SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange
Act of 1934
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(as permitted by Rule 14a-6(e)(2))
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.1a-11(c)
or 240.1a-12
Taco Cabana, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[ X ] No fee required.
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pursuant to Exchange Act Rule 0-11: (set forth amount on which the
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[ ] Check box if any part of the fee is offset as provided by
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the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
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4) Date Filed:
Taco Cabana, Inc.
8918 Tesoro Dr., Suite 200
San Antonio, Texas 78217
Notice of Annual Meeting of Stockholders
August 12, 1997
TO THE STOCKHOLDERS OF
TACO CABANA, INC.:
Notice is hereby given that the Annual Meeting of
Stockholders of Taco Cabana, Inc., a Delaware
corporation (the "Company"), will be held at the Harvey
Hotel, 4545 W. John Carpenter Freeway, Irving, Texas, on
Tuesday, August 12, 1997, at 10:00 a.m., Central
Daylight Time for the following purposes:
1.) To elect five directors.
2.) To vote upon a proposal to amend the Taco Cabana
1994 Stock Option Plan (the "1994 Option Plan") to
increase the number of shares of the Company's Common
Stock authorized for issuance under the 1994 Option Plan
from 500,000 shares to 1,250,000 shares.
3.) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed the close of
business on Monday, June 30, 1997 as the record date for
the determination of stockholders entitled to vote at
the meeting.
We hope that you will be able to attend the meeting
in person, but if you are unable to do so, please fill
in, sign and promptly mail back the enclosed proxy form,
using the return envelope provided. If for any reason
you should subsequently change your plans, you can of
course revoke the proxy at any time before it is
actually voted.
BY ORDER OF THE BOARD OF DIRECTORS
David G. Lloyd
Secretary
San Antonio, Texas
July 11, 1997
TACO CABANA, INC.
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 12, 1997
THE MEETING
This Proxy Statement is furnished to the
stockholders of Taco Cabana, Inc., a Delaware
corporation, in connection with the solicitation of
proxies by the Board of Directors of the Company for use
at the Annual Meeting of Stockholders to be held
Tuesday, August 12, 1997 (the "Meeting"). This Proxy
Statement, the accompanying proxy, and the Company's
Annual Report are being sent or given to the
stockholders of the Company on or about July 11, 1997.
The presence, in person or by proxy, of the holders
of a majority of the outstanding shares of the Company's
Common Stock is necessary to constitute a quorum at the
Meeting. Pursuant to applicable Delaware law, only votes
cast "for" a matter constitute affirmative votes. Votes
"withheld" or abstaining from voting are counted for
quorum purposes, but since they are not cast "for" a
particular matter, they will have the same effect as
negative votes or votes "against" a particular matter.
In deciding all questions, a holder of Common Stock is
entitled to one vote, in person or by proxy, for each
share held on the record date.
Proxies in the form enclosed will be voted at the
Meeting, if properly executed, returned to the Company
prior to the Meeting and not revoked. A proxy may be
revoked at any time before it is voted by giving written
notice of revocation to the Secretary of the Company
prior to the convening of the Meeting, or by presenting
another proxy card with a later date. If you attend the
Meeting and desire to vote in person, you may request
that your previously submitted proxy card not be used.
The record date for stockholders entitled to vote
at the Meeting is June 30, 1997. At the close of
business on June 30, 1997, the Company had issued and
outstanding and entitled to vote at the Meeting
15,346,537 shares of Common Stock (excluding 360,000
shares of treasury stock). As of June 30, 1997, the
directors and executive officers of the Company owned a
total of 95,367 shares of the Company's Common Stock, or
approximately 0.6% of the total number of shares
outstanding and entitled to vote at the Meeting.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information
concerning the beneficial ownership of the Company's Common
Stock as of May 30, 1997, by: (i) each person known by the
Company to be the beneficial owner of more than 5% of its
Common Stock, (ii) each named executive officer of the
Company, (iii) each director and director nominee of the
Company, and (iv) all directors and executive officers as a
group. Unless otherwise indicated, each of the stockholders
has sole voting and investment power with respect to the
shares beneficially owned.
Name Shares Beneficially Owned
-------------------------- -------------------------
Number Percent
----------- ----------
Stephen V. Clark (1) 80,000 *
James A. Eliasberg(2) 188,750 1.2%
David G. Lloyd(3) 31,800 *
William J. Nimmo 3,817 *
Richard Sherman(4) 73,003 *
Cecil Schenker(5) 93,503 *
Lionel Sosa (6) - -
Massachusetts Financial
Services Co. (7) 1,305,370 8.1%
Smith Barney Inc.,
Smith Barney Holdings,Inc.
Travelers Group Inc. (8) 2,190,801 13.6%
Dimensional Fund Advisors, Inc. (9) 995,564 6.2%
Crown Capital Management,Ltd. (10) 364,900 2.3%
Crown-Glynn Advisors, Ltd. (10) 490,750 3.1%
Glynn Capital Management(10) 855,650 5.5%
Crown Advisors, Ltd. (10) 855,650 5.5%
David Bellet (10) 855,650 5.5%
John Walter Glynn, Jr. (10) 855,650 5.5%
Chester A. Siuda (10) 855,650 5.5%
Jeffrey S. Hamren (10) 858,650 5.5%
Daryl Messinger (10) 855,650 5.5%
Margaret S. McNamara (10) 857,650 5.5%
Steve Rosston (10) 855,650 5.5%
All directors and officers
as a group (6 persons)(11) 470,873 2.9%
* Less than 1%
(1) Includes 80,000 shares subject to presently
exercisable options (or those exercisable within 60
days). Excludes 120,000 shares issuable pursuant to
options which are not currently exercisable (or
exercisable within 60 days).
(2) Includes 104,000 shares subject to presently
exercisable options (or those exercisable within 60
days). Excludes 120,000 shares issuable pursuant to
options which are not currently exercisable (or
exercisable within 60 days).
(3) Includes 25,000 shares issuable pursuant to presently
exercisable options (or those exercisable within 60
days). Excludes 75,000 shares issuable pursuant to
options which are not currently exercisable (or exercisable
within 60 days).
(4) Represents shares subject to presently exercisable
options (or those exercisable within 60 days).
Excludes 24,000 shares issuable pursuant to options
which are not currently exercisable (or exercisable
within 60 days).
(5) Represents shares subject to presently exercisable
options (or those exercisable within 60 days).
Excludes 24,000 shares issuable pursuant to options
which are not currently exercisable (or exercisable
within 60 days).
(6) Mr. Sosa is a nominee for director.
(7) Based upon Schedule 13G, filed jointly in February
1996, and amended in February 1997, indicating
beneficial ownership as stated in the table, and shared
dispositive power as to all shares beneficially owned.
Included in the joint filing were Massachusetts
Financial Services Company ("MFS"), indicating
beneficial ownership of 1,305,370 shares and sole
dispositive power as to 1,305,370 shares and MFS Series
Trust II - MFS Emerging Growth Fund ("MEG"), indicating
962,395 shares beneficially owned by MFS as well as
MEG. Address: 500 Boylston Street, Boston,
Massachusetts 02116.
(8) Based on Schedule 13G, filed jointly in October 1995,
and amended in January 1997, indicating beneficial
ownership as stated in the table. Included in the joint
filing were Smith Barney Inc. ("SB"), indicating shared
voting and dispositive power as to 1,415,801 shares,
and sole voting and dispositive power as to 0 shares;
Smith Barney Holdings Inc. ("SB Holdings"), indicating
shared voting and dispositive power as to 2,190,801,
and sole voting and dispositive power as to 0 shares;
and Travelers Group Inc. ("TRV"), indicating shared
voting and dispositive power as to 2,190,801, and sole
voting and dispositive power as to 0 shares. Address:
388 Greenwich Street, New York, New York 10013.
(9) Based on Schedule 13G, filed in February 1997,
indicating beneficial ownership and sole dispositive
power as stated in the table and sole voting power as
to 665,464 shares. Address: 1299 Ocean Avenue, 11th
Floor, Santa Monica, CA 90401.
(10) Based on Schedule 13G, filed in February 1997,
indicating beneficial ownership as stated in the table
and shared voting power, sole dispositive power and
shared dispositive power as indicated below:
<TABLE>
<S> <C> <C> <C>
Shared Voting Sole Dispositive Shared Dispositive
Name Power Power Power
- --------------------------------- ------------- ---------------- --------
Crown Capital Management, Ltd.(a) 364,900 - 364,900
Crown-Glynn Advisors,Ltd.(a) 490,750 - 490,750
Glynn Capital Management(b) 855,650 - 855,650
Crown Advisors, Ltd.(a) 855,650 - 855,650
David Bellet (c) 855,650 - 855,650
John Walter Glynn, Jr.(b) 855,650 - 855,650
Chester A. Suida (a) 855,650 - 855,650
Jeffrey S. Hamren (a) 855,650 3,000 855,650
Daryl Messinger (b) 855,650 - 855,650
Margaret S. McNamara (a) 855,650 2,000 855,650
Steve Rosston (b) 855,650 - 855,650
</TABLE>
Address: (a) 67 East Park Place, 8th floor, Morristown,
NJ 07960; (b) 3000 Sand Hill Road, Building 4, Suite
235, Menlo Park, CA 94025: (c ) 60 East 42nd Street,
New York, NY 10165.
(11) Includes 375,506 shares subject to presently
exercisable options (or those exercisable within 60
days). Excludes 363,000 shares issuable pursuant to
options which are not currently exercisable (or
exercisable within 60 days).
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting five directors are to be elected
by plurality of the votes cast by the holders of the
shares of outstanding Common Stock of the Company. Under
applicable Delaware law, in tabulating the vote, broker
nonvotes will be disregarded and have no effect on the
outcome of the vote. Each outstanding share of Common
Stock entitles the holder thereof to one vote with
respect to the election of the five director positions
to be filled at this meeting. The nominees for director
are Stephen V. Clark, William J. Nimmo, Richard Sherman,
Cecil Schenker and Lionel Sosa. All of the nominees,
except Lionel Sosa, are presently directors of the
Company. For information concerning the backgrounds of
such nominees, see "Directors and Executive Officers" on
page 6.
The enclosed Proxy, if properly signed and returned
will be voted FOR the election of these five nominees
unless authority to vote is withheld. The Board of
Directors has no reason to believe that any of such
nominees will be unable to serve if elected. In the
event any of such nominees become unavailable for
election, votes will be cast, pursuant to authority
granted by the enclosed Proxy, for such substitute
nominee as may be designated by the Board of Directors.
All directors will hold office until the annual meeting
of stockholders to be held in 1998 and until their
successors have been duly elected and qualified, unless
prior to such meeting a director resigns or his
directorship otherwise becomes vacant.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" THE ELECTION OF THE DIRECTOR NOMINEES.
Directors and Executive Officers
The directors and executive officers of the Company and
their respective ages are as follows:
Name Age Position
------------------- ---- ------------------------
Stephen V. Clark 43 Chief Executive Officer,
President and Director
James A. Eliasberg 39 Executive Vice President and
General Counsel
David G. Lloyd 34 Senior Vice President -
Finance, Chief Financial
Officer, Secretary and
Treasurer
Douglas Gammon 50 Senior Vice President -
Human Resources and People
William J. Nimmo 43 Director
Richard Sherman 53 Director
Cecil Schenker 55 Director
Lionel Sosa 58 Nominee for Director
Mr. Clark has served as the Company's Chief Executive
Officer since November 1996, and as the President, Chief
Operating Officer, and as a Director since April 1995.
Prior to that, Mr. Clark was with Church's Chicken, a
division of America's Favorite Chicken, for eighteen years
with his final title having been Senior Vice President and
Concept General Manager. He also served on the executive
committee of America's Favorite Chicken and was on the Board
of Directors of Church's Operators Purchasing Association.
In his final position with America's Favorite Chicken, Mr.
Clark was primarily responsible for the day-to-day
operations of over 1100 company-owned and franchised units
with aggregate sales volume in excess of $600 million.
Mr. Eliasberg has served as the Company's Executive
Vice President and General Counsel since April 1995. From
January 1991 to April 1995, Mr. Eliasberg served as the
Company's Senior Vice President and General Counsel. Prior
to that, Mr. Eliasberg was engaged in the private practice
of law in Southern California at the law firms of Fierstein
& Sturman (March 1989 to January 1991), Hill, Wynne, Troop &
Meisinger (May 1986 to February 1989) and Jones, Day, Reavis
& Pogue (October 1984 to March 1986). In addition to
supervising all of the Company's legal affairs, Mr.
Eliasberg's responsibilities include real estate,
construction and franchise development. Mr. Eliasberg is a
graduate of the University of Chicago law school.
Mr. Lloyd joined the Company in October 1994 as Vice
President - Finance, Chief Financial Officer, Secretary and
Treasurer and was promoted to Senior Vice President in May
1996. From August 1985 to October 1994, Mr. Lloyd served in
various capacities with Deloitte & Touche (the Company's
independent auditors), with his last position being Senior
Audit Manager. Mr. Lloyd is a certified public accountant.
Mr. Gammon joined the Company in March 1997 as Senior
Vice President, Human Resources and People Development. From
December 1989 to March 1997 Mr. Gammon served as Vice
President of Human Resources at Marriott International which
has over 15,000 employees in 50 states. Mr. Gammon has over
18 years of experience in the Human Resources field as well
as over six years experience in restaurant operations. He
was the past President for the Council of Hotel and
Restaurant Trainers.
Mr. Nimmo has served as a director of the Company since
November 1991. Since January 1997, Mr. Nimmo has been a
Partner with Halpern, Denny & Co., a venture capital firm in
Boston Massachusetts. Prior to that, Mr. Nimmo served as
Managing Director of Cornerstone Equity Investors, Inc., and
its predecessor firm, Prudential Equity Investors, Inc.,
since September 1989. For the ten years prior to that, Mr.
Nimmo was a Vice President of J.P. Morgan & Co.
Mr. Sherman has been a director of the Company since
November 1991. Mr. Sherman is a private investor and retail
consultant. Mr. Sherman served as President and Chief
Executive Officer of Rally's, Inc. from September 1987 to
January 1991. From August 1989 to January 1991, he also
served as Chairman of the Board of Rally's, Inc. Mr.
Sherman currently serves as a member of the Board of
Trustees of Paul Quinn College in Dallas, Texas and as a
director of Reed's Jewelers, Inc., Papa John's
International, Inc., and PJ America, Inc.
Mr. Schenker has been a director of the Company since
January 1992. Mr. Schenker is a corporate securities
attorney and is the managing partner of the San Antonio,
Texas office of the law firm of Akin, Gump, Strauss, Hauer &
Feld, L.L.P., of which Mr. Schenker has been a partner,
through his professional corporation since January of 1984.
Akin, Gump, Strauss, Hauer & Feld, L.L.P. has regularly
performed legal services for the Company. See "Compensation
Committee Interlocks and Insider Participation." Mr.
Schenker is also a director of Lot$ Off Corporation,
formerly 50-Off Stores, Inc.
Mr. Sosa, a nominee for Director, has served as the
Chief Executive Officer of KJS Marketing Agency since
January 1996. From 1994 to 1996 he served as Chairman of
DMB&B/Americas, a network of advertising agencies in the
U.S. and Latin America. In 1980 Mr. Sosa founded the agency
of Sosa, Bromley, Aguilar, Noble & Associates, an
advertising agency specializing in Hispanic marketing in the
U.S. Mr. Sosa sold Sosa, Bromley, Aguilar, Noble &
Associates in 1994. Mr. Sosa is currently a Director of the
Children's Television Workshop Network.
The Board of Directors has a compensation and stock
option committee and an audit committee, each of which
currently consists of William J. Nimmo, Richard Sherman and
Cecil Schenker. The Board of Directors does not currently
have a nominating committee. All directors serve for a term
of one year and until their successors are duly elected.
Each director who is not also an employee of the Company
receives an annual retainer of $25,000, and an attendance
fee of $2,500 per Board meeting for up to four meetings each
year. All non-employee directors are reimbursed for their
expenses. The Board of Directors met four times during
1996. Each incumbent director attended at least 75% of the
aggregate number of Board meetings and meetings of Board
committees of which he was a member held during 1996.
The compensation and stock option committee monitors
and makes recommendations to the Board with respect to
compensation programs for officers and directors and
administers the Company's Stock Option Plan. The
compensation and stock option committee met two times during
1996. It is anticipated that, if all nominees are elected to
the Board of Directors, the Board will appoint Lionel Sosa
to the compensation and stock option committee and Cecil
Schenker will resign from such committee. Mr. Schenker,
because of his performance of legal services for the
Company, does not qualify as a "Non-Employee Director" under
new SEC regulations governing option plan administration.
The audit committee considers the adequacy of the
internal controls of the Company and the objectivity of
financial reporting; meets with the independent certified
public accountants and appropriate Company financial
personnel about these matters; and recommends to the Board
the appointment of the independent certified public
accountants. The audit committee met two times in 1996.
Compliance with Section 16(a) of the Securities Exchange Act
of 1934
Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") requires each director and
executive officer of the Company, and each person who owns
more than 10% of a registered class of the Company's equity
securities to file by specific dates with the Securities and
Exchange Commission (the "SEC") initial reports of ownership
and reports of change in ownership of Common Stock and other
equity securities of the Company. Officers, directors and
10% stockholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they
file. The Company is required to report in this report any
failure of its directors and executive officers to file by
the relevant due date any of these reports during the
Company's fiscal year.
To the Company's knowledge, all Section 16(a) filing
requirements applicable to the Company's officers,
directors, and 10% stockholders were complied with.
EXECUTIVE COMPENSATION
Executive compensation is set at levels which are
sufficiently competitive with companies of similar size
and type to permit the Company to attract and retain the
best possible individuals. Compensation is structured to
provide incentives for executive officer performance
that results in continuing improvements in the Company's
financial results, over both the short term and the long
term. Compensation is also designed to align the
interests of the Company's executives and its
shareholders by providing for payment of a significant
portion of incentive compensation in the form of stock
options. Moreover, each executive officer's compensation
is based upon both individual and Company performance.
As may be seen from the Summary Compensation Table
included on page 10, the compensation of executive
officers consists of three principal parts, each of
which is reviewed regularly by the committee.
Salaries shown in the Summary Compensation Table
represent the fixed portion of compensation for
executive officers for the year. Changes in salary
depend upon Company as well as individual performance.
The bonuses shown in the Summary Compensation Table
are paid in cash to executive officers and depend upon
the financial and strategic accomplishments of the
Company. The Committee also has discretion to modify the
bonus based upon individual performance, including the
individual's progress in implementing the Company's
goals.
The third principal component of compensation arises
from the Company's grant of stock options to executive
officers (the Company's Stock Option Plan actually
covers several levels of employees). The Committee sets
the number of options to be granted based on a variety
of factors, including, principally, salary grade,
Company and individual performance and individual levels
of stock ownership. All options under the Plan are
granted at fair market value, and therefore any value
which ultimately accrues to executive officers is based
entirely on the Company's performance, as perceived by
investors who establish the price for the Company's
Common Stock.
A written employment agreement served as the principal
basis of Mr. Clark's compensation during 1996. During
1996 Mr. Clark's annual salary was adjusted to reflect
his responsibilities, experience, his individual
performance and important contributions to the Company.
On November 15, 1996, Mr. Clark was promoted to Chief
Executive Officer.
Respectfully submitted,
THE COMPENSATION AND STOCK OPTION COMMITTEE
Richard Sherman, William J. Nimmo, Cecil Schenker
Summary Compensation Table. The following table sets
forth certain information concerning the compensation earned
during the Company's last three fiscal years by the
Company's Chief Executive Officer and the Company's only two
other executive officers (collectively the "named executive
officers"):
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
----- -------
Other Secur-
Annual Restrict- ities All Other
Compen- ed Underly LTIP Compen-
Name and Fiscal Salary Bonus sation Stock ing Payouts sation
Principal Year ($) ($) ($) (1) Award(s) Options/ ($) ($)
Position SARS
--------- ------ ------ ------ ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen V. 1996 233,404 - - - - - -
Clark, 1995 152,455(2) 50,000 - - 200,000 - -
Chief 1994 -
Executive
Officer,
President , -
Chief
Operating
Officer
- -----------------------------------------------------------------------------------------
James A. 1996 189,235 - - - - -
Eliasberg, 1995 175,025 - - - 200,000 - -
Executive 1994 135,000 - - - 25,000(4) - -
Vice
President
and General
Counsel
- -----------------------------------------------------------------------------------------
David G. 1996 135,138 - - - - - -
Lloyd, 1995 117,605 - - - 75,000 - -
Senior Vice 1994 15,769(3) - - - 25,000 - -
President,
Chief
Financial
Officer,
Secretary
and
Treasurer
</TABLE>
__________________
(1) Certain of the Company's executive officers receive
personal benefits in addition to salary; however, the
Company has concluded that the aggregate amounts of
such personal benefits do not exceed the lesser of
$50,000 or 10% of annual salary and bonus reported for
any named executive officer.
(2) Mr. Clark joined the Company in April 1995.
(3) Mr. Lloyd joined the Company in October 1994.
(4) Mr.Eliasberg voluntarily rescinded this option grant in
January 1997.
Employment Agreements. The Company has written
employment agreements with Stephen Clark and James
Eliasberg. The Company's agreement with Mr. Clark expires
in April 1998. Mr. Clark receives a base salary of not less
than $200,000 per year during the term of his contract.
Additionally, Mr. Clark can be paid a bonus based on the
Company's achievement of certain performance goals.
Pursuant to such agreement, Mr. Clark has agreed not to
participate in any manner, during his term of employment and
for two years thereafter, in any business which owns a
Mexican fast food restaurant or Mexican "quick service"
restaurant in the Continental United States.
The Company's agreement with Mr. Eliasberg expires in
April 1998. Mr. Eliasberg receives a base salary of
$185,000 per year during the term of his contract.
Additionally, Mr. Eliasberg will be paid a bonus based on
the Company's achievement of certain performance goals.
Pursuant to such agreement, Mr. Eliasberg has agreed not to
participate in any manner, during his term of employment and
for two years thereafter, in any business which owns a
Mexican fast food restaurant or Mexican "quick service"
restaurant in the Continental United States.
Stock Option Plans and Directors' Options
Under the Taco Cabana, Inc. 1990 Stock Option Plan (the
"1990 Option Plan"), amended in August 1992, and the 1994
Stock Option Plan (the "1994 Option Plan") options to
purchase up to 1,500,000 and 500,000 shares, respectively,
of Common Stock may be granted to employees, outside
directors and consultants and advisers of the Company or any
subsidiary corporation or entity. The stock is intended to
permit the Company to retain and attract qualified
individuals who will contribute to its overall success.
Shares that by reason of the expiration of an option (other
than by reason of exercise) or which are no longer subject
to purchase pursuant to an option granted under an Option
Plan may be reoptioned thereunder. The 1990 and 1994 Option
Plans are administered by a committee of outside directors
(the "Committee"). The Committee sets specific terms and
conditions of options granted under the 1990 and 1994 Option
Plans and administers the 1990 and 1994 Option Plans, as
well as the Company's other employee benefit plans which may
be in effect from time to time. The Committee currently
consists of William J. Nimmo, Cecil Schenker and Richard
Sherman. It is anticipated that, if all nominees are elected
to the Board of Directors, the Board will appoint Lionel
Sosa to the compensation and stock option committee and
Cecil Schenker will resign from such committee. Mr.
Schenker, because of his performance of legal services for
the Company, does not qualify as a "Non-Employee Director"
under new SEC regulations governing option plan
administration.
The Company's employees are eligible to receive either
incentive stock options or nonqualified stock options or a
combination of both, as the Committee determines.
Non-employee participants may be granted only nonqualified
stock options. Stock options may be granted for a term not
to exceed ten years (five years with respect to a holder of
10% or more of the Company's shares in the case of an
incentive stock option) and are not transferable other than
by will or the laws of descent and distribution. Each
option may be exercised within the term of the option
pursuant to which it is granted (so long as the optionee, if
an employee, continues to be employed by the Company). In
addition, an incentive option may be exercised within 90
days after the termination of employment of the optionee
(subject to any limitations in the particular option),
within one year after termination in case of termination
because of disability, or throughout the term of the option
in the event of the optionee's death, to the extent in each
case the option was exercisable at the termination date. A
nonqualified stock option may be exercised for such period,
but not later than the expiration date, after termination of
employment, disability or death, as may be specified in the
particular option.
The exercise price of all incentive stock options must
be at least equal to the fair market value of the Common
Stock on the date of grant, or 110% of fair market value
with respect to any incentive stock option issued to a
holder of 10% or more of the Company's shares. Stock
options may be exercised by payment in cash of the exercise
price with respect to each share to be purchased, by
delivering Common Stock of the Company already owned by such
optionee with a market value equal to the exercise price, or
by a method in which a concurrent sale of the acquired stock
is arranged, with the exercise price payable in cash from
such sale proceeds.
The 1994 Option Plan provides that each outside
director will automatically receive a grant of 3,000
nonqualified stock options each year on the fifth business
day following the first public release of the Company's
audited earnings report on results of operations for the
preceding fiscal year. Each such option will become
exercisable in whole or in part on the first anniversary of
the award through the balance of its ten-year term. Subject
to availability of shares allocated to the 1994 Option Plan
and not already reserved for other outstanding stock
options, outside directors who join the Board in the future
will in addition receive an initial grant of options for
20,000 shares, which will become exercisable in five equal
increments beginning on the first anniversary of the award
and on each of the next four succeeding anniversary dates.
Such options will be exercisable for a term of ten years.
Such options will be awarded upon their appointment or
election to the Board. Options, once granted and to the
extent exercisable, will remain exercisable throughout their
term, regardless of whether the holder continues as a
director. The exercise price of the options is equal to
100% of the fair market value of a share of Common Stock at
the time of grant.
The 1990 Option Plan will terminate on October 14,
2000. The 1994 Option Plan will terminate on October 17,
2004. The Board of Directors may, however, terminate the
1990 and 1994 Option Plans at any time prior to such
respective dates. Termination of the 1990 and 1994 Option
Plans will not alter or impair, without the consent of the
optionee, any of the rights or obligations pursuant to any
option granted under the Option Plans.
As of June 30, 1997, options for 635,158 shares of
common stock had been granted under the 1990 Option Plan and
were outstanding, with a weighted average exercise price of
$6.35 per share, and no additional shares were available for
issuance upon exercise of options which may be granted in
the future. As of June 30, 1997, options for 861,842 shares
had been exercised.
As of June 30, 1997, options for 491,967 shares of
common stock had been granted under the 1994 Option Plan and
were outstanding, with a weighted average exercise price of
$5.68 per share, and 8,033 additional shares were available
for issuance upon exercise of options which may be granted
in the future. As of June 30, 1997, no options had been
exercised. The Company is proposing at the Annual Meeting to
amend the number of shares authorized to be issued
thereunder. See "Proposal No. 2 - Amendment to the Taco
Cabana, Inc. 1994 Stock Option Plan".
Stock Option Grant Table. The following table sets
forth certain information concerning options granted to the
named executive officers during the Company's fiscal year
ended December 29, 1996:
<TABLE>
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Total Option Stock PRice
Grated Exercise or Appreciation
Options to Employees in Base Price Expiration for Option Term(2)
Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($)
#(1)
- ------------------ ------- --------------- ----------- ----------- --------------------
<S> <C> <C> <C> <C> <C>
Stephen V. Clark - - - - -
James A. Eliasberg - - - - -
David G. Lloyd - - - - -
</TABLE>
Stock Option Exercises and Holdings Table. The following table
provides information concerning the exercise of options and
value of unexercised options held by the named executive
officers at December 29, 1996:
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
Shares
Acquired
on Value Number of Unexercised Value of Unexercised
Exercise Realized Options In-the-Money Options
Name (#) ($) at Fiscal Year End (#) at Fiscal Year End ($)(1)
- ------------- -------- -------- ----------------------- --------------------------
Exercis- Unexercis- Exercis- Unexercis-
able able able able
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Stephen V. - - 40,000 160,000 $85,000 $340,000
Clark
James A. - - 83,000 166,000 $160,114 $365,038
Eliasberg
David G. - - 25,000 75,000 $21,570 $86,280
Lloyd
</TABLE>
(1) Values stated are based on the last sale price of $7.31 per
share of the Company's Common Stock on the NASDAQ National
Market System on December 27, 1996, the last trading day of
the fiscal year, and equal the aggregate amount by which
the market value of the option shares exceeds the exercise
price of such options at the end of the fiscal year.
Compensation Committee Interlocks and Insider Participation
During 1996, William J. Nimmo, Richard Sherman and
Cecil Schenker served on the Company's compensation and
stock option committee.
Since 1987, the law firm of Akin, Gump, Strauss, Hauer
& Feld, L.L.P., has regularly rendered legal services as
counsel to the Company. Cecil Schenker, a director of the
Company and a member of the Company's compensation and stock
option committee, is the sole shareholder of Cecil Schenker,
P.C., a partner of Akin, Gump, Strauss, Hauer & Feld, L.L.P.
The Company believes that the abilities of Mr. Schenker
to make fair compensation decisions have not been
compromised by the relationships referred to above.
STOCK PERFORMANCE GRAPH
Comparison of Five Year-Cumulative Total Returns
Performance Graph for
Taco Cabana, Inc.
(GRAPH APPEARS HERE)
NASDAQ Stocks
(SIC 5800-
Measurement NASDAQ Stock 5899 US
Period Market Companies)
(Fiscal Year Taco Cabana, (US Eating and
Covered) Inc. Companies) drinking
places
- ----------- ------------ ------------ ------------
12/31/92 122.3 116.3 117.1
12/31/93 163.8 133.5 118.7
12/30/94 83.1 130.5 85.7
12/29/95 46.2 184.5 104.4
12/27/96 67.5 227.2 101.5
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 $100.0
on 10/16/92.
* The Company's Common Stock commenced trading on
October 16, 1992.
PROPOSAL 2
AMENDMENT TO THE TACO CABANA, INC. 1994 STOCK OPTION PLAN
To ensure the continued availability of the Taco
Cabana, Inc. 1994 Stock Option Plan to attract, motivate and
retain employees, on June 10, 1997, the Board of Directors,
unanimously approved an amendment to the 1994 Option Plan,
subject to stockholder approval at the Annual Meeting, to
increase the number of shares of Common Stock authorized for
issuance under the 1994 Option Plan from 500,000 shares to
1,250,000 shares.
The 1994 Option Plan is intended to advance the
interests of the Company by providing long-term incentives
to the Company's employees, directors and consultants. The
1994 Option Plan became effective upon the shareholders
approval in November, 1994.
The 1994 Option Plan is administered by the
Compensation and Stock Option Committee (the "Committee").
The Committee will set the specific terms and conditions of
options granted under the 1994 Option Plan.
The Company's employees will be eligible to receive
either incentive stock options or nonqualified stock options
or a combination of both, as the Committee determines. Non-
employee participants may be granted only nonqualified stock
options. Stock options may be granted for a term not to
exceed ten years (five years with respect to a holder of 10%
or more of the Company's shares in the case of an incentive
stock option) and are not transferable other than by will or
the laws of descent and distribution. Each option may be
exercised within the term of the option pursuant to which it
is granted (so long as the optionee, if an employee,
continues to be employed by the Company). In addition,
unless a shorter period is specified in a particular option
agreement, an option may be exercised within 90 days after
the termination of employment of the optionee (subject to
any limitations in the particular option), within one year
after termination in case of termination because of
disability, or throughout the term of the option in the
event of the optionee's death, to the extent in each case
the option was exercisable at the termination date.
The exercise price of all nonqualified stock options
must be at least equal to 100% of the fair market value of
the Common Stock on the date of grant. The exercise price
of all incentive stock options must be at least equal to
100% of the fair market value of the Common Stock on the
date of grant, or 110% of the fair market value with respect
to any incentive stock option issued to a holder of 10% or
more of the Company's shares. Stock options may be
exercised by payment in cash of the exercise price with
respect to each share to be purchased or by delivering
Common Stock of the Company already owned by such optionee
with a market value equal to the exercise price, or by a
method in which a concurrent sale of the acquired stock is
arranged, with the exercise price payable in cash from such
sale proceeds.
The 1994 Option Plan provides that each outside
director (i.e. non-employee director) will automatically
receive a grant of 3,000 nonqualified stock options each
year on the fifth business day following the first public
release of the Company's audited earnings report on results
of operations for the preceding fiscal year. Each such
option will become exercisable in whole or in part on the
first anniversary of the award through the balance of its
ten-year term. Subject to availability of shares allocated
to the 1994 Option Plan and not already reserved for other
outstanding stock options, each outside director who joins
the Board will in addition receive an initial grant of
options for 35,000 shares, which will become exercisable in
five equal increments beginning on the first anniversary of
the award and on each of the next four succeeding
anniversary dates. Such options will be exercisable for a
term of ten years. Options, once granted and to the extent
exercisable, will remain exercisable throughout their term,
regardless of whether the holder continues as a director.
The option exercise price of the options is equal to 100% of
the fair market value of the covered shares of Common Stock
at the time of grant.
The 1994 Option Plan will terminate on October 17,
2004. The Board of Directors may, however, terminate the
Option Plan at any time prior to such date. Termination of
the 1994 Option Plan will not alter or impair, without the
consent of the optionee, any of the rights or obligations
pursuant to any option granted under the 1994 Option Plan.
As of June 30, 1997, options to purchase a total of
about 491,967 shares at a weighted average exercise price of
$5.68 per share were outstanding under the 1994 Option Plan.
Federal Income Tax Consequences
The following is a general description of the federal
income tax consequences of options granted and exercised
under the Option Plan based upon present tax law which is
subject to change. Each optionee should consult with his or
her own tax advisor with respect to the specific tax
treatment of his or her particular transactions under the
Plan.
Incentive Stock Options ("ISO")
A participant who is granted an ISO recognizes no
taxable income when the ISO is granted. Generally, no
taxable income is recognized upon exercise of an ISO unless
the alternative minimum tax applies as described below.
Instead, a participant who exercises an ISO recognizes
taxable gain or loss when he sells his shares. Any gain or
loss recognized on the sale of shares acquired upon exercise
of an ISO is taxed as long-term capital gain or loss if the
shares have been held for more than one year after the
option was exercised and for more than two years after the
option was granted. In this event, the Company receives no
deduction with respect to the ISO shares. Long-term capital
gains of individuals presently may be taxed at lower rates
than ordinary income, but the deductibility of capital
losses remains subject to limitation.
If the participant disposes of the shares within one
year after the option was exercised or within two years
after the option was granted (a "disqualifying
disposition"), he recognizes ordinary income on disposition
of the shares, to the extent of the difference between the
fair market value on the date of exercise (or potentially up
to six months thereafter if the participant is subject to
Section 16 (b) of the Exchange Act) and the option price;
provided, however, that in the case of a disposition where a
loss, if sustained, would be recognized for tax purposes,
the ordinary income recognized shall not exceed the net gain
upon such disposition. Any additional gain will be taxed as
capital gain. Any loss will be taxed as a capital loss.
The Company generally receives a corresponding deduction in
the year of disposition equal to the amount of ordinary
income recognized by the participant.
Effect of Alternative Minimum Tax
Certain taxpayers who have significant tax preferences
(and other items allowed favorable treatment for regular tax
purposes) may be subject to the alternative minimum tax
("AMT"). The AMT is payable only if and to the extent that
it exceeds the taxpayer's regular tax liability, and any AMT
paid generally may be credited against subsequent regular
tax liability. For purposes of the AMT, an ISO is treated
as if it were an NSO (see below). Thus, the difference
between fair market value on the date of exercise (or
potentially up to six months thereafter) and the option
price is included in income for AMT purposes, and the
taxpayer receives a basis equal to such fair market value
for subsequent AMT purposes. However, regular tax treatment
(see above) will apply for AMT purposes if a disqualifying
disposition, where a loss, if sustained, would be
recognized, occurs in the same taxable year as the options
are exercised.
Nonqualified Stock Options ("NSO")
The tax treatment of NSOs differs significantly from
the tax treatment of ISOs. No taxable income is recognized
when an NSO is granted, but upon the exercise of an NSO, the
difference between the fair market value of the shares on
the date of exercise and the option price is taxable as
ordinary income and generally is deductible by the Company.
If the participant is subject to Section 16(b) of the
Exchange Act, the date for measuring taxable income
potentially may be deferred for up to six months after the
date of exercise (unless the optionee makes an election
under Section 83(b) of the Code within 30 days after
exercise), in which case the participant will be taxed
currently upon exercise of the NSO in an amount equal to the
excess, if any, of the fair market value of the shares at
that time over the option price. Any future appreciation in
the shares will be treated as capital gain upon the sale or
exchange of the shares.
The affirmative vote of a majority of the shares of
Common Stock present and entitled to vote at the Meeting is
required to approve the amendment to the Option Plan. The
enclosed form of Proxy provides a means for shareholders to
vote for said amendment, to vote against it or to abstain
from voting with respect to it. Each Proxy received in time
for the Meeting will be voted as specified therein. If a
shareholder executes and returns a Proxy, but does not
specify how the shares represented by such shareholder's
Proxy are to be voted, such shares will be voted FOR the
approval of the amendment to the Option Plan. In
determining whether this proposal has received the requisite
number of affirmative votes, abstentions will be counted and
will have the same effect as a vote against this proposal.
Broker non-votes will not be counted and will have no
effect.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE OPTION PLAN.
INDEPENDENT ACCOUNTANTS
The financial statements and schedules of the
Company as of December 29, 1996 and for the year then
ended were audited by Deloitte & Touche LLP. It is
anticipated that if the nominees are elected as
directors, the new Board of Directors will reappoint
such firm as independent certified public accountants
for the current fiscal year. A representative of
Deloitte & Touche LLP will be present at the Meeting,
will have an opportunity to make a statement if he or
she desires to do so and will be available to respond to
appropriate questions.
ANNUAL REPORT
The Company's Annual Report for the year ended
December 29, 1996, which includes the Company's
financial statements, accompanies this proxy statement,
but is not incorporated as part of the proxy statement
and is not to be regarded as part of the proxy
solicitation material.
OTHER MATTERS
The Company's management knows of no other matters
that may properly be, or which are likely to be, brought
before the meeting. However, if any other matters are
properly brought before the meeting, the persons named
in the enclosed proxy, or their substitutes, will vote
in accordance with their best judgment on such matters.
STOCKHOLDER PROPOSALS
The Company intends to conduct the next annual
meeting of stockholders in approximately August 1998.
Proposals by stockholders intended to be presented at
the annual meeting to be held in 1998 must be received
by the Company by May 1, 1998 to be included in the
Company's proxy statement and form of proxy relating to
that meeting. Such proposals should be addressed to the
Secretary of the Company at the address indicated in
this notice.
COST AND METHOD OF PROXY SOLICITATION
The accompanying Proxy is being solicited on behalf
of the Board of Directors of the Company. The expense
of preparing, printing and mailing the form of Proxy and
the material used in the solicitation thereof will be
borne by the Company. In addition to the use of the
mails, proxies may be solicited by personal interview,
telephone and telegram by directors, officers and
employees of the Company. Arrangements may also be made
with brokerage houses and other custodians, nominees and
fiduciaries for forwarding of solicitation materials to
the beneficial owners of stock held by such persons, and
the Company may reimburse them for reasonable out-of-
pocket expenses incurred by them in connection
therewith.
By Order of the Board of Directors
David G. Lloyd
Secretary
