Notice of Annual Meeting, this statement and the
accompanying proxy, together with the Company's Annual Report to Shareholders
for the year ended December 27, 1996, are first being sent to shareholders on
or about April 28, 1997.
The close of business on April 9, 1997, has been fixed as the record
date for the determination of shareholders entitled to notice of and to vote at
the meeting. At that date, the Company had outstanding 3,597,705 shares of
Common Stock, $.01 par value ("Common Stock"), each of which will be entitled
to one vote.
ELECTION OF DIRECTORS
(PROPOSAL 1)
The number of directors of the Company has been fixed by the Board of
Directors (the "Board"), pursuant to the Company's Bylaws, at seven. The
Company's Articles of Incorporation provide for the Board of Directors to be
divided into three classes, designated as Class I, Class II and Class III.
Each class of directors consists of directors who serve an initial term of a
one, two or three year period or until their successors are elected and
qualified. Thereafter, directors will serve staggered three-year terms. At
the meeting, Common Stock, represented by proxies, unless otherwise specified,
will be voted for the election of the two nominees hereinafter named, to serve
for a term of three years or until his successor is duly elected and qualified.
The following information is set forth with respect to the persons
nominated for election as a director and each director of the Company whose
term of office will continue after the meeting.
NOMINEES FOR ELECTION AT THE ANNUAL MEETING
<TABLE>
<CAPTION>
Director Term
Name Age Since Expires
---- --- ----- ---------
<S> <C> <C> <C>
Larry N. Forehand 52 1995 2000
John C. Textor 31 1996 2000
</TABLE>
Larry N. Forehand is the founder of the Company and has served as Vice
Chairman of the Company's Board of Directors since October 1995. From December
1973 to March 1995, Mr. Forehand served as President of the Company. Mr.
Forehand is presently the President of the Texas Restaurant Association, a
state trade association for the restaurant industry, and will serve in such
capacity through June 1997.
John C. Textor has served as President of Wyndcrest Partners, Ltd.,
(formerly Textor Ventures, Ltd.), an entity that focuses on the acquisition,
recapitalization and restructuring of medium-sized private companies, since
August 1991. During a portion of this time, Mr. Textor was also affiliated
with R. Best Associates, Inc., a Texas-based merchant banking firm, as a
principal. From October 1995 to January 1996, Mr. Textor also served as
interim Chief Financial Officer of the Company. Prior to August 1991, Mr.
Textor was jointly responsible for the Strategic Planning and Corporate Finance
Group at the Michael Swerdlow Companies, the general partner of a real
estate/merchant banking joint venture among Nelson Peltz, Peter May and
Shearson/American Express. Mr. Textor was previously
1
<PAGE> 4
employed as an associate in the Real Estate Merchant Banking Group at Shearson
Lehman Hutton, having originally joined that firm as a corporate financial
analyst in the New York Investment Banking Division.
DIRECTORS WHOSE TERMS WILL CONTINUE AFTER THE ANNUAL MEETING
<TABLE>
<CAPTION>
Director Term
Name Age Since Expires
---- --- -------- -------
<S> <C> <C> <C>
Louis P Neeb ............. 58 1995 1998
Michael D. Domec.......... 51 1995 1998
Patrick A. Morris ........ 51 1995 1999
J.J. Fitzsimmons ......... 49 1996 1999
Richard E. Rivera ........ 50 1996 1999
</TABLE>
Louis P. Neeb has served as Chairman of the Board and Chief Executive
Officer of the Company since November 1995. Since 1982 Mr. Neeb has served as
President of Neeb Enterprises, Inc., a personal restaurant consulting company.
From July 1991 to January 1994, Mr. Neeb served as President of Spaghetti
Warehouse, Inc. From September 1989 to June 1991, Mr. Neeb served as President
of Geest Foods USA. From 1982 to 1987, Mr. Neeb served as President and Chief
Executive Officer of Taco Villa, Inc. and its predecessors, a publicly held
corporation controlled by W.R. Grace & Co., where he oversaw the development of
the Applebee's restaurant chain and the operation of the Del Taco restaurant
chain. From 1980 to 1982, Mr. Neeb served as Chairman of the Board and Chief
Executive Officer of Burger King Corporation. From 1973 to 1980, Mr. Neeb
served in various positions, including President and Chief Operating Officer of
Steak & Ale Restaurants. During that time, Mr. Neeb directed the development
of the Bennigan's restaurant concept. Mr. Neeb serves as a director of ShowBiz
Pizza Time, Inc. and of Franchise Finance Corp. of America, an entity that
provides financing for real estate used for restaurants. Mr. Neeb is also a
director of Silver Diner, Inc., a publicly held restaurant company, and of Blue
Marlin Restaurants, Inc., a privately held restaurant company.
Michael D. Domec has served as President of Magnum Development, Inc.,
a residential real estate development company, since 1991, and as President of
Ole Restaurants, Inc., a franchisee of the Company, since June 1996. From
December 1977 until April 1996, Mr. Domec was Vice President of Casa Ole
Franchise Services, Inc. and the majority owner of seven Casa Ole restaurants
and a 49% owner of Casa Ole Franchise Services, Inc., with the other owners of
such corporation being Larry N. Forehand--49%, Lawrence K. Schoening--1% and
Corkey L. Turner--1%. As a franchisee of the Company, Mr. Domec has agreed to
open a minimum of five Casa Ole restaurants in the Houston area by 2001.
Patrick A. Morris has served as President, Chief Operating Officer and
a director of the Company since March 1995. From August 1993 to March 1995,
Mr. Morris was self-employed as a strategic planning consultant, and consulted
with the Company from November 1994 until his election as the Company's
President and Chief Operating Officer in March 1995. From November 1990 to
August 1993, Mr. Morris served as Senior Vice President of Tony Roma's. From
1985 to 1990, Mr. Morris served as an Executive Vice President of Perkins
Family Restaurants. Mr. Morris has further experience through his employment
in various executive positions with Taco Bell prior to 1985, where he
successfully completed the Fast-Track Operational Program to Regional Vice
President.
J. J. Fitzsimmons is Senior Vice President of Finance of Wal-Mart
Stores, Inc., a position held since November 1995. From September 1994 to
November 1995, Mr. Fitzsimmons served as Vice President of Finance of Wal-Mart
Stores, Inc. From November 1993 to September 1994, Mr. Fitzsimmons served as
Senior Vice President and as a securities analyst for Rauscher Pierce Refsnes,
Inc. From January 1993 to November 1993, Mr. Fitzsimmons served as Senior Vice
President and Chief Financial Officer of S&A Restaurant Corp. From August 1985
to January 1993, Mr. Fitzsimmons served as Senior Vice President, Director and
Chief Financial Officer of National Pizza Company.
Richard E. Rivera is President and Chief Executive Officer of RARE
Hospitality International, Inc., a position held since February 1994. Mr.
Rivera is also a director of RARE Hospitality International, Inc. and serves on
its Executive Committee. Mr. Rivera is also a director of the National
Restaurant Association. From February 1987 to February 1994, Mr. Rivera served
as President and Chief Executive Officer of TGI Friday's, Inc.
2
<PAGE> 5
BOARD MEETINGS AND COMMITTEES
Three meetings of the Board were held during 1996. Each of the
directors attended 100% of the meetings of the Board and the committees thereof
of which he is a member and served, except one member who was unable to attend
one board meeting.
The Board has an Audit Committee, the members of which are Messrs.
Textor, Rivera and Fitzsimmons; Mr. Fitzsimmons serves as Chairman. The Audit
Committee held one meeting during 1996. The Audit Committee is responsible for
reviewing the accounting practices and policies and recommending to whom
reports should be submitted within the Company, reviewing with the independent
auditors their final report, reviewing with the independent auditors the
overall accounting and financial controls and being available to the
independent auditors during the year for consultation purposes.
The Board has a Compensation/Stock Option Committee, the members of
which are Messrs. Forehand, Domec and Rivera; Mr. Rivera serves as Chairman.
The Compensation/Stock Option Committee held one meeting during 1996. The
Compensation/Stock Option Committee is responsible for determining the
compensation of the officers of the Company and granting options under the
Company's 1996 Casa Ole Long Term Incentive Plan and the 1996 Managers Stock
Option Plan.
The Board has an Executive Committee, the members of which are Messrs.
Neeb, Forehand and Morris; Mr. Neeb serves as Chairman. There were two
meetings of the Executive Committee during 1996. The Executive Committee has
the authority, between meetings of the Board, to take all actions with respect
to the management of the Company's business that require action by the Board,
except with respect to certain specified matters that by law must be approved
by the entire Board.
DIRECTOR COMPENSATION
Each outside director receives an annual retainer of $5,000
plus $750 per Board meeting attended and $250 per committee meeting attended
that is not in conjunction with a Board meeting and is reimbursed for expenses
incurred for attending any such meeting. The outside directors have agreed to
invest not less than 50% of their annual retainer for their service as
directors of the Company in each year to purchase shares of Common Stock of the
Company from the Company or in the open market through a program administered
by the Company. Each outside director is granted options to purchase shares of
Common Stock pursuant to the Casa Ole Stock Option Plan for Non-Employee
Directors (the "Directors Option Plan").
The Directors Option Plan provides that each outside director not
previously affiliated with the Company will automatically be granted an option
to purchase 10,000 shares of Common Stock. These options will be exercisable
in 20% increments at the market price on the date of grant and will vest
equally over the five-year period from the date of grant. Each outside
director will automatically receive options to purchase 3,000 shares of Common
Stock annually (or a pro rata portion thereof if the outside director is
elected other than at an annual meeting) immediately following his or her
reelection to the Board, exercisable at the fair market value of the Common
Stock at the close of business on the date immediately preceding the date of
grant. Such options will vest annually. Directors previously affiliated with
the Company, excluding those directors who are also officers of the Company,
will automatically receive options to purchase 3,000 shares of Common Stock
annually beginning with the first annual meeting following the initial public
offering. Such options will vest annually. All stock options granted pursuant
to the Directors Option Plan will be nonqualified stock options and will remain
exercisable until the earlier of ten years from the date of grant or six months
after the optionee ceases to be a director of the Company. Upon certain
significant events involving the Company, all options outstanding under the
Directors Option Plan shall terminate, provided that immediately prior to the
effective date of such transaction each holder of an outstanding option under
the Directors Option Plan shall be entitled to purchase the total number of
shares of Common Stock that such optionee would have been entitled to purchase
during the entire remaining term of the option. Such events include the merger
or consolidation of the Company in which the Company is not the surviving
corporation; a dissolution of the Company or a transfer of all or substantially
all of the assets or shares of stock to one or more other persons or entities;
any person or group (other than Messrs. Larry N. Forehand, Michael D. Domec and
Louis P. Neeb) becoming the beneficial owner of securities of the Company
representing 50% or more of the combined voting power of the Company; or if,
during any period of two consecutive
3
<PAGE> 6
years, individuals then constituting the Board of Directors cease for any
reason to constitute at least a majority of the Board unless the election of
each director who was not a director at the beginning of the period has been
approved in advance by at least two-thirds of the directors then in office who
were directors at the beginning of the period.
EXECUTIVE OFFICERS OTHER THAN DIRECTORS
The information below sets forth the name, age, current position with
the Company, the principal occupation, and the year of becoming an executive
officer of the Company for the one executive officer that is not a director.
Stacy M. Riffe, age 31, has served as Vice President, Chief Financial
Officer, Secretary and Treasurer of the Company since January 1996. From July
1991 to January 1996, Ms. Riffe served in various positions at Spaghetti
Warehouse, Inc. Ms. Riffe most recently served as Controller and Treasurer of
Spaghetti Warehouse, Inc. From January 1987 to July 1991, Ms. Riffe served in
various positions in the audit department at KPMG Peat Marwick LLP.
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 17, 1997 by each
person known to the Company to own beneficially more than five percent of the
Company's Common Stock, each director, each executive officer and all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Name of Beneficial Owner Owned (1) Class
- ------------------------ --------- -----
<S> <C> <C>
Larry N. Forehand and Forehand
Family Partnership, Ltd. (2)(3)...................... 833,012 22.5%
Strong Capital Management, Inc. (4)....................... 564,700 15.3%
100 Heritage Reserve
Menomonee Falls, Wisconsin 53051
Michael D. Domec (2)...................................... 180,000 4.9%
Louis P. Neeb (2)(5)(6)................................... 10,000 *
John C. Textor (5)(6)(7).................................. 173,184 4.7%
2176 Regents Blvd.
West Palm Beach, Florida 33409
Patrick A. Morris (2)(6)(8)............................... 13,243 *
Richard E. Rivera (9)..................................... 2,215 *
RARE Hospitality International, Inc.
8215 Roswell Road, Bldg. 200
Atlanta, Georgia 30350
J.J. Fitzsimmons (9)...................................... 2,180 *
Wal-Mart Stores, Inc.
702 Southwest 8th Street
Bentonville, Arkansas 72716
Stacy M. Riffe (2)(6)(10)................................. 5,498 *
All executive officers and directors as
a group (eight persons) (11)......................... 1,128,895 30.5%
</TABLE>
- ---------------
* Less than 1%
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<PAGE> 7
(1) The named shareholders have sole voting and dispositive power with
respect to all shares shown as being beneficially owned by them,
except as otherwise indicated.
(2) The business address is 1135 Edgebrook Drive, Houston, Texas 77034.
(3) Includes 520,996 shares held directly by Mr. Forehand and 312,016 held
by Forehand Family Partnership, Ltd. a limited partnership of which
Mr. Forehand is the sole managing general partner and of which Mr.
Forehand and his spouse are the sole limited partners.
(4) Based on Schedule 13G as of December 31, 1996, filed by Strong Capital
Management, Inc. with the Securities and Exchange Commission. The
Schedule 13G discloses that Strong Capital Management, Inc. has sole
voting power over 290,200 shares of Common Stock and sole dispositive
power over 564,700 shares of Common Stock.
(5) Additionally, Messrs. Neeb and Textor have warrants to purchase, at a
per share price of $10.90, up to 179,885 and 97,138 shares,
respectively, from the Company that do not become exercisable until
April 1998.
(6) Additionally, Messrs. Neeb, Morris and Textor and Ms. Riffe have
warrants to purchase, at a per share price of $10.90, up to 196,602,
98,301, 81,165 and 29,491 shares, respectively, from Larry N. Forehand
that do not become exercisable until April 1998.
(7) Warrants exercisable within 60 days of the Record Date by Tex-Mex
Partners, L.C., of which Mr. Textor is a principal but with respect to
which he has no ownership rights and with respect to which Mr. Textor
disclaims beneficial ownership.
(8) Includes 10,793 shares issuable pursuant to the exercise of stock
options exercisable within 60 days of the Record Date.
(9) Includes 2,000 shares issuable pursuant to the exercise of stock
options exercisable within 60 days of the Record Date.
(10) Includes 3,598 shares issuable pursuant to the exercise of stock
options exercisable within 60 days of the Record Date.
(11) Includes an aggregate of 191,575 shares issuable pursuant to the
exercise of stock options and warrants exercisable within 60 days of
the Record Date.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to
compensation paid by the Company and its subsidiaries to the Chief Executive
Officer and to the other most highly paid executive officers who received cash
compensation in excess of $100,000 for the fiscal year ended December 27, 1996
(collectively the "Named Executive Officers"). Information with respect to
compensation paid by the Company to the Chief Executive Officer for the fiscal
year ended December 26, 1995, is also presented. Information with respect to
prior fiscal years is not presented as the Company was not a reporting company
pursuant to Section 13(a) or 15(d) of the Exchange Act at any time during years
prior to 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS (#) COMPENSATION
- --------------------------- ---- ------ ----- ----- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Louis P. Neeb 1996 $ 60,577 - - - $ 10,500
Chairman and Chief 1995 - - - - $ 7,000
Executive Officer
Patrick A. Morris 1996 $164,138 - - 107,931 -
Chief Operating Officer
and President
</TABLE>
5
<PAGE> 8
The following table discloses, for each of the Named Executive
Officers, options granted during the fiscal year ended December 27, 1996, and
the potential realizable values for such options:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
---------------------------------------------------------- ----------------------------
SECURITIES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE
OPTIONS TO EMPLOYEES OR BASE EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR PRICE DATE 5% 10%
- ---- ---------- -------------- ----- ---- -- ---
<S> <C> <C> <C> <C> <C> <C>
Louis P. Neeb - - - - - -
Patrick A Morris (2) 107,931 38.9% $11.00 4/24/06 $746,649 $1,892,156
</TABLE>
- ----------------
(1) These dollar amounts represent the value of the option assuming
certain rates of appreciation from the market price of the Common
Stock at the date of grant. Actual gains, if any, on stock option
exercise are dependent on the future performance of the Common Stock
and overall market conditions. There can be no assurance that the
amounts reflected in this column will be achieved.
(2) Exercisable 10% on the first anniversary of the date of grant, 15% on
the second anniversary of the date of grant and 25% on each of the
third through fifth anniversaries of the date of grant.
The following table describes, for each of the Named Executive
Officers, options and the potential realizable values for their options at
December 27, 1996:
OPTION VALUES AT DECEMBER 27, 1996
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS (1)
------------------------------ ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Louis P. Neeb - - - -
Patrick A. Morris (2) - 107,931 - -
</TABLE>
- ---------------
(1) Based on the closing price per share of Common Stock on December 27,
1996, of $8.75 as reported by the Nasdaq National Market.
(2) Options were granted upon the Company's initial public offering and
vest 10% on April 24, 1997, 15% on April 24, 1998, and 25% on each
April 24 of years 1999, 2000 and 2001.
REPORT BY THE COMPENSATION/STOCK OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Board of Directors has established a Compensation/Stock Option
Committee (the "Committee") to administer all aspects of the compensation
program for the executive officers of the Company, including the review and
approval of the compensation levels, the evaluation of performance and the
granting of options under the Company's 1996 Casa Ole Long Term Incentive Plan.
The Committee consists of the three directors whose names are listed at the end
of this report.
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<PAGE> 9
The primary objective of the Company's compensation program is to
attract, retain and reward executives whose contributions will enhance the
Company's ability to execute its business strategy. The Company's strategy is
to provide shareholder value by growing the system through both same-store
sales increases and new unit openings, while differentiating the concept from
competition and maintaining strong price value for the customers.
The Company's executive compensation program includes base salary, a
cash bonus program, stock options and other forms of compensation as determined
by the Committee. Performance of the Company, the level of each executive's
responsibility and his or her ability to contribute to the Company's success
are considered in determining total compensation. Stock price performance is
only one measure of success and may not be the best current measure of
executive performance. Base salaries are set by considering compensation
levels of similar positions within industry peers.
The Company has three-year employment agreements with each of Messrs.
Neeb and Morris and Ms. Riffe that commenced with the completion of the
Company's initial public offering in April 1996, subject to the right of the
employee to terminate the agreement upon six months' notice to the Company.
Such agreements are subject to annual review and adjustment, and, in the event
that an agreement is terminated by the Company within three years from the
commencement of employment, the Company will pay the employee's base salary
until the first to occur of one year after termination or the securing of
alternative employment by the employee. Under the agreements, annual base
salaries for fiscal 1996 for Messrs. Neeb and Morris and Ms. Riffe were
$90,000, $160,000 and $79,500, respectively. No adjustments were made to the
base salaries during fiscal 1996.
Company executives are eligible to receive annual cash bonus awards
based in part on a formula of profits relative to financial plan. For fiscal
1996, no such bonuses were awarded.
The Board of Directors and shareholders of the Company approved the
Casa Ole 1996 Long Term Incentive Plan (the "Incentive Plan") in conjunction
with the initial public offering. The Incentive Plan authorizes the granting
of incentive stock options and non-qualified stock options to purchase Common
Stock, stock appreciation rights, restricted stock and performance units to key
executives and other key employees of the Company, including officers of the
Company and its subsidiaries, and is administered by the Committee. The
purpose of the Incentive Plan is to attract and retain key employees, to
motivate key employees to achieve long-range goals and to further align the
interests of key employees with those of the other shareholders of the Company.
The Incentive Plan authorizes the award of 320,000 shares of Common
Stock to be used for stock options, stock appreciation rights or restricted
stock. The Incentive Plan will terminate on December 31, 2005.
Executives and other key full-time employees of the Company and its
subsidiaries may be selected by the Committee to receive awards under the
Incentive Plan. In the discretion of the Committee, an eligible employee may
receive an award in the form of a stock option, stock appreciation right,
restricted stock award or performance unit or any combination thereof, and more
than one award may be granted to an eligible employee.
The Incentive Plan authorizes the award of both incentive stock
options and nonqualified stock options. Under the Incentive Plan, an option
may be exercised at any time during the exercise period established by the
Committee, except that: (i) no option may be exercised prior to the later of
the expiration of six months from the date of grant or one year following the
completion of the offering; (ii) no option may be exercised more than ninety
days after employment with the Company and its subsidiaries terminates by
reason other than death, disability or authorized leave of absence for military
or government service; and (iii) no option may be exercised more than twelve
months after employment with the Company and its subsidiaries terminates by
reason of death or disability. The term of each option is determined by the
Committee, but in no event may such term exceed ten years from the date of
grant.
The Company's Board of Directors granted options covering 107,931 and
35,977 shares of Common Stock to Mr. Morris and Ms. Riffe, respectively under
the Incentive Plan prior to the date on which the Registration Statement
relating to the Company's initial public offering was declared effective by the
Securities and Exchange Commission. The exercise price of all such options is
equal to the initial public offering price of $11.00. All such options will
vest and become exercisable at the rate of 10% on the first anniversary of the
date of grant, 15% on the second anniversary of the date of grant, and 25% on
each of the third through fifth anniversaries of the date of grant.
7
<PAGE> 10
Although not part of the compensation program for the Company's
executive officers, the Committee also administers the 1996 Managers Stock
Option Plan (the "Managers Plan"), which authorizes the granting of
non-qualified stock options to purchase Common Stock to employees of the
Company and its subsidiaries who are managers or assistant managers of or hold
key managerial positions in or for the Company or any subsidiary ("Managers")
and who are at the time of grant neither officers, directors nor 10%
shareholders of the Company. The Managers Plan was adopted by the Board of
Directors of the Company. The purpose of the Managers Plan is to attract and
retain key employees, to motivate key employees to achieve long-range goals, to
provide incentive compensation opportunities that are competitive with those of
other corporations and further align the interest of eligible employees with
the Company's other shareholders.
The Managers Plan authorizes the award of an aggregate of 200,000
shares of Common Stock to be used for non- qualified stock options. The
Managers Plan will terminate on December 31, 2005.
Under the Managers Plan, non-qualified stock options may be granted to
Managers at the price determined by the Committee, which shall be 100% of the
fair market value at the date the option is granted unless the Committee
expressly determines otherwise. The Managers Plan provides that an option
granted thereunder may be exercised at any time during the exercise period
established by the Committee, except that: (i) no option may be exercised more
than ninety days after employment with the Company and its subsidiaries has
terminated by reason other than death, disability or authorized leave of
absence for military or government service; and (ii) no option may be exercised
more than 12 months after employment has terminated by reason of death or
disability. The term of each option is determined by the Committee, but in no
event may such term exceed ten years from the date of grant.
The Committee believes that the compensation of the Company's
executives during fiscal 1996 was consistent with the objectives of the
Company's executive compensation program.
COMPENSATION/STOCK OPTION COMMITTEE
Larry N. Forehand
Michael D. Domec
Richard E. Rivera
COMPENSATION/STOCK OPTION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The Compensation/Stock Option Committee consists of Larry N. Forehand,
Michael D. Domec and Richard E. Rivera. Mr. Rivera serves as Chairman of the
Committee.
Prior to the Company's initial public offering in April 1996, Mr.
Forehand and Mr. Domec were officers, directors and shareholders in several of
the subsidiaries of the Company. Pursuant to a Contribution Agreement (see
"Certain Relationships and Related Transactions--Reorganization"), the
shareholders of the prior corporations contributed to the Company all
outstanding shares of capital stock of each corporation, and the Company issued
to such shareholders in exchange therefor an aggregate of 2,732,705 shares of
its Common Stock. The exchange transaction contemplated by the Contribution
Agreement was completed April 24, 1996. As a result of the exchange
transaction contemplated by the Contribution Agreement, the prior corporations
became wholly owned subsidiaries of the Company, and Mr. Forehand and Mr. Domec
received 983,012 and 1,315,000 shares of the Company's Common Stock,
respectively.
The Contribution Agreement also obligated Mr. Domec to sell, and the
Company to purchase, 1,135,000 shares of Common Stock owned by Mr. Domec
subsequent to the completion of the offering at an aggregate purchase price of
$11.35 million, or $10.00 per share, which repurchase was consummated
immediately after the offering.
In addition, the Company engaged in various other transactions related
to Mr. Forehand and/or Mr. Domec. For a complete description of each of the
following transactions, see "Certain Relationships and Related Transactions."
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Bay Area Management, Inc., an entity owned by Robert N. Domec, the
brother of Michael D. Domec, performs certain accounting, financial, payroll
and administrative services for the Company. Additionally, the Company leases
its executive offices from CO Properties No. 3, a Texas general partnership of
which Michael D. Domec and Larry N. Forehand are partners.
Larry N. Forehand sold warrants to Messrs. Neeb and Morris and Ms.
Riffe and to an entity affiliated with Mr. Textor to purchase an aggregate of
520,996 shares (with warrants for 25,000 of such shares to Mr. Textor's
affiliated entity rescinded by agreement in 1996) of the Common Stock of the
Company held by Mr. Forehand at the initial public offering price ($11.00 per
share) less the amount paid for the warrant ($.10 per share).
Prior to the effective date of the initial public offering, Larry N.
Forehand and his brother, Leon Forehand, made loans to certain corporations
that are now subsidiaries of the Company.
Michael D. Domec has signed a multi-unit development agreement with
the Company and has agreed to open a minimum of five restaurants in the
Houston, Texas area by 2001.
MDD Investments, Inc., a corporation controlled by Michael D. Domec,
received royalties from various of the corporations prior to the initial public
offering in connection with consulting services provided to such entities with
respect to restaurant design, purchasing and operational support.
Pursuant to Item 404 of Commission Regulation S-K, no executive
officer of the Company served as a member of the Compensation Committee (or
other board committee performing similar functions or, in the absence of any
such committee, the entire Board of Directors) of another corporation, one of
whose executive officers served on the Compensation Committee. No executive
officer of the Company served as a director of another corporation, one of
whose executive officers served on the Compensation Committee. No executive
officer of the Company served as a member of the Compensation Committee (or
other board committee performing equivalent functions or, in the absence of any
such committee, the entire Board of Directors) of another corporation, one of
whose executive offers served as a director of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon review of Forms 3, 4 and 5 for the 1996 fiscal year,
all reports required by Section 16(a) of the Securities Exchange Act of 1934 in
connection with the acquisition of shares of Common Stock by officers,
directors and persons who own more than 10% of a registered class of the
Company's equity securities were filed timely.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
REORGANIZATION
The Company was organized under the laws of the State of Texas on
February 16, 1996. The Company, the predecessor corporations and their
respective shareholders were parties to a Master Contribution Agreement dated
as of February 26, 1996 (the "Contribution Agreement"). The Contribution
Agreement provided for the organization and capitalization of the Company, the
redemption of Mr. Domec's shares and the rights and obligations of the
shareholders and the predecessor corporations with respect to certain federal
and state income tax matters relating to periods prior to the closing of the
transactions therein contemplated.
Acquisition of Predecessor Corporations. Pursuant to the Contribution
Agreement, the shareholders of the predecessor corporations contributed to the
Company all outstanding shares of capital stock of each of the corporations,
and the Company issued to such shareholders in exchange therefor an aggregate
of 2,732,705 shares of its Common Stock. The exchange transaction contemplated
by the Contribution Agreement was completed April 24, 1996. As a result of the
exchange transaction contemplated by the Contribution Agreement, the
predecessor corporations became wholly owned subsidiaries of the Company and
each shareholder of the Company
9
<PAGE> 12
received the following number of shares of Common Stock: Michael D. Domec,
1,315,000 shares; Larry N. Forehand, 983,012 shares; Robert N. Domec, 108,903
shares; Robert L. Forehand, 230,000 shares; Lawrence K. Schoening, 40,205
shares; and Corkey L. Turner, 55,585 shares.
Repurchase of Michael D. Domec's Shares. The Contribution Agreement
also obligated Michael D. Domec to sell, and the Company to purchase, 1,135,000
shares of Common Stock owned by Mr. Domec subsequent to the completion of the
offering at an aggregate purchase price of $11.35 million, or $10.00 per share.
The Contribution Agreement provided that the repurchase of Mr. Domec's shares
be consummated within five business days following the closing of the Company's
initial public offering, and such repurchase was consummated timely.
Federal and State Income Tax Matters; Indemnity. Upon consummation of
the exchange transaction contemplated by the Contribution Agreement, the S
corporation status of those predecessor corporations that had elected such
status ("Electing Corporations") terminated. The Contribution Agreement
provided that the income earned by the Electing Corporations for the period of
the current year during which they were S corporations would be allocated to
their respective shareholders for income tax purposes. Each such shareholder
is required under the Contribution Agreement to pay any and all taxes imposed
on him or such Electing Corporation for all taxable periods during which such
corporation was an S corporation, as well as any taxes imposed on him and/or
such corporation as a result of such corporation's S election being treated as
invalid or ineffective for any reason or for the revocation or termination of
such election prior to the termination date contemplated by the Contribution
Agreement.
The Contribution Agreement provided certain indemnity arrangements
among the Electing Corporations and their shareholders with respect to
adjustments to income and expense items for prior periods. In general, the
Electing Corporations were required to indemnify their respective shareholders
against all liabilities, including fines, deficiencies, costs and expenses with
respect to all taxes imposed on such shareholders as a result of an adjustment
to income reported by such Electing Corporations to such shareholders for any
period prior to termination of S corporation status as long as such adjustment
results in a corresponding decrease in the liability for taxes payable by the
Electing Corporations (excluding adjustments that affect the period or periods
during which items of income or expense were recognized to the extent that the
shareholder receives a refund or credit for overpayment of tax as a result of
such adjustment). Because the Electing Corporations are subsidiaries of the
Company pursuant to the consummation of the exchange transaction contemplated
by the Contribution Agreement, any indemnity required by an Electing
Corporation would adversely affect the consolidated financial statements of the
Company. Each shareholder of an Electing Corporation was required to indemnify
the Electing Corporation against his pro rata share of all liabilities,
including fines, deficiencies, costs and expenses with respect to all taxes
imposed on such Electing Corporation as a result of an adjustment to income
resulting in a decrease in such shareholder's taxable income for a particular
period or periods prior to the termination of S corporation status (although
the amount of any such indemnity obligation will be reduced by an amount equal
to the federal or state tax benefit resulting from deductions allowable to the
Electing Corporation for any state or local taxes paid by the Electing
Corporation with respect to any taxable income shifted from an S corporation
period to a C corporation period). In no event will the indemnity obligation
of such shareholder be greater than the amount by which the reduction in tax
liability of the shareholder resulting from the shifting of income to a C
corporation taxable year exceeds all reasonable costs incurred by the
shareholder attributable to securing such reduction in tax liability. Each
shareholder was also required to indemnify the Electing Corporation against his
pro rata share of all liabilities, including fines, deficiencies, costs and
expenses with respect to all taxes imposed on such Electing Corporation as a
result of a determination that all or any portion of the S corporation taxable
income reported for such Electing Corporation is taxable to the Electing
Corporation because the S corporation election for the Electing Corporation was
not effective or was revoked or terminated prior to the date of termination of
S corporation status.
AGREEMENTS CONCERNING WARRANTS AND OPTIONS
Under agreements dated the same date as the Contribution Agreement,
the Company entered into warrant agreements with Mr. Neeb and Tex-Mex Partners,
L.C. ("Tex-Mex"), a limited liability company of which Mr. Textor is a
principal, pursuant to which Mr. Neeb and Tex-Mex acquired warrants to purchase
shares of Common Stock at the initial public offering price less the amount
paid for the warrant ($.10 per share) for an aggregate amount of Common Stock
equal to ten percent (10%) of the shares of Common Stock of the Company
outstanding upon consummation of the initial public offering. Such shares were
allocated 5%, or 179,885 shares, to Mr. Neeb and 5%, or 179,885 shares, to
Tex-Mex. The Company's warrants to Mr. Neeb become exercisable on the
10
<PAGE> 13
second anniversary of the initial public offering, and the Company's warrants
to Tex-Mex become exercisable on the first anniversary of the initial public
offering.
The Company also granted stock options to Mr. Morris for an amount of
shares of Common Stock equal to 3% of the Common Stock, or 107,931 shares,
outstanding upon completion of the offering and to Ms. Riffe for an amount of
shares of Common Stock equal to 1% of the Common Stock, or 35,977 shares,
outstanding upon completion of the offering, with an exercise price equal to
the initial public offering price. The options granted to Mr. Morris and Ms.
Riffe vest and become exercisable at the rate of 10% on the first anniversary
of the date of grant, 15% on the second anniversary of the date of grant and
25% on each of the third through fifth anniversaries of the date of grant.
In addition, Larry N. Forehand sold warrants to Mr. Neeb, Tex-Mex, Mr.
Morris and Ms. Riffe to purchase an aggregate of 520,996 shares of the Common
Stock of the Company held by Mr. Forehand at the initial public offering price
less the amount paid for the warrant ($.10 per share). Such shares were
allocated 196,602 shares to Mr. Neeb, 196,602 shares to Tex-Mex (with warrants
for 25,000 of such shares rescinded by agreement in 1996), 98,301 shares to Mr.
Morris and 29,491 shares to Ms. Riffe. The warrants acquired from Mr. Forehand
by Messrs. Neeb and Morris and Ms. Riffe become exercisable on the second
anniversary of the initial public offering, and the warrants acquired from Mr.
Forehand by Tex-Mex become exercisable on the first anniversary of the initial
public offering (except for those allocable to Mr. Textor, which become
exercisable on the second anniversary).
The Company has granted limited registration rights to holders of
warrants granted by the Company and Larry N. Forehand to Mr. Neeb, Tex-Mex, Mr.
Morris and Ms. Riffe to register the 855,766 underlying shares of Common Stock
covered by such warrants in connection with registrations otherwise undertaken
by the Company.
LOANS BY RELATED PARTIES
Larry N. Forehand and his brother, Leon Forehand, made loans to
certain predecessor corporations from time to time prior to the Company's
initial public offering. Leon Forehand made a $125,000 loan to a predecessor
corporation in 1994. This loan, which had an outstanding principal balance of
approximately $34,469 at December 27, 1996, bears interest at 9% per annum and
is repayable in monthly payments of $3,975 of principal and interest through
October 1997. At December 27, 1996, the Company had no outstanding
indebtedness to Larry N. Forehand. The Company believes that the terms of the
loan arrangement are as favorable as those which the Company could have
obtained from a non-affiliated third party, and, therefore, plans to retire
such loan in accordance with its terms.
LEASE OF HEADQUARTERS BUILDING
The Company leases its executive offices in Houston, Texas from CO
Properties No. 3, a Texas partnership owned by Larry N. Forehand and Michael
D. Domec. The lease, which expires in April 1998, is a gross lease (where the
landlord pays utilities and property taxes) with monthly rental payments of
$5,000 per month (representing $1.00 per square foot). The Company believes
that this lease is on terms at least as favorable as could be obtained from an
unrelated third party.
ACCOUNTING AND FINANCIAL SERVICES
Bay Area Management Inc., an entity owned by Robert N. Domec, the
brother of Michael D. Domec, has performed accounting and financial services
for the predecessors of the Company for approximately 15 years. In addition to
providing all central accounting and certain administrative functions for the
Company, Bay Area Management, Inc. handles payroll, payroll taxes and related
personnel functions for the Company. Total fees paid by the Company to Bay
Area Management, Inc. for fiscal 1996 were $177,707. The Company believes that
the services provided by Bay Area Management, Inc. have been provided on terms
at least as favorable as could be obtained from an unrelated third party, and
the Company presently intends to continue to use the services of this company.
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<PAGE> 14
AREA DEVELOPMENT AGREEMENT
Michael D. Domec is a franchisee of Casa Ole and has agreed to open a
minimum of five restaurants in the Houston, Texas area by 2001. The first
restaurant under Mr. Domec's multi-unit development agreement opened in October
1996. Under the multi-unit development agreement Mr. Domec does not pay a
franchise fee but pays a royalty of 2% of gross sales.
The Company believes that the foregoing transactions were on terms no
less favorable to it than those that could have been obtained from unaffiliated
third parties. Related party transactions are subject to the review and
approval of the Company's Audit Committee, which is comprised exclusively of
independent directors who are not otherwise involved in the day-to-day
management of the Company or officers of the Company, and who do not have a
personal financial interest in the matter in which they are acting. Any future
related party transactions will be on terms no less favorable to the Company
than those that could be obtained from unaffiliated third parties.
PERFORMANCE GRAPH
The following performance graph compares the cumulative return of the
Common Stock with that of the Nasdaq Composite Index and the Standard & Poors
Midcap Restaurants Index since the Company's initial public offering, assuming
in each case an initial investment of $100 on April 25, 1996.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
TOTAL RETURN ANALYSIS
4/25/96 6/28/96 8/30/96 10/31/96 12/27/96
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASA OLe RESTAURANTS, INC. $ 100.00 $ 124.43 $ 119.32 $ 107.95 $ 79.55
S&P MIDCAP RESTAURANTS $ 100.00 $ 92.60 $ 86.06 $ 77.88 $ 81.47
NASDAQ COMPOSITE $ 100.00 $ 100.12 $ 96.48 $ 103.27 $ 109.23
- ------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 15
SELECTION OF INDEPENDENT AUDITORS
(PROPOSAL 2)
KPMG Peat Marwick LLP has served as the Company's independent
auditors since the initial public offering and are proposed to serve as the
independent auditors for the Company and its subsidiaries for the year ending
December 26, 1997. Representatives of KPMG Peat Marwick LLP are expected to be
present at the shareholders' meeting to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Any shareholder who intends to present a proposal at the 1998 Annual
Meeting of Shareholders for inclusion in the proxy statement and form of proxy
relating to that meeting is advised that the proposal must be received by the
Company at its principal executive offices not later than December 21, 1997.
The Company will not be required to include in its proxy statement or form of
proxy a shareholder proposal which is received after that date or which
otherwise fails to meet requirements for shareholder proposals established by
regulations of the Securities and Exchange Commission.
OTHER MATTERS
The solicitation of proxies is made by and on behalf of the Board.
The cost of the solicitation will be borne by the Company, including the
reasonable expenses of brokerage firms or other nominees for forwarding proxy
materials to beneficial owners. In addition to solicitation by mail, proxies
may be solicited by telephone, telegraph or personally. Proxies may be
solicited by directors, officers and employees of the Company without
additional compensation.
If the enclosed proxy is executed and returned, the shares represented
thereby will be voted in accordance with any specifications made by the
shareholder. IN THE ABSENCE OF ANY SUCH SPECIFICATION, THEY WILL BE VOTED TO
ELECT THE DIRECTORS AS SET FORTH UNDER "ELECTION OF DIRECTORS" ABOVE AND TO
APPROVE THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT AUDITORS FOR
FISCAL 1997 AS SET FOR UNDER "SELECTION OF INDEPENDENT AUDITORS" ABOVE.
Pursuant to applicable law, broker nonvotes and abstaining votes will not be
counted in favor of or against the election of any nominee for director or any
of the proposals to be presented at the meeting.
The presence of a shareholder at the meeting will not operate to
revoke his proxy. A proxy may be revoked at any time insofar as it has not
been exercised by giving written notice to the Company.
If any other matters come before the meeting, the persons named in the
proxy, or their substitutes, will vote thereon in accordance with their
judgment. The Board does not know of any other matters which will be presented
for action at the meeting.
By Order of the Board of Directors
Stacy M. Riffe
Secretary
April 23, 1997
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<PAGE> 16
PROXY PROXY
CASA OLE RESTAURANTS, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS -- MAY 28, 1997
The Undersigned hereby appoints LOUIS P. NEEB, PATRICK A. MORRIS and
STACY M. RIFFE, and each or any of them, as attorneys, agents and proxies of
the undersigned with full power of substitution, for and in the name, place
and stead of the undersigned, to attend the annual meeting of shareholders of
Casa Ole Restaurants, Inc. (the "Company") to be held in the Company's Pasadena
restaurant located at 1520 E. Southmore, Pasadena, Texas, on Wednesday, May 28,
1997, at 10:00 a.m., Houston time, and any adjournments(s) thereof, and to vote
thereat the number of shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present as indicated below
and on the reverse side hereof and, in their discretion, upon any other
business which may properly come before said meeting. This Proxy when
properly executed will be voted in accordance with your indicated directions.
If no direction is made, this proxy will be voted FOR the election of directors
and approval of the appointment of independent auditors.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 17
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
[ ]
For Withhold For All
1. Election of Directors -- All All Except
Nominees: Larry N. Forehand, John C. Textor [ ] [ ] [ ]
---------------------------------
(Except nominee(s) written above)
2. To approve the appointment of For Against Abstain
KPMG Peat Marwick LLP as the [ ] [ ] [ ]
Company's independent auditors
for fiscal 1997.
Please check this box if you plan to attend [ ]
the Annual Meeting of Shareholders
The undersigned acknowledges receipt of the
Notice of Annual Meeting of Shareholders and
of the Proxy Statement.
Dated:____________________, 1997
Signature(s)_________________________________
---------------------------------------------
Please sign exactly as your name appears.
Joint owners should each sign personally.
Where applicable, indicate your official
position or representation capacity. Please
date, sign and return this Proxy in the
enclosed business envelope.
