August 11, 1997
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, 1997
Gentlemen:
We are transmitting electronically the Form 10-Q for El Chico
Restaurants, Inc. for the quarter ended June 30, 1997.
Sincerely,
Susan R. Holland
Vice President, Treasurer &
Controller
/ktc
cc: National Assoc. of Securities Dealers, Inc.
(w/enclosures)
Lawrence E. White
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, 1997
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
Incorporation or organization) Identification No.)
12200 Stemmons Freeway, Suite 100, Dallas, Texas 75234
(Address of principal executive offices)
(Zip Code)
(972) 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 July 31, 1997.
Common Stock, $0.10 par value: 3,710,696.
======================================================================
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars, Except Par Value Amounts)
June 30, December 31,
1997 1996
(Unaudited)
ASSETS
Current Assets:
Cash and Cash Equivalents $ 925 $ 216
Accounts Receivable 1,008 1,154
Inventories 1,080 976
Prepaid Expenses and Other 1,027 1,330
Deferred Income Taxes 465 824
------ ------
Total Current Assets 4,505 4,500
Property and Equipment - Net 42,180 40,535
Other Assets and Deferred Costs 546 681
Deferred Income Taxes 2,443 1,946
------ ------
$ 49,674 $ 47,662
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current Maturities of Long-Term Debt$ 627 $ 27
Trade Accounts Payable 4,291 4,459
Accrued Liabilities 3,448 5,114
Income Taxes Payable 208 570
------ ------
Total Current Liabilities 8,574 10,170
Long-Term Debt, Less Current Maturities 10,402 9,765
Other Long-Term Liabilities 3,237 1,442
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 4,760,142 and 4,750,142
Shares in 1997 and 1996, respectively 478 475
Additional Paid-In Capital 15,991 15,925
Retained Earnings 19,973 18,876
Unamortd Value of Restr Stck Issued (39) (37)
------ ------
36,403 35,239
Less Treas Stck - At Cost, 1,053,807
and 1,057,760 Shares in 1997 and
1996, respectively (8,942) (8,954)
------ ------
27,461 26,285
------ ------
$ 49,674 $ 47,662
====== ======<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars, Except Per Share Amounts)
(Unaudited)
Quarter Ended Six Months Ended
------------- ----------------
6/30/97 6/30/96 6/30/97 6/30/96
-------- -------- ------- -------
Revenues:
Sales from Company-Owned
restaurants $25,794 $26,139 $49,537 $51,485
Equipment sales 226 136 290 313
Franchise revenues 493 510 940 1,002
------ ------ ------ ------
26,513 26,785 50,767 52,800
Cost and Expenses:
Restaurant cost of sales - food
and beverage 6,774 6,939 13,029 13,937
Restaurant cost of sales -
labor 8,554 8,525 16,637 17,171
Restaurant operating expses 7,515 7,541 14,264 15,524
Cost of equipment sales 204 105 256 249
General and administrative 2,319 2,438 4,664 4,816
Special Charge - 9,421 - 9,421
Gain on sale of assets - (605) - (605)
Interest expense 203 149 392 306
Interest income (17) (16) (36) (30)
------ ------ ------ ------
25,552 34,497 49,206 60,789
------ ------ ------ ------
Income (loss) before income
taxes 961 (7,712) 1,561 (7,989)
Income tax provision (benefit) 296 (2,684) 464 (2,766)
------ ------ ------ ------
NET EARNINGS (LOSS) $ 665 $(5,028) $1,097 $(5,223)
====== ====== ====== ======
Net earnings (loss) per
common share $ 0.18 $ (1.27) $ 0.30 $(1.30)
====== ====== ====== ======
Weighted average number of
shares and share equivalents
outstanding 3,718,332 3,964,076 3,713,583 4,027,649
======== ======== ======== ========
<PAGE>
EL CHICO RESTAURANTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
Six Months Ended
June 30,1997 June 30,1996
Cash Flows from Operating Activities:
Net Earnings (Loss) $1,097 $(5,223)
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 2,567 2,796
Amortization of Deferred Costs 244 432
Decrease in Accounts Receivable 146 128
Decrease in Income Tax Receivable - 8
Decrease (Increase) in Inventories (104) 179
Decrease in Prepaid Expenses and Other 303 293
Increase in Other Assets and Deferred
Costs (109) (60)
Decrease in Trade Accounts Payable and
Accrued Liabilities (1,834) (835)
Decrease in Income Taxes Payable (362) -
Increase (Decrease) in Long-Term
Liabilities 1,795 (137)
Deferred Income Taxes (138) (3,246)
Other 158 99
------ ------
Net Cash Provided by Operating Activities 3,763 3,250
------ ------
Cash Flows from Investing Activities:
Proceeds from Sale of Property - 700
Purchase of Property and Equipment (4,303) (3,716)
------ ------
Net Cash Used in Investing Activities (4,303) (3,016)
------ ------
Cash Flows from Financing Activities:
Borrowings of Long-Term Debt 1,249 1,760
Purchase of Treasury Stock - (2,112)
------ ------
Net Cash (Used in) Provided
by Financing Activities 1,249 (352)
------ ------
Net Decrease in Cash 709 (118)
Cash and Cash Equiv at Beginning of Period 216 266
------ ------
Cash and Cash Equivalents at End of Period $ 925 $ 148
====== ======
<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, 1997
and June 30, 1996 and financial position at June 30, 1997. 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, 1997 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, 1996 Annual Report on
Form 10-K should be read in conjunction with the consolidated condensed
financial statements.
2. Special Charge.
During the quarter ended June 30, 1996, 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 was an older
store that was closed during the quarter and was replaced with a new
prototype which opened July 1996. Subsequently, the Company entered
into agreements with two separate existing franchisees to operate two of
the six impaired restaurants. The three remaining impaired stores have
been closed, two of which are subleased or under contract to sublease and
the Company is in the process of locating a sublessor for the remaining
closed store.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 uncertanties 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.
Similarly, forward-looking statements regarding management's present
expectations for operating results involve risks and uncertanties
relative to these and other factors, such as advertising effectiveness
and the ability to achieve cost reductions, which also would cause actual
results to differ from present plans. Such differences could be
material. Management does not expect to update such forward-looking
statements continually as conditions change, and readers should consider
that such statements speak only as to the date hereof.
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 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. 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. A commitment fee of .25 percent is payable quarterly
on any unused commitments. As of June 30, 1997, $10,979,000 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 and has been used for repurchase of the
Company's common stock subject to certain limitations. The Company plans
to open two El Chico restaurants and one Cantina Laredo restaurant and
remodel ten El Chico restaurants during 1997 and estimates capital
expenditures during 1997 to be approximately $9,000,000, which will be
funded by internal operations and the existing credit facility.
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 deficit decreased from
$5,670,000 at December 31, 1996 to $4,069,000 at June 30, 1997, primarily
as a result of a reclassification of accrued liabilities, associated with
the second quarter 1996 special charge, to "Other Long-Term Liabilities"
reflecting present plans for disposition of these properties.
Results of Operations
Revenues for the quarter ended June 30, 1997 were $26.5 million,
a decrease of 1.0 percent, as compared to $26.8 million for the quarter
ended June 30, 1996. Company-owned restaurant sales included in these
amounts were $25.8 million and $26.1 million, respectively, a decrease
of 1.3 percent. Comparable Company-owned El Chico concept restaurant
sales were down 3.0 percent.
Year-to-date revenues were $50.8 million compared with $52.8
million for the same period a year earlier. Company-owned restaurant
sales included in these amounts were $49.5 million and $51.5 million,
respectively. The decrease of 3.8 percent was primarily due to a
decrease of 3.1 percent in comparable Company-owned El Chico concept
restaurant sales.
Franchise-related income decreased for the quarter and year-to-date
due to a decrease in the number of revenue-producing stores and a
decrease in comparable store sales of 1.1 percent and 1.4 percent,
respectively.
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 increased $90,000 for the quarter due
to an increase in kitchen equipment sales to chain accounts. Equipment
sales for the year-to-date decreased $23,000 due to a greater emphasis
on Company store remodels during the first quarter of 1997 rather than
outside sales. Cost of sales for the quarter and year-to-date increased
due to lower vendor rebates.
Restaurant food costs decreased as a percentage of sales to 26.3
percent from 26.5 percent due to the prior year amount including an
adjustment for prior period sales tax, partly offset by an increase in
ingredient cost in the current year related to sales of grill items which
carry a higher food cost. For the year-to-date, food costs decreased to
26.3 percent from 27.1 percent. Food cost was high a year ago as a
result of certain programs initiated to improve value perception such as
99-cent beer and margaritas, aggressive offering of free tortillas,
product introductions with high food costs and the adjustment for prior
period sales tax. The majority of these programs have been discontinued.
Restaurant labor increased for the quarter and year-to-date as a
percentage of sales to 33.2 percent from 32.6 percent and to 33.6 percent
from 33.4 percent, respectively, due to an increase in hourly labor,
partly offset by lower management incentive expense.
Operating expenses for the quarter increased as a percentage of
sales from 28.8 percent to 29.1 percent as a result of an increase in
advertising production costs, partly offset by a decrease in repair and
maintenance expense. Operating expenses for the year-to-date decreased
as a percentage of sales from 30.2 percent to 28.8 percent due to
decreases in repair and maintenance costs and depreciation expense
related to the prior year impairment of certain assets.
General and administrative costs decreased for the quarter and
year-to-date due to lower field supervision and corporate employee costs,
partly offset by higher placement fees for recruitment of managers and
professional fees.
During the quarter a year ago 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 was an older
store that was closed during the quarter a year ago and replaced with a
new prototype which opened July 1996. Subsequently, the Company entered
into agreements with two separate existing franchisees to operate two of
the six impaired restaurants. The three remaining impaired stores have
been closed, two of which are subleased or under contract to sublease and
the Company is in the process of locating a sublessor for the remaining
closed store.
During the prior year 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 increased for the quarter and year-to-date due to
higher interest rates and borrowings. Interest income for the quarter
and year-to-date increased slightly by $1,000 and $6,000, respectively.
At June 30, 1997 there were 68 Company-operated restaurants and 28
franchised restaurants.
Accounting Matters
In February 1997, the Financial Accounting Standards Board issued
SFAS No. 128, Earnings Per Share (Statement 128). Statement 128
specifies the computations, presentation and disclosure requirements for
earnings per share (EPS) for entities with publicly held common stock or
potential common stock. Statement 128 replaces primary EPS and fully
diluted EPS with basic EPS and diluted EPS, respectively. Statement 128
is effective for financial statements for both interim and annual periods
beginning after December 15, 1997, with earlier application not
permitted. If such early application were permitted, management believes
the impact of the adoption would not have a material impact on the
reported EPS at June 30, 1997 due to the anti-dilutive nature of the
majority of the Company's common share equivalents at June 30, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 - Amended Bylaws
10.1 - Amendment No. 1 to Employment Agreement between Wallace
A. Jones and El Chico Restaurants, Inc.
10.2 - Employment Agreement between Lawrence E. White and El
Chico Restaurants, Inc.
10.3 - Description of Retention Incentive Policy for Designated
Executive Officers
27 - Financial Data Schedule
(b) No report on Form 8-K was filed or required to be filed during
the quarter ended June 30, 1997.
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 11, 1997 By: /s/Susan R. Holland
---------------------------
Vice President, Treasurer
& Controller
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000719961
<NAME> EL CHICO RESTAURANTS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 925
<SECURITIES> 0
<RECEIVABLES> 1,008
<ALLOWANCES> 0
<INVENTORY> 1,080
<CURRENT-ASSETS> 4,505
<PP&E> 42,180
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,674
<CURRENT-LIABILITIES> 8,574
<BONDS> 0
0
0
<COMMON> 478
<OTHER-SE> 26,983
<TOTAL-LIABILITY-AND-EQUITY> 49,674
<SALES> 25,794
<TOTAL-REVENUES> 26,513
<CGS> 15,328
<TOTAL-COSTS> 25,366
<OTHER-EXPENSES> (17)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 961
<INCOME-TAX> 296
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 665
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
B Y L A W S
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 shareholders, 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 provided 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 a 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
shareholders 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 or she shall have
been removed from office. At any meeting of Shareholders called expressly
for that purpose, any Director or the entire Board of Directors may be
removed but only with cause (as defined below), 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) (as amended 6-17-97)
"Cause" means any of the following grounds:
(a) the commission of any act of fraud on the part of a
Director resulting or intending to result in personal
gain or enrichment at the expense of the Corporation;
(b) misappropriation, embezzlement, theft or willful and
material damage of or to any asset of the Corporation or
the use of the Corporation's funds or assets by a
Director for any illegal purpose;
(c) the commission of any criminal or illegal act on the part
of a Director that materially and adversely, whether
directly or indirectly, affects the name or good-will of
the Corporation; or
(d) a good faith determination by the Board of Directors of
the Corporation that the Director has committed an act of
gross negligence or willful misconduct that has or is
reasonably expected to have a material adverse effect on
the business or affairs of the Corporation.
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
resolution 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 Directors 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 elected 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 registered 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 purpose 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.
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 President 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 President'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 shareholders 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 likewise
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 prescribe.
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 disbursements and shall deposit all money,
checks and orders for the payment 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 prescribe.
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 Shareholders 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 adjournment 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 preceding 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 or 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 shareholders. 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 transfer 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 adjournment 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 corporation 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 Assistant 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 succession, 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 thereof 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 certificate, the Board of Directors may, in its
discretion and as a condition 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 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 Corporation'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, consisting 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 committee 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.
11.02 Advancement of Expenses to Directors. Reasonable 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
indemnification under Section 1 or this Article and (b) a written
undertaking by or on behalf of such Director to repay the amount paid or
reimbursed 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 this 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.
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.
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, partnership, 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.
11.05 Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a Director, 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 provisions of the Texas Business
Corporation Act, corporation for profit organized under laws other than
the laws of Texas, partnership, 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.
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.
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.
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
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, partnership,
joint venture, sole proprietorship, 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.
11.09 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 Incorporation 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.
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement (the "Amendment") is dated
as of August 7, 1997, by and between El Chico Restaurants, Inc., a Texas
Corporation with its principal executive offices at 12200 Stemmons Freeway,
Suite 100, Dallas, Texas 75234 (the "Company") and Wallace A. Jones (the
"Employee") who resides at 66615 Camille Avenue, Dallas, Texas 75252.
WITNESSETH:
WHEREAS, the Company and the Employee entered into that certain
Employment Agreement, dated as of ______________ (the "Employment
Agreement"), setting forth the terms of employment of the Employee by the
Company; and
WHEREAS, the Company believes that it is in the best interests of the
Company to extend the term of the Employment Agreement for a one-year period
beyond the termination date presently provided for therein;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
ARTICLE I
Section 3 of the Employment Agreement is hereby amended and restated
as follows:
"3. TERM.
Subject to the provisions of termination as provided in
Section 9 of this Agreement, the terms of the Employee's
employment with the Company shall commence on November 28, 1994
and shall terminate on November 28, 1998, unless sooner
terminated as provided for herein."
ARTICLE II
All of the other provisions of the Employment Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the day
and year first above written.
EL CHICO RESTAURANTS, INC.
By: /s/ Lawrence E. White
Print Name: Lawrence E. White
Title: Chief Financial Officer
EMPLOYEE
/s/ Wallace A. Jones
---------------------
Wallace A. Jones
EL CHICO RESTAURANTS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of August 7,
1997, between El Chico Restaurants, Inc., a Texas corporation with its
principal executive offices at 12200 Stemmons Freeway, Suite 100, Dallas,
Texas 75234 (the "Company"), and Lawrence E. White (the "Employee") who
resides at 5901 New Haven Drive, Plano, Texas 75093.
W I T N E S S E T H:
WHEREAS, on January 1, 1996, the Company and the Employee entered into
discussions outlining the Company's offer of employment to the Employee; and
WHEREAS, the Employee and the Company desire to finalize the terms of
the employment of the Employee with the Company;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, and subject to
the terms and conditions hereinafter set forth, the parties hereto agree as
follows:
1. DEFINITIONS.
In addition to the words and terms elsewhere defined in this Agreement,
the following words and terms as used herein shall have the following
meanings, unless the context or use indicates a different meaning:
"Cause" means (a) any act by the Employee that is materially
adverse to the best interests of the Company and which, if the subject
of a criminal proceeding, could result in a criminal conviction for a
felony or (b) the failure by the Employee to substantially perform his
duties hereunder, which duties are within the control of the Employee
(other than the failure resulting from the Employee's incapacity due
to physical or mental illness); provided, however, that the Employee
shall not be deemed to be terminated for Cause under this subsection
(b) unless and until (1) after the Employee receives written notice
from the Company specifying with reasonable particularity to the
actions of Employee that constitute a violation of this subsection (b)
and (2) within a period of 30 days after receipt of such notice (and
during which the violation is within the control of the Employee),
Employee fails to reasonably and prospectively cure such violation.
"Good Reason" means the occurrence of a Triggering Event (as
defined below) and (a) without his prior written concurrence, the
Employee is assigned any duties or responsibilities that are
inconsistent with his positions, duties, responsibilities or status at
the commencement of the term of this Agreement, or his reporting
responsibilities or titles in effect at such time are materially
changed, (b) the Employee's total compensation is reduced or any other
failure by the Company to comply with Section 4 hereof, or (c) any
change in any employee benefit plans or arrangements in effect on the
date hereof in which the Employee participates (including without
limitation any pension and retirement plan, savings and profit sharing
plan, or life, medical or disability insurance plan), which would
materially adversely affect the Employee's rights or benefits
thereunder, unless such change occurs pursuant to a program applicable
to all executive officers of the Company and does not result in a
proportionately greater reduction in the rights of or benefits to the
Employee as compared to any other executive officer of the Company.
"Triggering Date" means the date of a Triggering Event.
"Triggering Event" means an event of a nature that would be
required to be reported by the Company in response to item 6(d) of
Schedule 14A of Regulation 14A promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); provided that,
without limitation, such an event shall be deemed to have occurred if
(a) any person or group (as such terms are used in Section 13(d) and
14(d) of the Exchange Act) is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act) directly or indirectly,
of securities of the Company representing more than 35% of the combined
voting power of the Company's then outstanding securities, or (b) there
are serving as directors two or more persons who were elected as
members of the Board of Directors and were not nominated by management
or the Board of Directors of the Company to serve on the Board of
Directors of the Company, or (c) the Company is merged or consolidated
with another person or entity and as a result of such merger or
consolidation less than 51% of the outstanding voting securities of the
surviving or resulting person or entity are owned in the aggregate by
the former shareholders of the Company, excluding for purposes of such
calculation the voting securities of the Company owned by a party to
such merger or consolidation of affiliates (within the meaning of the
Exchange Act) of such party, as the same existed immediately prior to
such merger or consolidation, or (d) the Company sells all or
substantially all of its assets to another person or entity which is
not a direct or indirect wholly owned subsidiary of the Company.
2. EMPLOYMENT.
The Company hereby employs the Employee and the Employee hereby accepts
employment on the terms and conditions set forth herein.
3. TERM.
Subject to the provisions of termination as provided in Section 8 of
this Agreement, the terms of the Employee's employment with the Company
shall commence on January 1, 1997 and shall terminate on November 28, 1998,
unless sooner terminated as provided for herein.
4. SALARY.
(a) For all services rendered by the Employee under this Agreement,
the Company shall pay the Employee a base salary of $168,000 per year,
payable bi-weekly in accordance with the Company's customary payroll
practices. Such base salary shall be reviewed annually by the Board of
Directors of the Company. Any increase in base salary pursuant to this
paragraph shall become the new base salary.
(b) The Employee shall be entitled to receive an annual bonus
following each year of employment during the term hereof of up to 52.5% of
the Employee's base salary, based on the attainment of financial objectives
established by the Company and approved by the Board of Directors. The
first such bonus shall be payable during fiscal 1998 based upon the
attainment of financial objectives during fiscal 1997.
(c) The Employee shall be entitled to participate in or receive
benefits under any employee benefit or bonus plan or arrangement
(collectively referred to as "Benefits") made available by the Company in
the future to its executive officers and key management personnel, subject
to and on a basis consistent with the terms, conditions and overall
administration of such plan or arrangement. Nothing paid to the Employee
under any plan or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the salary payable to the Employee
pursuant to Section 4(a).
5. DUTIES.
The Employee shall serve as the Chief Financial Officer of the Company
and shall continue to be engaged in an Executive capacity with the Company
to supervise and direct the financial activities and to maintain the public
relations and goodwill of the Company. The precise services of the Employee
may be reasonably extended or curtailed from time to time by the Board of
Directors of the Company, and the Employee shall report to the President and
Chief Executive Officer.
6. EXTENT OF SERVICES AND SITUS.
The Employee shall devote such time, attention, and energy to the
business and affairs of the Company as are reasonably necessary to the
performance and discharge of the duties assigned to Employee under this
Agreement. Employee shall not during the term of his employment under this
Agreement engage in any other business activity that could constitute a
conflict of interest, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage. This shall not be construed as
preventing the Employee from managing his current investments or investing
his assets in such form or manner as will not require any services on the
part of the Employee in the operation and the affairs of the companies in
which such investments are made. On or after the Triggering Date, the
Employee shall not be required to change the situs of his employment from
his permanent place of employment immediately prior to the Triggering Date.
7. DISABILITY.
If the Employee is unable to perform his services by reason of illness
or incapacity for a continuous period in excess of six months, unless
otherwise required by the provisions of Section 9 or 22 of this Agreement,
compensation otherwise payable by the Company shall cease and any future
payments to the Employee shall be subject to the terms and provision of
long-term disability insurance coverage, if any, maintained by the Company.
Notwithstanding anything herein to the contrary, the Board of Directors of
the Company may terminate the Employee's employment with the Company under
this Agreement at any time after the Employee shall be absent from his
employment, for whatever reason, for a continuous period of more than six
months, and, except for any obligations of the Company under Sections 9, 22,
and 25 of this Agreement, all other obligations of the Company hereunder
shall cease upon such termination.
8. TERMINATION.
8.1 Termination Prior to the Triggering Date.
(a) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date, the Company may terminate the Employee's employment
with the Company under this Agreement with Cause and, subject to the
provisions of Sections 22 and 25 hereof, with no liability on its part for
further payments after the termination date to the Employee by the
affirmative vote of two-thirds of the members of the Board of Directors of
the Company.
(b) Upon 30 days' prior written notice to the Employee and prior to
the Triggering Date, the Company may terminate the Employee's employment
with the Company under this Agreement without Cause and, subject to the
provisions of Sections 22 and 25 hereof, with no liability other than the
obligation to pay the base salary for one year from the date of notice.
(c) Prior to the Triggering Date, the Employee may terminate his
employment with the Company under this Agreement by giving 30 days' prior
written notice of his desire to the Board of Directors of the Company and
receiving an affirmative vote of two-thirds of the members of the Board of
Directors of the Company. The employee will continue to receive his base
salary and benefits through the date of termination with no liability on the
part of the Company for further payments to the Employee, subject to the
provision of Sections 22 and 25 hereof.
(d) In voting upon such termination described in Section 8.1(a) or
(c), if the Employee is also a member of the board of Directors of the
Company, then he may not vote on such termination, and the total number of
members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
8.2 Termination On or After the Triggering Date.
(a) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 8.2(c), the Company may terminate the Employee's employment with the
Company under this Agreement only for Cause and, subject to the provisions
of Sections 22 and 25 hereof, with no liability on its part for further
payments to the Employee, by the affirmative vote of two-thirds of the
members of the Board of Directors of the Company. In voting upon such
termination, if the Employee is also a member of the Board of Directors of
the Company, then he may not vote on such termination, and the total number
of members of the Board of Directors will be reduced by one for purposes of
voting on such termination.
(b) On or after the Triggering Date and irrespective of whether or
not the Employee has given notice of termination of employment pursuant to
Section 8.2(c), if the Employee's employment with the Company is terminated
without Cause or if Employee terminates his employment with the Company for
Good Reason (which the Employee is hereby given the right to do on 30 days'
prior written notice), the Employee will continue to accrue and receive his
base salary and Benefits through the date of termination and will be
entitled to receive the benefits provided for under Section 9 hereof.
(c) On or after the Triggering Date, the Employee may, in his sole
and absolute discretion and without any prior approval by the Board of
Directors of the Company, and upon 12 months' prior written notice to the
Company, terminate his employment with the Company under this Agreement for
any reason whatsoever. If the Employee's employment with the Company under
this Agreement is terminated pursuant to this Section 8.2(c) and subject in
all respects to the provisions of Section 8.2(a) and (b), the Employee will
continue to accrue and receive his base salary and Benefits through the date
of termination and will be entitled to receive the benefits provided for
under Section 9 hereof. No termination of the Employee's employment with
the Company pursuant to Section 8.2(b) or (c) shall in any way terminate the
Company's obligations under Section 22 and 25 of this Agreement.
9. COMPENSATION AFTER CERTAIN TERMINATIONS.
If the Employee's employment with the Company is terminated (whether
such termination is by the Employee or by the Company) at any time on or
within three years after the Triggering Date for any reason other than (a)
termination by the Company for Cause, (b) the Employee having reached the
age of 65, or (c) the Employee's death, then, within five days after the
date of such termination, the Company shall pay the Employee a lump sum
amount in such equal to 2.0 (two) times the Employee's annualized includable
compensation (within the meaning of Section 28OG(d)(1) of the Internal
Revenue Code of 1986, as amended) from the Company during the period
consisting of the five full taxable years of the Employee ending immediately
prior to the year in which the Triggering Date occurred (or such portion of
such period during which the Employee was an employee of the Company).
10. TRANSFER OF ASSETS TO IRREVOCABLE TRUST.
On the Triggering Date or as soon thereafter as the Company knows of
the occurrence of a Triggering Event, the Company shall transfer cash to the
Irrevocable Trust created by the Irrevocable Trust Agreement, an executed
copy of which is attached hereto as Exhibit A, in an amount no less than the
total amount which would be payable to the Employee pursuant to Section 9 of
this Agreement as if the Employee's employment terminated on the Triggering
Date. The Company shall take whatever steps are necessary to maintain the
trust established pursuant to the Irrevocable Trust Agreement and shall
comply with the terms of the Irrevocable Trust Agreement both before and
after the Triggering Date and until the Irrevocable Trust terminates by its
own terms. The employee has the right to enforce the provisions of this
paragraph through specific performance.
11. MITIGATION.
The Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by the Employee as the
result of employment by another employer after the date of termination of
Employee's employment with the Company, or otherwise.
12. ENTIRE AGREEMENT.
This Agreement embodies the entire agreement and understanding between
the parties hereto with respect to the subject matter hereof and supersedes
all prior negotiations, agreements, and understandings relating to such
subject matter, and may be modified or amended only by an instrument in
writing signed by the parties hereto.
13. LAW TO GOVERN.
This Agreement is executed and delivered in the State of Texas and
shall be governed, construed, and enforced in accordance with the laws of
the State of Texas.
14. ASSIGNMENT.
This Agreement is personal to the parties, and neither this Agreement
nor any interest herein may be assigned (other than by will or by the laws
of descent and distribution) without the prior written consent of the
parties hereto nor be subject to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal process of any kind against the
Employee or any of his beneficiaries or any other person. Notwithstanding
the foregoing, but subject to satisfaction of the Company's obligation to
fund the Irrevocable Trust as provided in Section 10, the Company shall be
permitted to assign this Agreement to any corporation or other business
entity succeeding to substantially all of the business and assets of the
Company by merger, consolidation, sale of assets, or otherwise, but only if
by written agreement the company's successor assumes in full all of the
Company's obligations under this Agreement. From and after assignment of
this Agreement by the Company in accordance with the foregoing provisions, a
Triggering Event shall be deemed to have occurred. Failure by the Company
to obtain such assumption prior to the effectiveness of such succession
shall be a breach of this Agreement and shall entitle the Employee to
immediately receive compensation under this Agreement from the Company and
from the Company's successor in the same aggregate amount and on the same
terms as he would be entitled to hereunder if he had voluntarily terminated
his employment with the Company for Good Reason after the Triggering Date,
and, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Triggering Date.
15. BINDING AGREEMENT.
Subject to the provisions of Section 14 of this Agreement, this
Agreement shall be binding upon and shall inure to the benefit of the
Company and the Employee and their respective representatives, successors
and assigns.
16. REFERENCES AND GENDER.
All references to "Sections" contained herein are, unless specifically
indicated otherwise, references to sections and subsections of this
Agreement. Whenever herein the singular number is used, the same shall
include the plural where appropriate, and words of any gender shall include
each other gender where appropriate.
17. WAIVER.
No waiver of any right under this Agreement shall be deemed effective
unless the same is set forth in writing and signed by the party giving such
waiver, and no waiver of any right shall be deemed to be a waiver of any
such right in the future.
18. NOTICES.
Except as may be otherwise specifically provided in this Agreement, all
notices required or permitted hereunder shall be in writing and will be
deemed to be delivered when deposited in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed
to the parties at the respective addresses set forth herein, or at such
other addresses as may have theretofore been specified by written notice
delivered in accordance herewith.
19. OTHER INSTRUMENTS.
The parties hereto covenant and agree that they will execute such other
and further instruments and documents as are or may become necessary or
convenient to effectuate and carry out the terms of this Agreement.
20. HEADINGS.
The headings used in this Agreement are used for reference purposes
only and do not constitute substantive matter to be considered in construing
the terms of this Agreement.
21. INVALID PROVISION.
Any clause, sentence, provision, section, subsection, or paragraph of
this Agreement held by a court of competent jurisdiction to be invalid,
illegal, or ineffective shall not impair, invalidate, or nullify the
remainder of this Agreement, but the effect thereof shall be confined to the
clause, sentence, provision, section, subsection, or paragraph so held to be
invalid, illegal, or ineffective.
22. RIGHTS UNDER PLANS AND PROGRAMS.
Anything in this Agreement to the contrary notwithstanding, no
provision of this Agreement is intended, nor shall it be construed, to
reduce or in any way restrict any benefit to which the Employee may be
entitled under any agreement, plan, arrangement or program providing
benefits for the Employee, except as provided in the terms and conditions of
the said specific programs and benefits.
23. MULTIPLE COPIES.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which shall together constitute
one and the same instrument. The terms of this Agreement shall become
binding upon each party from and after the time that he or it executed a
copy hereof. In like manner, from and after the time that any party
executes a consent or other document, such consent or other document shall
be binding upon such parties.
24. WITHHOLDING OF TAXES.
The Company may withhold from any amounts payable under this Agreement
all federal, state, city or other taxes as shall be required pursuant to any
law or government regulation or ruling.
25. LEGAL FEES AND EXPENSES.
The Company shall pay and be responsible for all legal fees and
expenses which the Employee may incur as a result of the Company's failure
to perform under this Agreement or as a result of the Company or any
successor contesting the validity or enforceability of this Agreement.
26. SET OFF OR COUNTERCLAIM.
Except with respect to any claim against or debt or other obligation
of the Employee properly recorded on the books and records of the Company
prior to the Triggering Date, there shall be no right of set off or
counterclaim against, or delay in, any payment by the Company to the
Employee or his beneficiaries provided for in this Agreement in respect of
any claim against or debt or other obligation of the Employee, whether
arising hereunder or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
EL CHICO RESTAURANTS, INC.
By: /s/ Wallace A. Jones
Print Name: WALLACE A. JONES
Title: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
EMPLOYEE
/s/ Lawrence E. White
Lawrence E. White
Retention Incentive Policy for Designated Executive Officers
(August 7, 1997)
As a result of the Board of Directors forming a Special Committee
to review possible proposals seeking to acquire the Company, there has
been a marked increase in concern among Company Associates about their
future with the Company. This heightened level of concern exposes the
Company to disruptive instability that would impede the Company from
orderly execution of its operating strategies and tactics during this
period while the Special Committee is conducting its reviews. This, in
turn, could impair the financial performance of the Company during this
period, resulting in unfavorable consequences to the shareholders by
jeopardizing the realizable value from a transaction. In order to
encourage the retention of key Associates during this period and to
minimize the disruptions and instability that would be caused by
unexpected loss of key Associates and the difficulty in replacing them
considering the uncertainty of the Company's future ownership, the Board
of Directors has resolved to adopt the following retention incentive plan
for designated officers not otherwise subject to employment agreements:
If the Company is acquired, and if, as a result of such change in
ownership, any designated officer not otherwise compensated under an
employment agreement should cease to be employed (other than as a result
of voluntary termination or termination for Cause) by the Company at the
same or greater base compensation within six (6) months of such change in
ownership, then, and in consideration of such officer's commitment to
remain employed with the Company through the period ending sixty (60)
days following such acquisition or change in ownership, such officer will
receive a retention incentive of twenty-six (26) weeks' base salary upon
execution of a written release satisfactory to the Company. Payment of
the incentive may be either in lump sum and/or as salary continuation at
the sole discretion of the Company, and all applicable payroll tax and
other deductions will be withheld from the payments.
For purposes of this policy, "Cause" means (a) any act by the officer
that is materially adverse to the best interests of the Company, and
which, if subject to a criminal proceeding, could result in a criminal
conviction for a felony, or (b) the failure of the officer substantially
to perform their normal duties, other than as a result of incapacitation
due to medical reasons, provided that the officer has been given written
notice from the Company specifying the nature of the failure to perform
their duties and given thirty (30) days to cure the failure
prospectively.
