<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:
<TABLE>
<S> <C>
[ ] 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 Rule 14a-11(c) or Rule 14a-12
</TABLE>
Pollo Tropical, 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)(1) 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
POLLO TROPICAL, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 22, 1997
To the Shareholders of Pollo Tropical, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of Shareholders (the
"Annual Meeting") of Pollo Tropical, Inc., a Florida corporation (the
"Company"), will be held at 10:00 a.m., local time, on Thursday, May 22, 1997,
at the Dadeland Marriott Hotel, 9090 South Dadeland Boulevard, Miami, Florida,
for the following purposes:
(1) To elect three members to the Company's Board of Directors to hold
office until the 2000 Annual Meeting or until their successors are duly
elected and qualified;
(2) To ratify the reappointment of Arthur Andersen LLP as the
Company's independent public accountants; and
(3) To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 31, 1997 as
the record date for determining those shareholders entitled to notice of, and to
vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return the
enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors,
/s/ Stuart I. Harris
---------------------------
Stuart I. Harris
Secretary
Miami, Florida
April 28, 1997
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE ENCOURAGED TO ATTEND THE
MEETING IN PERSON. THOSE SHAREHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON AT THE MEETING.
<PAGE> 3
1997 ANNUAL MEETING OF SHAREHOLDERS
OF
POLLO TROPICAL, INC.
PROXY STATEMENT
TIME, DATE AND PLACE OF ANNUAL MEETING
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Pollo Tropical, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), for use at the 1997 Annual Meeting of
Shareholders of the Company to be held at 10:00 a.m., local time, on Thursday,
May 22, 1997, at the Dadeland Marriott Hotel, 9090 South Dadeland Boulevard,
Miami, Florida, and at any adjournments or postponements thereof (the "Annual
Meeting"), pursuant to the enclosed Notice of Annual Meeting.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is April 28, 1997. Shareholders
should review the information provided herein in conjunction with the Company's
Annual Report to Shareholders for the fiscal year ended December 29, 1996 (the
"1996 Annual Report") which accompanies this Proxy Statement. The Company's
principal executive offices are located at 7300 N. Kendall Drive, 8th Floor,
Miami, Florida 33156, and its telephone number is (305) 670-7696.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in doing so.
1
<PAGE> 4
PURPOSES OF THE ANNUAL MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) To elect three members to the Company's Board of Directors to hold
office until the 2000 Annual Meeting or until their successors are
duly elected and qualified;
(2) To ratify the reappointment of Arthur Andersen LLP as the Company's
independent public accountants; and
(3) To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth herein)
will be voted (a) for the election of the respective nominees for director named
below, and (b) in favor of all other proposals described in the Notice of Annual
Meeting. In the event a shareholder specifies a different choice by means of the
enclosed proxy, his shares will be voted in accordance with the specification(s)
so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on March 31, 1997 as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were 8,133,799 shares of Common Stock issued and outstanding, all of which
are entitled to be voted at the Annual Meeting. Each share of Common Stock is
entitled to one vote on each matter submitted to shareholders for approval at
the Annual Meeting. Shareholders do not have the right to cumulate their votes
for directors.
The attendance, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
will be required for approval of (i) the proposal to ratify the reappointment of
Arthur Andersen LLP as the Company's independent public accountants for 1997,
and (ii) any other matter that may be submitted to a vote of the shareholders.
If less than a majority of the outstanding shares entitled to vote are
represented at the Annual Meeting, a majority of the shares so represented may
adjourn the Annual Meeting to another date, time or place, and notice need not
be given of the new date, time or place if the new date, time or place is
announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more inspectors
of election for the meeting. Such inspector(s) shall determine the number of
shares of Common Stock represented at the meeting, the existence of a quorum and
the validity and effect of proxies, and shall receive, count and tabulate
ballots and votes and determine the results thereof. Abstentions will be
considered as shares present and entitled to vote at the Annual Meeting and will
be counted as votes cast at the Annual Meeting, but will not be counted as votes
cast for or against any given matter.
2
<PAGE> 5
A broker or nominee holding shares registered in its name, or in the name
of its nominee, which are beneficially owned by another person and for which it
has not received instructions as to voting from the beneficial owner, may have
discretion to vote the beneficial owner's shares with respect to the election of
directors and other matters addressed at the Annual Meeting. Any such shares
which are not represented at the Annual Meeting either in person or by proxy
will not be considered to have cast votes on any matters addressed at the Annual
Meeting.
BENEFICIAL SECURITY OWNERSHIP
The following table sets forth, as of the Record Date, information with
respect to the beneficial ownership of the Company's Common Stock by (i) the
Company's Chief Executive Officer and each of the other "Named Executive
Officers" (as defined below in "Executive Compensation--Summary Compensation
Table"), (ii) each director of the Company, (iii) all directors and executive
officers of the Company as a group and (iv) each holder of five percent (5%) or
more of the Company's outstanding shares of Common Stock. The Company is not
aware of any beneficial owner of more than five percent of the outstanding
shares of Common Stock other than as set forth in the following table.
<TABLE>
<CAPTION>
AMOUNT
AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES
- --------------------------- ------------- -----------
<S> <C> <C>
Larry J. and Molly Harris(3) 1,262,681 15.5%
Stuart I. and Mary Harris(4) 1,326,762 16.3%
Nicholas A. Castaldo(5) 1,000 *
William Carl Drew(6) 29,000 *
Glenn Rozansky(7) 152,402 1.9%
Lazaro Garcia(8) -0- -0-
Ronald L. Miller(9) 85,263 1.0%
Craig M. Nash(10) 21,500 *
Alan Vituli(11) 18,000 *
Clayton E. Wilhite(12) -0- -0-
All directors and executive officers as a group
(11 persons) 2,905,375 35.7%
Dimensional Fund Advisors Inc. (13)
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401 469,100 5.8%
</TABLE>
- ----------
* Less than 1%
(1) Unless otherwise indicated, the address of each of the beneficial owners
identified is c/o Pollo Tropical, Inc., 7300 North Kendall Drive, 8th
Floor, Miami, Florida 33156.
(2) Unless otherwise indicated, each person has sole voting and investment
power with respect to the shares indicated. Except as noted below, the
number of shares indicated includes shares of Common Stock subject to stock
options granted pursuant to the Company's 1993 Stock Option Plan, the
Company's 1995 Stock
3
<PAGE> 6
Option Plan and the Company's 1995 Directors' Stock Option Plan that are
presently exercisable or exercisable within 60 days.
(3) The number of shares indicated (i) excludes 270,918 shares of Common Stock
held in trust for the benefit of Larry and Molly Harris's children, with
respect to which Mr. and Mrs. Harris disclaim beneficial ownership, and
(ii) includes 80,025 shares of Common Stock issuable to Mr. Harris upon
exercise of presently exercisable options.
(4) The number of shares indicated (i) excludes 210,879 shares of Common Stock
held in trust for the benefit of Stuart and Mary Harris's children, with
respect to which Dr. and Mrs. Harris disclaim beneficial ownership, (ii)
includes 1,248,442 shares of Common Stock owned by Harris Family
Investments, Ltd., a family limited partnership of which Harris Family
Investments, Inc. is the sole general partner and 24,970 shares of Common
Stock owned by Harris Family Investments, Inc. Because of its power to
vote, control and dispose of such shares, Harris Family Investments, Inc.
may be deemed to be the beneficial owner of such shares. Dr. and Mrs.
Harris are the only shareholders, directors and officers of Harris Family
Investments, Inc. and therefore may be deemed to be the beneficial owners
of all of such shares beneficially owned by Harris Family Investments,
Inc., and (iii) includes 53,350 shares of Common Stock issuable upon
exercise of presently exercisable options.
(5) The number of shares indicated (i) excludes 25,000 shares of restricted
Common Stock awarded to Mr. Castaldo pursuant to the Company's 1995
Restricted Stock Award Plan, which vest over three years commencing
September 30, 1998, (ii) includes 1,000 shares owned directly by Mr.
Castaldo, and (iii) excludes 200,000 shares of Common Stock issuable
pursuant to stock options granted to Mr. Castaldo which become exercisable
over four years, commencing September 30, 1997.
(6) The number of shares indicated includes (i) 25,000 shares owned directly,
and (ii) 4,000 shares of Common Stock issuable pursuant to stock options
granted Mr. Drew which became exercisable over four years, commencing April
15, 1997.
(7) The number of shares indicated includes 42,166 shares issuable upon
exercise of presently exercisable options held by Mr. Rozansky.
(8) Mr. Garcia resigned as of October 1996 from all positions with the Company.
(9) The number of shares indicated includes (i) 2,000 shares owned directly,
(ii) 10,000 shares owned by Sheila Miller, his wife, (iii) 55,263 shares
issuable upon exercise of presently exercisable options held by Miller
Advisory Corp., of which Mr. Miller is the sole shareholder, and (iv)
18,000 shares issuable upon exercise of presently exercisable options held
by Mr. Miller.
(10) The number of shares indicated includes (i) 18,000 shares issuable upon
exercise of presently exercisable options, (ii) 1,500 shares owned
directly, and (iii) 2,000 shares owned by his wife.
(11) The number of shares indicated includes 18,000 shares issuable upon the
exercise of presently exercisable options.
(12) The number of shares indicated excludes 15,000 shares of Common Stock
awarded to Mr. Wilhite pursuant to the Company's 1995 Directors' Stock
Option Plan which become exercisable over three years, commencing August
12, 1997.
(13) The number of shares indicated includes (i) 359,800 shares owned directly,
(ii) 69,300 shares owned by DFA Investment Dimensions Group Inc., and (iii)
40,000 shares owned by The DFA Investment Trust Company, as set forth in
the Schedule 13G delivered to the Company in February 1997, and not
independently verified.
4
<PAGE> 7
ELECTION OF DIRECTORS; NOMINEES
The Company's Articles of Incorporation provide that the number of
directors constituting the Company's Board of Directors shall not be less than
three nor more than 15, as determined in the manner provided by the Company's
Bylaws. The Company's Bylaws provide that the number of directors shall be fixed
from time to time by resolution of the Board of Directors. The Board of
Directors has fixed at seven the number of directors that constitutes the Board.
The Board appointed Clayton E. Wilhite to fill the vacancy on the Board.
Pursuant to the Company's Bylaws and Florida corporate law, newly appointed
directors, appointed to fill a vacancy on the Board, shall be elected at the
next annual meeting of shareholders. Therefore, Mr. Wilhite will be nominated to
the Board of Directors at the Annual Meeting.
Messrs. Stuart I. Harris, Ronald L. Miller and Clayton E. Wilhite have been
nominated by the Company to be reelected as directors at the Annual Meeting, and
proxies will be voted for Messrs. Harris, Miller and Wilhite absent contrary
instructions. Each of the nominees for election as a director of the Company is
a current member of the Board of Directors. Mr. Harris has served as a director
of the Company since its inception in 1988. Mr. Miller has served as a director
of the Company since November 1993, when the Company completed its initial
public offering. Mr. Wilhite has served as a director of the Company since
August 1996, when he was appointed by the Board to fill a director vacancy. The
Board of Directors has no reason to believe that any of the nominees will refuse
or be unable to accept election; however, in the event that a nominee is
unwilling or unable to accept election or if any other unforeseen contingencies
should arise, each proxy that does not specifically direct otherwise will be
voted for the remaining nominee, if any, and for such other person(s) as may be
designated by the Board of Directors.
The Company's Articles provide that the Board of Directors be divided into
three classes. Each class of directors serves staggered three-year terms or
until their successors are elected and qualified. Accordingly, Messrs. Stuart I.
Harris, Ronald L. Miller and Clayton E. Wilhite, if reelected, will hold office
until the annual meeting of shareholders to be held in 2000. Messrs. Alan Vituli
and Craig M. Nash will hold office until the 1998 annual meeting and Messrs.
Larry J. Harris and Nicholas A. Castaldo will hold office until the 1999 annual
meeting.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ---- --- ---------------------
<S> <C> <C>
Larry J. Harris 36 Chairman and Chief Executive Officer
Stuart I. Harris 43 Vice Chairman and Secretary
Nicholas A. Castaldo 45 President, Chief Operating Officer and Director
William C. Drew 37 Vice President, Chief Financial Officer
William Walton 59 Vice President, Operations
Glenn Rozansky 39 Vice President, Real Estate and Development
Ronald L. Miller 53 Director
Craig M. Nash 43 Director
Alan Vituli 55 Director
Clayton E. Wilhite 51 Director
</TABLE>
5
<PAGE> 8
Larry J. Harris co-founded the Company in 1988 and has served as the
Chairman and Chief Executive Officer since the Company's inception (and as the
President from the Company's inception through September 1995). From 1982 to
1989, Mr. Harris was an officer and director of Food Spot Corporation ("Food
Spot"), a privately-held corporation which operates a convenience store chain in
South Florida and is controlled by members of Mr. Harris's family. Mr. Harris
continues to serve as a director of Food Spot. Mr. Harris is a graduate of the
Florida International University School of Hospitality Management.
Stuart I. Harris, M.D., Ph.D. co-founded the Company in 1988 and has served
as an officer and director since that time. Since 1995, Dr. Harris has been
President of Seaview Research, Inc., a medical research company. From 1989 to
1995, Dr. Harris was employed by South Florida Bioavailability Clinic, Inc.
where he served as Medical Director. From 1988 to 1989, Dr. Harris was an
Assistant Professor of Medicine at the University of Miami School of Medicine
and from 1984 to 1988, he was a Medical Staff Fellow at the National Heart, Lung
and Blood Institute of the National Institutes of Health. Dr. Harris, who is the
brother of Larry J. Harris, also serves as a director of Food Spot.
Nicholas A. Castaldo has been the Company's President since October 1995
and the Company's Chief Operating Officer since November 1, 1996. He was elected
to the Board of Directors at the Company's prior meeting of shareholders in May
1996. Prior to joining the Company and since August 1993, he was employed as
Vice President of Marketing of Denny's Inc. From 1986 to 1993, Mr. Castaldo was
employed by S & A Restaurant Corp., which includes the Steak & Ale and
Bennigan's restaurant chains, and ultimately served as Senior Vice President of
Marketing and Business Development. Mr. Castaldo's career spans 20 years and
includes management positions at Burger King, Citicorp, and Clairol Inc. He is a
graduate of St. Johns University and Harvard University's Graduate School of
Business.
William C. Drew has been the Company's Vice President and Chief Financial
Officer since April 1996. Prior to joining the Company, Mr. Drew served, in
1995, as Chief Financial Officer for G. Neil Companies, a direct marketing
company of products for human resource professionals. From 1990 through 1994,
Mr. Drew was Chief Financial Officer of Theater Acquisition Company, an
international circuit of movie theaters. From 1988 to 1990 Mr. Drew was Chief
Financial Officer for G.L. Homes, a real estate developer and from 1983 to 1988
Mr. Drew was employed with Ernst & Young, LLP as an audit manager. Mr. Drew is a
CPA and graduate of the University of South Florida.
William Walton has been the Company's Vice President, Operations since
November 1996. Prior to that and since 1992 he was the Company's Director of
Training and then the Director of Human Resources, Quality Assurance and
Personnel. From 1986 to 1992 Mr. Walton served with Marriott Corporation as Area
Manager for Wag's Restaurants and Director of Conversions for their restaurant
division.
Glenn Rozansky has been Vice President, Real Estate and Development since
1992. From 1986 until joining the Company, Mr. Rozansky served as Vice President
of Rozansky Development Company, a real estate company which developed retail
and other commercial properties. From 1981 to 1986, Mr. Rozansky was Project
Manager at Rozansky and Kay Construction Company. Mr. Rozansky is a graduate of
Vanderbilt University.
Ronald L. Miller has been a director of the Company since November 1993.
Mr. Miller has been President of Miller Advisory Corp., a firm specializing in
mergers and acquisitions and the private placement of capital, since October
1989. From 1977 to 1989, Mr. Miller was Senior Vice President--Corporate
Finance of Raymond James and Associates, Inc., an investment banking firm, and
ultimately served as head of its Corporate Finance Department. Mr. Miller is
Chairman of the Board of Directors
6
<PAGE> 9
of Provider Solutions, Inc., a computer software company serving the home
healthcare industry, hospitals and nursing homes. Mr. Miller is also a member of
the Board of Directors of Boca Raton Capital Corp., an investment banking firm.
Miller Advisory Corp. has served as an advisor to the Company since March 1993.
Craig M. Nash has been a director of the Company since November 1993. Mr.
Nash is President and Chief Executive Officer of Interval International, Inc.
("Interval"). He has been associated with Interval since 1978. Interval is in
the resort and travel business and is a subsidiary of CUC International, a New
York Stock Exchange listed company. Mr. Nash is also an attorney and has been an
active participant in the legislative and regulatory concerns of the American
Resort Development Association ("ARDA") for over a decade. Mr. Nash serves as a
member of the Board of Directors, as well as a member of the Executive
Committee, of ARDA.
Alan Vituli has been a director of the Company since November 1993. Since
1986, Mr. Vituli has been Chairman and Chief Executive Officer of Carrols
Corporation, an owner and operator of franchised Burger King restaurants. From
1983 to 1985, Mr. Vituli was a managing director of Smith Barney, Harris Upham
responsible for certain types of nonconventional financings. From 1973 to 1983,
he was a partner with Coopers & Lybrand in New York City.
Clayton E. Wilhite has been a director of the Company since August 1996.
Mr. Wilhite has been Chairman of Thurloe Holdings, L.L.C., a firm that invests
in marketing-driven and consumer-focussed retail business with multi-unit outlet
operations or the potential thereof, since it was founded in August 1996. He has
over 25 years of experience in the advertising industry, both domestically and
abroad, and presently serves a marketing consultant to new ventures. From August
1988 to July 1996, Mr. Wilhite served as President and Vice Chairman of North
American operations of the international advertising agency, D'Arcy Masius
Benton & Bowles. Mr. Wilhite earned his B.A. in Political Science and his M.B.A.
from the University of Michigan.
The Company's Articles provide that the Board of Directors be divided into
three classes. Each class of directors serves staggered three-year terms or
until their successors are elected and qualified. Accordingly, Messrs. Stuart I.
Harris, Ronald L. Miller and Clayton E. Wilhite, if reelected, will hold office
until the annual meeting of shareholders to be held in 2000. Messrs. Alan Vituli
and Craig M. Nash will hold office until the 1998 annual meeting and Messrs.
Larry J. Harris and Nicholas A. Castaldo will hold office until the 1999 annual
meeting.
Lazaro Garcia served as the Company's Vice President, Chief Operations
Officer during the Company's fiscal year ended December 29, 1996 (the "1996
fiscal year"). As of October 1996, Mr. Garcia resigned from all positions with
the Company.
EMPLOYMENT AGREEMENTS
In September 1995, the Company entered into an employment agreement with
Nicholas A. Castaldo to serve as the Company's President. The agreement is for
an initial term expiring on September 30, 1998. It may be extended by the
Company for an additional two-year term expiring on September 30, 2000. Pursuant
to the agreement, Mr. Castaldo received a base annual salary at the rate of
$250,000 through 1996. Mr. Castaldo is eligible for bonuses of up to 40% of his
base salary based upon the achievement of certain individual and corporate
performance standards. Mr. Castaldo also received (i) 200,000 stock options with
an exercise price of $4.50 per share, which options vest over four years
commencing September 30, 1997, and (ii) 25,000 shares of restricted stock, which
vest over three years commencing September 30, 1998. Additionally, he receives a
monthly car allowance. Mr.
7
<PAGE> 10
Castaldo has also agreed not to compete with the Company during his employment
with the Company and for a period of two years following his termination of
employment with the Company.
Nicholas A. Castaldo's employment agreement provides that so long as he is
employed by the Company and is in compliance with his agreement, the Board of
Directors will take all action necessary to nominate him to serve as a director
of the Company. He was elected to the Board of Directors at the last meeting of
Shareholders in May 1996. There are no other arrangements or understandings with
the Company with respect to the selection of officers or directors.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the 1996 fiscal year, the Company's Board of Directors held five
formal meetings and took a number of other actions by written consent. During
the 1996 fiscal year, no director attended fewer than 75 percent of the
aggregate of (i) the number of meetings of the Board of Directors held during
the period he served on the Board, or (ii) the number of meetings of committees
of the Board of Directors held during the period he served on such committees.
The Board of Directors has an Audit Committee, an Executive Committee, a
Strategic Planning Committee and a Compensation Committee. The Board does not
have a nominating or similar committee.
Messrs. Vituli and Miller are the current members of the Audit Committee,
which held two meetings during the 1996 fiscal year. The duties and
responsibilities of the Audit Committee include (a) recommending to the Board of
Directors the appointment and termination of the Company's independent public
accountants, (b) reviewing the plan, scope and results of independent audits,
(c) reviewing the Company's significant accounting policies and internal
controls, and (d) reporting its recommendations and findings to the full Board
of Directors.
Messrs. L. Harris, Castaldo and Miller are the current members of the
Executive Committee and Messrs. L. Harris, Castaldo, Wilhite and S. Harris are
the current members of the Strategic Planning Committee. The Executive Committee
oversees the implementation by management of the annual operating plan. The
Strategic Planning Committee is responsible for overseeing management's
development and implementation of the Company's strategic development plans. The
Executive Committee and the Strategic Planning Committee met four and three
times, respectively, during the 1996 fiscal year.
Messrs. Vituli and Nash are the current members of the Compensation
Committee, which held four meetings during the 1996 fiscal year. The
Compensation Committee reviews and approves the compensation of the Company's
executive officers and administers the Company's stock option and stock plans.
DIRECTOR COMPENSATION
The Company pays each director who is not an employee of the Company an
annual retainer of $12,500 plus (a) $1,000 for each Board of Directors meeting,
or separately held committee meeting, attended in person and (b) $500 for each
Board of Directors, or separately held committee meeting, in which directors
participate by telephone conference call. The Company reimburses all directors
for expenses incurred in connection with their services as directors. In
addition, each director who is not an employee of the Company generally receives
options to purchase 15,000 shares of Common Stock (which vest equally over three
years) in connection with his initial election to the Board of Directors and
options to purchase an additional 3,000 shares (which vest equally over three
years) for each year of service thereafter under the Company's 1995 Directors'
Stock Option Plan (the "1995 Directors' Plan").
8
<PAGE> 11
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid to the
Company's Chief Executive Officer and each of the Company's other executive
officers whose total annual salary and bonus was $100,000 or more (the Chief
Executive Officer and such other executive officers are sometimes referred to
herein as the "Named Executive Officers") with respect to the fiscal year ended
December 29, 1996:
<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION (1) COMPENSATION
---------------- ------------
NUMBER
FISCAL RESTRICTED OF OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARD GRANTED
--------------------------- ------ ------ ----- ----------- ----------
<S> <C> <C> <C> <C> <C>
Larry J. Harris 1996 $250,000 $ -0- -0-
Chairman of the Board 1995 $250,000 $ -0- -0-
and Chief Executive Officer 1994 $250,000 $ -0- -0-
Nicholas A. Castaldo 1996 $250,000 $50,000 -0-
President, Chief Operating 1995 $ 62,500 $ -0- $112,500(2) 200,000
Officer and Director
William Carl Drew 1996 $ 87,000 $15,000 30,000
Vice President, Chief Financial Officer
Glenn Rozansky 1996 $135,000 $ -0- -0-
Vice President, Real Estate and 1995 $135,000 $ -0- 5,000
Development 1994 $125,500 $ -0- -0-
Lazaro Garcia 1996 $104,000 $ -0- -0-
Vice President, Chief Operations 1995 $135,000 $ -0- 7,500
Officer(3) 1994 $125,000 $10,500 -0-
</TABLE>
- ----------
(1) The columns for "Other Annual Compensation" and "All Other Compensation"
have been omitted because there is no compensation required to be reported
in such columns. The aggregate amount of perquisites and other personal
benefits provided to each Named Executive Officer is less than the lesser
of $50,000 or 10% of the total of annual salary and bonus of such officer.
(2) At December 29, 1996, the number and value of restricted stock holdings was
25,000 shares and $65,625, respectively.
(3) Mr. Garcia resigned as of October 1996 from all positions with the Company.
Stuart I. Harris received compensation of $84,000 during the year ended
December 29, 1996, in connection with services rendered in his capacity as Vice
Chairman and Secretary of the Company.
9
<PAGE> 12
OPTION GRANTS TABLE
The following table sets forth certain information concerning options
granted during the 1996 fiscal year to the Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable Value
Number of Percent of at Assumed Annual Rates
Securities Total Options of Stock Price Appreciation
underlying Granted Exercise For Option Term
options to Employees Price Expiration -----------------------------
Name Granted (#) in Fiscal Year ($/SH) Date 5% ($) 10% ($)
- ----------------- ----------- -------------- -------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
William Carl Drew 30,000 22% $4.50 4/15/05 $ 63,000 $ 166,000
</TABLE>
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning options
exercised during the 1996 fiscal year and unexercised stock options held in each
case by the Named Executive Officers as of the end of the 1996 fiscal year.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS AT 1996 OPTIONS AT 1996
SHARES FISCAL YEAR-END FISCAL YEAR-END
ACQUIRED ON VALUE EXERCISABLE(E) EXERCISABLE(E)
NAME EXERCISE REALIZED UNEXERCISABLE(U) UNEXERCISABLE(U)
- ---- -------- -------- ---------------- ----------------
<S> <C> <C> <C> <C>
Larry J. Harris -0- $ -0- 80,025(E) $ -0-(E)
-0-(U) -0-(U)
Nicholas A. Castaldo -0- -0- -0-(E) -0-(E)
200,000(U) -0-(U)
William C. Drew -0- -0- -0-(E) -0-(E)
30,000(U) -0-(U)
Lazaro Garcia (1) 39,963 128,581 24,000(E) 21,015(E)
-0-(U) -0-(U)
Glenn Rozansky 51,887 166,870 42,666(E) 60,710(E)
3,334(U) -0-(U)
</TABLE>
(1) Mr. Garcia resigned as of October 1996 from all positions with the Company.
STOCK OPTION AND STOCK AWARD PLANS
In June 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"). Under the 1995 Plan, 500,000 shares of Common Stock are reserved for
issuance upon exercise of options. The Plan is designed to serve as an incentive
for retaining qualified and competent employees.
In June 1995, the Company adopted the 1995 Bonus/Fee Stock Option Plan (the
"1995 Bonus Plan"). Under the 1995 Bonus Plan, 500,000 shares of Common Stock
are reserved for issuance upon exercise of options. The 1995 Bonus Plan allows
certain eligible employees and directors who receive either a cash bonus or a
director's fee of $2,500 or more to elect to receive stock options instead of
10
<PAGE> 13
receiving cash to which they are entitled (the "Deferred Cash"). The per share
exercise price of the options granted pursuant to the 1995 Bonus Plan would be
equal to 50% of the fair market value of the Common Stock on the day the option
is granted. The number of shares of Common Stock covered by the option would be
calculated by doubling the number of shares that could be purchased at fair
market value with the Deferred Cash so that the "in-the-money" value of the
option equals the Deferred Cash. No options have been granted pursuant to the
1995 Bonus Plan.
In November 1995, the Company adopted the 1995 Directors' Stock Option Plan
(the "1995 Directors' Plan"). Under the 1995 Directors' Plan, 200,000 shares of
Common Stock are reserved for issuance upon exercise of options. Upon election
as a member of the Board, each Director receives an option to purchase 15,000
shares of Common Stock, and an additional option to purchase 3,000 shares of
Common Stock is granted on each annual meeting date under certain conditions.
All stock options granted pursuant to the 1995 Directors' Plan become
exercisable in one-third increments over a three year period, so long as the
optionee is a Director on the relevant exercise date.
In November 1995, the Company adopted the 1995 Restricted Stock Award Plan
(the "1995 Restricted Plan"). Under the 1995 Restricted Plan, not less than
100,000 shares of Common Stock are reserved for award and issuance, generally at
no cost to the employee. In November 1995, the Company awarded 25,000 shares of
Common Stock to its President pursuant to the 1995 Restricted Plan. These shares
vest as to 20% in September 1998, 30% in September 1999 and 50% in September
2000. The Company recorded deferred compensation of $112,500 on the date of
grant based on the quoted market value of the Common Stock. Deferred
compensation is being amortized to expense ratably over the restricted period,
and is included in the accompanying consolidated financial statements.
Generally, the stock options granted pursuant to the Company's 1993 Stock
Option Plan, the 1995 Plan and the 1995 Bonus Plan vest in increments of 33% per
year over a three year period on the yearly anniversary of the grant and have a
term of ten years from the date of grant.
LONG-TERM INCENTIVE AND PENSION PLAN
The Company has no long-term incentive or pension plans.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The three principal components of compensation the Company provides to its
executive officers are salary, bonus and stock (in the form of options or
restricted stock). These components are designed to facilitate fulfillment of
the compensation objectives of the Company's Board of Directors and the
Compensation Committee, which objectives include (i) attracting, motivating and
retaining competent and highly qualified management in a competitive
environment, (ii) recognizing individual initiative and achievement, (iii)
rewarding management for short- and long-term accomplishments, and (iv) aligning
management compensation with the achievement of the Company's goals and
performance objectives, including earnings growth.
The Compensation Committee endorses the position that equity ownership by
management is beneficial in aligning management's and shareholders' interests in
the enhancement of shareholder value. This alignment is amplified by the
extensive holdings by management of Company Common Stock and stock options. Base
salaries for new management personnel are determined initially by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for managerial talent, including a
comparison of base salaries for comparable positions at similar companies of
comparable sales and capitalization. Annual bonuses are determined
11
<PAGE> 14
and awarded by evaluating the performance of the executive officer, the
performance of the Company (and the executive officer's contribution to such
performance), the competitive marketplace, compliance with specific requirements
in employment agreements and the responsibilities assumed by the executive
officer consistent with the policies enumerated herein.
The Compensation Committee has reviewed the Company's existing management
compensation programs and has consulted with the Company's Chairman and Chief
Executive Officer to evaluate the Company's current compensation programs and
agrees that they fit with the philosophy of the Compensation Committee. The
Compensation Committee has undertaken a study with senior management and is in
the process of developing a structured senior executive officer bonus plan to be
finalized during 1997 where bonuses are contingent upon measured improvement in
shareholder value.
Chief Executive Officer Compensation
For the 1996 fiscal year, Larry J. Harris, the Chairman of the Board and
Chief Executive Officer of the Company received $250,000 in salary and no bonus,
the same as in the 1995 fiscal year. The Compensation Committee did not award
Mr. Harris any stock-based compensation because, as one of the Company's largest
shareholders, the Compensation Committee believed that Mr. Harris' interests
were already aligned with those of the shareholders of the Company.
Executive Officer Compensation
In April 1996, William Carl Drew was employed as the Company's Vice
President of Finance and Chief Financial Officer. In November 1996, William
Walton was promoted to the position of Vice President of Operations of the
Company. The Company's President, Chief Financial Officer, Vice President of
Operations and Vice President of Real Estate & Development were compensated in
1996 based upon individual and separately negotiated terms and conditions of
employment. For 1996, the Compensation Committee granted 30,000 stock options to
the Company's Chief Financial Officer and 20,000 stock options to the Company's
Vice President of Operations.
Nicholas A. Castaldo, the President and Chief Operating Officer of the
Company, is compensated pursuant to his employment agreement which was entered
into in September 1995. The agreement covers an initial term expiring on
September 30, 1998 and may be extended by the Company for an additional two-year
term expiring September 30, 2000. Pursuant to the agreement, Mr. Castaldo
received a base annual salary at the rate of $250,000 for the period of
employment in 1995 and during 1996. Mr. Castaldo is eligible for bonuses of up
to 40% of his base salary based upon the achievement of certain individual and
corporate performance objectives and received a $50,000 bonus for the 1996
fiscal year. Mr. Castaldo received 200,000 stock options and 25,000 restricted
shares in 1995 in connection with his employment with the Company.
Stock Options
During the 1996 fiscal year, the Company granted an aggregate of 90,000
options to purchase Common Stock to its executive officers. The grant was
approved by the Compensation Committee, based upon a recommendation by the
Company's Chief Executive Officer. All of the grants were at $4.50 per share
which was higher than the market price of the Common Stock on the date of grant.
In December 1993, the Internal Revenue Service issued proposed regulations
concerning compliance with Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Section 162(m) generally disallows a public company's
deduction for compensation to any one employee in excess of $1.0 million per
year unless the compensation is pursuant to a plan approved by the company's
shareholders. None of the Named Executive Officers presently receives, and the
12
<PAGE> 15
Compensation Committee does not anticipate that any of such persons will
receive, annual cash compensation in excess of the $1.0 million cap provided in
Section 162(m). Each of the Company's stock option and stock award plans is in
compliance with the requirements of Section 162(m).
Craig Nash
Alan Vituli
13
<PAGE> 16
CERTAIN TRANSACTIONS
RELATED PARTY AGREEMENT
In December 1994, the Company entered into an exclusive franchise
development agreement with Carrols Corporation, a privately held company which
is the largest franchisee of Burger King. The agreement provides for the
development of a minimum of 33 franchised restaurants over the next six years in
an area encompassing the State of Ohio and the metropolitan areas of Lexington
and Louisville, Kentucky. In June 1995, the Company extended the development
schedule for these restaurants for a period of one year. Carrols Corporation has
also been granted options for the development of franchised restaurants in
Michigan and Toronto, Ontario, Canada. Alan Vituli, a director of the Company
and a member of the Company's Compensation Committee, is the Chairman and Chief
Executive Officer of Carrols Corporation. The Company received $120,000 in
initial franchise fees during the 1994 fiscal year from Carrols Corporation. No
payments were due or made during the 1995 fiscal year. In April 1997, the
franchise development agreement with Carrols Corporation was terminated.
RELATED PARTY INDEBTEDNESS
In connection with the acquisition of the Dadeland restaurant site in 1990,
Verde Properties Limited Company, a Florida limited liability company owned, in
part, by Larry and Stuart Harris ("Verde Properties"), borrowed an aggregate of
$700,000 from a financial institution, which loan was secured by a guarantee and
a pledge of certain assets of the Company, and the personal guarantees of
certain of the Company's shareholders, including Larry and Stuart Harris. In
November 1993 Verde Properties refinanced the loan and the Company was released
from its guarantee; however, the pledged assets of the Company were not released
as collateral for the loan.
RELATED PARTY LEASES
The Company leases the land on which its Dadeland restaurant is located
from Verde Properties. The lease expires in 2009, subject to two five-year
renewal periods at the Company's option. The lease provides for a monthly rental
of $8,050 in 1996 and $8,050 in 1997, plus sales tax, increasing every five
years to $10,646 per month for the final five-year period of the initial term,
and obligates the tenant to pay real estate taxes. Under the terms of the lease,
the Company paid rents to Verde Properties of $91,350 in the fiscal year ended
December 31, 1995 and $96,600 in the fiscal year ended December 29, 1996.
The Company believes that the terms of the foregoing arrangements are at
least as favorable as those that it could obtain from non-affiliated third
parties. All business transactions with affiliates of the Company require the
approval of a majority of the Company's non-employee directors and must be on
terms no less favorable than could be obtained from non-affiliated third
parties.
14
<PAGE> 17
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Company's Common Stock with the cumulative total shareholder return on The
NASDAQ Composite Stock Index and The Media General Restaurant Industry Stock
Index commencing on October 19, 1993 (the first day the Common Stock began
trading on The NASDAQ Stock Market) and ended December 29, 1996. The graph
assumes a $100 investment on October 19, 1993 in each of Pollo Tropical, Inc.
Common Stock, The Nasdaq Stock Market Index, and the Media General Restaurant
Index.
<TABLE>
<CAPTION>
10/19/93 12/31/93 12/30/94 12/29/95 12/29/96
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Pollo Tropical, Inc. $100 $102 $50 $ 22 $ 11
Nasdaq Stock Market Index $100 $101 $99 $140 $172
Media General Restaurant Index $100 $103 $93 $127 $128
</TABLE>
SECTION 16(A) COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten percent of the Company's outstanding shares of
Common Stock, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common
Stock. Such persons are required by SEC regulation to furnish the Company with
copies of all such reports that they file.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required to be filed, all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners have been complied with, except that Messrs. Miller, Nash and Vituli
filed their Statements of Changes of Beneficial Ownership of Securities on Form
4 late with respect to options granted pursuant to the 1995 Directors' Plan on
May 31, 1996, and Messrs. Drew, Walton and Wilhite filed their Initial
Statements of Beneficial Ownership of Securities on Form 3 late.
15
<PAGE> 18
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, independent public accountants, served as
the Company's independent public accountants for the fiscal year ended December
29, 1996. The Board of Directors, on the recommendation of the Company's Audit
Committee, has selected Arthur Andersen LLP as the Company's independent public
accountants for the current fiscal year ending December 28, 1997. One or more
representatives of Arthur Andersen LLP are expected to be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions from
shareholders.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, any other business should properly come before the Annual
Meeting, the persons named in the accompanying proxy will vote proxies as in
their discretion they may deem appropriate, unless they are directed by a proxy
to do otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1998 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's principal executive offices
no later January 15, 1998.
By Order of the Board of Directors,
/s/ Larry J. Harris
--------------------------
LARRY J. HARRIS
Chairman of the Board and
Chief Executive Officer
Miami, Florida
April 28, 1997
16
<PAGE> 19
Appendix A
POLLO TROPICAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned, a shareholder of POLLO TROPICAL, INC., a Florida
corporation (the "Company"), hereby appoints Larry J. Harris and Stuart I.
Harris, and each of them, as proxies for the undersigned, each with full power
of substitution, and hereby authorizes them to represent and to vote, as
designated below, all of the shares of common stock of the Company owned of
record by the undersigned at the close of business on March 31, 1997 at the
Annual Meeting of Shareholders of the Company to be held at the Dadeland
Marriott Hotel, 9090 South Dadeland Boulevard, Miami, Florida, on May 22, 1997
at 10:00 a.m., local time, and at any adjournments or postponements thereof.
The Board of Directors unanimously recommends a vote FOR each proposal.
1. ELECTION OF DIRECTORS
STUART I. HARRIS RONALD L. MILLER CLAYTON E. WILHITE
[ ] VOTE FOR all nominees listed, [ ] WITHHOLD AUTHORITY TO VOTE
except authority to vote for all nominees
withheld from the following
nominees (if any)__________.
2. Ratify the reappointment of Arthur Andersen LLP as the Company's
independent public accountants.
[ ] VOTE FOR [ ] VOTE AGAINST [ ] ABSTAIN
3. Upon such other matters as may properly come before such Annual Meeting or
any adjournments or postponements thereof. In their discretion, the proxies
are authorized to vote upon such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
(SEE REVERSE SIDE)
<PAGE> 20
(CONTINUED FROM OTHER SIDE)
Please date, sign and mail your proxy card back as soon as possible!
Annual Meeting of Shareholders
POLLO TROPICAL, INC.
May 22, 1997
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED "FOR" ALL OF THE PROPOSALS.
The undersigned hereby acknowledges receipt of (1) the Notice of Annual
Meeting for the 1997 Annual Meeting and (2) the Proxy Statement.
Dated: ______________________________, 1997
___________________________________________
(Signature)
___________________________________________
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name appears hereon and mail it
promptly even though you now plan to attend the meeting. When signing
as attorney, executor, administrator, trustee or guardian, please give
full title as such. When shares are held by joint tenants, both should
sign. If a corporation, please sign in full corporate name by president
or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY PROMPTLY USING THE ENVELOPE
PROVIDED. NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
