August 14, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Room 1004
Judiciary Plaza
Washington, D.C. 20549
RE: El Chico Restaurants, Inc. 10-Q for Quarter Ended June 30, 1996
Gentlemen:
We are transmitting electronically the Form 10-Q for El Chico
Restaurants, Inc. for the quarter ended June 30, 1996.
We are also forwarding three complete copies, one of which is manually
signed, to the National Association of Securities Dealers, Inc.
Sincerely,
Susan R. Holland
Treasurer, Controller
/ktc
cc: National Assoc. of Securities Dealers, Inc.
(w/enclosures)
Lawrence E. White
John A. Cuellar
Ron Frappier
Darl Hatfield
Britt Langford
<PAGE>
=========================================================================
F O R M 1 0 - Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 0-12802
EL CHICO RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Texas 75-0982250
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
12200 Stemmons Freeway, Suite 100, Dallas, Texas 75234
(Address of principal executive offices)
(Zip Code)
(214) 241-5500
(Registrant's telephone number, including area code)
___________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No___
Number of shares outstanding of each of the issuer's classes of common stock,
as of August 9, 1996.
Common Stock, $0.10 par value: 3,801,646.
=========================================================================
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands of Dollars, Except Par Value Amounts)
June 30, December 31,
1996 1995
---------- ------------
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $148 $266
Accounts Receivable 851 979
Income Tax Receivable 58 66
Inventories 921 1,100
Prepaid Expenses and Other 1,053 1,346
Deferred Income Taxes 3,408 71
------- -------
Total Current Assets 6,439 3,828
Property and Equipment - Net 39,458 46,209
Other Assets and Deferred Costs 604 1,002
------- -------
$46,501 $51,039
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of
Long-Term Debt $26 $25
Trade Accounts Payable 3,979 4,384
Accrued Liabilities 5,581 4,115
------- -------
Total Current Liabilities 9,586 8,524
Long-Term Debt, Less Current
Maturities 10,183 8,435
Other Long-Term Liabilities 1,103 1,240
Deferred Income Taxes 434 343
Stockholders' Equity:
Preferred Stock - Authorized 1,000,000
Shares of $.10 Par Value;
None Issued - -
Common Stock - Authorized 10,000,000
Shares of $.10 Par Value; Issued
4,750,142 and 4,746,975 Shares in
1996 and 1995 475 475
Additional Paid-In Capital 15,900 15,895
Retained Earnings 16,715 21,938
Unamortized Value of Restricted
Stock Issued (28) (59)
------- -------
33,062 38,249
Less Treasury Stock - At Cost, 918,795
and 651,744 Shares in 1996 and 1995,
respectively (7,867) (5,752)
------- -------
25,195 32,497
------- -------
$46,501 $51,039
======= =======
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Six
Quarter Ended Months Ended
------------------ ----------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
Revenues:
Sales from Company-Owned
restaurants $26,139 $25,729 $51,485 $49,671
Equipment sales 136 416 313 608
Franchise revenues 510 542 1,002 1,003
------- ------- ------- -------
26,785 26,687 52,800 51,282
------- ------- ------- -------
Cost and Expenses:
Restaurant cost of sales - food
and beverage 6,939 6,471 13,937 12,547
Restaurant cost of sales - labor 8,525 8,514 17,171 16,654
Restaurant operating expenses 7,541 7,355 15,524 14,164
Cost of equipment sales 105 388 249 529
General and administrative 2,438 2,332 4,816 4,717
Special Charge 9,421 - 9,421 -
Gain on sale of assets (605) - (605) -
Interest expense 149 158 306 307
Interest income (16) (10) (30) (46)
------- ------- ------- -------
34,497 25,208 60,789 48,872
------- ------- ------- -------
Income (loss) before income
taxes (7,712) 1,479 (7,989) 2,410
Income tax provision (benefit) (2,684) 476 (2,766) 782
------- ------- ------- -------
NET EARNINGS (LOSS) $(5,028) $1,003 $(5,223) $1,628
======= ======= ======= =======
Net earnings (loss) per
common share $(1.27) $0.25 $(1.30) $0.41
======= ======= ======= =======
Weighted average number of
shares and share equivalents
outstanding 3,964,076 3,942,393 4,027,649 4,012,951
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Six Months Ended
6/30/96 6/30/95
------- -------
Cash Flows from Operating Activities:
Net Earnings (Loss) $(5,223) $1,628
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided by Operating Activities:
Special Charge 9,421 -
Gain on Sale of Property (605) -
Depreciation and Amortization of
Property and Equipment 2,796 2,447
Amortization of Deferred Costs 432 686
Decrease (Increase) in Accounts Receivable 128 (47)
Decrease in Income Tax Receivable 8 -
Decrease in Inventories 179 24
Decrease in Prepaid Expenses and Other 293 255
Increase in Other Assets and Deferred Costs (60) (625)
Decrease in Trade Accounts Payable and
Accrued Liabilities (835) (988)
Increase in Income Taxes Payable - 181
Increase (Decrease) in Long-Term Liabilities (137) 409
Deferred Income Taxes (3,246) (125)
Other 99 109
------ ------
Net Cash Provided by Operating
Activities 3,250 3,954
------ ------
Cash Flows from Investing Activities:
Proceeds from Sale of Property 700 -
Purchase of Property and Equipment (3,716) (5,832)
------ ------
Net Cash Used in Investing Activities (3,016) (5,832)
------ ------
Cash Flows from Financing Activities:
Borrowings of Long-Term Debt 1,760 3,300
Purchase of Treasury Stock (2,112) (2,174)
Proceeds from Note Receivable - 245
------ ------
Net Cash (Used in) Provided by
Financing Activities (352) 1,371
------ ------
Net Decrease in Cash (118) (507)
Cash and Cash Equivalents at Beginning of Period 266 727
------ ------
Cash and Cash Equivalents at End of Period $148 $220
====== ======
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
Note to Consolidated Condensed Financial Statements
(Unaudited)
1. Basis of presentation and other accounting information.
The consolidated condensed financial statements and information included
herein are unaudited; however, they reflect all adjustments which are, in
the opinion of Management, necessary for a fair statement of the results of
operations for the interim periods ended June 30, 1996 and June 30, 1995
and financial position at June 30, 1996. The adjustments consist only of
normal recurring items except for the special charge discussed below. The
results of operations for the six months ended June 30, 1996 are not
necessarily indicative of the results to be expected for the full fiscal
year. The notes to the consolidated financial statements contained in the
December 31, 1995 Annual Report on Form 10-K should be read in conjunction
with the consolidated condensed financial statements.
2. Special Charge.
During the quarter the Company incurred a special charge of $9.4 million to
provide for the impairment and exit plans of six units slated for closing,
the impairment of the carrying values of three other stores that will
continue operating as well as a write-down of certain other assets. One of
the six stores is an older store that was closed during the quarter and was
replaced with a new prototype which opened July 16, 1996. The effect of
the impairment, excluding the store to be replaced, reduced depreciation
and amortization expense by $170,000 in the second quarter and will reduce
depreciation and amortization by $280,000 in the last half of the year.
Collectively, the five stores to be closed had sales of $903,000 and
$942,000 and store operating loses of $250,000 and $9,000 in the first and
second quarter in 1996, respectively.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company has an unsecured credit facility with a $16,000,000 commitment
comprised of a $15,000,000 revolving line of credit and a $1,000,000 letter of
credit facility. The line of credit matures on December 31, 1997, and may be
converted to a term loan, payable quarterly on a 10-year amortization
schedule, and maturing on December 31, 1999. Both the line of credit and the
term loan presently bear interest at the Company's option of prime rate or up
to six-month LIBOR plus .75 percent. Both rates are subject to maintaining
certain financial covenants, and interest is payable upon maturity of the
LIBOR advances or quarterly for prime rate advances. Principally because of
the special charge, the interest on the line of credit will be at LIBOR plus
1.75 percent and/or prime plus 0.50 percent beginning on August 14, 1996
until certain financial covenants are met. In addition, the Company has
entered into an interest rate swap on a notional balance of $5 million, under
which a fixed rate of 6.61 percent is paid against a floating rate equal to
three-month LIBOR, initially 5.50 percent. In addition, a commitment fee of
.25 percent is payable quarterly on any unused commitments. As of June 30,
1996, $10,135,000 was outstanding under the line of credit. The credit
facility was obtained for the funding of the construction of new Company-
owned restaurants, remodeling existing restaurants, and the purchase of the
Company's headquarters facility during 1993. The Company plans to open
two restaurants and remodel ten to twelve El Chico restaurants and estimates
capital expenditures during 1996 to be approximately $8,000,000 to
$10,000,000, which will be funded by internal operations and the existing
credit facility. The credit facility also may be used for the repurchase of
the Company's common stock with certain limitations. The Board of Directors
has authorized the repurchase of up to 409,000 shares of the Company's common
stock from time-to-time in the open market. As of August 9, 1996, 300,900
shares have been purchased under this plan.
Forward-looking statements regarding management's present plans or
expectations for new restaurant openings, remodels, other capital
expenditures, the financing thereof, and disposition of impaired restaurants
involve risks and uncertainties relative to return expectations and related
allocation of resources, and changing economic or competitive conditions, as
well as the negotiation of agreements with third parties, which could cause
actual results to differ from present plans or expectations and such
differences could be material.
During the quarter one Company-owned "El Chico" restaurant was closed in
Richardson, Texas, and on July 16, 1996 a new replacement store was opened.
The Company is currently operating with a working capital deficit, which is
common in the restaurant industry, since restaurant companies do not typically
require a significant investment in either accounts receivable or inventory.
Working capital increased from a deficit of $4,696,000 at December 31, 1995 to
a deficit of $3,147,000 at June 30, 1996, primarily as a result of an increase
in the deferred tax benefit partly offset by an increase in accrued
liabilities. Both increases are the result of the special charge.
Results of Operations
Revenues for the quarter ended June 30, 1996 were $26.8 million, an increase
of.4 percent, as compared to $26.7 million for the quarter ended June 30,
1995. Company-owned restaurant sales included in these amounts were $26.1
million and $25.7 million, respectively, an increase of 1.6 percent,
reflecting the addition of new stores. Comparable Company-owned El Chico
concept restaurant sales were down 3.6 percent.
Year-to-date revenues were $52.8 million compared with $51.3 million for the
same period a year earlier. Company-owned restaurant sales included in these
amounts were $51.5 million and $49.7 million, respectively. The increase of
3.7 percent was due to the addition of new stores, partly offset by a decrease
of 2.2 percent in comparable Company-owned El Chico concept restaurant sales.
Franchise-related income decreased for the quarter due to a franchise fee in
the prior year related to the opening of the Wichita, Kansas restaurant and a
decrease in comparable store sales of 4.9 percent. Year-to-date
franchise-related income decreased $1,000 due to the franchise fee in the
prior year and a decline in comparable store sales of 2.6 percent, partly
offset by an increase in the number of franchised stores.
Pronto Design & Supply, Inc. (Pronto) is a wholly owned subsidiary in the
business of designing food-service kitchens and supplying the related
equipment. Equipment sales decreased for the quarter and year-to-date due to
the sale of kitchen equipment a year ago to a franchisee. Equipment cost of
sales for the quarter and year-to-date decreased as a percentage of sales due
to higher vendor rebates.
Restaurant food costs increased as a percentage of sales to 26.5 percent from
25.2 percent and to 27.1 percent from 25.3 percent for the quarter and
year-to-date, respectively. The increases were a result of increased cost of
cheese and tomatoes, the offering of additional menu items with higher costs
and an accrual for an underpayment of prior period sales tax. These increases
were partly offset by decreased cost of other produce items.
Restaurant labor decreased for the quarter and year-to-date as a percentage of
sales to 32.6 percent from 33.1 percent and to 33.4 percent from 33.5 percent,
respectively, due to the elimination of the restaurant cashier position by
changing to a server-banking system, and from converting certain restaurant
employees from minimum wage to tipped compensation. This decrease was offset
by increased payroll taxes and management compensation expense, which
increased as a percentage of sales as a result of lower weighted average sales
per restaurant. Payroll taxes were higher as FICA paid on reported tips
increased as a result of more employees being compensated by tips.
Operating expenses for the quarter increased as a percentage of sales from
28.6 percent to 28.8 percent as a result of an increase in repairs and
utilities, partly offset by a decrease in depreciation expense and pre-opening
amortization. Operating expenses for the year-to-date increased as a
percentage of sales from 28.5 percent to 30.1 percent as a result of an
increase in repair and maintenance costs and expenses related to the
replacement of point-of-sale equipment. In addition, year-to-date operating
expenses included advertising production costs of $285,000 for the production
of television test commercials. These increases were partly offset by a
decline in depreciation and pre-opening amortization. Depreciation decreases
were due to the impairment of certain assets.
General and administrative costs increased for the quarter and year-to-date
due to increased field supervision and corporate employee costs, partly offset
by lower professional fees.
During the quarter the Company incurred a pre-tax special charge of $9.4
million to provide for the impairment and exit plans of six units slated for
closing, the impairment of the carrying values of three other stores that will
continue operating as well as a write-down of certain other assets. One of
the six stores is an older store that was closed during the quarter and was
replaced with a new prototype which opened July 16, 1996. Subsequent to the
end of the quarter, the Company entered into an agreement with an existing
franchisee to operate an impaired restaurant. The effect of the impairment,
excluding the store to be replaced, reduced depreciation and amortization
expense by $170,000 in the second quarter and will reduce depreciation and
amortization by $280,000 in the last half of the year. Collectively, the five
stores yet to be closed had sales of $903,000 and $942,000 and store operating
loses of $250,000 and $9,000 in the first and second quarter of 1996,
respectively.
During the quarter, the Company sold two parcels of real estate including the
sale of a store previously leased to a franchisee which was sold to that
franchisee and sale of a vacant, undeveloped piece of land adjacent to
a franchise store resulting in gains of $605,000.
Interest expense decreased for the quarter due to lower interest rates, partly
offset by higher borrowings. Interest expense for the year-to-date was stable
with a decrease of $1,000.
On February 15, 1996, the Board of Directors authorized the repurchase of up
to 409,000 shares of the Company's outstanding common stock from time to time
in the open market. As of August 9, 1996, 300,900 shares have been purchased
for a total purchase cost of $2.4 million.
At June 30, 1996 there were 70 Company-operated restaurants and 28 franchised
restaurants, excluding one franchised store which was destroyed by fire during
the quarter.
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
On May 2, 1996, the Company held its annual meeting of shareholders.
At such meeting, the shareholders (i) elected directors of the Company
and (ii) approved a proposal to adopt the El Chico Restaurants, Inc.
1995 Stock Plan (1,608,506 for, 180,467 against, 15,517 abstain,
937,800 non-votes).
The votes for directors were as follows.
Nominee For Withheld
Wallace A. Jones 2,734,405 7,885
Grahame N. Clark, Jr. 2,734,405 7,885
Jack D. Knox 2,734,370 7,920
Joseph V. Mariner, Jr. 2,734,368 7,922
Joseph S. Thomson 2,734,368 7,922
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4 - Amended Bylaws
10 - 1995 Stock Option Plan
27 - Financial Data Schedule
(b) No report on Form 8-K was filed or required to be filed during the
quarter ended June 30, 1996.
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 thereunto duly authorized.
EL CHICO RESTAURANTS, INC.
Date: August 14, 1996 By: /s/ Susan R. Holland
Treasurer, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000719961
<NAME> EL CHICO RESTAURANTS, INC.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 148
<SECURITIES> 0
<RECEIVABLES> 851
<ALLOWANCES> 0
<INVENTORY> 921
<CURRENT-ASSETS> 6,439
<PP&E> 39,458
<DEPRECIATION> 0
<TOTAL-ASSETS> 46,501
<CURRENT-LIABILITIES> 9,586
<BONDS> 0
<COMMON> 475
0
0
<OTHER-SE> 24,720
<TOTAL-LIABILITY-AND-EQUITY> 46,501
<SALES> 26,139
<TOTAL-REVENUES> 26,785
<CGS> 15,464
<TOTAL-COSTS> 25,548
<OTHER-EXPENSES> 8,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149
<INCOME-PRETAX> (7,712)
<INCOME-TAX> (2,684)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,028)
<EPS-PRIMARY> (1.27)
<EPS-DILUTED> (1.27)
</TABLE>
BY LAWS
OF
EL CHICO RESTAURANTS, INC.
ARTICLE I.
OFFICE
1.01 The principal place of business of the Corporation
shall be at 12200 Stemmons, Suite 100, Dallas, Texas 75234
where its registered office shall also be located. (as
amended 5-3-83) (as amended 6-13-85)
ARTICLE II.
2.01 All meetings of the shareholders shall be held at
the registered office of the Corporation, or at such other
place as may be designated by the Board of Directors prior to
issuance of notice of the meeting.
2.02 An annual meeting of the shareholders of the
Corporation shall be held during each calendar year on such
date and at such time as shall be designated from time to
time by the Board of Directors and stated in the notice of
the meeting. At such meeting, the shareholders shall elect
directors and transact such other business as may properly be
brought before the meeting. (as amended 8-31-76) (as amended
2-5-82) (as amended 12-22-83) (as amended 6-14-84) (as
amended 12-8-92) (as amended 02-09-95)
2.03 A special meeting of the shareholders may be
called at any time by the Chairman of the Board, the
President, the Board of Directors, or the holders of not less
than ten percent of all shares entitled to vote at such
meeting. Only business within the purpose or purposes
described in the notice of special meeting may be conducted
at such special meeting. (as amended 02-09-95)
2.04 Except as otherwise provided by law, written or
printed notice stating the place, day and hour of each
meeting of the shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than
sixty days before the date of the meeting by or at the
direction of the President, the Secretary, or the officer or
person calling the meeting, to each shareholder of record
entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it
appears on the share transfer records of the Corporation,
with postage thereon prepaid. (as amended 02-09-95)
2.05 The holders of a majority of shares outstanding,
present in person or represented by proxy, shall be requisite
to and shall constitute a quorum at all meetings of the
shareholders for the transaction of business, except as may
be otherwise provided by statute. If, however, such quorum
shall not be present or represented at any meeting of the
shareholders, the shareholders entitled to vote thereat,
present in person or represented by proxy, shall have power
to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall
be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business
may be transacted which might have been transacted at the
meeting as originally notified.
2.06 When a quorum is present at any meeting of the
share-holders, the vote of the holders of a majority of the
outstanding shares, present in person or represented by
proxy, shall decide any question brought before such meeting,
unless the question be one upon which, be express provision
of the statutes, a different vote is required, in which case
such express provision shall control.
2.07 Each outstanding share shall be entitled to one
vote on each matter submitted to a vote at a meeting of
shareholders, and in the election of directors shall be
entitled to one vote for one candidate for each directorship
to be filled, cumulative voting not being permitted. A
shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly author-ized
attorney-in-fact. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise
provided in the proxy. Each proxy shall be revocable, unless
expressly provid-ed therein to be irrevocable, and in no
event shall it remain irrevocable for a period of more than
eleven (11) months.
2.08 At each meeting of the shareholders, the Chairman
of the Board, or, in the absence of the Chairman of the
Board, the President, shall act as Chairman. The order of
business at each such meeting shall be as determined by the
Chairman of the meeting. The Chairman of the meeting shall
have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts and things
as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of
procedures for the maintenance of order and safety,
limitations on the time allotted to questions or comments on
the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement
thereof, and the opening and closing of the voting polls.
At any annual meeting of shareholders, only such
business shall be conducted as shall have been brought before
the annual meeting (a) by or at the discretion of the
Chairman of the meeting or (b) by any shareholder who
complies with the procedures set forth in this Section.
For business properly to be brought before an annual
meeting by a shareholder, the shareholder must have given
timely notice thereof in proper written form to the Secretary
of the Corporation. To be timely, a shareholder's notice must
be delivered to or mailed and received at the principal
executive offices of the Corporation not less than 90 days
prior to the date one year from the date of the immediately
proceeding annual meeting. To be in proper written form, a
shareholder's notice to the Secretary shall set forth in
writing as to each matter the shareholder proposes to bring
before the annual meeting: (a) a brief description of the
business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual
meeting; (b) the name and address, as they appear on the
Corporation's books, of the shareholder proposing such
business; (c) the class and number of shares of the Corporation
which are beneficially owned by the shareholder; and (d) any
material interest of the shareholder in such business.
Notwithstanding anything in the bylaws to the contrary, no
business shall be conducted at an annual meting except in
accordance with procedures set forth in this Section. The
Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the annual meeting that business was
not properly brought before the annual meeting in accordance
with the provisions of this Section and, if he should so
determine, he shall so declare to the annual meeting and any
such business not properly brought before the annual meeting
shall not be transacted. Notwithstanding the foregoing
provisions of this Section 2.08, a shareholder seeking to
have a proposal included in the Corporation's proxy statement
shall comply with the requirements of Regulation 14A under
the Securities Exchange Act of 1934, as amended. (02-09-95)
ARTICLE III.
DIRECTORS
3.01 The business and affairs of the Corporation shall
be managed by a Board of seven (7) Directors. The exact
number of Directors shall be set from time to time by
resolution of the Board of Directors at any meeting. Any
decrease shall, however, not have the effect of shortening
the term of any incumbent Director, and the number of
directors shall never be less than three (3). Directors need
not be residents of the State of Texas or share-holders of
the Corporation. They shall be elected at the Annual Meeting
of Shareholders, and each Director shall be elected to serve
until his successor shall have been elected and qualified, or
he shall have been removed from office. At any meeting of
Share-holders called expressly for that purpose any Director
or the entire Board of Directors may be removed with or
without cause, by a vote of the holders of a majority of the
shares then entitled to vote at an election of Directors.
(as amended 8-15-72) (as amended 12-5-77) (as amended 1-8-79)
(as amended 4-30-79) (as amended 2-29-80) (as amended 5-3-83)
(as amended 6-14-84) (as amended 5-28-91) (as amended 2-27-92)
(as amended 7-1-92) (as amended 12-8-92)
3.02 Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the
remaining Directors, though less than a quorum of the Board
of Directors. A Director elected to fill a vacancy shall be
elected for the un-expired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the
number of Directors shall be filled by election at an annual
meeting or at a special meeting of the shareholders called
for that purpose.
3.03 A majority of the number of Directors shall
constitute a quorum for the transaction of business. The act
of the majority of Directors present at the meeting at which
a quorum is present shall be the act of the Board of
Directors, unless the act of a greater number is required by
law.
3.04 Directors, as such, shall not receive any stated
salary for their services, but for attendance at meetings may
be paid such compensation as the Board of Directors shall
from time to time deem proper. Nothing contained in these
bylaws shall preclude a Director from serving the Corporation
in any other capacity and receiving compensation therefor.
3.05 The Board of Directors, by resolution adopted by
a majority of the Directors, may designate two (2) or more
Directors to constitute an executive committee, which
committee, to the extent provided in such resolution, shall
have and may exercise all of the authority of the Board of
Directors in the business and affairs of the Corporation,
except where action of the Board of Directors is specified by
statute or other applicable law. The Board of Directors may
also at any time, for any reason, by resolu-tion adopted by
a majority of the Directors, remove any member or members of
such committee. The Board of Directors by resolution adopted
by a majority of the Directors may appoint ex officio
members to serve on the executive committee which members
shall participate in the meetings of the committee, but shall
not be entitled to vote on any action regarding the business
and affairs of the Corporation. (as amended 6-23-69) (as
amended 9-5-85)
3.06 Such other committees as may be deemed necessary
may also be elected or appointed by the Board of Directors or
chosen in such other manner as the Board of Directors may by
resolution prescribe.
3.07 Nominations of persons for election to the Board
of Directors may be made by the Board of Directors, by a
Nominating Committee established by the Board of Directors or
by any shareholder of the Corporation entitled to vote for
the election of Directors. Any shareholder of the
Corporation entitled to vote for the election of Directors at
a meeting may nominate persons for election as Directors only
if written notice is received by the Board of Directors of
such shareholder's intent to make such nomination not later
than (a) with respect to any annual meeting of shareholders,
not less than 90 days prior to the date one year from the
date of the immediately proceeding annual meeting or (b) with
respect to any special meeting at which the election of
Directors is to be held, seven days after the date that the
notice of the special meeting is mailed, or otherwise given.
Each written notice delivered to the Board of Directors by
the shareholder shall set forth: (a) the name and address of
the shareholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that
the shareholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of
all arrangements or understandings between the shareholder
and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; (d) such other
information regarding each nominee proposed by such
shareholder as would have been required to be included in a
proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been
nominated, or intended to be nominated, by the Board of
Directors; and (e) the written consent of each nominee to
serve as a Director of the Corporation if so elected. The
Chairman of the meeting may refuse to acknowledge the
nomination of any person not made in full compliance with the
foregoing procedure. (02-09-95)
ARTICLE IV.
MEETINGS OF THE BOARD OF DIRECTORS
4.01 The first meeting of each newly elected Board of
Direct-ors shall be held at the same place as the meeting of
shareholders at which such Directors were elected,
immediately following the holding of such meeting of
shareholders, unless a different time and place be fixed by
the shareholders at such meeting. No notice of such meeting
of Directors shall be necessary to the newly elect-ed
Directors in order legally to constitute the meeting if a
quorum be present.
4.02 In addition to the meeting mentioned in Section
4.01, there shall be held such regular meetings (if any) of
the Board of Directors as the Board of Directors shall from
time to time deter-mine. The place, day and hour of all such
meetings shall be as determined by the Board of Directors,
and notice thereof shall be given in like manner as provided
in Section 4.03.
4.03 Special meetings of the Board of Directors may be
called by the President (or by the Chairman of the Board of
Directors if the Board create such office), and shall be
called by the President or Secretary on written request of
two (2) Directors. In either such event the meeting shall be
held at the Corporation's register-ed office, unless a
different place for the holding thereof shall have
previously been fixed by the Board of Directors, in which
event such meeting shall be held there. Notice stating
place, day and hour of the meeting shall be delivered to each
Director not less than one (1) day before the date of the
meeting, either personally, by mail or by telegram, by or at
the direction of the officer or Directors calling the
meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed
to the Director at his address as it appears on the records
of the Corporation with postage thereon prepaid. If by
telegram, it shall be deemed to be delivered when the message
is filed in a telegraph office addressed to the Directors at
his address as aforesaid with cost of transmission prepaid.
(as amended 5-19-70)
4.04 Neither the business to be transacted at, nor the
pur-pose of, any regular or special meeting of the Board of
Directors need be specified in the notice or in any waiver of
notice of such meeting.
4.05 Attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where
a Director who attends the meeting objects to the
transaction of any business on the ground that the meeting is
not lawfully called or convened.
<PAGE>
ARTICLE V.
WAIVERS OF NOTICE
5.01 Whenever any notice is required by statute or
these bylaws to be given to any shareholder or Director, the
waiver thereof, in writing, signed by the person or persons
entitled to such notice, whether before or after the time
stated therein, shall be equivalent to the giving of such
notice.
ARTICLE VI.
OFFICERS
6.01 The officers of the Corporation shall be a
Chairman of the Board, a Vice Chairman of the Board, a Chief
Executive Officer, a President, a Vice President, a
Secretary, a Treasurer, and such other officers (the "Other
Officers") as the Board of Directors may appoint from time to
time. The Chairman of the Board, Vice Chairman of the Board,
Chief Executive Officer, President, Vice President, Secretary
and Treasurer shall each be elected by the newly elected
Board of Directors at its first meeting or at any other time
the Board may deem appropriate. The Board of Directors may
delegate to the Chief Executive Officer the power to select,
choose and elect any or all of the Other Officers and to
prescribe their respective duties, powers and compensation
(other than compensation under an employee benefit plan that
specifically requires approval by the Board of Directors or
any committee thereof). The Other Officers, if any, shall be
elected (i) if the Board of Directors has delegated such
responsibility to the Chief Executive Officer, by the Chief
Executive Officer at any time or times he deems appropriate
or (ii) in the absence of such delegation, by the newly
elected Board of Directors at its first meeting or at any
other time the Board may deem appropriate. No officers,
except the President, need be Directors, and any two (2) or
more officers, except the offices of President and Secretary,
may be held by the same person. (as amended 5-3-83) (as
amended 12-5-85) (as amended 6-20-96)
6.02 Officers of the Corporation, upon election, shall
hold office until their successors shall have been elected
and qualify, or until such officers shall have been removed
from office. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of
Directors whenever in its judgement the best interests of the
Corporation will be served thereby.
6.03 The salaries of all officers and agents, other
than ordinary employees, shall be fixed by the Board of
Directors.
6.04 The President shall have general management of the
Corporation and see that all orders and resolutions of the
Board of Directors are carried into effect. (as amended
5-3-83)
6.05 The Vice President shall be an assistant to the
Presi-dent and have such other authority and duties as the
President may delegate and as may not be inconsistent with
those from time to time prescribed by the Board of Directors.
In event of the Presi-dent's absence or disability, he shall
act in the President's stead with the same authority that the
latter would have had.
6.06 The Secretary shall attend all meetings of the
Board of Directors and shareholders and record in a book to
be kept for that purpose all votes and the minutes of all
proceedings. He shall give, or cause to be given, notice of
all meetings of the share-holders and special meetings of the
Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors, under whose
supervision he shall be. He shall keep in safe custody the
seal of the Corporation and, when authorized by the Board,
affix the same to any instrument requiring it and, when so
affixed, it shall be attested by his signature. He shall
like-wise have custody of the stock transfer books.
6.07 An Assistant Secretary, if any, shall, in event of
the absence or disability of the Secretary, perform the
duties and exercise the powers of the Secretary and perform
such other duties and have such other powers as the Board of
Directors shall pre-scribe.
6.08 The Treasurer shall have the custody of the
corporate funds and securities and shall keep in books
belonging to the Corporation full and accurate accounts of
receipts and disburse-ments and shall deposit all money,
checks and orders for the pay-ment of money payable to the
Corporation, in its name and to its credit in such depository
or depositories as may be designated by the Board of
Directors. Subject to the provisions of Section 9.01, he
shall disburse the funds of the Corporation as may be ordered
by the board, with proper vouchers for such disbursements,
and shall render to the President and Directors, at the
regular meetings of the board, or whenever they may require
it, an account of all his transactions as Treasurer and of
the financial condition of the Corporation.
6.09 If required by the Board of Directors, the
Treasurer shall give the Corporation a bond in such form and
sum and with such surety or sureties as shall be satisfactory
to the board, for the faithful performance of the duties of
his office and for the restoration to the Corporation, in
case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other
property of whatever kind in his possession or under his
control belonging to the Corporation.
6.10 An Assistant Treasurer, if any, shall, in event of
the absence or disability of the Treasurer, perform the
duties and exercise the powers of the Treasurer, and perform
such other duties and have such other powers as the Board of
Directors shall pre-scribe.
6.11 The powers and duties of the several officers
shall be as provided from time to time by resolution or
other directive of the Board of Directors. In the absence of
such provisions, the respective officers shall have the
powers and shall discharge the duties customarily and usually
held and performed by like officers of corporations similar
in organization and business purposes to this Corporation.
6.12 Any two of the following four officers: the Chief
Executive Officer, the Chief Financial Officer, the
Treasurer, or the General Counsel, shall have the power to
act for the Company to incur liabilities, to issue the
Company's notes bonds and other obligations by mortgage or
pledge of all or any of the Company's property, and to borrow
money, at rates of interest not to exceed prime plus two
percent. The stated amount of funds borrowed under the
section shall not exceed sixteen million dollars. (adopted
6-13-85) (as amended 9-8-87) (as amended 4-5-88) (as amended
9-23-91) (as amended 7-21-93) (as amended 7-20-94) (as
amended 12-21-94)
ARTICLE VII.
BOOKS AND RECORDS
7.01 Correct and complete books and records of
accounts, as well as minutes of the proceedings of the
Corporation's Share-holders and Board of Directors, shall be
kept at its registered office, along with a record of its
shareholders, giving the names and addresses of all
shareholders and the number of shares held by each.
7.02 For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of
shareholders or any adjourn-ment thereof, or entitled to
receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose,
the Board of Directors of the Corporation may provide that
the stock transfer books shall be closed for a stated period
but not to exceed, in any case, fifty (50) days. If the
stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at
a meeting of shareholders, such books shall be closed for at
least ten (10) days immediately pre-ceding such meeting. In
lieu of closing the stock transfer books, the Board of
Directors may, however, fix in advance a date as the record
date for any such determination of shareholders, such date in
any case to be not more than fifty (50) days and, in case of
a meeting of shareholders, not less than ten (10 days prior
to the date on which the particular action, requiring such
determination of shareholders is to be taken. If the stock
transfer books are not closed and no record date is fixed by
the Board of Directors for the determination of shareholders
entitled to notice of nor to vote at a meeting of
shareholders, or shareholders entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the Board of Directors
declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of share-holders.
When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as herein
provided, such determination shall apply to any adjournment
thereof except where the determination has been made through
the closing of stock trans-fer books and the stated period of
closing has expired.
7.03 The office or agent having charge of the stock
transfer books for shares of the Corporation shall make, at
least ten (10) days before each meeting of the shareholders,
a complete list of the shareholders entitled to vote at such
meeting or any adjourn-ment thereof, arranged in alphabetical
order, with the address of and the number of shares held by
each, which list, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office of
the Corporation and shall be subject to inspection by any
shareholder at any time during usual business hours. Such
list shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection
of any shareholder during the whole time of the meeting. The
original stock transfer books shall be prima facie evidence
as to who are the shareholders entitled to examine such list
or transfer books or to vote at any meeting of shareholders.
ARTICLE VIII.
RESPECTING CERTIFICATES OF STOCK
AND TRANSFER THEREOF
8.01 The certificates of stock of the Corporation shall
be numbered and shall be entered in the proper books of the
corpora-tion as they are issued. They shall set forth the
owner's name and number of shares and shall be signed by the
Chairman of the board, the President or a Vice President, and
the Secretary or an Assis-tant Secretary of the Corporation.
Signing may be accomplished manually or, when permitted by
law, by facsimile signature, as determined by the Board of
Directors. (as amended 11-6-91)
8.02 Upon surrender to the Corporation of a certificate
for shares duly endorsed or accompanied by proper evidence of
succes-sion, assignment or authority to transfer, it shall be
the duty of the Corporation to issue a new certificate to the
person entitled thereto, cancel the old certificate and
record the transaction upon its books.
8.03 The Corporation shall be entitled to treat the
holder of record of any share or shares of stock as the
holder in fact there-of and, accordingly, shall not be bound
to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether
or not it shall have express or other notice thereof, except
as may be otherwise provided by the laws of Texas.
8.04 The Board of Directors may direct a new
certificate to be issued in lieu of any theretofore issued by
the Corporation, alleged to have been lost or destroyed, upon
the making of an affidavit of the fact, by the person
claiming the certificate to be lost or destroyed. When
authorizing such issue of a new certifi-cate, the Board of
Directors may, in its discretion and as a condi-tion
precedent to the issuance thereof, require the owner of such
lost or destroyed certificate, or his legal representative,
to advertise the same in such manner as it shall require or
give the Corporation a bond in such sum and form, and with
such surety or sureties as it may direct as indemnity against
any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost or
destroyed, or may require both such conditions.
ARTICLE IX.
CHECKS
9.01 All checks, drafts or orders for the payment of
money and all promissory notes issued by the Corporation
shall be signed by such officer or officers, or such other
person or persons, as the Board of Directors may from time to
time designate, and in addition, the Board may likewise
authorize an officer of the Corporation, in turn, to
designate and authorize other officers or employees so to
write checks, drafts or orders for the payment of money, in
the name and on behalf of the Corporation. Signing may be
accomplished manually or by facsimile signature, as
determined by the Board of Directors.
ARTICLE X.
SEAL
10.01 The corporate seal shall have inscribed thereon
the name of the Corporation, and be in form as shown by the
impression thereof on the margin opposite this paragraph.
ARTICLE XI.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
11.01 Indemnification of Directors. The Corporation
shall indemnify a person who was, is, or is threatened to be
made, a named defendant or respondent in a proceeding because
the person is or was a Director against any judgments,
penalties (including excise and similar taxes), fines,
settlements and reasonable expenses actually incurred by the
person in connection with the proceeding if it is determined,
in the manner described below, that the person (1) conducted
himself in good faith, (2) reasonably believed, in the case
of conduct in his official capacity as Director of the
Corporation, that his conduct was in the Corpora-tion's best
interests, and in all other cases, that his conduct was at
least not opposed to the Corporation's best interests and (3)
in the case of any criminal proceeding, had no reasonable
cause to believe his conduct was unlawful; provided that if
the proceeding was brought by or on behalf of the
Corporation, the indemnification shall be limited to
reasonable expenses actually incurred by the person in
connection with the proceeding; and provided further that a
Director may not be indemnified for obligations resulting
from a proceeding (1) in which such Director is found liable
on the basis that personal benefit was improperly received by
him, whether or not the benefit resulted from an action taken
in such Director's official capacity, or (2) in which the
Director is found liable to the Corporation. The
determinations required above that the person has satisfied
the prescribed conduct and belief standards must be made (1)
by a majority vote of a quorum consisting of Directors who at
the time of the vote are not named defendants or respondents
in the proceeding, (2) if such a quorum cannot be obtained,
by a majority vote of a committee of the Board of Directors,
designated to act in the matter by a majority vote of all
Directors, consist-ing solely of two or more Directors who at
the time of the vote are not named defendants or respondents
in the proceeding, (3) by special legal counsel selected by
the Board of Directors or a committee of the Board by vote as
set forth in clause (1) or (2) of this sentence, or, if such
a quorum cannot be obtained and such a committee cannot be
established, by a majority vote of all Directors, or (4) by
the shareholders in a vote that excludes the shares held by
Directors who are named defendants or respondents in the
proceeding. The determination as to reasonableness of
expenses must be made in the same manner as the determination
that the person has satisfied the prescribed conduct and
belief standards, except that if the determination that the
person has satisfied the prescribe conduct and belief
standards is made by special legal counsel, the determination
as to reasonableness of expenses must be made by the Board of
Directors or a committee of the Board by vote as set forth in
clause (1) or (2) of the immediately preceding sentence or,
if such a quorum cannot be obtained and such a commit-tee
cannot be established, by a majority vote of all Directors.
The termination of a proceeding by judgment, order,
settlement or conviction, or on a plea of nolo contendere or
its equivalent is not of itself determinative that the person
did not meet the requirements for indemnification set forth
above. Notwithstanding any other provision of these bylaws,
the Corporation shall pay or reimburse expenses incurred by
a Director in connection with his appearance as a witness or
other participation in a proceeding at a time when he is not
a named defendant or respondent in the proceeding.
Section 11.02 Advancement of Expenses to Directors.
Reason-able expenses incurred by a Director who was, is, or
is threatened to be made, a named defendant or respondent in
a proceeding shall be paid or reimbursed by the Corporation
in advance of the final disposition of the proceeding after
(1) the Corporation receives (a) a written affirmation by the
Director of his good faith belief that he has met the
standard of conduct necessary for indemnifica-tion under
Section 1 or this Article and (b) a written undertaking by or
on behalf of such Director to repay the amount paid or reim-bursed
if it is ultimately determined that he has not met
those requirements, and (2) a determination that the facts
then known to those making the determination would not
preclude indemnification under Section 1 of this Article.
The written undertaking described in the immediately
preceding sentence to repay the amount paid or reimbursed to
the Director by the Corporation must be an unlimited general
obligation of the Director but need not be secured and it may
be accepted without reference to financial ability to make
repayment. Determinations and authorizations of payment
under the Section 2 must be made in the manner specified in
Section 1 of this Article for the determination that the
person has satisfied the conduct and belief standards.
Section 11.03 Officers. The Corporation shall
indemnify and advance expenses to an officer of the
Corporation to the same extent that it is required to
indemnify and advance expenses to Directors under these
bylaws or by statute. In addition, the Corporation may
indemnify and advance expenses to an officer of the
Corporation to such further extent, consistent with law, as
may be provided by the Restated Articles of Incorporation,
these bylaws, general or specific action of the Board of
Directors, or contract or as permitted or required by common
law.
Section 11.04 Others. The Corporation may indemnify
and advance expenses to an employee or agent of the
Corporation to the same extent that it is required to
indemnify and advance expenses to Directors under these
bylaws or by Statute. The Corporation may indemnify and
advance expenses to persons who are not or were not officers,
employees or agents of the Corporation but who are or were
serving at the request of the Corporation as a Director,
officer, partner, venturer, proprietor, trustee, employee,
agent or similar functionary of another corporation for
profit subject to the provisions of the Texas Business
Corporation Act, corporation for profit organized under laws
other than the laws of Texas, part-nership, joint venture,
sole proprietorship, trust, employee benefit plan or other
enterprise to the same extent that it is required to
indemnify and advance expenses to Directors under this
Article or by statute. The Corporation may indemnify and
advance expenses to an employee, agent or other person
serving at the request of the Corporation (as described above
in this Section 4) who is not a Director to such further
extent, consistent with law, as may be provided by the
Restated Articles of Incorporation, these bylaws, general or
specific action of the Board of Directors, or contract or as
permitted or required by common law.
Section 11.05 Insurance. The Corporation may purchase
and maintain insurance on behalf of any person who is or was
a Direc-tor, officer, employee or agent of the Corporation or
who is or was serving at the request of the Corporation as a
Director, officer, partner, venturer, proprietor, trustee,
employee, agent or similar functionary of another corporation
for profit subject to the pro-visions of the Texas Business
Corporation Act, corporation for profit organized under laws
other than the laws of Texas, partner-ship, joint venture,
sole proprietorship, trust, employee benefit plan or other
enterprise, against any liability asserted against him and
incurred by him in such a capacity or arising out of his
status as such a person, whether or not the Corporation would
have the power to indemnify him against that liability under
these bylaws or by statute.
Section 11.06 Report to Shareholders. Any
indemnification of or advance of expenses to a Director in
accordance with this Article or the provisions of any statute
shall be reported in writing to the shareholders with or
before the notice or waiver of notice of the next
shareholders' meeting or with or before the next submission
to shareholders of a consent to action without a meeting and,
in any case, within the 12-month period immediately following
the date of the indemnification or advance.
Section 11.07 Entitlement. These indemnification
provisions shall inure to each of the Directors, officers,
employees and agents of the Corporation, and other persons
serving at the request of the Corporation (as provided in
this Article), whether or not the claim asserted against him
is based on matters that antedate the adoption of this
Article, and in the event of his death shall extend to his
legal representatives; but such rights shall not be exclusive
of any other rights to which he may be entitled. All rights
to indemnification under this Article shall be deemed to be
provided by a contract between the Corporation and the
Director, officer, employee or agent who serves in such
capacity at any time while these bylaws and other relevant
provisions of the Texas Business Corporation Act and other
applicable law, if any, are in effect. Any repeal or
modification thereof shall not affect any rights or
obligations then existing.
Section 11.08 Definitions. For purposes of this
Article:
(a) The term "expenses" includes court costs and
attorneys' fees;
(b) The term "proceeding" means any threatened, pending
or completed action, suit or proceeding, whether civil,
criminal, administrative, arbitrative or investigative, any
appeal in such an action, suit or proceeding, and any inquiry
or investigation that could lead to such an action, suit or
proceeding;
(c) The term "Director" means any person who is or was
a Director of the Corporation and any person who, while a
Director of the Corporation, is or was serving at the request
of the Corpora-tion as a Director, officer, partner,
venturer, proprietor, trustee, employee, agent or similar
functionary of another corpora-tion for profit subject to the
provisions of the Texas Business Corporation Act, corporation
for profit organized under laws other than the laws of Texas,
partnership, joint venture, sole proprie-torship, trust,
employee benefit plan or other enterprise;
(d) The term "Corporation" includes any domestic or
foreign predecessor entity of the Corporation in a merger,
consolidation or other transaction in which the liabilities
of the predecessor are transferred to the Corporation by
operation of law, and in any other transaction in which the
Corporation assumes the liabilities of the predecessor but
does not specifically exclude liabilities that are the
subject matter of this Article;
(e) The term "official capacity" means, when used with
respect to a Director, the office of Director in the
Corporation and, when used with respect to a person other
than a Director, the elective or appointive office in the
Corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of
the Corporation, but does not include service for any other
corporation for profit subject to the provisions of the Texas
Business Corporation Act or corporation for profit organized
under laws other than the laws of Texas or any partnership,
joint venture, sole proprietorship, trust, employee benefit
plan or other enterprise; and
(f) The Corporation is deemed to have requested a
Director to serve an employee benefit plan whenever the
performance by him of his duties to the Corporation also
imposes duties on or otherwise involves services by him to
the plan or participants or bene-ficiaries of the plan.
Excise taxes assessed on a Director with respect to an
employee benefit plan pursuant to applicable law are deemed
fines. Action taken or omitted to be taken by a Director
with respect to an employee benefit plan in the performance
of his duties for a purpose reasonably believed by him to be
in the interest of the participants and beneficiaries of the
plan is deemed to be for a purpose which is not opposed to
the best interests of the Corporation.
Section ll.09 Severability. The provisions of this
Article are intended to comply with Articles 2.02A(16) and
2.02-1 of the Texas Business Corporation Act. To the extent
that any provision of this Article authorizes or requires
indemnification or the advancement of expenses contrary to
such statutes or the Restated Articles of Incorporation, the
Corporation's power to indemnify or advance expenses under
such provision shall be limited to that permitted by such
statutes and the Restated Articles of Incorpora-tion and any
limitation required by such statutes or the Restated Articles
of Incorporation shall not affect the validity of any other
provision of this Article. (as amended 9-10-86)
ARTICLE XII.
12.01 The Board of Directors shall have the power to
alter, amend or repeal these bylaws and to adopt new bylaws.
EL CHICO RESTAURANTS, INC.
1995 STOCK PLAN
Scope and Purpose of Plan
This El Chico Restaurants, Inc. 1995 Stock Plan (the "Plan")
provides for the granting of:
(a) Incentive Options (hereinafter defined) to certain key
employees of El Chico Restaurants, Inc., a Texas corporation (the
"Corporation"), or of its Affiliates (hereinafter defined); and
(b) Nonstatutory Stock Options (hereinafter defined) to
certain key employees, employee directors and nonemployee directors
of the Corporation or of its Affiliates;
(c) Restricted Stock (hereinafter defined) to certain key
employees and nonemployee directors of the Corporation or of its
Affiliates.
The purpose of the Plan is to provide an incentive for key
employees and directors of the Corporation or its Affiliates to remain
in the service of the Corporation or its Affiliates, to extend to them
the opportunity to acquire a proprietary interest in the Corporation so
that they will apply their best efforts for the benefit of the
Corporation, and to aid the Corporation in attracting able persons to
enter the service of the Corporation and its Affiliates.
SECTION 1. Definitions
1.1 "Act" shall mean the Securities Exchange Act of 1934, as
amended.
1.2 "Affiliates" shall mean (a) any corporation, other than the
Corporation, in an unbroken chain of corporations ending with the
Corporation if each of the corporations, other than the Corporation, owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain and (b) any corporation, other than the Corporation, in an unbroken
chain of corporations beginning with the Corporation if each of the
corporations, other than the last corporation in the unbroken chain, owns
stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such
chain.
1.3 "Agreement" shall mean the written agreement between the
Corporation and a Holder evidencing the Award granted by the Corporation
and the understanding of the parties with respect thereto.
1.4 "Award" shall mean an award granted in accordance with the
provisions of the Plan in the form of an Option, Restricted Stock or any
combination thereof.
1.5 "Board of Directors" shall mean the board of directors of the
Corporation.
1.6 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.7 "Committee" shall mean the committee appointed pursuant to
Section 3 hereof by the Board of Directors to administer this Plan.
1.8 "Eligible Individuals" shall mean (a) key employees,
including officers and directors who are also employees of the
Corporation or any of its Affiliates and (b) nonemployee directors of the
Corporation or of any of its Affiliates. Notwithstanding the foregoing
provisions of this Section 1.8, to ensure that the requirements of the
third sentence of Section 3.1 are satisfied, the Board of Directors may
from time to time specify individuals who shall not be eligible for the
Awards or the grant of options or stock appreciation rights or
allocations of stock under any other plan of the Corporation or its
affiliates (as such terms are used in Subsection (d)(3) of Rule 16b-3
promulgated under the Act); provided, however, the Board of Directors may
at any time determine that any individual who has been so excluded from
eligibility shall become eligible for Awards and grants of such options
or stock appreciation rights or allocations of stock under any other
plans of the Corporation and its Affiliates as it may specify.
1.9 "Fair Market Value" shall mean:
(a) If shares of Stock of the same class are listed or
admitted to unlisted trading privileges on any national or regional
securities exchange at the date of determining the Fair Market
Value, the last reported sale price on such exchange on the last
business day prior to the date in question; or
(b) If shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices therefor in the over-the-counter
market shall be reported by the National Association of Securities
Dealers, Inc. Automated Quotations, Inc. ("NASDAQ") National Market
System at the date of determining the Fair Market Value, the last
reported sale price so reported on the last business day prior to
the date in question; or
(c) If Shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices therefor shall not be reported
by the NASDAQ National Market System as provided in Subsection
1.9(b), and bid and asked prices therefor in the over-the-counter
market shall be reported by NASDAQ (or, if not so reported, by the
National Quotation Bureau Incorporated) at the date of determining
the Fair Market Value, the average of the closing bid and asked
prices on the last business day prior to the date in question; and
(d) If shares of Stock of the same class shall not be
listed or admitted to unlisted trading privileges as provided in
Subsection 1.9(a) and sales prices or bid and asked prices therefor
shall not be reported by NASDAQ (or the National Quotation Bureau
Incorporated) as provided in Subsection 1.9(b) or Subsection 1.9(c)
at the date of determining the Fair Market Value, the value
determined in good faith by the Board of Directors.
For purposes of valuing Incentive Options, the Fair Market Value
of Stock shall be determined without regard to any restriction other than
one which, by its terms, will never lapse.
1.10 "Holder" shall mean an Eligible Individual to whom an Award
has been granted.
1.11 "Incentive Options" shall mean stock options that are
intended to satisfy the requirements of section 422 of the Code.
1.12 "Nonstatutory Options" shall mean stock options that do not
satisfy the requirements of section 422 of the Code.
1.13 "Options" shall mean either Incentive Options or Nonstatutory
Options, or both.
1.14 "Restricted Stock" shall mean Stock delivered under the Plan
that is subject to (i) the requirements of Section 6 and (ii) such other
restrictions as the Committee deems appropriate or desirable.
1.15 "Restriction Period" shall mean the period or periods
specified in this Agreement or in the Restricted Stock Agreement of the
Holder, which shall specify a period commencing on the date an Award is
granted and ending on such date as the Committee shall determine.
1.16 "Stock" shall mean the Corporation's authorized $.01 par
value common stock, together with any other securities with respect to
which Options granted hereunder may become exercisable.
SECTION 2. Stock and Maximum Number of Shares Subject to the Plan
2.1 Description of Stock and Maximum Shares Allocated. Both
Restricted Stock and Stock which Options granted hereunder give a Holder
the right to purchase may be unissued or reacquired shares of Stock, as
the Board of Directors may, in its sole and absolute discretion from time
to time determine.
Subject to the adjustments in Section 7.6 hereof, the aggregate
number of (i) shares of Restricted Stock that may be the subject of an
Award hereunder and (ii) shares of Stock that may be issued pursuant to
the exercises of all Options granted hereunder shall not exceed 400,000
shares of Stock.
2.2 Restoration of Unpurchased Shares. If an Award hereunder
expires or terminates for any reason during the term of this Plan and
prior to the completion of the Restriction Period or exercise of an
Option in full or if all of the shares of Stock subject to an Award have
not for any other reason been issued pursuant to the Award, the shares
of Stock subject to but not issued or otherwise used under such Award
shall be "restored" to the Plan by again being available for Awards
granted after the shares' restoration.
2.3 Maximum Number of Shares and Awards that May be Granted to
Committee Members. Notwithstanding any other provision in the Plan or
any Agreement, other than the provisions of Subsection 3.1(a) concerning
"disinterested persons," the maximum number of shares that any Committee
member who is not a disinterested person (as specified in Section 3) may
acquire hereunder pursuant to an Award to any Committee member who is not
a disinterested person is 0 shares. In addition, the maximum period that
may be specified in the Agreement of a Committee member who is not a
disinterested person within which an Option or Award granted hereunder
may be exercised is ten (10) years.
2.4 Issuance of stock in Name of Holder. Upon issuance of Stock
to any Holder pursuant to the terms of this Plan and any Holder's
Agreement, such Stock shall only be issued into the name of the Holder
or his or her legal representative.
SECTION 3. Administration of the Plan
3.1 Committee. The Plan shall be administered by the Committee.
The Committee shall consist of all non-employee members of the Board of
Directors. In the event that the Stock is registered under Section 12
of the Act, all members of the Committee shall be "disinterested
persons," as defined in Rule 16b-3 promulgated under the Act, and shall
be subject to the following limitations:
(a) Except for awards granted pursuant to Section 3.1(b)
or pursuant to other plans of the Corporation or its Affiliates
that meet the requirements of Rule 16b-3(c), members of the
Committee shall not be eligible to receive stock options, stock
appreciation rights, or an allocation of stock under any plan of
the Corporation or its Affiliates (as such terms are used in Rule
16b-3) while they are serving as members of the Committee, and they
must not have received such options, stock appreciation rights, or
an allocation of stock under any plan of the Corporation or its
Affiliates within one year prior to their appointment to the
Committee.
(b) Awards shall be granted to each current and future
member of the Committee as follows:
3.1.1 An option to purchase 2,500 shares of Stock will be
granted to current members of the Committee and an
option to purchase 10,000 shares of Stock will be
granted to future members of the Committee upon
appointment and participation as a member thereof.
Said Option may be exercised with respect to 20
percent of said Stock on each of the first five
anniversaries of the date of such grant. This grant
shall be effective as of the first meeting of the
Committee at which such member shall attend in person
and vote; provided, however, that for those persons
who are members of the Committee at the date the
shareholders of the Corporation approve this section,
this grant shall be effective as of the first meeting
of the Board of Directors in the calendar year
following the date of such approval by the
shareholders.
3.1.2 For each person who is a member of the Committee both
before and after the regular annual meeting of
shareholders of the Corporation each year (beginning
with the annual meeting in 1996), an Option to
purchase 2,500 shares of Stock will be granted. Said
Option may be exercised with respect to 20 percent of
said Stock on each of the first five anniversaries of
the date of such grant. The grant shall be effective
as of the first meeting of the Board of Directors in
each calendar year following each such annual meeting
of shareholders.
3.1.3 For each person who is a member of the Committee, both
before and after the annual meeting of shareholders of
the Corporation in 1996 and, thereafter, who is a
member of the Committee on February 1 of each calendar
year, 500 shares of Restricted Stock will be granted.
Such Restricted Stock shall be subject to a
Restriction Period of six (6) months. The initial
Award will be granted as of the first meeting of the
Board of Directors following the annual meeting in
1996, and, thereafter, successive Awards will be
granted as of February 1 of each calendar year.
3.1.4 The Options granted pursuant to this section shall be
exercisable at 100 percent of Fair Market Value at the
effective date of the grant.
3.1.5 With respect to Options granted hereunder, the number
of shares exercisable hereunder and exercise prices
shall be adjusted according to the provisions of
Section 7 and any other relevant provisions hereof.
3.1.6 These provisions may not be amended more than once
every six months, other than to comport with changes
in the Code, the Act, or the regulations thereunder.
3.2 Duration, Removal, Etc.. The members of the Committee shall
serve at the pleasure of the Board of Directors, which shall have the
power, at any time and from time to time, to remove members from the
Committee or to add members thereto. Vacancies on the Committee, however
caused, shall be filled by action of the Board of Directors.
3.3 Meetings and Actions of Committee. The Committee shall elect
one of its members as its Chairman and shall hold its meetings at such
times and places as it may determine. All decisions and determinations
of the Committee shall be made by the majority vote or decision of all
of its members present at a meeting; provided, however, that any decision
or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a
meeting duly called and held. The Committee may make any rules and
regulations for the conduct of its business that are not inconsistent
with the provisions hereof and with the bylaws of the Corporation as it
may deem advisable.
3.4 Committee's Powers. Subject to the express provisions
hereof, the Committee shall have the authority, in its sole and absolute
discretion, (a) to adopt, amend, and rescind administrative and
interpretive rules and regulations relating to the Plan; (b) to determine
the terms and provisions of the respective Agreements (which need not be
identical), including, but not limited to provisions defining or
otherwise relating to (i) subject to Section 7 of the Plan, the term and
the period or periods and extent of excercisability of the Options,
(ii) the extent to which the transferability of shares of Stock issued
upon exercise of Options is restricted, (iii) the extent to which the
transferability of shares of Restricted Stock shall be restricted,
(iv) the restrictions that shall be placed upon Restricted Stock at the
time of its Award, (v) the effect of termination of employment upon the
exercisability of the Options and the termination of the Restrictions
Period with respect to Restricted Stock, and (vi) the effect of approved
leaves of absence (consistent with any applicable regulations of the
Internal Revenue Service); (c) to accelerate the time of exercisability
of any Option that has been granted; (d) to construe the respective
Agreements and the Plan; and (e) to make all other determinations and
perform all other acts necessary or advisable for administering the Plan,
including the delegation of such ministerial acts and responsibilities
as the Committee deems appropriate. The Committee may correct any defect
or supply any omission or reconcile any inconsistency in the Plan or in
any Agreement in the manner and to the extent it shall deem expedient to
carry it into effect, and it shall be the sole and final judge of such
expediency. The Committee shall have full discretion to make all
determinations on the matters referred to in this Section 3.4, and such
determinations shall be final, binding and conclusive.
SECTION 4. Eligibility and Participation
4.1 Eligible Individuals. Awards may be granted hereunder only
to persons who are Eligible Individuals at the time of the grant thereof.
Notwithstanding any provision contained herein to the contrary, a
person shall not be eligible to receive an Incentive Option hereunder
unless he is an employee of the Corporation or an Affiliate, nor shall
a person be eligible to receive an Incentive Option hereunder if he, at
the time such Option is granted, would own (within the meaning of
sections 422 and 425 of the Code) stock possessing more than ten percent
(10%) of the total combined voting power or value of all classes of stock
of the Corporation or of an Affiliate, unless at the time such Incentive
Option is granted, (i) the exercise price per share of Stock is at least
one hundred and ten percent (110%) of the Fair Market Value of each share
of stock to which the Incentive Option relates and (ii) the Incentive
Option is not exercisable after the expiration of five (5) years from the
date it is granted.
4.2 Notwithstanding any provision contained herein to the
contrary, there shall be no grant in excess of 100,000 shares to any one
individual in any one year.
4.3 No Right to Award. The adoption of the Plan shall not be
deemed to give any person a right to be granted an Option nor to receive
an Award.
SECTION 5. Grant of Awards and Certain Terms of the Agreements
Subject to the express provisions hereof, the Committee shall
determine which Eligible Individuals shall be granted Awards hereunder
from time to time. In making grants, the Committee shall take into
consideration the contribution the potential Holder has made or may make
to the success of the Corporation or its Affiliates and such other
considerations as the Board of Directors may from time to time specify.
The Committee shall also determine the number of shares subject to each
such Award and shall authorize and cause the Corporation to grant Awards
in accordance with such determinations.
The date on which the Committee completes all action constituting
an offer of an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date
on which the Award covered by an Agreement is granted, even though
certain terms of the Agreement may not be at such time determined and
even though the Agreement may not be executed until a later time. For
purposes of the preceding sentence, an offer shall not be deemed made
until the Committee has communicated the grant thereof to the potential
Holder. In no event, however, shall an Optionee gain any rights in
addition to those specified by the Committee in its grant, regardless of
the time that may pass between the grant of the Award and the actual
execution of the Agreement by the Corporation and the Holder.
Each Award granted hereunder shall be evidenced by an Agreement,
executed by the Corporation and the Eligible Individual to whom the Award
is granted, incorporating such terms as the Committee shall deem
necessary or desirable. More than one Award may be granted hereunder to
the same eligible Individual and be outstanding concurrently hereunder.
In the event an Eligible Individual is granted any combination of one or
more Incentive Options, one or more Nonstatutory Options and one or more
grants of restricted Stock, such grants shall be evidenced by separate
Agreements, one for each of the Incentive Option grants, one for each of
the Nonstatutory Option grants and one or each of the Restricted Stock
awards.
Each Agreement may contain or otherwise provide for conditions
giving rise to the forfeiture of the Stock acquired pursuant to an Award
granted hereunder or otherwise, and such restrictions on the
transferability of shares of the Stock acquired pursuant to an Award
granted hereunder or otherwise as the Committee in its sole and absolute
discretion shall deem proper or advisable. Such conditions giving rise
to forfeiture may include, but need not be limited to, the requirement
that the Holder render substantial services to the Corporation, or its
Affiliates for a specified period of time. Such restrictions on
transferability may include, but need not be limited to, options and
rights of first refusal in favor of the Corporation and shareholders of
the Corporation other than the Holder of such shares of Stock who is a
party to this particular Agreement or a subsequent holder of the shares
of Stock who is bound by such Agreement.
In addition, the Committee may grant cash awards payable in
connection with the exercise of an Award the terms and conditions of such
awards to be such as the Committee in it sole discretion deems
appropriate; provided, however, that no such cash award shall be
effective unless it can comply and does comply with any applicable
requirements for exemption from liability pursuant to Rule 16b-3
promulgated under the Act.
Notwithstanding the foregoing provisions of this Section 5, the
Chief Executive Officer of the Corporation may, from time to time, at his
sole discretion but subject to the following provisions of this Section
5, grant Awards to individuals who are not at the time of grant subject
to liability under Section 16(b) of the Act. The total number of shares
of the Restricted Stock or other Stock, as appropriate, that shall at any
time be subject to grant pursuant to the immediately preceding sentence
shall be specified from time to time by resolution of the Board of
Directors, and such number of shares shall be included within the number
of shares stated in Section 2.1. The Board of Directors may further
limit the authority of the Chief Executive Officer to grant Awards and
may prescribe some or all of the terms of any such Awards to such an
extent as the Board of Directors deems appropriate.
SECTION 6. Restricted Stock
6.1 Methods of Acquisition. Restricted Stock may be received by
an Eligible Individual either as an Award or as the result of an exercise
of an Option. Restricted Stock shall be subject to a Restriction Period,
after which restrictions will lapse.
6.2 Restrictions on Disposal. Except as otherwise provided in
this Section 6 and Section 7 of the Plan, no shares of Restricted Stock
received by an Eligible Individual shall be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of during the Restriction
Period.
6.3 Custody of Stock During Restriction Period. The Committee
may require under such terms and conditions as it deems appropriate or
desirable that the certificates for Restricted Stock delivered under the
Plan may be held in custody by a bank or other institution, or that the
Corporation may itself hold such shares in custody until the Restriction
Period expires or until restrictions thereon otherwise lapse, and may
require, as a condition of receipt of any Restricted Stock that the
Eligible Individual shall have delivered a stock power endorsed in blank
relating to the Restricted Stock.
6.4 Limited Exchange of Restricted Stock. Nothing in this
Section 6 shall preclude an Eligible Individual from exchanging any
shares of Restricted Stock subject to the restrictions contained herein
for any other shares of Stock that are similarly restricted, but only to
the extent such exchanges are permitted under the terms of this Plan or
this Agreement at the time of the exchange.
SECTION 7. Terms and Conditions of Awards
All Awards granted hereunder shall comply with, be deemed to
include, and shall be subject to the following terms and conditions:
7.1 Number of Shares. Each Agreement shall state the number of
shares of Stock to which it relates.
7.2 Option Exercise Price. Each Incentive Stock Option Agreement
and Nonstatutory Stock Option Agreement shall state the exercise price
per share of Stock. The exercise price per share of Stock subject to an
Incentive Option shall not be less than the greater of (a) the par value
per share of the Stock or (b) 100% of the Fair Market Value per share of
the Stock on the date of the grant of the Option. The exercise price per
share of Stock subject to a Nonstatutory Option shall not be less than
fifty percent (50%) of the Fair Market Value per share of the Stock on
the date of the grant of the Option.
7.3 Medium and Time of Payment, Method of Exercise, and
Withholding Taxes. The exercise price of an Option shall be payable upon
the exercise of the Option (i) in cash, (ii) by check payable to the
order of the Corporation, (iii) with the consent of the Committee, with
shares of Stock of the Corporation owned by the Holder for at least six
(6) months, or (iv) by a combination of cash and such shares.
Exercise of an Option shall not be effective until the Corporation
has received written notice of exercise. Such notice must specify the
number of whole shares to be purchased and be accompanied by payment in
full of the aggregate exercise price of the number of shares purchased.
The Corporation shall not in any case be required to sell, use, or
deliver a fractional share of Stock with respect to any Award.
The Committee may, in its discretion, require a Holder to pay to
the Corporation at the time of exercise of an Option or portion thereof
or the lapse of a Restriction Period, as applicable, the amount that the
Corporation deems necessary to satisfy its obligation to withhold
federal, state or local income or other taxes incurred by reason of the
exercise. Where the exercise of an Option or lapse of a Restriction
Period does not give rise to an obligation to withhold federal income or
other taxes on the date of exercise, the Corporation may, in its
discretion, require a Holder to place unrestricted shares of Stock, which
may be the shares received upon exercise of the Option or released by the
lapse of the Restriction Period, in escrow for the benefit of the
Corporation until such time as federal income or other tax withholding
is no longer required with respect to such shares or until such
withholding is required on amounts included in the gross income of the
Holder as a result of the exercise of an Option, the disposition of
shares of Stock acquired pursuant thereto or the lapse of the Restriction
Period. At such later time, the Corporation, in its discretion, may
require a Holder to pay to the Corporation the amount that the
Corporation deems necessary to satisfy its obligation to withhold
federal, state or local income or other taxes incurred by reason of the
exercise of the Option, the disposition of shares of Stock or the lapse
of the Restriction Period. Upon receipt of such payment by the
Corporation, such shares of Stock shall be released from escrow to the
Holder.
7.4 Term, Time of Exercise, and Transferability of Awards and
Options. In addition to such other terms and conditions as may be
included in a particular Agreement granting an Award, the rights of a
Holder under an Award shall be exercisable during a Holder's lifetime
only by him or her or by his or her guardian or legal representative.
Each Award shall also be subject to the following terms and conditions:
(a) Termination of Employment or Directorship. The
provisions of this Section 7.4(a) shall apply to the extent a
Holder's Agreement does not expressly provide otherwise. If a
Holder ceases to be employed by at least one of the employers in
the group of employers consisting of the Corporation and its
affiliates because the Holder voluntarily terminates employment
with such group of employers and the Holder does not remain or
thereupon become a director of the Corporation or one or more of
its Affiliates, or if a Holder voluntarily ceases to be a director
of at least one of the corporations in the group of corporations
consisting of the Corporation and its Affiliates and the Holder
does not remain or thereupon become an employee of the Corporation
or one or more of it's Affiliates, the Holder shall have the right
for thirty (30) days after such termination or cessation to
exercise the Option with respect to that portion thereof that has
become exercisable and, with respect to Restricted Stock, receive
an additional thirty (30) days for restrictions on such Restricted
Stock to lapse pursuant to the Holder's Agreement as of the date
of the Holder's termination of employment or cessation of
directorship, whichever occurs latest, and thereafter (i) that
portion of the Option shall terminate and cease to be exercisable
and (ii) the shares of Restricted Stock with respect to which the
restrictions applicable to such Restricted Stock have not lapsed
shall revert to the Corporation.
If a Holder ceases to be employed by at least one of the
employers in the group of employers consisting of the Corporation
and its Affiliates because any of such entities terminates the
Holder's employment for misconduct, (i) the portion, if any, of an
Award or Option that remains unexercised, including that portion,
if any, that pursuant to the Agreement is not yet exercisable, at
the time of the Holder's termination of employment, shall terminate
and cease to be exercisable as of such time and (ii) the shares of
Restricted Stock with respect to which the restrictions applicable
to such Restricted Stock have not lapsed shall revert to the
Corporation. "Misconduct" shall be defined in the Corporation's
Personnel Policy and Procedures Manual.
If a Holder ceases to be employed by at least one of the
employers in the group of employers consisting of the Corporation
and its affiliates because one or more of such entities terminates
the employment of the Holder, but not for misconduct, and the
Holder does not remain or thereupon become a director of the
Corporation or one or more of it's affiliates, the Holder shall
have the right for ninety (90) days after such termination or
cessation to exercise the Option with respect to that portion
thereof that has become exercisable and, with respect to Restricted
Stock, receive an additional ninety (90) days for restrictions on
such Restricted Stock to lapse pursuant to the Holder's Agreement
as of the date of the Holder's termination of employment or
cessation of directorship, whichever occurs latest, and thereafter
(i) that portion of the Option shall terminate and cease to be
exercisable and (ii) the shares of Restricted Stock with respect
to which the restrictions applicable to such Restricted Stock have
not lapsed shall revert to the Corporation.
With respect to nonemployee director holders, if such a
Holder ceases to be a director of at least one of the corporations
in the group of corporations consisting of the Corporation and its
Affiliates, the Holder shall have the right for thirty (30) days
after such cessation to exercise the options with respect to that
portion thereof that has become exercisable.
That portion of an Option which is not exercisable on the
date of termination of employment or cessation of directorship
shall terminate and be forfeited to the Corporation on the date of
such termination or cessation.
(b) Disability. The provisions of this Section 7.4(b)
shall apply to the extent a Holder's Agreement does not expressly
provide otherwise. If a Holder ceases to be employed by at least
one of the employers in the group of employers consisting of the
Corporation and its Affiliates by reason of disability (as defined
in section 22(e)(3) of the Code) and does not remain or thereupon
become a director of the Corporation or one or more of its
Affiliates, or if the Holder is only a director and ceases by
reason of such disability to be a director of at least one of the
corporations in the group of corporations consisting of the
Corporation and its Affiliates, the Holder shall have the right for
twelve (12) months after the date of termination of employment with
or cessation of directorship of such group of employers by reason
of disability, whichever occurs latest, to exercise an Option to
the extent such Option is exercisable and, with respect to
Restricted Stock, receive an additional twelve (12) months for
restrictions on such Restricted Stock to lapse pursuant to the
terms of the Holder's Agreement on the date of his termination of
employment or cessation of directorship, and thereafter (i) the
Option shall terminate and cease to be exercisable and (ii) the
shares of Restricted Stock with respect to which the restrictions
applicable to such Restricted Stock have not lapsed shall revert
to the Corporation.
(c) Death. The provisions of this Section 7.4(c) shall apply to
the extent a Holder's Agreement does not expressly provide otherwise.
If a Holder dies while in the employ of the Corporation or an Affiliate
or dies while a director of the Corporation or an Affiliate, an Option
shall be exercisable by the Holder's legal representatives, heirs,
legatees, or distributees for twelve (12) months following the date of
the Holder's death to the extent such Option is exercisable and, with
respect to Restricted Stock, receive an additional twelve (12) months for
restrictions on such Restricted Stock to lapse pursuant to the Holder's
Agreement on the Holder's date of death, and thereafter (i) the Option
shall terminate and cease to be exercisable and (ii) the shares of
Restricted Stock with respect to which the restrictions applicable to
such Restricted Stock have not lapsed shall revert to the Corporation.
Notwithstanding any other provision of this Plan, including the
provisions of items (a), (b), and (c) of this Section 7.4, no Incentive
Option shall be exercisable after the expiration of the later of ten (10)
years from the date it is granted, or the period specified in Section
4.1, if applicable.
The Committee shall have authority to prescribe in any Option
Agreement that the Option evidenced thereby may be exercised in full or
in part as to any number of shares subject thereto at any time or from
time to time during the term of the Option, or in such installments at
such times during said term as the Committee may prescribe. Except as
provided above and unless otherwise provided in any Agreement, an Option
may be exercised at any time or from time to time during the term of the
Option. Such exercise may be as to any or all whole (but no fractional)
shares that have become purchasable under the Award or Option.
Within a reasonable time or such time as may be permitted by law
after (i) the Corporation receives written notice that the Holder has
elected to exercise all or a portion of an Option, such notice to be
accompanied by payment in full of the aggregate Option exercise price of
the number of shares of Stock purchased or (ii) the Restriction Period
with respect to a Holder's Restricted Stock has lapsed, the Corporation
shall deliver a certificate representing such shares and pay any other
amounts payable in consequence of such exercise. In the event that a
Holder is entitled to receive shares due to his exercise of any
combination of an Incentive Option, or portion thereof, or a Nonstatutory
Stock Option, or a portion thereof and the lapse of a Restriction Period,
separate Stock certificates shall be issued, one for the Stock subject
to the Incentive Option one for the Stock subject to the Award or
Nonstatutory Stock Option, and one for the released Restricted Stock.
The number of the shares of Stock transferrable due to an exercise of an
Option or the lapse of a Restriction Period under this Plan shall not be
increased due to the passage of time, except as may be provided in an
Agreement. However, this number of such shares of Stock which are
transferrable may increase due to the occurrence of certain events which
are fully described in Section 7.6.
Nothing herein or in any award granted hereunder shall require the
Corporation to issue any shares pursuant to such Award if such issuance
would, in the opinion of counsel for the Corporation, constitute a
violation of the Securities Act of 1933, as amended, or any similar or
superseding statute or statutes, or any other applicable statute or
regulation, as then in effect. At the time of receipt of shares pursuant
to an Award, the Corporation may, as a condition precedent, require from
the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written
representations, if any, concerning his intentions with regard to the
retention or disposition of the shares being acquired pursuant to such
Award and such written covenants and agreements, if any, as to the manner
of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such
Holder (or in the event of his death, his legal representatives, heirs,
legatees, or distributees), will not involve a violation of the
Securities Act of 1933, as amended, or any similar or superseding statute
or statues, or any other applicable state or federal statute or
regulation, as then in effect.
7.5 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option. Except
as is otherwise provided in the second paragraph of Section 7.6 hereof,
with respect to any Incentive Option granted under this Plan, the sum of:
(a) the aggregate Fair Market Value of shares of Stock
subject to such Incentive Option that first become purchasable in
a calendar year under such Incentive Option, and
(b) the aggregate Fair Market Value of shares of Stock or
stock of any Affiliate (or a predecessor of the Corporation or an
Affiliate) subject to any other incentive stock option (within the
meaning of section 422 of the Code) of the Corporation or its
Affiliates (or a predecessor corporation of any such corporation),
that first become purchasable in a calendar year under such
incentive stock option
may not (with respect to any Holder) exceed $100,000 or such other amount
as may be specified by section 422 of the Code, with such Fair Market
Value to be determined as of the date the Incentive Option or such other
incentive stock option is granted.
For purposes of this Section 7.5, "predecessor corporation" means
(i) a corporation that was a party to a transaction described in section
425(a) of the Code (or which would be so described if a substitution or
assumption under such section had been effected) with the Corporation,
(ii) a corporation that, at the time the new incentive stock option
(within the meaning of section 422 of the Code) is granted, is an
Affiliate of the Corporation or a predecessor corporation of any such
corporations, or (iii) a predecessor corporation of any such
corporations.
7.6 Adjustments Upon Changes in Capitalization, Merger, Etc.
Notwithstanding any other provision hereof, in the event of any change
in the number of outstanding shares of Stock
(a) effected without receipt of consideration therefor by the
Corporation, by reason of a stock dividend, or split, combination,
exchange of shares or other recapitalization, merger, or otherwise,
in which the Corporation is the surviving corporation;
(b) by reason of a spin-off to the shareholders of a part of
the Corporation into a separate entity; or
(c) by reason of assumptions and conversions of outstanding
grants due to an acquisition by the Corporation of a separate
entity, then:
(i) the aggregate number and class of the reserved shares, (ii) the
number and class of shares subject to each outstanding Award and (iii)
the exercise price of each outstanding Option shall be automatically
adjusted to accurately and equitably reflect the effect thereon of such
change; provided, however, that any fractional share resulting from such
adjustment may be eliminated. In the event of a dispute concerning such
adjustment, the Committee has full discretion to determine the resolution
of the dispute. Such determination shall be final, binding and
conclusive. The number of reserved shares or the number of shares
subject to any outstanding Award shall be automatically reduced by any
fraction included therein which results from any adjustment made pursuant
to this Section 7.6.
The following provisions of this Section 7.6 shall apply unless a
Holder's Agreement provides otherwise. The occurrence of:
(a) a dissolution or liquidation of the Corporation;
(b) a merger or consolidation (other than a merger effecting
a reincorporation of the Corporation in another state or any other
merger or a consolidation in which the shareholders of the
surviving corporation and their proportionate interests therein
immediately after the merger or consolidation are substantially
identical to the shareholders of the Corporation and their
proportionate interests therein immediately prior to the merger or
consolidation) in which the Corporation is not the surviving
corporation (or survives only as a subsidiary of another
corporation in a transaction in which the shareholders of the
parent of the Corporation and their proportionate interests therein
immediately after the transaction are not substantially identical
to the shareholders of the Corporation and their proportionate
interests therein immediately prior to the transaction);
(c) a transaction in which any person becomes the owner of
50% or more of the total combined voting power of all classes of
stock of the Corporation
shall cause every Award then outstanding to terminate, but (i) the
Holders of each such then outstanding Options shall, in any event, have
the right, immediately prior to such dissolution, liquidation, merger,
consolidation, or transaction, to exercise such Options, to the extent
not theretofore exercised, without regard to the determination as to the
periods and installments of exercisability made pursuant to a Holder's
Agreement if (and only if) such Options have not at that time expired or
been terminated and (ii) the restrictions applicable to the Holders of
Restricted Stock pursuant to every such terminating award shall lapse
immediately prior to such dissolution, liquidation, merger,
consolidation, or transaction without regard to the determination as to
the periods and installments of vesting of Restricted Stock made pursuant
to a Holder's Agreement if (and only if) such Restricted Stock has not
at that time otherwise reverted to the Corporation.
7.7 Rights as a Shareholder. A Holder shall have no right as a
shareholder with respect to any shares covered by his Award until a
certificate representing such shares is issued and delivered to him. No
adjustment shall be made for dividends (ordinary, or extraordinary,
whether in cash or other property) or distributions or other rights for
which the record date is prior to the date such certificate is issued,
except as provided in Section 7.6 hereof.
7.8 Modification, Extension and Renewal of Awards. Subject to
the terms and conditions of and within the limitations of the Plan, the
Committee may modify, extend or renew outstanding Awards granted under
the Plan, or accept the surrender of Awards outstanding hereunder (to the
extent not theretofore exercised) and authorize the granting of new
Awards hereunder in substitution therefor (to the extent not theretofore
exercised). The Committee may not, however, without the consent of the
Holder, modify any outstanding Awards so as to specify a higher or lower
exercise price as to Options or accept the surrender of outstanding
Incentive Options and authorize the granting of new Awards in
substitution therefor specifying a higher or lower exercise price. In
addition, no modification of an Award granted hereunder shall, without
the consent of the Holder, alter or impair any rights or obligations
under any Award theretofore granted hereunder to such Holder under the
Plan, except as may be necessary, with respect to Incentive Options, to
satisfy the requirements of section 422 of the Code.
7.9 Furnish Information. Each Holder shall furnish to the
Corporation all information requested by the Corporation to enable it to
comply with any reporting or other requirement imposed upon the
Corporation by or under any applicable statute or regulation.
7.10 Obligation to Exercise. The granting of an Option hereunder
shall impose no obligation upon the Holder to exercise the same or any
part thereof.
7.11 Agreement Provisions. The Agreements authorized under the
Plan shall contain such provisions in addition to those required by the
Plan (including, without limitation, restrictions or the removal of
restrictions upon (i) the exercise of an Option and the retention or
transfer or shares thereby acquired and (ii) Restricted Stock and the
lapse of the Restriction Period) as the Committee shall deem advisable.
Each Option Agreement shall identify the Option evidenced thereby as an
Incentive Option or a Nonstatutory Option, as the case may be, and no
Agreement shall cover both an Incentive Option and a Nonstatutory Option
or both either type of Option and Restricted Stock. Each Agreement
relating to an Incentive Option granted hereunder shall contain such
limitations and restrictions upon the exercise of the Incentive Option
to which it related as shall be necessary for the Incentive Option to
which such Agreement relates to constitute an incentive stock option, as
defined in section 422 of the Code.
7.12 Non-Transferability of Award. An Award granted under this
Plan shall not be transferable except by will or by the laws of descent
and distribution. The Holder may not make any disposition of an Award
or any interest therein. As used in this Plan, "disposition" means any
sale, transfer, encumbrance, gift, donation, assignment, pledge,
hypothecation, or other disposition, whether similar or dissimilar to
those previously enumerated, whether voluntary or involuntary, and
whether during the Holder's lifetime or upon or after his death,
including, but not limited to, any disposition by operation of law, by
court order, by judicial process, or by foreclosure, levy, or attachment,
except a transfer by will or by the laws of descent or distribution. Any
attempted disposition in violation of this Section 7.12 shall be void and
ineffective for all purposes.
SECTION 8. Remedies
8.1 Remedies. The Corporation shall be entitled to recover from
a Holder reasonable attorneys' fees incurred in connection with the
enforcement of the terms and provisions of the Plan and any Agreement
whether by an action to enforce specific performance or for damages for
its breach or otherwise.
8.2 Specific Performance. The Corporation shall be entitled to
enforce the terms and provisions of this Section 8, including the remedy
of specific performance, in Dallas, Dallas County, Texas.
SECTION 9. Duration of Plan
No Awards may be granted hereunder after the date that is ten (10)
years from the earlier of (i) the date the Plan is adopted by the Board
of Directors or (ii) the date the Plan is approved by the shareholders
of the Corporation.
SECTION 10. Amendment of Plan
The Board of directors may, insofar as permitted by law, with
respect to any shares at the time that are not subject to Awards, suspend
or discontinue the Plan or revise or amend it in any respect whatsoever;
provided, however, that, without the approval of the holders of a
majority of the outstanding shares of voting stock of all classes of the
Corporation present and voting in person or by proxy at a meeting of
shareholders, no such revision or amendment shall (i) cause the Plan to
no longer comply with the requirements of Section 16(b) of the Act, any
rule promulgated thereunder, any successor statute or rule or other such
regulatory requirements, or in any manner cause Incentive Options issued
under it to fail to satisfy the requirements applicable to incentive
stock options as defined in section 422 of the Code.
SECTION 11. General
11.1 Application of Funds. The proceeds received by the
Corporation from the sale of shares pursuant to Awards and Options shall
be used for general corporate purposes.
11.2 Right of the Corporation and Affiliates to Terminate
Employment. Nothing contained in the Plan, or in any Agreement, shall
confer upon any Holder the right to continue in the employ of the
Corporation or any Affiliate, or interfere in any way with the rights of
the Corporation or any Affiliate to terminate his employment any time.
11.3 No Liability for Good Faith Determinations. Neither the
members of the Board of Directors nor any member of the Committee shall
be liable, even if negligent, for any act, omission, or determination
taken or made in good faith with respect to the Plan or any Award granted
under it, and members of the Board of Directors and the Committee shall
be entitled to indemnification and reimbursement by the Corporation in
respect of any claim, loss, damage, or expense (including attorneys'
fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and
amounts paid in satisfaction of a judgment, except a judgment based on
a finding of bad faith) arising therefrom to the full extent permitted
by law and under any directors' and officers' liability or similar
insurance coverage that may from time to time be in effect.
11.4 Information Confidential. As partial consideration for the
granting of each Award hereunder, the Agreement may, in the Committee's
sole and absolute discretion, provide that the Holder shall agree with
the Corporation that he will keep confidential all information and
knowledge that he has relating to the manner and amount of his
participation in the Plan; provided, however, that such information may
be disclosed as required by law and may be given in confidence to the
Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure
a loan. In the event any breach of this promise comes to the attention
of the Committee, it shall take into consideration such breach in
determining whether to recommend the grant of any future Award to such
Holder as a factor militating against the advisability of granting any
such future Award to such individual.
11.5 Other Benefits. Participation in the Plan shall not preclude
the Holder from eligibility in any other stock option of the Corporation
or any Affiliate or any old age benefit, insurance, pension, profit
sharing, retirement, bonus, or other extra compensation plans that the
Corporation or any Affiliate has adopted, or may, at any time, adopt for
the benefit of its employees.
11.6 Execution of Receipts and Releases. Any payment of cash or
any issuance or transfer of shares of Stock to the Holder, or to his or
her legal representative, heir, legatee, or distributee, in accordance
with the provisions hereof, shall, to the extent thereof, be in full
satisfaction of all claims of such persons hereunder. The Committee may
require any Holder, legal representative, heir, legatee, or distributee,
as a condition precedent to such payment, to execute a release and
receipt therefor in such form as it shall determine.
11.7 No guarantee of Interests. The Committee, the Board of
Directors and the Corporation, individually and collectively, do not
guarantee the Stock of the Corporation from loss or depreciation.
11.8 Payment of Expenses. All expenses incident to the
administration, termination, or protection of the Plan, including, but
not limited to, legal and accounting fees, shall be paid by the
Corporation or its Affiliates; provided, however, that the Corporation
or any Affiliate may recover any and all damages, fees, expenses, and/or
costs arising out of any actions taken by the Corporation to enforce its
rights hereunder.
11.9 Corporation Records. Records of the Corporation or its
Affiliates regarding the Holder's period of employment, termination of
employment and the reason therefor, leaves of absence, re-employment, and
other matters shall be conclusive for all purposes hereunder, unless
determined by the Committee to be incorrect.
11.10 Information. The Corporation and its Affiliates shall, upon
request or as may be specifically required hereunder, furnish or cause
to be furnished, all of the information or documentation that is
necessary or required by the Committee to perform its duties and
functions under the Plan.
11.11 No Liability of Corporation. The Corporation assumes no
obligation or responsibility to the Holder or his or her legal
representatives, heirs, legatees, or distributions for any act of, or
failure to act on the part of, the Committee.
11.12 Corporation Action. Any action of the Corporation shall be
by resolution of its Board of Directors or by a person authorized to act
by resolution of the Board of Directors.
11.13 Severability. If any provision of this Plan is held to be
illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining provisions hereof, but such provision shall be fully
severable, and the Plan shall be construed and enforced as if the illegal
or invalid provision had never been included herein.
11.14 Notices. Whenever any notice is required or permitted
hereunder, such notice must be in writing and personally delivered or
sent by mail or by a nationally recognized courier service. Any notice
required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered, or, if mailed,
whether actually received or not, on the third business day after it is
deposited in the United States mail, certified or registered, postage
prepaid, addressed to the person who is to receive it at the address
which such person has previously specified by written notice delivered
in accordance herewith or, if by courier, twenty-four (24) hours after
it is sent, addressed as described in this Section. The Corporation or
a Holder may change, at any time and from time to time, by written notice
to the other, the address which it or he or she had previously specified
for receiving notices. Until changed in accordance herewith, the
Corporation and each Holder shall specify as its and his or her address
for receiving notices the address set forth in the Agreement pertaining
to the shares to which such notice relates.
11.15 Waiver of Notice. Any person entitled to notice hereunder
may waive such notice.
11.16 Successors. The Plan shall be binding upon the Holder, his
or her legal representatives, heirs, legatees and distributees upon the
Corporation, its successors, and assigns, and upon the Committee, and its
successors.
11.17 Headings. The titles and headings of Sections are included
for convenience of reference only and are not to be considered in
construction of the provisions hereof.
11.18 Governing Law. All questions arising with respect to the
provisions of the Plan shall be determined by application of the laws of
the State of Texas except to the extent Texas law is preempted by
federal law. Questions arising with respect to the provisions of an
Agreement that are matters of contract law shall be governed by the laws
of the state specified in the Agreement, except to the extent preempted
by federal law and except to the extent that Texas corporate law
conflicts with the contract law of such state, if different, in which
event Texas corporate law shall govern. The obligation of the
Corporation to sell and deliver Stock hereunder is subject to applicable
laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such
Stock.
11.19 Word Usage. Words used in the masculine shall apply to the
feminine where applicable, and wherever the context of this Plan
dictates, the plural shall be read as the singular and the singular as
the plural.
SECTION 12. Approval of Shareholders
The Plan shall take effect on the date it is approved by the Board
of Directors of the Corporation, subject to approval by the shareholders
of the Corporation. If this Plan is not approved by the holders of a
majority of the holders of shares of equity securities of the Corporation
having voting rights and present and voting in person or by proxy at a
meeting of shareholders and within the period beginning on the date the
Board of Directors adopts the Plan and ending twelve (12) months after
the date the Plan is adopted by the Board of Directors, none of the
Options granted hereunder shall constitute Incentive Options and in the
event that the Plan is not so approved on or before the first annual
meeting of shareholders of the Corporation following the date the Board
of Directors adopts the Plan, if any Awards or Options are granted under
the Plan before the date such shareholders do approve the Plan to
individuals subject to suit under Section 16b of the Act at the time of
grant, such Awards or Options shall be null, void, and of no force and
effect as of their grant date. If subsequent to the adoption of this
Plan, the rules and regulations promulgated under the Act associated with
the beneficial treatment of certain events under Section 16(b) of the Act
are amended so as to remove a requirement for shareholder approval listed
in this Section 12 or in Section 10, and the Code does not require
shareholder approval, that requirement for shareholder approval in this
Section 12 and Section 10 shall be automatically deleted from this Plan.
IN WITNESS WHEREOF, El Chico Restaurants, Inc., acting by and
through its officers hereunto duly authorized, has executed this El Chico
Restaurants, Inc. 1995 Stock Plan on this the 27 day of October,
1995.
EL CHICO RESTAURANTS, INC.
By: /s/Lawrence E. White
Title:Executive V.P &C.F.O.
