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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CAPITAL BRANDS, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CAPITAL BRANDS, INC.
-------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions apply:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0 -11:
(4) Proposed maximum aggregate value of transaction:
<PAGE>
[ ] 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:
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<PAGE>
PROXY STATEMENT
CAPITAL BRANDS, INC.
1225 Broken Sound Parkway, Boca Raton, Florida 33481
-----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on July 3, 1996
-----------------------
To the Shareholders
of Capital Brands, Inc.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders
(the "Annual Meeting") of Capital Brands, Inc., a Florida corporation (the
"Company"), will be held at 9:00 a.m., local time, on Wednesday, July 3, 1996,
at the Embassy Suites, 661 N.W. 53rd Avenue, Boca Raton, Florida for the
following purposes:
(1) To elect six members to the Company's Board of Directors to
hold office until the Company's 1997 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To increase the authorized common stock of the Company from
12,500,000 shares of Common Stock, par value $.0008 per share
to 50,000,000 shares of Common Stock, par value $.0001 per
share;
(3) To approve an amendment to the Company's Articles of
Incorporation to change the name of the Company to
CompScript, Inc;
(4) To approve the Company's 1996 Stock Option Plan, as adopted
by the Board of Directors on May 28, 1996; and
(5) 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 June 12, 1996
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
BRIAN A. KAHAN
Chairman of the Board, Chief Executive
Officer and President
Boca Raton, Florida
June 14, 1996
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS 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.
<PAGE>
1996 ANNUAL MEETING OF SHAREHOLDERS
OF
CAPITAL BRANDS, INC.
----------------------
PROXY STATEMENT
---------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of Capital Brands, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.0001 per share (the "Common Stock"), for use at the 1996 Annual Meeting of
Shareholders of the Company to be held at 9:00 a.m., local time, on Wednesday,
July 3, 1996, at the Embassy Suites, 661 N.W. 53rd Avenue, Boca Raton, Florida
or at any adjournment(s) or postponement(s) thereof (the "Annual Meeting"),
pursuant to the foregoing Notice of Annual Meeting of Shareholders.
The approximate date that this Proxy Statement and the form of proxy
are first being sent to shareholders is June 12, 1996. Shareholders should
review the information provided herein in conjunction with the Company's 1995
Annual Report on Form 10-KSB and 10-KSB/A, which accompanies this Proxy
Statement. The Company's principal executive offices are located at 1225 Broken
Sound Parkway, N.W., Suite A, Boca Raton, Florida 33481, and its telephone
number is (407) 994-8595.
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 so doing.
<PAGE>
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of six members to the Company's Board of
Directors to serve until the Company's 1997 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) To increase the authorized common stock of the Company from
12,500,000 shares of Common Stock, par value $.0008 per share
to 50,000,000 shares of Common Stock, par value $.0001 per
share;
(3) To approve an amendment to the Company's Articles of
Incorporation to change the name of the Company to
Compscript, Inc;
(4) To approve the Company's 1996 Stock Option Plan, as adopted
by the Board of Directors on May 28, 1996; and
(5) Such other business as may properly come before the Annual
Meeting, including 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 above)
will be voted for the election of the six nominees for director named below. 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 so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on June 12, 1996
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 9,846,374 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. If less than a majority of 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.
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<PAGE>
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth, as of June 12, 1996, information with
respect to the beneficial ownership of the Company's Common Stock by (i) each
person who is known by the Company to own beneficially more than 5% of its
Common Stock, (ii) each director and nominee for director, (iii) each Named
Executive Officer (as defined herein), and (iv) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
AMOUNT AND NATURE OF OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) SHARES OWNED(2)
- --------------------------------------- ----------------------- ---------------
<S> <C> <C>
Brian A. Kahan.............................. 4,432,453(3) 45.0%
Gerard N. Altieri........................... 723,733 7.4
Martha M. Little............................ 243,212(4) 2.5
Malcolm Leonard............................. 14,894(5) *
Robert Edelheit............................. 48,730 *
Paul Heimberg............................... 161,782(6) 1.6
Gary Splain................................. 0 *
All directors and executive officers
as a group (seven persons).................. 5,624,804(7) 57.1
- ----------------------------
<FN>
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the listed
beneficial owners identified is 1225 Broken Sound Parkway, N.W., Suite
A, Boca Raton, Florida 33451. Unless otherwise noted, the Company
believes that all persons named in the table have sole voting and
investment power with respect to all the shares of Common Stock
beneficially owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy
Statement upon the exercise of warrants or options. Each beneficial
owner's percentage ownership is determined by assuming that warrants or
options that are held by such person (but not those held by any other
person) and that are exercisable within 60 days from the date of this
Proxy Statement have been exercised.
(3) Includes 3,759,328 shares of Common Stock held as Trustee for the Kahan
Family Revocable Trust. Also includes 673,125 shares of Common Stock
held by Mr. Kahan as custodian for his three minor children, Shannon A.
Kahan (224,375 shares of Common Stock), Amanda R. Kahan (224,375 shares
of Common Stock) and Heather S. Kahan (224,375 shares of Common Stock).
3
<PAGE>
(4) Includes 15,594 shares of Common Stock held by Mrs. Little as custodian
for her son Nathan D. Little.
(5) Includes 3,898 shares of Common Stock held by Mr. Leonard in a Joint
Tenancy with a Right of Survivorship ("JTWROS") with his sister Corinne
Leonard, 5,848 shares of Common Stock held by Mr. Leonard in a JTWROS
with his daughter Jennifer Gottlieb and 5,848 shares of Common Stock
held by Mr. Leonard in a JTWROS with his daughter Shari Leonard.
(6) Includes 3,898 shares of Common Stock held by Mr. Heimberg's wife,
Denise Heimberg,
(7) See notes 3 - 6 above.
</FN>
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than ten
percent of the Company's outstanding 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 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, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
complied with.
ELECTION OF DIRECTORS; NOMINEES
The Company's Articles gf Incorporation provide that the number of
directors constituting the Company's Board of Directors shall not be less than
one nor more than ten, 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 six the number of directors that will constitute the
Board for the ensuing year. Each director elected at the Annual Meeting will
serve for a term expiring at the Company's 1997 Annual Meeting of Shareholders
or when his successor has been duly elected and qualified.
The Company has nominated each of Brian A. Kahan, Gerard N. Altieri,
Martha M. Little, Malcolm Leonard, Robert Edelheit and Paul Heimberg to be
elected as a director at the Annual Meeting. The Board of Directors has no
reason to believe that any nominee will refuse or be unable to accept election;
however, in the event that one or more nominees are unable to accept election or
if any other unforeseen contingencies should arise, each proxy that does not
direct otherwise will be voted for the remaining nominees, if any, and for such
other persons as may be designated by the Board of Directors.
4
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning the
current directors and nominee directors of the Company and the executive
officers of the Company:
NAME AGE TITLE
- --------------------------------------------------------------------------------
Brian A. Kahan .................. 44 Chairman of the Board, Chief
Executive Officer and President of
the Company
Martha M. Little ................ 35 Vice President and Director
Gary Splain ..................... 46 Treasurer and Secretary
Gerard N. Altieri ............... 66 Director
Malcolm Leonard ................. 53 Director
Robert Edelheit ................. 56 Director
Paul E. Heimberg................. 45 Director
BRIAN A. KAHAN has been a Chairman, Chief Executive Officer and
President of the Company since April 1996. In October 1991, Mr. Kahan found
Aldencare and served as its Chief Executive Officer and became Chief Executive
Officer of CompScript when it merged with Aldencare in 1994. Mr. Kahan has a
B.S. in Pharmacy from the University of Maryland, School of Pharmacy. Mr. Kahan
is currently President of the American Society of Consultant Pharmacists and
serves on the LTC Commission for the State of Florida. Mr. Kahan is presently a
clinical instructor for the University of Florida and Nova Southeastern College
of Pharmacy and is a trustee for the Florida Pharmacy Foundation.
MARTHA M. LITTLE has been the Vice President and Director of the
Company since April 1996. Ms. Little has been with Aldencare and CompScript
since October 1991, serving as Pharmacy Manager in 1991 until 1993. Ms. Little
was promoted to Vice President in February 1992 and was appointed a Director of
CompScript in January 1993. Ms. Little is a member of the American Society of
Consultant Pharmacists and received a B.S. from the University of Florida and a
post-graduate doctor of pharmacy degree from Nova Southeastern University.
GARY SPLAIN has served as the Treasurer and Secretary of the Company
since April 1996. Mr. Splain has served as the comptroller of CompScript since
1992. From 1991 to 1992 Mr. Splain was the business office manager for a local
branch of a national institutional pharmacy. Mr. Splain received a B.A. in
accounting from Queens College.
GERARD N. ALTIERI has been Director of the Company since April 1996.
Mr. Altieri was President of G.N. Altieri & Associates from 1970 until 1990.
From 1986 to 1993 Mr. Altieri was President of Insurex a pharmacy benefit
management company. In 1993, Mr. Altieri formed CompScript, Inc. and began the
management of prescription drugs in the field of workman's compensation. Mr.
Altieri received a B.A. in Business Administration from Fairfield University and
received his Charter Life Underwriter's Designation from the College of Life
Underwriter.
MALCOLM LEONARD has served as a Director of the Company since April
1996. Mr. Leonard is a Certified Public Accountant and has been the managing
partner of Leonard & Danzinger, CPA's since 1975. Mr. Leonard is a member of the
American Institute of Certified
5
<PAGE>
Public Accountants and the Florida Institute of Certified Public Accountants.
Mr. Leonard received a B.S. from Farleigh Dickinson University and is a CPA.
ROBERT EDELHEIT has served as a Director of the Company since April
1996. Mr. Edelheit is President of United Group Programs, and employee benefit
sales and consulting firms with offices in Boca Raton, Atlanta and Philadelphia.
Mr. Edelheit received his B.S. in Business from the State University of New
York. Mr. Edelheit is editor and publisher of the newsletter, Synopsis, a fax
digest with an emphasis on employee benefits. Mr. Edelheit has been an Associate
Professor at Florida Atlantic University in Boca Raton, Florida and speaks
nationally on Employee Benefits.
PAUL HEIMBERG has served as Director of the Company since April 1996.
Mr. Heimberg is a partner with the law firm of Heimberg & Lumer, in Boca Raton,
Florida since November, 1995. Previously Mr. Heimberg was a partner with the
firm of Heimberg, Heimberg, Rader & Levenstein, P.A. from 1990 to 1995. Mr.
Heimberg received his B.A. from the University of Wisconsin and his J.D. from
Boston University Law School.
The Company's officers are elected annually by the Company's Board of
Directors and serve at the discretion of the Company's Board of Directors. The
Company pays each non-employee director a fee to be determined for each meeting
of the Company's Board of Directors, or committee thereof, attended and
reimburses all directors for their expenses in connection with their activities
as directors of the Company. Directors of the Company who are also employees of
the Company do not receive additional compensation for their services as
directors.
During the year ended December 31, 1995, the Company's Board of
Directors held meetings and took action by unanimous written consent a total of
23 times.
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation paid to
Mitchell Rubinson and Stephen Groth (collectively, the "Named Executive
Officers") by the Company and its direct and indirect subsidiaries,
International Fast Food Corporation ("IFFC"), QPQ Corporation ("QPQ"), QPQ
Medical Weight Loss Centers, Inc. ("QPQ Medical") and Family Chicken
Incorporation ("FCI"). None of the other executive officers of the Company,
IFFC, QPQ, QPQ Medical or FCI were paid a total annual salary and bonus for the
1995 fiscal year which was $100,000 or more. In connection with the Share
Exchange Agreement with CompScript, the Company divested itself of interests in
IFFC, and FCI and reduced its equity ownership interest in QPQ to 1,125,000
shares. In addition, Mr. Rubinson and Mr. Groth tendered their resignations as
officers and directors of the Company.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------- ------------
OTHER NUMBER OF
FISCAL ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY COMPENSATION GRANTED(2) COMPENSATION
- ---------------------- ---- ----- ----------- -------- ------------
<S> <C> <C> <C> <C> <C>
Mitchell Rubinson, 1995 $426,527(3) $27,223(4) 100,000(5) --
Chief Executive Officer
1994 277,747(6) 5,913(7) 0
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1993 171,753(8) 19,685(9) 150,000(10) --
Stephen Groth, 1995 117,962(11) 12,084(12) 25,000(13)
Chief Financial Officer
1994 150,000(14) 32,792(15) 0
1993 98,076(16) 18,750(17) 200,000(18) --
- ------------------------
<FN>
(1) The columns for "Bonus", "Restricted Stock Awards" and "LTIP Payouts"
have been omitted because there is no compensation required to be
reported in such columns.
(2) See "Aggregated Fiscal Year-End Options Value Table" for additional
information concerning options granted.
(3) Represents $125,000, $159,976 and $141,551 paid by the Company, IFFC
and QPQ, respectively.
(4) Includes automobile allowances of $12,000 and $12,000 paid by the
Company and IFFC, respectively. Includes medical insurance premium of
$3,223 paid by IFFC.
(5) Represents an option granted by QPQ to purchase 100,000 shares of QPQ
Common Stock at an exercise price of $1.5625. As of March 7, 1995, each
of the options to purchase shares of QPQ Common Stock held by Mr.
Rubinson was amended to reduce the stated exercise price therein to the
fair market value of the QPQ Common Stock on such date ($0.69). See
"Option Repricings."
(6) Represents $149,382 and $128,365 paid by IFFC and QPQ, respectively.
(7) Represents medical insurance premiums paid by IFFC.
(8) Represents $135,846 and $35,907 paid by IFFC and QPQ, respectively.
(9) Represents an automobile allowance of $12,000 and medical insurance
premiums of $7,685 paid by IFFC.
(10) Represents an option granted by IFFC to purchase 50,000 shares of IFFC
Common Stock at an exercise price of $8.50 per share and an option
granted by QPQ to purchase 100,000 shares of QPQ Common Stock at an
exercise price of $6.00 per share. See "Option Repricings."
(11) Paid by IFFC, which figure includes $35,389 paid by QPQ to IFFC for
Mr. Groth's services.
(12) Represents an automobile allowance of $9,000 and medical insurance
premiums of $3,084 paid by IFFC, which figure includes the following
sums paid by QPQ to IFFC for Mr. Groth's services: an auto allowance of
$2,700 and medical insurance premiums of $925.
(13) Represents an option granted by QPQ to purchase 25,000 shares of QPQ
Common Stock at an exercise price of $1.5625. As of March 7, 1995, each
of the options to purchase shares of QPQ Common Stock held by Mr. Groth
was amended to reduce the stated exercise price therein to the fair
market value of the QPQ Common Stock on such date ($0.69). See "Option
Repricings. "
(14) Paid by IFFC, which figure includes $75,000 paid by QPQ to IFFC for
Mr. Groth's services.
(15) Represents a housing allowance in Poland of $20,000 medical insurance
premiums of $3,792 and an auto allowance of $9,000 paid by IFFC, which
figures include the following sums paid by QPQ to IFFC for Mr. Groth's
services: an allowance for housing in Poland of $10,000 medical
insurance premiums of $1,896 and an auto allowance of $4,500.
(16) Paid by IFFC, which figure includes $27,403 paid by QPQ to IFFC for
Mr. Groth's services.
7
<PAGE>
(17) Includes an allowance for housing in Poland of $6,000 medical insurance
premiums of $4,500 and an automobile allowance of $7,500 paid by IFFC,
which figures include the following sums paid by QPQ to IFFC for Mr.
Groth's services: an allowance for housing in Poland of $3,000 medical
insurance premiums of $1,125 and an automobile allowance of $1,875.
(18) Represents an option granted by the Company to purchase 100,000 shares
of Common Stock at an exercise price of $3.00 per share (pre-split), an
option granted by IFFC to purchase 50,000 shares of IFFC Common Stock
at an exercise price of $8.50 per share and an option granted by QPQ to
purchase 50,000 shares of QPQ Common Stock at an exercise price of
$6.00 per share. See "Option Repricings."
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
CAPITAL BRANDS, INC. The Company entered into an agreement with Mr.
Rubinson effective March 31, 1995 which provides that he will serve as Chairman
of the Board, Chief Executive Officer and President of the Company for an
initial term of three years, which the Company may extend for up to two
additional years. Mr. Rubinson's annual salary for the first year will be
$125,000, subject to annual 10% increases. Pursuant to the employment agreement,
Mr. Rubinson is required to devote such portion of his business time to the
Company as may be reasonably required by the Company's Board of Directors,
subject to Mr. Rubinson's other business interests. Mr. Rubinson's employment
agreement requires that he not compete or engage in any business competitive
with the Company's business for the term of the agreement and for two years
thereafter. Mr. Rubinson is entitled to certain fringe benefits including an
automobile allowance of $1,000 a month. Mr. Rubinson's employment agreement
provides for a payment of $125,000 in the event his employment is terminated by
reason of his death or disability and a severance payment of twice the minimum
annual salary then in effect in the event his employment is terminated by the
Company without cause. Mr. Rubinson's employment agreement does not provide for
a severance payment in the event Mr. Rubinson is terminated for cause. Mr.
Rubinson's contract with the Company was terminated. In lieu of cash severance,
Mr. Rubinson received 250,000 shares of QPQ Common Stock.
AGGREGATED FISCAL YEAR-END OPTION VALUE TABLE
The following table sets forth certain information concerning
unexercised stock options to purchase the Company's Common Stock held by the
Named Executive Officers as of December 31, 1995. No stock options were
exercised by the Named Executive Officers during the year ended December 31,
1995. The Company has not granted any stock appreciation rights.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
HELD AT DECEMBER 31, 1995 OPTIONS AT DECEMBER 31, 1995(1)
----------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mitchell Rubinson -0- -0- $ -0- $ -0-
Stephen R. Groth 60,000 40,000 $ -0- $ -0-
<FN>
(1) Average of the high ask and low bid quotations for the Company's Common
Stock as reported by NASDAQ on December 29, 1995 was $3.50 post-split
and the closing bid price of the Common Stock on April 18, 1996 as
reported in the Wall Street Journal was $5.8752 post-split.
</FN>
</TABLE>
8
<PAGE>
OPTION REPRICINGS
IFFC and QPQ have issued, pursuant to the terms of their stock option
plans, a number of stock options to directors, executive officers and key
employees. See "SECURlTY OWNERSHIP" for more information regarding the options
granted to Mitchell Rubinson and Stephen R. Groth. As of February 27, 1995, the
exercise price of each of the stock options granted by IFFC was below the fair
market value of the IFFC Common Stock underlying the stock options. In an effort
to provide the holders of the stock options additional incentive to use their
best efforts on behalf of IFFC, as of February 27, 1995, each of the stock
option agreements between IFFC and Mitchell Rubinson and Stephen R. Groth was
amended to reduce the exercise price stated therein to the fair market value of
the underlying IFFC Common Stock on such date ($1.375). As of March 7, 1995, the
exercise price of each of the outstanding stock options granted by QPQ was
higher than the fair market value of the QPQ Common Stock underlying the
options. In an effort to provide the holders of the stock options an additional
incentive to use their best efforts on behalf of QPQ, as of March 7, 1995, each
of the stock option agreements between QPQ and Mitchell Rubinson and Stephen R.
Groth was amended to reduce the exercise price stated therein to the fair market
value of the underlying QPQ Common Stock on such date ($0.69).
SHARED FACILITIES
The Company had shared with QPQ and IFFC the use and cost of office
space, Suites 200, 206 and 210 at 1000 Lincoln Road, Miami, Florida. With
respect to Suite 200, the Company, QPQ and IFFC were responsible for $2,400, $0,
$10,274, respectively, of the lease payments made in the year ended December 31,
1995 and $1,200,$0 and $10,302,respectively, of the lease payments made in the
year ended December 31, 1994. With respect to Suite 206, the Company, QPQ and
IFFC were ultimately responsible for $8,829, $756 and $0, respectively, of the
lease payments made in the year ended December 31, 1995 and $2,662, $532 and $0,
respectively, of the lease payments made in the year ended December 31, 1994.
With respect to Suite 210, QPQ was solely responsible for the $9,585 and $3,195
in total lease payments made during the year ended December 31, 1995 and
December 31, 1994, respectively.
IFFC operates a Burger King restaurant adjacent to a Domino's pizza
store operated by QPQ in Poland. Each restaurant has its own counter service and
kitchen area, but the restaurant and store share seating space. IFFC and QPQ are
jointly and severally liable for, and costs are allocated between the companies
with respect to, the leasehold payments for the site.
ESCROW SHARES
As of June 1, 1992, the Company placed 200,000 shares of its then
1,500,000 shares of Common Stock of IFFC in escrow (the "Escrow Shares") with
Continental Stock Transfer & Trust Company, as escrow agent, pursuant to an
agreement by and among the Company, IFFC, the escrow agent and Whale Securities
Co., L.P., the underwriter of IFFC's initial public offering. Since IFFC's net
income for the year ended December 31,1993 did not equal or exceed $2,000,000
and, since IFFC's net income for the year ended December 31, 1994 did not equal
or exceed $5,000,000 the Escrow Shares were, pursuant to the terms of the escrow
agreement, contributed to the capital of IFFC on March 31, 1995.
DOMINO'S DEVELOPMENT AGREEMENT
QPQ was incorporated in June 1993 by the Company. In connection with
QPQ's organization, QPQ issued an aggregate of 1,375,000 shares of QPQ Common
Stock to the
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Company in consideration of the assignment to QPQ of the Company's rights and
obligations under the Domino's Development Agreement, the Company's 100 percent
equity interest in Pizza King Polska, a Polish limited liability corporation,
and $160,000 in cash. The Company entered into the Domino's Development
Agreement with Domino's on June 11, 1993. As consideration for the grant of
development rights, the Company agreed to pay Domino's $300,000 of which
$100,000 was paid upon execution of the Development Agreement. The Company also
incurred approximately $10,854 in legal and other expenses in connection with
the Development Agreement. In connection with the Company's assignment of the
Development Agreement to QPQ, QPQ assumed the obligations of the Company under
the Development Agreement, including, but not limited to, the obligation to pay
Domino's $200,000 upon Domino's cancellation of or acquisition of all right,
title and interest to a prior registration in Poland of the trademark "Domino's"
and the cessation of the use by a pizza restaurant in Poland of the trademark
"Domino Pizza." QPQ satisfied its obligation to Domino's by making payments of
$50,000 and $100,000 to Domino's in March and June of 1994, respectively, and by
expending $70,0000 on Domino's behalf in connection with the acquisition and
registration of certain Domino's trademarks in Poland.
Prior to QPQ's initial public offering, the Company funded QPQ's
working capital requirements through non-interest bearing advances which
aggregated to $173,973. QPQ has repaid such advances.
INTERNATIONAL HOTEL CORPORATION
In February 1994, International Hotel Corporation ("IHC"), then owned
by the Company (90%) and Mitchell Rubinson (10%), entered into the Holiday Inn
Development Agreement (the "Holiday lnn Development Agreement") with Bass
International Holdings, N.V. ("BlH"). Pursuant to the Holiday Inn Development
Agreement, IHC has the exclusive right to develop Express Hotels in Poland for
the term of the Holiday Inn to Development Agreement, which expires on July 31,
1999. In exchange for the development rights, IHC paid BIH an aggregate of
$300,000. During the term of the Holiday Inn Development Agreement, IHC, to
maintain its exclusive rights, was required to open and operate at least 20
Express Hotels in accordance with the following specified schedule: one Express
Hotel by August 1995 and a cumulative total of four, eight, fourteen and twenty
Express Hotels by August of the next four consecutive years, respectively. IHC
has not yet developed any Express Hotels.
In connection with IHC's acquisition of the Express Hotels development
rights, on February 14, 1994, the Company entered into a Loan Agreement (the
"Loan Agreement") with Marilyn Rubinson, the mother of Mitchell Rubinson, in the
principal amount of $350,000, which amount was evidenced by a Promissory Note,
payable on demand and bearing interest at a rate per annum equal to two percent
above the prime rate of Northern Trust Bank of Florida, N.A. (the "Promissory
Note"). Three hundred thousand dollars of the loan proceeds were contributed by
the Company as capital to IHC and used by IHC to secure the Holiday Inn
Development Agreement. The remainder of the loan has been used for the Company's
general corporate purposes. As of December 31, 1994, the Company owed Marilyn
Rubinson $375,482 under the Loan Agreement and, as of March 1, 1995, the Company
satisfied its indebtedness to Marilyn Rubinson. In connection with the Loan
Agreement, IHC issued Marilyn Rubinson Common Stock Purchase Warrants (the "IHC
Warrants") to purchase 100 shares (9.1%) of IHC's Common Stock, par value $.01
per share (the "IHC Common Stock"), at an exercise price of $.10 per share. As
of February 3, 1995, Marilyn Rubinson exercised all of the IHC Warrants.
As of March 28, 1995, the Company, Mitchell Rubinson and Marilyn
Rubinson sold (the "IHC Sale"), pursuant to a Stock Purchase Agreement (the "IHC
Purchase Agreement"), all of
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their debt and equity interest in IHC to IFFC in exchange for 336,364, 31,818
and 31,818 shares, respectively, of restricted IFFC Common Stock (the "IFFC
Shares"). The IHC Purchase Agreement also provides that IFFC shall pay to the
Company 10% of IHC's Net Income (as such term is defined in the IHC Purchase
Agreement), if any, for the next fifteen years.
The Company and Mitchell Rubinson agreed to use their best business
efforts to convince BIH to modify, if necessary, the terms of the Holiday Inn
Development Agreement so that IHC would not, solely because it has not developed
an Express Hotel by September 1, 1995, lose its exclusive development rights
(the "Exclusivity Extension") or rights to apply $200,000 already paid to BIH
against future franchise application fees (the "Franchise Fee Extension"). Since
BIH has not yet consented to the Exclusivity Extension nor the Franchise Fee
Extension, IFFC has exercised its right to require the Company, Mitchell
Rubinson and Marilyn Rubinson to transfer the IFFC Shares back to IFFC, and IFFC
has transferred its equity interest in IHC back to the Company, Mitchell
Rubinson and Marilyn Rubinson.
LOAN TRANSACTIONS WITH IFFC
As of September 1994, IFFC loaned the Company $20,000 to cover its
operating expenses. In October 1994, the Company repaid IFFC $20,000. In January
and February 1996, the Company loaned IFFC an aggregate of $63,000.
LOAN TRANSACTIONS WITH SHAREHOLDERS
On June 15, July 5, September 13, September 23 and October 28, 1994,
Mitchell Rubinson loaned the Company $15,000, $10,000, $30,000, $10,000 and
$20,000, respectively, to cover operating expenses. In February 1995, the
Company satisfied its indebtedness to Mr. Rubinson by paying him $88,000.
CONSULTING AGREEMENT BETWEEN IFFC AND QPQ
On July 25, 1993, IFFC entered into a three year consulting agreement
(the "Consulting Agreement") with QPQ. Under the terms of such agreement, IFFC
is to assist QPQ generally with operational and administrative matters. Pursuant
to the Consulting Agreement, as amended on July 27,1994 and January 1, 1995,
IFFC provides to QPQ: (1) the services of IFFC's Chief Financial Officer for not
more than 30% of his business time; (2) the services of IFFC's Controller for
not more than 30% of his business time; and (3) the services of managerial,
general office and staff personnel of IFFC. In exchange for such services, QPQ
pays IFFC: (1) 30% of the cost of all compensation and benefits provided by IFFC
to its Chief Financial Officer; (2) 27.5% of all compensation and benefits
provided by IFFC to its Controller; and (3) all costs and expenses incurred by
IFFC in connection with the services rendered pursuant to the Consulting
Agreement. In the year ended December 31, 1995 and the year ended December
31,1994, QPQ's payments to IFFC pursuant to the terms of the Consulting
Agreement aggregated to $218,742 and $395,020, respectively. In connection with
the signing of the Consulting Agreement, QPQ granted IFFC an option to purchase
up to 250,000 shares of common stock of QPQ at an exercise price of $6.00 per
share.
In April 1995, IFFC's majority-owned subsidiary (85%), IFFP, entered
into a consulting agreement (the "Subsidiary Consulting Agreement") with the
wholly-owned subsidiary of QPQ, Pizza King Polska, pursuant to which IFFP has
agreed to provide Pizza King Polska with all general staff and administrative
support required by Pizza King Polska to operate its Domino's Store business.
The services of Leon Blumenthal have been made available to Pizza King Polska
and QPQ pursuant to the Subsidiary Consulting Agreement. In exchange for such
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services, IFFP receives from Pizza King Polska a sum equivalent to 10% of Pizza
King Polska's sales and a reimbursement of expenses. In the year ended December
31, 1995 Pizza King Polska's payments to IFFP pursuant to the terms of the
Subsidiary Consulting Agreement aggregated to $116,723.
QPQ CORPORATION PRIVATE OFFERING
As of December 31, 1994, QPQ had working capital of $1,085,490. After
discussions with QPQ in March 1995, QPQ's accountants advised QPQ that if QPQ
was unable to obtain additional funds they would have substantial doubt as to
QPQ's ability to operate as a going concern. After considering various
alternatives and factors, including the market price of the common stock of QPQ,
its trading volume and various time constraints, the Board of Directors of QPQ
authorized a private offering of up to 4,000,000 shares of common stock of QPQ.
As of March 30, 1995, QPQ sold in a private offering (the "Private Offering")
3,400,000 shares of restricted common stock of QPQ, 1,000,000 shares to each of
Mitchell Rubinson, Marilyn Rubinson and Nigel Norton and 400,000 shares to an
unaffiliated Greek corporation. Mitchell Rubinson has indicated to QPQ that
Marilyn Rubinson, the mother of Mr. Rubinson, and Nigel Norton, the
brother-in-law of Mr. Rubinson, are not affiliates of Mr. Rubinson and that they
have not entered into any contracts, arrangements or understanding with Mr.
Rubinson with respect to control of QPQ.
LITIGATION FINANCING AGREEMENT
As of January 25, 1996, IFFC and IFFP (collectively, the "IFFC
Affiliates") entered into an Agreement to Assign Litigation Proceeds (the
"Funding Agreement") with Litigation Funding, Inc., a Florida corporation
("Funding"). Mitchell Rubinson, the chairman of the board, chief executive
officer and president of IFFC is also the chairman of the board, chief executive
officer and president and the sole shareholder of Funding.
Pursuant to the Funding Agreement, Funding agreed to pay on behalf of
IFFC and/or IFFP up to $500,001 (the "Amount") for all expenses (including
attorneys' fees, court costs and other related expenses, but not judgments or
amounts paid in settlement) actually incurred by or on behalf of IFFC and/or
IFFP in connection with investigating, defending, prosecuting, settling or
appealing the BKC Litigation and any and all claims or counterclaims of BKC
against IFFC and/or IFFP (collectively, the "BKC Matter"). Funding has paid all
amounts it has been requested to pay pursuant to the Funding Agreement.
In consideration of the Amount, IFFC and IFFP each assigned to Funding
a portion of any and all benefits and gross sums, amounts and proceeds that each
of them may receive, collect, realize, otherwise obtain ar benefit from in
connection with, resulting from or arising in connection with the BKC Matter or
any related claim, demand, appeal, right and/or cause of action of the IFFC
Affiliates, including, but not limited to, amounts received or entitled to be
received by the IFFC Affiliates in respect of (i) the gross proceeds of any
court ordered decision or judgment (a "Judgment") entered in favor of IFFC
and/or IFFP, (ii) the Sale Proceeds (as such term is defined below, the "Sales
Proceeds") of any sale of the assets of IFFC and/or IFFP to BKC, any of BKC's
affiliates and/or any entity which is introduced to the IFFC Affiliates by BKC
(collectively, the "BKC Entities") in connection with a settlement of the BKC
Matter, (iii) any amounts paid in compromise or settlement (a "Settlement") of
the BKC Matter in whole or in part, (iv) any liabilities or indebtedness of IFFC
or IFFP assumed or satisfied by the BKC Entities (the "Debt Relief Proceeds")
and (v) the monetary value to the IFFC Affiliates of any concessions made by BKC
with respect to its rights under (a) the Development Agreement and/or (b) the
Franchise Agreements and any future franchise agreements between BKC and IFFP
and/or IFFC (the
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"Contract Modification Proceeds"). All of the IFFC Affiliates' rights, titles
and interests, legal and equitable, in and to such aforementioned benefits and
gross sums, amounts and proceeds are collectively referred to herein as the
"Proceeds."
Specifically, IFFC and IFFP each individually assigned, set over,
transferred and conveyed to Funding all of its right, title and interest in and
to the sum of the following (the "Assigned Proceeds"): (i) fifty percent (50%)
of the Proceeds to the extent that such amount does not exceed Funding's
Expenses ("Funding's Expenses"), which are defined as the sum of the aggregate
amount of money paid by Funding as the Amount and the amount of money expended
by Funding if it assumes the prosecution of the BKC Matter; (ii) fifty percent
(50%) of any Proceeds, excluding any Sales Proceeds, in excess of the sum of
Funding's Expenses and the IFFC Affiliates' Expenses (as such term is defined
below, the "IFFC Affiliates' Expenses"); and (iii) fifty percent (50%) of any
Sales Proceeds in excess of the sum of Funding's Expenses and the IFFC
Affiliates' Expenses.
Subject to Funding's recovery of Funding's Expenses, IFFC and IFFP have
retained the right to and shall be entitled to recover from the Proceeds the sum
of (i) $303,731, and (ii) all of the amounts they may expend in the future in
connection with the BKC Matter, before Funding shall be entitled to receive any
other Proceeds.
The definition of Sales Proceeds in the Funding Agreement varies
depending upon whether the transaction is structured as (1) a sale by IFFC of
all or substantially all of its equity interest in IFFP (an "Equity Sale"), or
(2) a sale by IFFP of all or substantially all of its assets (an "Asset Sale").
In the event of an Equity Sale, Sale Proceeds are defined as the difference
between the value of the consideration paid to or for the benefit of IFFC and a
sum which is designed to roughly approximate the net market value of the assets
and liabilities underlying the equity interest purchased. In the event of an
Asset Sale, Sale Proceeds are defined as the difference between the value of the
consideration paid to or for the benefit of IFFP and a sum which is designed to
roughly approximate the net market value of the assets and liabilities
purchased.
Pursuant to the Funding Agreement, proceeds other than cash are deemed
to have a value equal to the fair market value of such assets on the date such
Proceeds are payable to IFFC, IFFP or Funding. Provided, however, if such cash
Proceeds are not all to be paid within 90 days of a Judgment or Settlement, then
the net present value of the cash Proceeds to be paid are to be calculated by an
independent certified public accountant (the "Appraiser") selected by the
Company and Funding. The value of non-cash Proceeds are to be determined by the
Appraiser.
In connection with the execution and delivery of the Funding Agreement,
IFFC, IFFP, Funding and a law firm (the "Escrow Agent") entered into an Escrow
Agreement. Pursuant to the Funding Agreement and the Escrow Agreement, except
for Proceeds which the Escrow Agent cannot reduce to physical possession, all
Proceeds, if any, resulting from the BKC Matter are to be delivered to the
Escrow Agent before they are delivered to the IFFC Affiliates and/or Funding.
The Escrow Agent is required to dispose of Proceeds only in accordance with (1)
the joint written instructions of the Company, IFFP and Funding, or (2) the
instructions of a court of competent jurisdiction. The Funding Agreement
provides that the Escrow Agent shall first apply all Readily Available Cash
Proceeds (as such term is defined below, the "Readily Available Cash Proceeds")
to satisfy Funding's rights to Proceeds (assigned to Funding by IFFC or IFFP)
before any non-Readily Available Cash Proceeds are delivered to Funding by the
Escrow Agent on behalf of such company. Readily Available Cash Proceeds are
defined to be all cash Proceeds payable to IFFC, IFFP or Funding within one (1)
year of a Judgement or Settlement. In the
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event that the Readily Available Cash Proceeds are not sufficient to satisfy
Funding's rights in Proceeds (assigned to Funding by such company), then IFFC
and IFFP have each agreed to pay out of its individually available "cash and
cash equivalents" (the "Cash Resources") an amount of Cash Resources to satisfy
the deficiency. In the event that the Readily Available Cash Resources of a
company are insufficient to cover the deficiency, such company, subject to
Funding's agreement, will have the right to elect which assets it will deliver
to Funding in satisfaction of Funding's rights to receive Proceeds. In the event
that Funding is unable to agree with a company with respect to which assets such
company will deliver to Funding, then the matter shall be submitted to a court
of competent jurisdiction.
In consideration of the Amount, IFFC also assigned to Funding a
security interest (the "Security Interest") in its entire equity interest in
IFFP (the "IFFP Stock"). The Security Interest secures the delivery to Funding
of all the Assigned Proceeds. In order to perfect the Security Interest, IFFC
has agreed to take all such actions as are necessary under the laws of the
Republic of Poland ("Poland") and the State of Florida to transfer title to the
IFFP Stock to the Escrow Agent; provided, however, that IFFC has retained
beneficial ownership of the IFFP Stock, including the right to vote the IFFP
Stock, unless Funding does not receive the Assigned Proceeds in accordance with
the terms of the Funding Agreement and such nonreceipt is not rectified within
45 days (an "Event of Default"). IFFC has further agreed to deliver to the
Escrow Agent such documents as are necessary to file with the appropriate
authorities in Poland to, if an Event of Default occurs, officially transfer
legal and beneficial title to the IFFP Stock to Funding. IFFC and Funding have
agreed that record title to the IFFP Stock is being transferred to the Escrow
Agent to provide Funding a perfected security interest in the IFFP Stock without
being forced to rely on Poland's apparently deficient system of recording and
perfecting security interests. If (1) Funding receives the Assigned Proceeds in
accordance with the terms of the Funding Agreement or (2) it becomes apparent
that Funding shall not ever be entitled to receive any Proceeds, then Funding is
required to immediately issue a notice to the Escrow Agent with respect to the
IFFP Stock, and the Security Interest is to be satisfied and extinguished.
In the event the IFFP Stock is transferred to Funding, the proceeds of
any sale of, or other realization upon, all or any part of the IFFP Stock shall
be applied by Funding in the following order of priority: first, to payment of
the expenses of such sale or other realization, including all expenses,
liabilities and advances incurred or made by the Funding or its counsel in
connection therewith or in connection with the care or safekeeping of any or all
of the IFFP Stock; second, to payment of Funding's right to the Assigned
Proceeds; and finally, any surplus then remaining shall be paid to the Company,
or its successors or assigns, or to whosoever may be lawfully entitled to
receive the same or as a court of competent jurisdiction may direct.
In the event that the IFFC Affiliates fail to use their best efforts to
vigorously pursue their claims against BKC, then Funding shall have the right
to, at its own expense, participate in and assume the prosecution of the IFFC
Affiliates' claims in the BKC Matter ("Assume the Prosecution"). In order for
Funding to Assume the Prosecution, it must first provide the IFFC Affiliates
written notice of its intention to Assume the Prosecution and identify which
material action or actions the IFFC Affiliates failed to take in order to
vigorously pursue their claims against BKC. If the IFFC Affiliates do not or
cannot take action or actions to compensate for their past failure or failures
to take action, then Funding may Assume the Prosecution.
In connection with the execution of the Funding Agreement, Mr. Rubinson
unconditionally guaranteed to the IFFC Affiliates Funding's payment of the
Amount.
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LICENSE AGREEMENT
As of November 9, 1995 QPQ, Medical entered into a license agreement
(the "License Agreement") with Weight Loss Associates, Inc. ("Weight Loss
Associates"), a corporation owned by Dr. Rabinowitz, a director of QPQ, and Mr.
Rubinson, QPQ's Chairman of the Board, Chief Executive Officer and President,
pursuant to which QPQ Medical has acquired the exclusive rights subject to
certain restrictions, to use and sublicense a weight loss system and certain
proprietary marks developed by Weight Loss Associates. The weight loss system
(the "Program") integrates systems and routines of nutrition management,
exercise and prescribed medication.
Under the License Agreement, Weight Loss Associates is required to
assist QPQ Medical in developing and operating the Weight Loss Centers and other
businesses (collectively, the "Weight Loss Business") that utilize the Program,
which assistance includes, but is not limited to, the following: providing to
QPQ Medical the Program; providing to QPQ Medical the information necessary to
prepare operations and marketing materials which describe how the Program should
be implemented; providing to QPQ Medical information necessary to prepare a
comprehensive business plan with respect to the Program; providing to QPQ
Medical any assistance or information reasonably deemed necessary or desirable
by QPQ Medical in connection with any of its efforts to secure financing for the
Business; providing any assistance or information reasonably deemed necessary or
desirable by QPQ Medical in connection with any of his efforts to sub-license
the Program and/or Marks; providing to QPQ Medical in connection with any of its
efforts to (i) obtain any governmental license, authorization, permits, consent
or approval with respect to use of the Program and/or Marks, and (ii) respond to
any governmental authority inquiries with respect to the Business; providing to
QPQ Medical technical advice regarding the development and marketing of the
Business; and continuing to use its best efforts to develop and/or enhance the
value of the Business and Program.
Weight Loss Associates is also responsible for the establishment of all
protocols to be followed in connection with the implementation of the Program by
QPQ Medical. Subject to Weight Loss Associates' consent otherwise, QPQ Medical
is prohibited from overriding, modifying or otherwise causing non-conformity
with such protocols established by Weight Loss Associates in connection with the
implementation of the Program.
QPQ Medical shall pay Weight Loss Associates, Inc., as royalties for
the license of the Program, (i) a percentage of QPQ Medical's "Operating Profit"
from each of its product lines associated weight loss, and (ii) a percentage of
QPQ Medical's "Extraordinary Gain" from certain events. Payments shall be made
in arrears not later that the twentieth day of each month. For purposes of the
License Agreement, Operating Profit is generally defined in accordance with
Statement of Financial Accounting Standards No. 14 but excludes royalties
payable to Weight Loss Associates and certain other items. For purposes of the
License Agreement, "Extraordinary Gain" is defined to include the gain
associated with the events described in APB Opinion No. 30, including: (a) the
disposal of a business segment, (b) extraordinary items, and (c) unusual or
infrequent items. The calculation of an Extraordinary Gain is made in accordance
with APB Opinion No. 30 and generally accepted accounting principles, with the
following modifications: (a) Extraordinary Gain is computed without reduction or
allowance for events which give rise to a negative Extraordinary Gain, (b)
Extraordinary Gain is computed without reduction or allowance for federal or
state income taxes, and (c) in computing Extraordinary Gain, estimated Operating
Profit or negative Operating Profit between "measurement date" and the "disposal
date" (as such terms are defined in APB Opinion No. 30) do not enter into the
computation of Extraordinary Gain. The License Agreement also provides that
Weight Loss Associates and its employees, officers or directors are entitled to
reimbursement from QPQ Medical for ordinary and necessary
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out-of-pocket expenses incurred by them in the course of performing their duties
under the License Agreement. QPQ Medical will be required to make payments to
Weight Loss Associates even if QPQ medical fails to develop the system into a
profitable business concept.
ACQUISITION OF FAMILY CHICKEN INCORPORATED
FCI was incorporated in June 3, 1994 to develop and operate fast food
chicken dine-in, take-out and/or delivery service outlets ("Chicken Shops").
Pursuant to a Stock Purchase Agreement dated August 29, 1995 (the "Stock
Purchase Agreement") between the Company and Mr. Rubinson, the Company acquired
(the "Acquisition") all of the outstanding capital stock of FCI. Pursuant to the
terms of the Stock Purchase Agreement, the Company purchased the stock of FCI
from Mr. Rubinson by issuing Mr. Rubinson a note in the principal amount of
$150,450 and releasing Mr. Rubinson from his guarantee of FCI's repayment of
$295,000 owed to the Company. The note bore interest at a rate equal to the
prime rate plus one percent. The principal of and interest on the note were due
and payable on December 31, 1995 and were paid in December 1995 ($100,000) and
January 1996 ($83,464). Prior to FCI's acquisition by the Company, FCl's
operations were financed primarily from capital contributions and loans by or
from Mr. Rubinson and his affiliates ($30,000), by loans from the Company
($295,000) and loans from Marilyn Rubinson ($210,000). In December 1995, the
Company repaid the outstanding principal balance of FCl's loans from Mr.
Rubinson, Mr. Rubinson's affiliates and Marilyn Rubinson. As of December 31,
1995, FCI owed $12,410 and $20,504 of interest to Mr. Rubinson and his
affiliates and Marilyn Rubinson. The Company's loans to FCI were converted into
equity contributions in December 1995.
FCI is licensed to develop and operate Chicken Shops pursuant to a
master franchise agreement, dated January 1, 1995 (the "Master Franchise
Agreement"), with Integrated Equities, Inc. ("Integrated Equities"). Integrated
Equities is owned by Mitchell Rubinson (40%), Marilyn Rubinson (40%), the mother
of Mr. Rubinson, and Roman Jones (20%), FCI's President. In the year ended
December 31, 1995, FCI owed Integrated Equities approximately $21,096 pursuant
to the Master Franchise Agreement, which amount and additional royalties were
paid in February 1996.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE COMPANY'S NAME
The Board of Directors unanimously has approved, and recommends that
the holders of the Company Common Stock that they approve an amendment to the
Articles of Incorporation that would amend Article I thereof to change the name
of the Company to "CompScript, Inc."
The name Capital Brands originates from the Company's original purposes
to acquire at least a majority interest in, and operation control of, business
enterprises, development and marketing of commercial enterprises, products and
services and participation in business ventures with existing and newly formed
business entities and a joint venture or other activity business relationship
basis. The Board of Directors has concluded that the name "Capital Brands, Inc."
no longer currently describes the scope of the Company's business, and that the
name "CompScript, Inc." would better describe the Company's intention to expand
and diversify its business in the pharmacy management services in which
CompScript is principally engaged.
The change of the name will not effect in any way the validity or
transferability of stock certificates currently outstanding, the capital
structure of the Company or the listing of any of its securities on the NASDAQ
SmallCap Stock Market, although a new stock ticket symbol will be adopted to
reflect the Company's new name.
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The affirmative vote of the holders of a majority of the outstanding
shares of Company Common Stock is required for approval of the amendment to the
Articles of Incorporation. If the Amendment is approved by the Shareholders, the
Amendment will become effective upon filing with the secretary of state of the
State of Florida.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED AMENDMENT TO THE ARTICLES OF INCORPORATION.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED CAPITAL STOCK OF THE COMPANY
The Board of Directors has voted to increase the authorized shares of
Common Stock, par value $.0008 per share from 12,500,000 to 50,000,000, par
value $.0001 per share, subject to approval by the Shareholders of the Company.
The Board of Directors determined that such Amendment is advisable and directed
that the proposed Amendment be considered at the Annual Meeting of Shareholders
to be held on July 3, 1996. There are no present plans, understandings,
arrangements or discussions for the issuance of additional shares of Common
Stock that would be authorized by this Amendment. The full text of the proposed
Amendment to the Certificate of Incorporation is set forth in Appendix A to this
Proxy Statement. The Amendment will not effect the number of shares of Preferred
Stock authorized.
The Board of Directors believe that this increase is desirable for a
number of reasons, including but not limited to facilitating the ability of the
Company to effect growth through future acquisition and future financings, stock
splits or dividends for other corporate purposes. The Company seeks to avoid the
delay and expense incurred in holding special meetings of the Shareholders to
approve amendments to the Articles of Incorporation.
Other than options to purchase up to 625,000 shares of Common Stock
there are no outstanding obligations of the Company to issue any shares of its
Commonn Stock as of the date herein.
The affirmative vote of the holders of a majority of the outstanding
shares of the Company Common Stock is required for approval of the amendment to
the Articles of Incorporation. If the Amendment is approved by the Shareholders,
the Amendment will become effective upon the filing with the secretary of state
of the State of Florida.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSED
AMENDMENT TO THE ARTICLES OF INCORPORATION.
PROPOSAL RELATING TO THE 1996 OPTION PLAN
On May 28, 1996 the Board of Directors adopted, subject to approval by
the stockholders, a stock option plan called the "1996 Stock Option Plan." A
copy of the 1996 Stock Option Plan (the "Plan") is attached to this proxy
statement as Appendix A. Shareholders will be asked at the meeting to vote on a
proposal to adopt the Plan. The following summary describes features of the
Plan. This summary is qualified in its entirety by reference to the specific
provisions of the Plan, the full text of which is set forth as Appendix B.
The Board of Directors have determined that the Plan will work to
increase the officers, key employees' and consultants' interest in the Company
and to align more closely their interests with the interests of the Company's
shareholders. The Board of Directors believes that the Plan
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is in the Company's best interests and therefore recommends adoption of the Plan
on essentially the terms and conditions as are set forth below.
Under the Plan, the Company has reserved an aggregate of 900,000 shares
of Common Stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The Board of Directors or the Compensation Committee of the Board of
Directors (the "Committee") of the Company administers the Plan including,
without limitation, the selection of the persons who will be granted Plan
Options under the Plan, the type of Plan Options to be granted, the number of
shares subject to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not qualify ("Non-Qualified
Options"). Any Incentive Option granted under the Plan must provide for an
exercise price of not less that 100% of the fair market value of the underlying
shares on the date of such grant, but the exercise price of any Incentive Option
granted to an eligible employee owning more that 10% of the Company's Common
Stock must be at least 110% of such fair market value as determined on the date
of the grant. The term of each Plan Option and the manner in which it may be
exercised is determined by the Board of the Directors or the Committee, provided
that no Plan Option may be exercisable more than 10 years after the date of its
grant and, in case of an Incentive Option granted to an eligible employee owning
more that 10% of the Company's Common Stock, no more than five years after the
date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee but shall in no event be less than 5% of the
fair market value of the underlying shares on the date of grant.
Officers, key employees, board members and consultants of the Company
and its subsidiaries are eligible to receive Non-Qualified Options under the
Plan. Only officers, key employees and consultants of the Company who are
employed by the Company or by any subsidiary thereof are eligible to receive
Incentive Options.
If an optionee's employment is terminated for any reason, other than
his death or disability or termination for cause, the Plan Option granted to him
shall lapse to the extent unexercised on the earlier of the expiration date or
three days following the date of termination. If the optionee dies during the
term of his employment, the Plan Option granted to him shall lapse to the extent
unexercised on the earlier of the expiration date of the Plan Option or the date
one year following the date of the optionee's death. If the optionee is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986, the Plan Option granted to him lapses to the
extent unexercised on the earlier of the expiration date of the option or one
year following the date of such disability. Plan Options will immediately
terminate if employment is terminated for cause as determined by the Company.
The Board of Directors or Committee may amend, suspend or terminate the
Plan at any time, except that no amendment shall be made without shareholder
approval which (i) increases the total number of shares subject to the Plan,
(ii) materially increases the benefits accruing to Plan participants, or (iii)
materially modifies the requirements as to eligibility for participation in the
Plan. Unless the Plan shall theretofore have been suspended or terminated by the
Board of Directors, the Plan shall terminate on May 29, 2006. Any such
termination of the Plan shall not affect any Plan Options granted under the Plan
prior to the actual date on which such action occurred.
18
<PAGE>
The following discussion is based on federal income tax laws and
regulations in effect on May 31, 1996. It does not purport to be a complete
description of the federal income tax consequences of the Plan, nor does it
describe the consequences of state, local or foreign tax laws which may be
applicable. Accordingly, any person receiving a grant under the Plan should
consult with his own tax adviser.
An employee granted an Incentive Stock Option does not recognize
taxable income either at the date of grant or at the date of this timely
exercise. However, the excess of the fair market value of Common Stock received
upon exercise of the Incentive Stock Option over the Option exercise price is an
item of tax preference under Section 57(a)(3) of the Code and maybe subject to
the alternative minimum tax imposed by Section 55 of the Code. Upon disposition
of stock acquired on exercise of an Incentive Stock Option, long-term capital
gain or loss is recognized in an amount equal to the difference between the
sales price and the Incentive Stock Option exercise price, provided that the
option holder has not disposed of the stock within two years from the date of
grant and within one year from the date of exercise. If the Incentive Stock
Option holder disposes of the acquired stock (including the transfer of acquired
stock in payment of the exercise price of an Incentive Stock Option) without
complying with both of these holding period requirements ("Disqualifying
Disposition"), the option holder will recognize ordinary income at the time of
such Disqualifying Disposition to the extent of the difference between the
exercise price and the lesser of the fair market value of the stock on the date
the Incentive Stock Option is exercise (the value six months after the date of
exercise may govern in the case of an employee whose sale of stock at a profit
could subject him to suit under Section 16(b) of the Securities Exchange Act of
1934) or the amount realized on such Disqualifying Disposition. Any remaining
gain or loss is treated as a short-term or long-term capital gain or loss,
depending on how long the shares are held. In the event of a Disqualifying
Disposition, the Incentive Stock Option tax preference described above may not
apply (although, where the Disqualifying Disposition occurs subsequent to the
year the Incentive Stock Option is exercised, it may be necessary for the
employee to amend his return to eliminate the tax preference item previously
reported). The Company and its subsidiary are not entitled to a tax deduction
upon either exercise of an Incentive Stock Option or disposition of stock
acquired pursuant to such an exercise, except to the extent that the Option
holder recognized ordinary income in a Disqualifying Disposition.
In respect to the holder of Non-Qualified Options, the option holder
does not recognize taxable income on the date of the grant of the Non-Qualified
Option, but recognizes ordinary income generally at the date of exercise in the
amount of the difference between the option exercise price and the fair market
value of the Common Stock on the date of exercise. However, if the holder of
Non-Qualified Options is subject to the restrictions on resale of Common Stock
under Section 16 of the Securities Exchange Act of 1944, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the Common Stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by the Company in
the year that income is recognized.
There are no options existing under the plan as of the date hereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
ADOPTION OF THE 1996 STOCK OPTION PLAN SET FORTH ABOVE.
19
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected Ernst & Young, LLP as the
independent public accountants for the fiscal year ending December 31, 1996. It
is anticipated that a representative of Ernst & Young, LLP will be present at
the Annual Meeting to answer questions within such firm's field of experience.
The Company's independent accountant for the prior year was Coopers and Lybrand,
LLP.
On June 12, 1996, Coopers & Lybrand, LLP, was replaced as the Company's
auditors. During the two most recent fiscal years and interim period subsequent
to December 31, 1995, there have been no disagreements with Coopers & Lybrand,
LLP, on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure or any reportable events.
OTHER BUSINESS
The Board knows of no other business to be brought before the Annual
Meeting. If, however, business should properly come before the Annual Meeting,
the persons named in the accompanying proxy may vote proxies as in their
discretion they may deem appropriate, unless they are directed by shareholders
otherwise.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
A shareholder intending to present a proposal to be included in the
Company's proxy statement for the Company's 1997 Annual Meeting of Shareholders
must deliver a proposal in writing to the Company's executive offices no later
than February 28, 1997.
By Order of the Board of Directors
BRIAN A. KAHAN
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE
OFFICER AND PRESIDENT
Boca Raton, Florida
June 14, 1996
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Appendix A
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
CAPITAL BRANDS, INC.
Pursuant to the provisions of ss.607.10025 of the Florida Business
Corporation Act, the undersigned corporation adopts the following Certificate of
Amendment to its Articles of Incorporation.
1. The name of the corporation is CAPITAL BRANDS, INC. (the
"Corporation"), Charter #P94000048261, filed on June 28, 1994.
2. The following Amendments to the Articles of Incorporation were
adopted by all of the directors of the Corporation by resolution on May 28,
1996, in the manner prescribed by the Florida Business Corporation Act.
Shareholder consent of the following amendments to the Articles of Incorporation
was approved on July ___, 1996 in the manner prescribed by the Florida Business
Corporation Act.
(A) Article II of the Corporation's Articles of Incorporation
is stated to read in its entirety as follows:
"ARTICLE II
The name of the Corporation shall be: COMPSCRIPT, INC."
(B) The first paragraph of Article III of the Corporation's
Articles of Incorporation shall be and hereby is amended and restated to read in
its entirety as follows:
"ARTICLE III
The aggregate number of shares of all classes of capital stock that
this Corporation shall have authority to issue is fifty-one million
(51,000,000), consisting of (i) fifty million (50,000,000) shares of common
stock, par value $0.0001 per share (the "Common Stock"), and (ii) one million
(1,000,000) shares of preferred stock, par value $0.0001 per share (the
"Preferred Stock")."
3. This Certificate of Amendment shall be effective as of
___________, Miami, Florida time, on the date of filing.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the Chief Executive Officer
of the Corporation, has executed these Articles of Amendment to the Articles of
Incorporation of Capital Brands, Inc. as of the ____ day of July, 1996.
CAPITAL BRANDS, INC.,
a Florida corporation
By:_____________________________
Brian A. Kahan,
Chief Executive Officer
- 2 -
<PAGE>
Appendix B
CAPITAL BRANDS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF PLAN
The purpose of this Employee Stock Option Plan (the "Plan") is
to provide additional incentive to officers and other key employees and
individuals or organizations who perform services for the Company
("Consultants") of Capital Brands, Inc. (the "Company") and each present or
future parent or subsidiary corporation by encouraging them to invest in shares
of the Company's common stock, $.0001 par value ("Common Stock"), and thereby
acquire a proprietary interest in the Company and an increased personal interest
in the Company's continued success and progress, to the mutual benefit of
officers, employees, consultants and shareholders.
2. AGGREGATE NUMBER OF SHARES
900,000 shares of the Company's Common Stock shall be the
aggregate number of shares which may be issued under this Plan. Notwithstanding
the foregoing, in the event of any change in the outstanding shares of the
Common Stock of the Company by reason of a stock dividend, stock split,
combination of shares, recapitalization, merger, consolidation, transfer of
assets, reorganization, conversion or what the Board of Directors ("Board") or
Compensation Committee (defined in Section 4(a)), determines in its sole
discretion to be similar circumstances, the aggregate number and kind of shares
which may be issued under this Plan shall be appropriately adjusted in a manner
determined in the sole discretion of the Board or Compensation Committee.
Reacquired shares of the Company's Common Stock, as well as unissued shares, may
be used for the purpose of this Plan. Common Stock of the Company subject to
options which have terminated unexercised or cancelled, either in whole or in
part, shall be available for future options granted under this Plan.
3. CLASS OF PERSONS ELIGIBLE TO RECEIVE OPTIONS
All officers, key employees and consultants of the Company and
of any present or future Company parent or subsidiary corporation are eligible
to receive a non-qualified stock option or options under this Plan. All
officer's, key employees and consultants who are considered employees of the
company and of any present or future company parent or subsidiary corporation
are eligible to receive an Incentive Stock Option or Options under this Plan.
The individuals who shall, in fact, receive an option or options shall be
selected by the Board or Compensation Committee, in its sole discretion, except
as otherwise specified in Section 4 hereof.
<PAGE>
4. ADMINISTRATION OF PLAN
(a) This Plan shall be administered by the Board or
Compensation Committee ("Committee") appointed by the Company's Board. The
Committee shall consist of a minimum of two members of the Board, and, if the
Company registers a class of equity security under section 12 of the Security
Exchange Act of 1934, as amended, (the "Act") each of whom shall be a
"disinterested person" within the meaning of Rule 16b-3(c)(2)(i) under the Act
of the Securities and Exchange Commission (the "SEC") or any future
corresponding rule. The Board or Committee shall, in addition to its other
authority and subject to the provisions of this Plan, determine which
individuals shall in fact be granted an option or options, whether the option
shall be an Incentive Stock Option or a Non-Qualified Stock Option (as such
terms are defined in Section 5(a)), the number of shares to be subject to each
of the options, the time or times at which the options shall be granted, the
rate of option exercisability, and, subject to Section 5 hereof, the price at
which each of the options is exercisable and the duration of the option.
(b) The Board or Committee shall adopt such rules for the
conduct of its business and administration of this Plan as it considers
desirable. A majority of the members of the Board or Committee shall constitute
a quorum for all purposes. The vote or written consent of a majority of the
members of the Board or Committee on a particular matter shall constitute the
act of the Board or Committee on such matter. The Board or Committee shall have
the right to construe the Plan and the options issued pursuant to it, to correct
defects and omissions and to reconcile inconsistencies to the extent necessary
to effectuate the Plan and the options issued pursuant to it, and such action
shall be final binding and conclusive upon all parties concerned. No member of
the Board or Committee shall be liable for any act or omission (whether or not
negligent) taken or omitted in good faith, or for the exercise of any authority
or discretion granted in connection with the Plan to a Board or Committee, or
for the acts or omissions of any other members of the Board or Committee.
Subject to the numerical limitations on Committee membership set forth in
Section 4(a) hereof, the Board may at any time appoint additional members of the
Committee and may at any time remove any member of the Committee with or without
cause. Vacancies in the Committee, however caused, may be filled by the Board,
if it so desires.
(c) In the event that the members of the Committee or the
Board are not all "disinterested persons" (i.e. a director who is not during the
one year prior to service as an administrator of the Plan, granted or awarded
equity securities pursuant to the Plan or any other plan of the Company, or any
of its affiliates, subject to the exceptions permitted pursuant to Regulation
240.16b-3, as amended, of the Securities Exchange Act of 1934, as amended) and
the Company is subject to the Act, the following conditions shall apply to the
administration of the Plan with respect to all officers and directors entitled
to participate in the Plan including members of the Committee:
(i) each officer and director shall be entitled, under
the Plan, to acquire a maximum of 10,000 shares of
Common Stock in the Company,
2
<PAGE>
(ii) at the exercise price provided herein, (which price
share not be less than the fair market value of the
shares on the date of grant).
(iii) during the period beginning on the third business day
following the dates of release of a quarterly or
annual summary statement of sales and earnings,
appearing in wire service, financial news service,
generally circulated newspaper or other public
release, and ending on the twelfth business day
following such date.
The foregoing (i), (ii) and (iii) shall not be amended more than once
every six (6) months other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder.
5. INCENTIVE STOCK OPTIONS AND NON-QUALIFIED STOCK OPTIONS
(a) Options issued pursuant to this Plan may be either
Incentive Stock Options granted pursuant to Section 5(b) hereof or Non-Qualified
Stock Options granted pursuant to Section 5(c) hereof, as determined by the
Board or Committee. None of the shares of common stock underlying any Options
issued pursuant to this Plan may be disposed of before six months have elapsed
from the date of issuance of the Option. An "Incentive Stock Option" is an
option which satisfies all of the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and the regulations thereunder,
and a "Non-Qualified Stock Option" is an option which either does not satisfy
all of those requirements or the terms of the option provide that it will not be
treated as an Incentive Stock Option. The Board or Committee may grant both an
Incentive Stock Option and a Non-Qualified Stock Option to the same person, or
more than one of each type of option to the same person. The option price for
Incentive Stock Options issued under this Plan shall be equal at least to the
fair market value (as defined below) of the Company's Common Stock on the date
of the grant of the option. The option price for Non-Qualified Stock Options
issued under this Plan may, in the sole discretion of the Board or Committee, be
less than the fair market value of the Common Stock on the date of the grant of
the option but in no event less than 50% of the fair market value of the Common
Stock on the date of grant. If an Incentive Stock Option is granted to an
individual who, at the time the option is granted, owns stock possessing more
than 10 percent of the total combined voting power of all shares of stock of the
Company or any parent or subsidiary corporation of the Company (a "10%
Shareholder"), the option price shall not be less than 110 percent of the fair
market value, as determined by the Board or Committee in accordance with its
interpretation of the requirements of Section 422 of the Code and the
regulations thereunder, of the Company's Common Stock on the date of grant of
the option. The fair market value of the Company's Common Stock on any
particular date shall mean the last reported sale price of a share of the
Company's Common Stock on any stock exchange on which such stock is then listed
or admitted to trading, or on the NASDAQ Stock Market, on such date, or if no
sale took place on such day, the last such date on which a sale took place, or
if the Common Stock is not then quoted on the Nasdaq Stock Market, or listed or
admitted to trading on any stock exchange, the average of the bid and asked
prices in the over-the-counter market on such date, or if none of the foregoing,
a price determined by the Board or Committee based on other measures of value.
3
<PAGE>
(b) Subject to the authority of the Board or Committee set
forth in Section 4(a) hereof, Incentive Stock Options issued pursuant to this
Plan shall be issued substantially in the form set forth in Appendix I hereof,
which form is hereby incorporated by reference and made a part hereof, and shall
contain substantially the terms and conditions set forth therein. Incentive
Stock Options shall not be exercisable after the expiration of ten years (five
years in the case of 10% Shareholders) from the date such options are granted,
unless terminated earlier under the terms of the option. No Incentive Stock
Option may be granted if, as the result of such grant, the aggregate fair market
value (determined at the time of grant) of the shares with respect to which such
Incentive Stock Options are exercisable for the first time during any calendar
year (under all such plans of the Company, any parent or subsidiary) shall
exceed One Hundred Thousand Dollars ($100,000). At the time of the grant of an
Incentive Stock Option hereunder, the Board or Committee may, in its discretion,
modify or amend any of the option terms contained in Appendix I for any
particular optionee, provided that the option as modified or amended satisfies
the requirements of Section 422 of the Code and the regulations thereunder. Each
of the options granted pursuant to this Section 5(b) is intended, if possible,
to be an "Incentive Stock Option" as that term is defined in Section 422 of the
Code and the regulations thereunder. In the event this Plan or any option
granted pursuant to this Section 5(b) is in any way inconsistent with the
applicable legal requirements of the Code or the regulations thereunder for an
Incentive Stock Option, this Plan and such option shall be deemed automatically
amended as of the date hereof to conform to such legal requirements, if such
conformity may be achieved by amendment.
(c) Subject to the authority of the Board or Committee set
forth in Section 4(a) hereof, Non-Qualified Stock Options issued pursuant to
this Plan shall be issued substantially in the form set forth in Appendix II
hereof, which form is hereby incorporated by reference and made a part hereof,
and shall contain substantially the terms and conditions set forth therein,
Non-Qualified Stock Options shall expire ten years after the date they are
granted, unless terminated earlier under the option terms. At the time of
granting a Non-Qualified Stock Option hereunder, the Board or Committee may, in
its discretion, modify or amend any of the option terms contained in Appendix II
for any particular optionee.
(d) Neither the Company nor any of its current or future
parents, subsidiaries or affiliates, nor their officers, directors,
shareholders, stock option plan committees, employees or agents shall have any
liability to any optionee in the event (i) an option granted pursuant to Section
5(b) hereof does not qualify as an "Incentive Stock Option" as that term is used
in Section 422 of the Code and the regulations thereunder; (ii) any optionee
does not obtain the tax treatment pertaining to an Incentive Stock Option; or
(iii) any option granted pursuant to Section 5(c) hereof is an "Incentive Stock
Option." The Company shall indemnify the Board and Committee against all claims
or liability arising hereunder, including reasonable attorneys fees and costs.
4
<PAGE>
6. MODIFICATION, AMENDMENT, SUSPENSION AND TERMINATION
Options shall not be granted pursuant to this Plan after the
expiration of ten years from the date the Plan is adopted by the Board of the
Company. The Board reserves the right at any time, and from time to time, to
modify or amend this Plan in any way, or to suspend or terminate, effective as
of such date, which date may be either before or after the taking of such
action, as may be specified by the Board; provided, however, that such action
shall not affect options granted under the Plan prior to the actual date on
which such action occurred. If a modification or amendment of this Plan is
required by the Code or the regulations thereunder to be approved by the
shareholders of the Company in order to permit the granting of "Incentive Stock
Options" (as that term is defined in Section 422 of the Code and regulations
thereunder) pursuant to the modified or amended Plan, such modification or
amendment shall also be approved by the shareholders of the Company in such
manner as is prescribed by the Code and the regulations thereunder. Further, if
such amendment will (i) materially increase the total number of shares which may
be issued and sold pursuant to options granted under the Plan, (ii) materially
increase the benefits accruing to Plan participants or (iii) materially modify
the requirements as to eligibility for participation in the Plan, such amendment
must be approved by the stockholders of the Company. If the Board voluntarily
submits a proposed modification, amendment, suspension or termination for
shareholder approval, such submission shall not require any future
modifications, amendments, suspensions or terminations (whether or not relating
to the same provision or subject matter) to be similarly submitted for
shareholder approval.
7. EFFECTIVENESS OF PLAN
This Plan shall become effective on the date of its adoption
by the Board, subject however to approval by the holders of the Company's Common
Stock in the manner as prescribed in the Code and the regulations thereunder.
This Plan shall continue in effect until all shares of stock available for grant
under this Plan shall have been acquired through exercise of options or until
ten years from the date of adoption of the Plan by the Board, whichever is
earlier. Options may be granted under this Plan prior to obtaining shareholder
approval, provided such options shall not be exercisable until shareholder
approval is obtained.
8. GENERAL CONDITIONS
(a) Nothing contained in this Plan or any option granted
pursuant to this Plan shall confer upon any employee the right to continue in
the employ of the Company or any affiliated or subsidiary corporation or
interfere in any way with the rights of the Company or any affiliated or
subsidiary corporation to terminate his employment in any way.
(b) As a condition to the receipt or exercise of any
option, the Board or Committee, in its sole and absolute discretion, may require
that an optionee or a class of optionees agree to be bound by certain
nondisclosure, nonsolicitation and/or noncompetition covenants prohibiting such
optionee from disclosing or using proprietary information of the Company at any
time or from soliciting the Company's employees, customers or suppliers or from
competing with the Company at any time during employment and for a stated period
5
<PAGE>
following termination of employment. In the event of any breach of such
covenants or the provisions of any other agreement between the Company and the
optionee, the Board or Committee, in its sole and absolute discretion, in
addition to any other rights or remedies of the Company at law or in equity, may
(i) cancel any unexercised option held by such optionee, (ii) rescind the
exercise of any option exercised twelve (12) months prior to, or at any time
after, such breach by requiring such optionee to return any shares received upon
the exercise of such option to the Company and/or (iii) require such optionee to
pay to the Company an amount equal to the Gain Realized (as hereinafter defined)
on the exercise of any option exercised twelve (12) months prior to, or at any
time after, such breach. As used herein, Gain Realized shall equal the fair
market value of any Common Stock received on the date of exercise of an option
less the option exercise price.
(c) At the time of exercise of any Option, the Company
may require as a condition of the exercise of such Option, the payment to the
Company of an amount of the tax the Company may be required to withhold to
obtain a deduction for federal income tax purposes as a result of the exercise
of such option. The Committee shall not be required to issue shares until such
obligations are satisfied. The Committee may permit these obligations to be
satisfied by having the Company withhold a portion of the shares of stock that
would otherwise be issued to him or her upon exercise of the option, or to the
extent permitted, by tendering shares previously acquired.
(d) Corporate action constituting an offer of stock for
sale to any employee under the terms of the options to be granted hereunder
shall be deemed complete as of the date when the Board or Committee authorizes
the grant of the option to the employee, regardless of when the option is
actually delivered to the employee or acknowledged or agreed to by him.
(e) The terms "parent corporation" and "subsidiary
corporation" as used throughout this Plan, and the options granted pursuant to
this Plan, shall (except as otherwise provided in the Option form) have the
meaning that is ascribed to that term when contained in Section 422(b) of the
Code and the regulations thereunder, and the Company shall be deemed to be the
grantor corporation for purposes of applying such meaning.
(f) References in this Plan to the Code shall be deemed
to also refer to the corresponding provisions of any future United States
revenue law.
(g) The use of the masculine pronoun shall include the
feminine gender whenever appropriate and nouns in the singular shall include the
plural.
(h) This Plan shall be governed and construed in
accordance with the laws of the State of Florida.
(i) This Plan shall be binding upon the successors and
assigns of the Company.
(j) During a grantee's lifetime no stock option granted under
this Plan shall 8be transferable and stock options may be exercised only by the
grantee.
6
<PAGE>
CAPITAL BRANDS, INC.
1225 BROKEN SOUND PARKWAY
BOCA RATON, FL 33481
PROXY
The undersigned hereby constitutes and appoints Brian Kahan as Proxy, with the
power to appoint his substitute, and hereby authorizes him to represent and to
vote as designated below, all shares of common stock of the Company held of
record by the undersigned on June 12, 1996, at the Annual Meeting of
Stockholders to be held on July 3, 1996, or any adjournment thereof.
1. Election of Directors
FOR all nominees listed below WITHHELD AUTHORITY to vote
(except as marked to the for all nominees listed
contrary) --- below ---
--- ---
Brian A. Kahan Malcolm Leonard
Gerard N. Altieri Robert Edelheit
Martha M. Little Paul Heimberg
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
PLEASE DRAW A LINE THROUGH THAT NOMINEE'S NAME)
2. To amend the Company's Articles of Incorporation to effect an increase of the
Company's authorized common stock from 12,500,000 shares of common stock, par
value $.0008 to 50,000,000 shares of common stock, par value $.0001.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
3. To amend the Company's Articles of Incorporation to change the name of
the Company to CompScript, Inc.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
4. To approve the Company's 1996 Stock Option Plan, as adopted by the
Board of Directors.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
5. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
(SEE REVERSE SIDE)
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CAPITAL
BRANDS, INC. This Proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR the nominees listed in Proposal 1 and FOR Proposals 2,
3 and 4.
Please sign exactly as name appears below. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
Corporation, please sign in the Corporate name by President or other authorized
officer. If a Partnership, please sign in Partnership name by authorized person.
----------------------------------
Signature
----------------------------------
Signature If Held Jointly
----------------------------------
(Please Print Name)
----------------------------------
Number of Shares Subject to Proxy
Dated: ____________________, 1996
