<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
PANCHO'S MEXICAN BUFFET, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
[PANCHO'S MEXICAN BUFFET, INC. LOGO]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 22, 1998
The Annual Meeting of Stockholders of PANCHO'S MEXICAN BUFFET, INC., will
be held at the Company's restaurant (Pancho's Mexican Buffet) 1927 E. Beltline
Road, Carrollton, Texas 75006 on Wednesday, January 27, 1999 at 10:00 a.m. for
the following purposes:
(1) To elect two (2) Directors;
(2) To consider and act upon a proposal to amend the Certificate of
Incorporation to effect a one-for-three reverse stock split.
and to transact such other business as may properly come before the meeting or
any adjournment thereof.
Only holders of Common Shares of record on the books of the Company at the
close of business on December 10, 1998 will be entitled to vote at the meeting
or any adjournment thereof.
A complete list of Stockholders entitled to vote will be available for
examination and inspection by any Stockholder from January 15-26, 1999, during
usual business hours, at the Company's restaurant, Pancho's Mexican Buffet, 1927
E. Beltline Road, Carrollton, Texas 75006.
By Order of the Board of Directors
SAMUEL L. CARLSON
Secretary
Fort Worth, Texas
December 22, 1998
<PAGE> 3
PANCHO'S MEXICAN BUFFET, INC.
3500 Noble Avenue Fort Worth, Texas 76111
(Principal Executive Offices)
PROXY STATEMENT
The following information is submitted concerning the enclosed Proxy and
the matters to be acted upon under the authority thereof at the Annual Meeting
of Stockholders of the Company to be held on the 27th day of January, 1999, or
any adjournment thereof pursuant to the enclosed notice of said meeting.
INFORMATION CONCERNING PROXY
The Proxy is solicited on behalf of the Board of Directors of the Company.
It may be revoked by the Stockholder at any time prior to the exercise thereof
by filing with the Secretary of the Company a written revocation or duly
executed Proxy bearing a later date. The Proxy shall be suspended if the
Stockholder shall be present at the meeting and elects to vote in person.
Unless contrary instructions are indicated on the Proxy, all shares
represented by valid proxies received pursuant to this solicitation (and which
have not been revoked or suspended before they are voted) will be voted for the
proposals to elect two directors and amend the Certificate of Incorporation to
effect a one-for-three stock split. The presence, in person, or by proxy, of the
holders of a majority of the issued and outstanding Common Shares on December
10, 1998 is necessary to constitute a quorum at the Annual Meeting. Abstentions
and broker non-votes are counted as shares present in the determination of
whether the shares of stock represented at the meeting constitute a quorum.
Because the two nominees receiving the highest vote totals will be elected as
Directors, abstentions and broker non-votes will not affect the outcome of the
election. The affirmative vote of a majority of the Common Shares present, or
represented by proxy, and entitled to vote at the Annual Meeting is necessary
for approval of the proposed amendment to the Certificate of Incorporation to
effect a one-for-three stock split.
The cost of solicitation of Proxies by the Board will be borne by the
Company. In addition to solicitation by mail, proxies may be solicited by
directors, executive officers and employees of the Company personally or by
telephone or facsimile. Forms of proxy material also may be distributed through
brokers, custodians and other like parties to the beneficial owners of the
Company's common stock, and the Company may reimburse such parties for their
reasonable out-of-pocket and clerical expenses incurred in connection therewith.
The securities of the Company entitled to vote at the meeting consist, as
of December 10, 1998, of 4,358,723 Common Shares of a par value of $.10 per
share. Only Stockholders of record on the books of the Company at the close of
business on that date will be entitled to vote at the meeting. Each share is
entitled to one vote on each matter to be voted on at the meeting. There are no
cumulative voting rights.
The approximate date on which this Proxy Statement and the enclosed Form of
Proxy will be first sent or given to Stockholders is December 22, 1998.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall be not
less than three (3) nor more than fifteen (15) members. The Board of Directors
has fixed at eight (8) the number of Directors which will constitute the Board
for the ensuing year.
The Certificate of Incorporation and Bylaws of the Company provide for a
classified Board of Directors, with the Board divided into three classes. At the
1999 meeting, two directors are to be elected for a term of three (3) years, and
until their successors are duly elected and qualified. It is proposed that
Messrs. Jesse Arrambide, III and Tomas Orendain, current Directors of the
Company, be elected for a term of three (3)
<PAGE> 4
years. The Board of Directors has no reason to believe that the nominees will
refuse to act or be unable to accept election; however, in such event or if any
other unforeseen contingencies should arise, it is intended that the proxies
will be voted for such other persons as may be recommended by the Board of
Directors.
THE BOARD OF DIRECTORS
The following table indicates the name, age, principal occupation, position
and offices with the Company for past five years, term of office and period
during which he has served as such, of each Director and Director nominee.
<TABLE>
<CAPTION>
PROPOSED
TERM OR
DIRECTOR TERM TO ALL POSITIONS HELD
NAME SINCE EXPIRE PAST FIVE YEARS
---- AGE -------- -------- ------------------
<S> <C> <C> <C> <C>
Jesse Arrambide, III 46 1977 2002 Chairman of the Board of Directors since August
1993, and Chief Operations Officer since
December, 1994; Vice President, Operations from
November 1984 to August 1993; President, A & A
Foods, Inc. and President, A & A Foods No. 2,
Inc., operators of restaurants, since 1994.
Tomas Orendain 65 1993 2002 President, T.S. Orendain Associates, Inc., an
architectural firm. Chairman of the Board,
Orendain Telecommunication Services, Inc. since
1995.
- -------------------------------------------------------------------------------------------------------
Rudolph Rodriguez, Jr. 66 1993 2001 Chairman, and Chief Executive Officer, Rodriguez
Festive Foods, Inc., a manufacturer of Mexican
Food products; Advisory Board Member, Chase Bank
of Texas NA, Fort Worth, Texas.
Samuel L. Carlson 62 1993 2001 Senior Vice President, Administration and
Secretary.
David Oden 38 1998 2001 Senior Vice President and Chief Financial Officer,
TX. C. C., Inc., operator of the Texas Land &
Cattle Steak House restaurant chain, since
October 1998; Chief Financial Officer, TX. C. C.,
Inc. from July 1997 to October 1998; Senior Vice
President and Chief Financial Officer, Silver
Diner, Inc. from September 1995 to July 1997;
Vice President, Treasurer, Chief Financial
Officer and Assistant Secretary of Pancho's
Mexican Buffet, Inc. from January 1991 to July
1995.
- -------------------------------------------------------------------------------------------------------
Hollis Taylor 62 1974 2000 President and Chief Executive Officer.
Robert L. List 61 1993 2000 President, Hammond's Candies & West Indies Candy
Company since 1992; Director, Mercury Air Group,
Inc. since 1990.
George N. Riordan 65 1994 2000 Chairman of the Board, The MacNeal-Schwendler
Corporation, a computer aided engineering
software firm, since January 1997, Director,
since 1983. Partner, George Riordan & Co.,
investment bankers.
- -------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 5
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors is convened annually following its election at the
Annual Meeting of Stockholders, and at that time it elects officers and appoints
committees to serve at the pleasure of the Board.
During the fiscal year ending September 30, 1998, the Board of Directors
held five meetings. No director attended fewer than 75% of the total meetings of
the Board of Directors and Committees of the Board on which he served during the
fiscal year.
The Compensation Committee is composed of Messrs. Tomas Orendain, George N.
Riordan and Robert L. List. This committee met two times during the past fiscal
year. Its function is to approve officers' salaries, administer executive
compensation plans, and approve officers' bonuses.
The Nominating Committee, composed of Messrs. George N. Riordan and Tomas
Orendain, will consider requests for nominations to the Board submitted in
writing to the Secretary of the corporation at the principal executive offices
of the corporation not less than 60 days, nor more than 90 days, prior to the
next annual meeting of Stockholders scheduled to be held on January 26, 2000.
Such request for nomination should include sufficient biographical material and
other information required by Article II, Section 12 of the Bylaws to permit an
appropriate evaluation by the Nominating Committee. The Nominating Committee was
appointed at a meeting of the Board of Directors on July 31, 1998 and has had
one meeting.
The Audit Committee, which met three times during the fiscal year, is
composed of Messrs. Robert L. List, George N. Riordan and Rudolph Rodriguez, Jr.
The function of the Audit Committee includes reviewing the engagement of the
independent auditors, the scope and timing of the audit, certain non-audit
services to be rendered by the independent auditors, reviewing the report of the
independent auditors upon completion of their audit, and reviewing with the
independent auditors and management the Company's policies and procedures with
respect to accounting and financial controls.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AS OF DECEMBER 10, 1998
The Company has only one outstanding class of equity securities, its Common
Stock par value $.10. Unless otherwise indicated, all shares are owned directly
and the owner has sole voting and investment powers with respect thereto.
The security ownership, as of December 10, 1998, of certain beneficial
owners known to the Company to own more than five percent of the Company's
Common Stock was:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
<S> <C> <C>
Dimensional Fund Advisors Inc.(1) 273,600 6.28%
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
Carolina S. Arrambide 239,922 5.50%
3116 Westador Drive
Arlington, Texas 76015
</TABLE>
3
<PAGE> 6
- ---------------
(1) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 273,600 shares of
Pancho's Mexican Buffet, Inc., all of which shares are held in portfolios
of DFA Investment Dimensions Group, Inc., a registered open-end investment
company, or in series of The DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and the DFA Participating Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares.
Cede & Co. and other central clearinghouses were the record holders of
approximately 3,263,340 shares (74.9%), which include shares beneficially owned
by some of the entities listed above.
The security ownership as of December 10, 1998 including shares subject to
options that are exercisable in the next 60 days, (all Common Stock) of (i)
Directors and executive officers and (ii) Directors and executive officers as a
group, was:
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1)(2) OF CLASS
---------------- -------------------------- --------
<S> <C> <C>
Hollis Taylor 188,364(3) 4.13%
Samuel L. Carlson 62,660 1.37%
Jesse Arrambide, III 108,016(3)(6) 2.37%
Robert L. List 19,141(4) .42%
Rudolph Rodriguez, Jr. 23,141(4) .51%
W. Brad Fagan 11,696(8) .26%
Tomas S. Orendain 19,141(4) .42%
George N. Riordan 19,141(7) .42%
David Oden
All Directors and executive 451,300(5) 9.90%
officers as a group
</TABLE>
- ---------------
(1) Includes shares purchased by the employee stock purchase plan through
September 30, 1998.
(2) Based on presently exercisable options which are indicated in the following
footnotes to this table, the percentage ownership is calculated on the
assumption that the shares presently purchasable, or purchasable within the
next sixty days, underlying such options are outstanding.
(3) This amount includes 74,000 shares subject to options that are exercisable
within the next sixty days.
(4) This amount includes 12,500 shares subject to options that are exercisable
within the next sixty days.
(5) This amount includes 201,750 shares that directors and executive officers
have the right to acquire within the next sixty days through the exercise
of stock options. The exercise price of all these options is higher than
the market price of the Company's stock on December 10, 1998.
(6) Estate of Jesse Arrambide has pledged 92,632 of the Company's common shares
for various loans. Jesse Arrambide, III acts as Independent Executor and
has sole voting power of these shares. Jesse Arrambide, III disclaims
beneficial ownership of these securities.
(7) This amount includes 10,500 shares subject to options that are exercisable
within the next sixty days.
(8) This amount includes 5,750 shares subject to options that are exercisable
within the next sixty days.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") and the Nasdaq initial reports of ownership and
reports of changes in ownership of Common Stock and other equity securities of
the Company. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on review of the copies of such reports furnished to the Company and written
representations that no other reports were required, for the year ended
September 30, 1998, all Section 16(a) filing requirements applicable to its
executive officers, Directors and greater than ten-percent beneficial owners
were filed on a timely basis.
4
<PAGE> 7
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following sets forth information concerning the compensation of the
Company's Chief Executive Officer and each of the other three most highly
compensated executive officers of the Company (the "Named Executive Officers")
for the fiscal years shown.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS ALL OTHER
FISCAL ------------------------------------- OTHER ANNUAL ------------ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) BONUS($)(2) COMPENSATION(3) OPTIONS ($)(4)
--------------------------- ------ --------- ----------- ----------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Hollis Taylor................... 1998 $194,465 $ 31,949 $ 4,496
President and Chief 1997 176,788 33,703 4,588
Executive Officer 1996 155,299 29,988 4,614
Jesse Arrambide III............. 1998 155,557 15,975 722
Chairman of the Board and 1997 135,046 15,591 671
Chief Operations Officer 1996 118,631 14,172 671
Samuel L. Carlson............... 1998 123,524 22,172 1,688
Senior Vice President 1997 110,492 23,387 1,720
Administration and 1996 97,062 21,259 1,339
Secretary
W. Brad Fagan................... 1998 95,382 390
Vice President, Treasurer 1997 79,800 390
and Assistant Secretary 1996 70,100 548
</TABLE>
- ---------------
(1) Annual incentive plan. (see Report of the Compensation Committee of the
Board of Directors)
(2) Stock bonus program. (see Report of the Compensation Committee of the Board
of Directors)
(3) "Other Annual Compensation" is intended to cover forms of annual
compensation not properly categorized as salary or bonus, including
perquisites. No named executive received such compensation or perquisites
which exceeded a threshold level for disclosure purposes.
(4) The totals in the column reflect the value of the Company contributions to
each named executive under the Employee Stock Purchase Program and
additional life insurance. These amounts for the 1998 fiscal year were as
follows: Hollis Taylor: $1,500 and $2,996. Jesse Arrambide III: $600 and
$122. Samuel L. Carlson: $0 and $1,688 and W. Brad Fagan: $390 and 0.
AGGREGATED OPTION EXERCISES IN 1998 AND 1998 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1998 SEPTEMBER 30, 1998(1)(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Hollis Taylor........................... 0 N.A. 74,000 $0 0
Jesse Arrambide III..................... 0 N.A. 74,000 0 0
W. Brad Fagan........................... 0 N.A. 5,750 1,250 0 0
</TABLE>
- ---------------
(1) Market value less exercise price, before payment of applicable income taxes.
(2) Exercise price is higher than market price of Company's stock.
5
<PAGE> 8
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
There currently exist Employment Agreements between the Company and Messrs.
Taylor, Arrambide, Carlson and Fagan, providing that Messrs. Taylor, Arrambide,
Carlson and Fagan are to be employed by the Company at a base salary of not less
than $195,000, $160,000, $125,000 and $100,000 per year, respectively. These
Agreements are considered for automatic renewal on December 31 of each
succeeding year for a period of five years, expressly subject to the approval of
the Compensation Committee. Because these contracts were not renewed at December
31, 1997, these contracts are scheduled to expire by their terms on December 31,
2001, which is five years from the date of the last automatic renewal on
December 31, 1996. During the term of the aforesaid Employment Agreements, these
individuals are to serve as officers of the Company and perform such services
similar to and not inconsistent with the present positions held by each with the
Company. In addition, they shall be eligible to participate in all Company
benefit, bonus and other plans. Under the terms of each Employment Agreement,
such employment may be terminated for "cause" as defined in each Employment
Agreement. See 1992 Stock Option Plan for change in control provisions.
COMPENSATION OF DIRECTORS
Each member of the Board of Directors who is not an employee of the Company
receives a Director's fee, in the amount of $10,000 cash annually, and
reimbursement of actual expenses incurred. Directors who are not employees of
the Company have in the past received options under both the Stock Option Plan
for Non-Employee Directors and the 1992 Stock Option Plan. Non-employee
Directors will receive future automatic option grants under the 1992 Stock
Option Plan, and under the 1998 Restricted Stock Plan for Non-Employee
Directors, Directors receive shares of the Company's stock in the amount of
$2,500 quarterly, based on market price.
1992 STOCK OPTION PLAN
The 1992 Stock Option Plan (1992 Plan) was approved by the shareholders at
the Annual Meeting held January 27, 1993, and amended at the Annual Meeting held
January 28, 1998. Under the 1992 Plan, each Director of the Company who was not
an employee automatically received a non-qualified stock option immediately
following the Annual Meeting of Shareholders held on January 27, 1993, in the
amount of 5,000 shares of the Company's Common Stock. At each Annual Meeting of
the shareholders thereafter, each Director of the Company who is not an employee
of the Company will automatically receive a non-qualified stock option covering
4,000 (2,000 previously) shares of the Company's Common Stock. All options
granted under the 1992 Plan will have an exercise price equal to the fair market
value of the Common Stock on the date of the Annual meeting of the shareholders
to which it relates. Each option granted will have a term not to exceed ten (10)
years and generally will become exercisable at the rate of twenty-five percent
(25%) for each year the optionee remains with the Company as a Director. Options
granted to a Director can, in no event, be exercisable until the lapse of six
(6) months from the date of grant.
Other than in the case of a reincorporation of the Company in another
state, in the event of (i) dissolution or liquidation of the Company, (ii) a
transaction in which more than 50 percent of the shares of the Company that are
entitled to vote are exchanged, or (iii) any merger or consolidation or other
reorganization in which the Company is not the surviving corporation (or in
which the Company becomes a subsidiary of another corporation), outstanding
options under this Plan shall become fully exercisable immediately prior to any
such event.
Unless terminated earlier by reason of expiration of the option term,
options under the 1992 Option Plan will terminate (a) three months after the
optionee's directorship terminates for reasons other than death or disability;
(b) 12 months after termination for disability; and (c) the normal termination
date, in the case of death. All options granted under the 1992 Plan will be
non-transferable by the optionee other than by Will or the laws of descent and
distribution. Such options may contain such other terms, provisions and
conditions not inconsistent with the 1992 Plan.
6
<PAGE> 9
Pursuant to the terms of the 1992 Plan, options covering 331,000 shares at
a market price of $11.375 were granted to officers and employees of the Company
on December 16, 1993 and 5,000 shares at a price of 3.1875 on September 29,
1995, and to non-employee Directors, 15,000 shares on January 26, 1994, 12,000
shares on January 25, 1995 and January 24, 1996, 10,000 shares on January 22,
1997 and 16,000 shares on January 28, 1998. On January 27, 1999, options
covering 21,000 shares of the Company's Common Stock will automatically be
granted to the non-employee Directors of the Company. Options to purchase
279,250 shares of the Company's Common Stock were outstanding as of September
30, 1998. With the exception of the automatic grants to non-employee directors,
no other options were granted, and no options were exercised during the fiscal
year ended September 30, 1998. The exercise price of all outstanding options is
higher than the market price of the Company's stock on December 10, 1998.
INDEBTEDNESS OF MANAGEMENT
The Company has made loans to key employees and officers of the Company to
purchase stock of the Company. The Board of Directors is of the opinion that by
providing a means for certain key persons to obtain an equity ownership in the
Company that the Company could retain and attract qualified employees for its
key positions.
In April, 1992, loans totalling $757,625 were made to eleven key employees
who purchased 104,500 shares of authorized, but unissued common stock from the
Company, at the then current market price. The loans bear interest at the rate
of 7.83 percent, and provide for periodic payment. The largest indebtedness in
excess of $60,000 outstanding to any one person since October 1, 1997, and the
balance as of December 10, 1998, was $72,500 and $58,000 respectively for Hollis
Taylor.
Jesse Arrambide, III and Arrambide family-owned restaurant operations,
collectively, are indebted to the Company in the amount of $62,097 as of
December 10, 1998. The Estate of Jesse Arrambide has signed a note in the amount
of $29,026 (which excludes the amount owed for the stock), at an interest rate
of 9.5% due March 31, 1999. As collateral for payment for this note, 40,000 of
the Company's common shares have been pledged. The largest aggregate amount of
such indebtedness outstanding since October 1, 1997 was $103,612.
This indebtedness, including certain advances, was incurred by Jesse
Arrambide, III, individually, in connection with a Company loan to purchase
Company stock, and by the Arrambide family-owned restaurant operations in
connection with the purchases from the Company of supplies and equipment on a
cost plus basis.
As of December 10, 1998 no other executive officer and/or director had an
outstanding balance in excess of $60,000.
7
<PAGE> 10
COMPANY STOCK PRICE PERFORMANCE
The graph below compares the cumulative total shareholder return on $100
invested at market close on September 30, 1993, assuming the reinvestment of all
dividends, on the Common Stock of the Company for the last five years with the
cumulative total return of the Nasdaq Stock Market Index (US Companies) and the
Nasdaq Eating and Drinking places (US Companies).
COMPARISON OF FIVE YEAR-CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
PANCHO'S MEXICAN BUFFET, INC.
CHART TO COME
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
---------------------------------------------
1993 1994 1995 1996 1997 1998
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
M Pancho's Mexican Buffet, Inc. 100.0 87.5 32.3 21.1 24.0 9.2
- ---
. . . Q Nasdaq Stock Market Index (US Companies) 100.0 100.8 139.3 165.2 226.8 231.8
- .
- - - - - O Nasdaq Eating & Drinking Places (US Companies) 100.0 86.8 93.9 94.2 86.5 57.7
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the
previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading
day, the preceding trading day is used.
D. The index level for all series was set to $100.00 on 09/30/93.
8
<PAGE> 11
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
The Compensation Committee of the Board of Directors establishes the
general compensation policies of the Company, establishes the compensation plans
and specific compensation levels for executive officers and administers the
Company's annual incentive plan and stock option plan. The Compensation
Committee is composed of three independent, non-employee directors who have no
interlocking relationships as defined by the SEC.
The compensation committee relies primarily on data supplied by outside
consultants. Base salary, annual incentive and long-term incentive comparisons
are made relative to companies within the food and restaurant industry with
revenues closely comparable to the Company.
The compensation program for executives is viewed as a total compensation
package comprised of base salary, annual incentives and long-term capital
appreciation opportunities in the form of stock options and a stock purchase
program. The total cash compensation is comprised of base salaries that are
targeted to be slightly less than the average market salaries for comparable
companies with annual incentive opportunity targeted at a level higher than
average if targeted performance levels are attained.
ANNUAL INCENTIVE
The Officer's Bonus program is designed to reward executives for the annual
growth of the Company. Officers become eligible for a bonus only after a
predetermined level of consolidated earnings, before income taxes and payouts of
officer's bonuses has been met. Once the plan target has been met, bonuses as a
percentage of base salary are paid to executives based upon a graduated
schedule. The bonus percentage depends upon the degree to which the plan was
exceeded. Hollis Taylor is eligible for an additional 25% above the target
bonus. To be eligible, all officers must be employed at the end of the fiscal
year and any new officer would receive a bonus based on a pro-rata basis.
Payment of bonuses is made after the annual audit. There were no incentive
bonuses paid in 1998 because performance did not warrant a payout.
LONG-TERM INCENTIVES
The stock bonus program utilized by the Company is designed to (1) align
executives with the long-term goals of the Company, (2) create an environment
whereby executives are aligned closely with shareholders and (3) encourage high
levels of stock ownership. Primary emphasis of the total compensation package
for executives is placed on the long-term component. The program of the Company
provides loans to executives to purchase shares of stock at a fixed market
price. The loan must be paid off ratably over ten years. If the financial
position of the Company and individual performance warrants, the Company pays to
the executive a stock bonus to cover the cost of the annual loan payment. While
this program has been successful, the long-term incentive compensation is below
market.
CEO COMPENSATION
The Compensation Committee believes that the Chief Executive Officer's
(CEO) compensation should be influenced by Company performance. Therefore,
although there is necessarily some subjectivity in setting the CEO's salary,
elements of the compensation package are directly tied to Company performance.
The Committee establishes the CEO's salary by reviewing annually the salaries of
CEO's of comparably-sized companies and their performance according to data
obtained by the Committee from independent outside consultants. In addition, the
CEO participates in the annual incentive plan described above.
The number of shares granted to the CEO is determined by the subjective
evaluation of the executive's ability to influence the Company's long-term
growth and profitability. The last grant of options the CEO received consisted
of 74,000 shares granted in 1993 at a market price of $11.375 per share. All
shares available to be purchased by the executive are granted at the current
market price. A loan was made to the CEO in 1992 to purchase 20,000 shares at a
market price of $7.875 per share. The loan is payable over ten years plus
interest. It has been Company policy to grant a bonus to the CEO in an amount to
cover the annual loan cost
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if the Company is in a financial position to make such a payment and if the
CEO's performance warranted such stock bonus. During the fiscal year, the
Company paid a stock bonus of $31,949 to the CEO.
Compensation Committee:
Tomas Orendain
George N. Riordan
Robert L. List
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings, including this Proxy Statement,
in whole or in part, the preceding report and the Company Stock Performance
Chart on Page 8 shall not be incorporated by reference into any such filings.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Rudolph Rodriguez, Jr., Director, is Chairman and Chief Executive Officer
of Rodriguez Festive Foods, Inc., which sold products to the Company's outside
distributor, which are then purchased by the Company, in the amount of
$1,839,050 during the fiscal year ended September 30, 1998. In the same fiscal
year, Rodriguez Festive Foods, Inc. purchased items in the amount of $52,760
from the Company. Rodriguez Festive Foods, Inc. also leases the Company's cold
storage facilities formerly used by the Company's food distribution center. The
lease is for $5,000 per month expiring on October 31, 2000 including renewal
options. All of the foregoing transactions with Rodriguez Festive Foods, Inc.
were entered into in the ordinary course of business, and it is believed that
the terms and conditions are no less favorable to the Company than they would
have been for similar transactions with unrelated parties.
Occasional sales of supplies and equipment are made on a cost plus basis to
the family owned restaurant operations of Jesse Arrambide III, Chairman of the
Board and Chief Operations Officer of the Company. Sales were $5,444 for the
year ended September 30, 1998.
AMENDMENT TO EFFECT REVERSE SPLIT
The Board of Directors has adopted, and proposes that the stockholders of
the Company approve, an amendment to the Certificate of Incorporation that would
effect a one-for-three reverse split of the outstanding shares of Common Stock,
but would maintain the authorized number of shares of Common Stock at 20,000,000
shares and the par value at $.10 per share (collectively, the "Reverse Split").
The authorized number of shares (500,000) and par value ($10.00) of the
Company's Preferred Stock would remain unchanged.
REASONS FOR THE REVERSE SPLIT
Listing of the Company's Common Stock. The Common Stock is currently
listed on the Nasdaq National Market. On September 28, 1998, the Company
received a notice from Nasdaq that, based on a review by Nasdaq's staff, the
Common Stock had failed to maintain a market value of public float greater than
or equal to $5 million. Nasdaq's rules require that the stock of each company
listed on the Nasdaq National Market maintain this public float value. Nasdaq
notified the Company that the Common Stock would be delisted from the Nasdaq
National Market at the opening of business on December 30, 1998, unless the
Company could demonstrate compliance with the $5 million public float
requirement.
On October 23, 1998, the Company received another notice from Nasdaq that,
based on a review by Nasdaq's staff of the price data covering the 30 days prior
to the notice, the Common Stock had failed to maintain a closing bid price of at
least to $1.00 per share in accordance with Nasdaq's rules. Nasdaq notified the
Company that if it were unable to demonstrate compliance with the $1.00 minimum
bid price requirement by the 90 day period ending January 21, 1999, the Common
Stock would be delisted from the Nasdaq National Market at the opening of
business on January 25, 1999.
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The Company will submit a request to Nasdaq that a hearing be held in
connection with both of the notices described above. The Company expects that
the hearing will be held in the first two weeks of February, 1999. Until the
hearing is held and a decision is reached, the Company expects that its Common
Stock will continue to be listed on the Nasdaq National Market.
In response to Nasdaq's notices, the Board of Directors evaluated the
Company's alternatives concerning the Common Stock's listing. After reviewing
the history of the price and public float of the Common Stock, the Board
determined that it was very possible that the Common Stock would not be able to
maintain the minimum public float required for the Common Stock's continued
listing with the Nasdaq National Market. To deal with this possibility, the
Board determined that it would be in the best interests of the Company and its
stockholders that the Company submit an application to have the Common Stock
listed on the Nasdaq SmallCap Market. The Nasdaq SmallCap Market requires a
market value of public float equal to $1 million, a requirement that the Common
Stock meets at this time.
However, the SmallCap Market also requires that stock listed on it have a
minimum bid price per share of $1.00 that is maintained for 10 consecutive days.
Recently, the Common Stock has not met this requirement, and, as discussed
above, the Common Stock may be delisted from the National Market. The Company
believes that, after conducting the Reverse Split, the Common Stock is more
likely to meet the minimum bid price per share listing requirement and,
afterwards, to continue to meet such listing requirements of the Nasdaq SmallCap
Market. The Company believes the completion of the Reverse Split will cause the
trading price of the Common Stock to increase proportionately. There can be no
assurance, however, that the Reverse Split will result in any change in the
price of the Company's Common Stock or that, if the price of the Company's
Common Stock does increase as a result of the Reverse Split, such increase will
be sufficient to allow the Company to comply with the listing requirements of
the Nasdaq SmallCap Market. The Company has applied for listing of the Common
Stock on the Nasdaq SmallCap Market. However, there can be no assurance that the
Company's application will be approved by the Nasdaq SmallCap Market.
Effect on Earnings Per Share. Furthermore, the Company believes that the
total number of shares currently outstanding is disproportionately large
relative to the Company's present market capitalization. Moreover, when such a
large number of shares is outstanding, earnings per share is only affected by a
significant change in net earnings.
Marketability. The Company believes that the Reverse Split may result in a
broader market for the Common Stock than currently exists due to the increase of
the per share price. The Company believes that the present level of per share
market prices of the Common Stock impairs the acceptability of the stock by
portions of the financial community and the investing public. Theoretically, the
price per share of stock should not, of itself, affect the marketability of the
stock, the type of investor who acquires the stock or a company's reputation in
the financial community. However, in practice, the price per share does affect
the stock because many investors look upon low priced stock as unduly
speculative in nature, and, as a matter of policy, avoid investment in such
stocks. The increased price per share may encourage interest and trading in the
Company's Common Stock and possibly promote greater liquidity for the Company's
stockholders, although such liquidity could be adversely affected by the reduced
number of shares outstanding after the Reverse Split. Nonetheless, there is no
assurance that these effects will occur or that the per share price level of the
Common Stock immediately after the proposed Reverse Split will be maintained for
any period of time.
Commissions. In addition, the Company believes that the Reverse Split may
improve the liquidity of the Company's Common Stock in another manner.
Frequently, brokers charge trading commissions based upon the number of shares
purchased. As a result, this trading commission per share is relatively higher
as a percentage of the value of the shares of the Company's Common Stock
purchased. The Company believes that the relatively high trading cost of the
Company's Common Stock may adversely impact the liquidity of the Company's
Common Stock by making it a less attractive investment than the stock of other
companies in the Company's industry. If the Reverse Split is effected and the
price of the Company's Common Stock rises correspondingly, the trading costs for
the Company's Common Stock would decrease.
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Increase of Surplus. As a part of the Reverse Split, the Company's surplus
would be increased as a result of maintaining the par value of the Common Stock
at $.10 per share but decreasing the number of issued shares of the Company.
Under the Delaware General Corporation Law (the "DGCL"), a corporation is
permitted to purchase its own shares of capital stock or to declare dividends
only to the extent that the corporation has an amount of surplus equal to or
greater than the amount of the stock redemption or dividend. Under the DGCL, the
"surplus" of a corporation is defined as the excess of the net assets of a
corporation less the stated capital of a corporation. The "stated capital" of a
corporation is equal to the number of issued shares of the corporation
multiplied by the par value of the shares. The "net assets" of a corporation is
the assets minus the liabilities of a corporation. Because the number of issued
shares of the Company will decrease as a result of the Reverse Split but the par
value will remain the same, the stated capital of the Company will necessarily
decrease. The amount by which the stated capital decreases will be considered
additional surplus of the Company. Despite the increase in the amount of surplus
that would be caused by the split, the Company at this time has no plans, other
than in connection with the redemption of fractional shares created by the
Reverse Split as described below, to redeem its shares of Common Stock or have
any other distributions, other than cash dividends that may be paid from time to
time.
Effective Increase of Authorized Shares. As a part of the Reverse Split,
the Company proposes to effectively increase the number of authorized shares of
Common Stock by maintaining the authorized number at 20,000,000 shares. The
Company believes that the Reverse Split will provide greater flexibility to
issue additional equity securities, for example to raise additional capital. The
Preferred Stock would not be affected by the Reverse Split. The Company has not
issued any shares of Preferred Stock to date. The Board of Directors believes
the proposed amounts of Common Stock and Preferred Stock authorized for issuance
are adequate to meet the Company's needs in the foreseeable future. If the
Reverse Split is approved, no shareholder approval will be solicited for the
issuance of all or any portion of the additional shares of Common Stock and
Preferred Stock unless required by law or any rules or regulations to which the
Company is subject.
EFFECT OF REVERSE SPLIT ON STOCKHOLDERS
The proposed Reverse Split will not affect any stockholder's proportionate
equity interest in the Company, except for those stockholders who would receive
cash in lieu of fractional shares. Holders of Common Stock will continue to be
entitled to receive such dividends as may be declared by the Board of Directors.
Outstanding stock options under the Company's stock plans will be adjusted to
reflect the ratio of the Reverse Split if such transaction is effected. The
Company's reporting obligations under the Securities Exchange Act of 1934 (the
"1934 Act") will not be affected by the Reverse Split.
EFFECT OF REVERSE SPLIT ON CAPITAL STOCK
The Company's Certificate of Incorporation currently authorizes the
issuance of 20,000,000 shares of Common Stock and 500,000 shares of Preferred
Stock. At the Record Date, the Company had outstanding 4,424,000 shares of
Common Stock, leaving a total of 15,576,000 authorized and unissued shares of
Common Stock available for future issuances. Following the Reverse Split, the
Company will have approximately 1,475,000 shares of Common Stock outstanding,
leaving approximately 18,525,000 authorized but unissued shares of Common Stock
available for issuance. The par value of the Common Stock would remain at $.10
per share. Because the number of issued shares of the Company would decrease but
the par value would remain the same after the Reverse Split, the Company's
stated capital would decrease by approximately $295,000, and the Company's
surplus account would increase by a corresponding amount. This change in the
Company's capital accounts would be reflected in the Company's financial
statements, along with a notation of the change in outstanding shares of Common
Stock, as a result of the Reverse Split.
There were no shares of Preferred Stock issued or reserved for issuance on
the Record Date, except in connection with the Company's Stockholders' Rights
Plan. The Preferred Stock will be unaffected by the Reverse Split.
If the amendment is approved by the stockholders, the Company will file a
Certificate of Amendment (the "Certificate") to its Certificate of Incorporation
with the Secretary of State of the State of Delaware
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promptly following the conclusion of the meeting. The proposed amendment would
become effective on the date of such filing (the "Effective Date"). On the
Effective Date, without further action of the Company or its stockholders, (i)
every three shares of Common Stock outstanding will automatically be reverse
split into one share outstanding, (ii) the number of shares of authorized Common
Stock will remain fixed at 20,000,000 and (iii) the par value of the Common
Stock will remain at $.10 per share. Based on information as of the Record Date,
the Company anticipates that the number of outstanding shares of Common Stock,
after giving effect to the Reverse Split, will be approximately 1,475,000
shares. Upon filing the Certificate, the Company will notify the stockholders
that the Reverse Split has been effected.
EXCHANGE OF CERTIFICATES; NO FRACTIONAL SHARES
After the Effective Date, the Company will issue certificates representing
one share of Common Stock in exchange for each three shares of Common Stock
presently outstanding upon surrender of an existing certificate evidencing
outstanding shares of Common Stock.
NO FRACTIONAL SHARES OF COMMON STOCK WILL BE ISSUED IN CONNECTION WITH THE
PROPOSED REVERSE STOCK SPLIT. ASSUMING THE APPROVAL OF THE REVERSE SPLIT, A
STOCKHOLDER WHO WOULD OTHERWISE BE ENTITLED TO RECEIVE A FRACTIONAL SHARE OF
COMMON STOCK WILL RECEIVE, IN LIEU THEREOF, CASH IN A PROPORTIONAL AMOUNT EQUAL
TO THE LAST BID PRICE OF THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET ON THE
EFFECTIVE DATE.
The Company will appoint Continental Stock Transfer & Trust Company as
exchange agent ("Exchange Agent") in connection with the Reverse Split. As soon
as practicable after the Effective Date, the holders of the Common Stock will be
notified and requested to surrender to the Exchange Agent any certificate(s)
representing outstanding shares of Common Stock in exchange for certificate(s)
representing the reduced number of shares of Common Stock that will result from
the Reverse Split, together with cash in lieu of any fractional share. On the
Effective Date, each certificate representing shares of Common Stock will be
deemed for all purposes to represent the reduced number of shares of Common
Stock that will result from the Reverse Split, whether or not the certificates
representing the outstanding Common Stock are surrendered for exchange.
The Company will deposit with the Exchange Agent, as soon as practicable
after the Effective Date, cash in an amount equal to the value of the estimated
aggregate number of fractional shares that will result from the Reverse Split.
Any portion of the cash deposited with the Exchange Agent to pay for fractional
shares that is held by the Exchange Agent six months after the Effective Date
will be returned to the Company, on demand. Thereafter, holders of post-split
shares eligible for this cash settlement would be paid directly by the Company.
Based on the aggregate number of shares owned by record holders as of the Record
Date, the Company estimates that payments for fractional shares resulting from
the Reverse Split will aggregate approximately $1,200.00. The Company intends to
use existing cash for such purpose. The Company currently has 680 stockholders
of record, with approximately 1,200 beneficial owners, and, following the
Reverse Split, the Company does not anticipate that this number will change
materially.
NO DISSENTER'S RIGHTS
The DGCL does not vest stockholders of a Delaware corporation with
dissenter's rights with respect to the Reverse Split.
RESALES OF RESTRICTED SECURITIES
The proposed amendment will not affect the transferability of shares of
Common Stock or any present restriction on the sale thereof. Therefore, for
purposes of determining the relevant holding period as prescribed by Rule 144
under the Securities Act of 1933, as amended, the shares of Common Stock to be
issued to each stockholder after the Effective Date will be deemed to have been
acquired on the date on which the stockholder acquired the shares of Common
Stock held immediately prior to the Effective Date.
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FEDERAL INCOME TAX CONSEQUENCES
A summary of the federal income tax consequences of the Reverse Split is
set forth below. The discussion is based on the present federal income tax law.
The discussion is not, and should not be relied on as, a comprehensive analysis
of the tax issues arising from or relating to the proposed amendment.
Accordingly, stockholders are urged to consult their personal tax advisors for
an analysis of the effect of the Reverse Split on their respective tax
situations, including consequences under applicable state tax laws.
The Reverse Split will be deemed to be a tax-free recapitalization to the
Company and its stockholders to the extent that outstanding shares of Common
Stock are exchanged for a reduced number of shares of Common Stock. Therefore,
neither the Company nor its stockholders will recognize any gain or loss for
federal income tax purposes as a result thereof. However, if a stockholder
receives cash in lieu of any fractional share interest in the Common Stock, such
stockholder will be treated as having received the cash in redemption of his or
her fractional share interest. Depending on the stockholder's retained stock
interest, such cash redemption will be treated as either (i) a dividend to the
extent of the Company's current and accumulated earnings and profit with any
excess first applied against the stockholder's adjusted tax basis allocable to
the fractional share interest ("Basis") and the remainder treated as gain from
the sale or exchange of the fractional shares or (ii) gain or loss from the sale
or exchange of the fractional shares in an amount equal to the difference, if
any, between the cash received and the stockholder's Basis.
The shares of Common Stock to be issued to each stockholder will have an
aggregate basis, for computing gain or loss, equal to the aggregate basis of the
shares of Common Stock held by such stockholder immediately prior to the
Effective Date, less any basis allocable to the fractional shares redeemed (if
any) to the extent such redemption is treated as a sale or exchange under the
preceding paragraph. A stockholder's holding period for the shares of Common
Stock to be issued will include the holding period for shares of Common Stock
exchanged therefor, provided, that such outstanding shares of Common Stock were
held by the stockholder as capital assets on the Effective Date.
PROPOSED AMENDMENT TO CERTIFICATE OF INCORPORATION
If the Reverse Split is approved, the Certificate of Incorporation will be
amended by deleting the first paragraph of Article Fourth in its entirety and
inserting in its place the following paragraphs:
FOURTH: This corporation is authorized to issue twenty million five
hundred thousand (20,500,000) shares of capital stock. Twenty million
(20,000,000) of the authorized shares shall be Common Stock, ten cents
($0.10) par value each; and five hundred thousand (500,000) of the
authorized shares shall be preferred stock, ten dollars ($10.00) par value
each.
The corporation does, by this Amendment to the Certificate of
Incorporation (such Amendment to the Certificate of Incorporation being
effective upon its filing with the Secretary of State of the State of
Delaware, with the time of such effectiveness being hereinafter referred to
as the "Effective Time"), reclassify its shares of Common Stock, par value
$.10 per share (the "Old Common Stock") issued and outstanding immediately
before the Effective Time and cancel its unissued shares of Old Common
Stock unissued before the Effective Time, as set forth herein.
All of the shares of Old Common Stock that were authorized but
unissued immediately before the Effective Time, shall, at the Effective
Time, be canceled. The Old Common Stock shall be superseded by the
authorized but unissued shares of Common Stock, $0.10 par value of the
Corporation.
Each three shares of Old Common Stock outstanding immediately before
the Effective Time, and each three shares of Old Common Stock issuable
pursuant to an instrument exercisable for shares of Old Common Stock,
shall, at the Effective Time, be reclassified as and converted into, and
become a right to receive, and the holders of the outstanding Old Common
Stock or instruments exercisable for such Old Common Stock shall be
entitled to receive therefor upon surrender of the certificates
representing such shares of Old Common Stock to the Corporation, or upon
exercise of such instrument, one share of Common Stock, $0.10 par value of
the Corporation, subject to the treatment of fractional shares set forth
herein.
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<PAGE> 17
No scrip or fractional certificates will be issued. In lieu of
fractional shares, the corporation will pay a cash adjustment in respect of
such fraction of a share in an amount equal to the same fraction of the
closing bid price of the Common Stock as quoted on the Nasdaq National
Market System, or such other representative price as determined by the
officers of the corporation, as of the closing of business on the Effective
Date.
APPROVAL OF REVERSE SPLIT
The affirmative vote of the holders of a majority of the outstanding shares
of Common Stock outstanding and entitled to vote on the Record Date is required
to approve the Reverse Split.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE AMENDMENT TO
EFFECT THE REVERSE SPLIT.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The independent auditors of the Company are Deloitte & Touche LLP, who have
acted in that capacity for many years. The Company has requested that Deloitte &
Touche LLP act as the independent auditors for the Company for fiscal 1999.
Representatives of Deloitte & Touche LLP will be present at the annual meeting
with the opportunity to make a statement if they desire to do so and will be
available to respond to appropriate questions addressed to them.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
A Stockholder intending to present a proposal for inclusion in the
Company's proxy statement and form of proxy for the Company's next Annual
Meeting of Stockholders must deliver such proposal in writing to the Company's
principal executive offices no later than August 24, 1999.
If a Stockholder desires to bring business before the meeting which is not
the subject of a proposal timely submitted for inclusion in the Proxy statement,
the Stockholder must follow the procedures outlined in the Company's Bylaws. A
copy of these procedures is available upon request from the Secretary of the
Company. 3500 Noble Avenue, Fort Worth, Texas 76111. One of the procedural
requirements in the Bylaws is timely notice in writing of the business the
Stockholder proposes to bring before the meeting. Notice must be received not
less than 60 days nor more than 90 days prior to the meeting.
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
The Company knows of no matters other than those above stated which are to
be brought before the meeting. It is intended that the persons named in the
enclosed Proxy will vote your stock according to their best judgment if any
other matters do properly come before the meeting.
A copy of the Annual Report for fiscal 1998 is being mailed to Stockholders
with the Proxy Statement. The Annual Report is not to be regarded as
proxy-soliciting material or a communication by means of which any solicitation
is to be made.
Whether or not you intend to be present at this meeting, you are urged to
return the Proxy promptly. If you are present at the meeting, and wish to vote
your stock in person, this Proxy shall, at your request, be returned to you at
the meeting.
By Order of the Board of Directors
SAMUEL L. CARLSON
Secretary
Dated: December 22, 1998
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SITE OF PANCHO'S MEXICAN BUFFET, INC.
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JANUARY 27, 1999 AT 10:00 A.M.
PANCHO'S MEXICAN BUFFET
1927 E. BELTLINE RD.
CARROLLTON, TEXAS
TELEPHONE 972-416-1200
MAP
<PAGE> 19
PANCHO'S MEXICAN BUFFET, INC.
PROXY FOR ANNUAL MEETING JANUARY 27, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS
That I, the undersigned, revoking all previous proxies do make, constitute
and appoint Jesse Arrambide III, Samuel L. Carlson and Hollis Taylor, or any of
them, my true and lawful attorneys, with power of substitution, for me and in my
name to vote at the annual meeting of the stockholders of PANCHO'S MEXICAN
BUFFET, INC. to be held on the 27th day of January, 1999, and at any adjournment
thereof, on all shares of stock of said Company standing in my name upon its
books. No business other than the proposals described below are expected to come
before the meeting, but should any other matter requiring a vote of stockholders
arise, the persons named herein will vote thereon in accordance with their best
judgment to the extent permitted by law or regulation. The Board of Directors
recommends a vote FOR proposals 1 & 2.
(1) [ ] FOR [ ] WITHHOLD VOTE The election of Jesse Arrambide, III and
Tomas Orendain as directors. If you desire to withhold authority to
vote for any individual nominee, please write that nominee's name on the
space provided:
- --------------------------------------------------------------------------------
(2) [ ] FOR [ ] AGAINST [ ] ABSTAIN To consider and act upon a proposal
to amend the Certificate of Incorporation to effect a one-for-three reverse
stock split.
<PAGE> 20
THIS PROXY, PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREON
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1 & 2, AND IN THE DISCRETION OF THE PROXIES SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING.
Date:
---------------------- ---------------------------------
Signature
---------------------------------
INSTRUCTIONS
If signing in a representative
capacity (as attorney, executor
or administrator, trustee,
guardian or custodian, corporate
officer or general partner)
please indicate such capacity
following signature. Proxies for
custodial accounts must be signed
by the named custodian, not by
the minor.
