FORM 10-K/A
Amendment No. 1
(Contains Part III of Registrant's Annual Report on Form 10-K)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-19623
MIAMI SUBS CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0249329
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6300 N.W. 31ST AVENUE, FORT LAUDERDALE, FLORIDA 33309
(Address of principal executive offices)
(Zip Code)
(954) 973-0000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
NONE NONE
Securities registered pursuant to section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of August 26, 1996, 27,738,840 shares of common stock were outstanding. On
such date, the aggregate market value of the common stock held by
non-affiliates of the Registrant was approximately $19,254,000 (amount
computed based on the closing price on August 26, 1996). As of August 26,
1996, 505,500 shares of convertible preferred stock, which are also voting
stock, were outstanding and held by non-affiliates. Such shares are not
traded on a market.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table contains information regarding the Directors and Executive
Officers of the Company.
<TABLE>
<CAPTION>
Name Position Age
- ---------------------- ----------------------------------------------------------------------- ---
<S> <C> <C>
Thomas J. Russo Chairman of the Board, Director, President and 55
Chief Executive Officer
Gus Boulis Director 47
Richard U. Jelinek Director 48
Greg Karan Director 39
Francis P. Lucier Director 68
William L. Paternotte Director 51
Joseph Zappala Director 62
- ---------------------- ----------------------------------------------------------------------- ---
Donald L. Perlyn Executive Vice President of Franchise Development 53
Arthur G. Gunther Executive Vice President of Marketing, Concept and Product Development 60
Jerry W. Woda Senior Vice President of Finance, Chief Financial Officer,and Treasurer 46
Gus Bartsocas Senior Vice President of International and Non-Traditional Development 44
Robert J. Hoffman Vice President of Operations 49
Frank M. Puthoff Vice President, General Counsel and Secretary 50
Richard D. Palmisciano Vice President of Real Estate and Construction 54
Robert Yiannas Vice President of Operations 35
</TABLE>
The size of the Board is currently set at seven directors. Directors of the
Company are elected annually. The current Board is expected to serve until
the next annual meeting. Directors who are employees of the Company receive
no additional compensation for their service as directors. Directors who are
not salaried employees of the Company ("non-employee Directors") are paid a
fee of $4,000 per year, together with the expenses of attending meetings. In
addition, under the Company's 1990 Executive Option Plan, each Director of the
Company who is not an employee of the Company receives an option to purchase
30,000 shares of common stock when he or she is first elected a Director, and
an option to purchase 2,000 shares of common stock as of the date of each
Meeting of Shareholders at which the Director is reelected. These options are
immediately exercisable at a price equal to the fair market value per share of
Common Stock on the date of grant, are non-qualified stock options, and have a
ten-year term. If a Director ceases to be a Director by reason of his or her
death or disability or for any other reason than a removal for cause (in which
event the options automatically terminate) any unexercised portion of the
options granted shall remain exercisable for the shorter of the period of
twelve (12) months after such event or the term described in the immediately
preceding sentence. Mr. Gus Boulis, the founder of the Company and the former
Chairman of the Board of Directors and a former Officer of the Company, is not
eligible to receive any options pursuant to the terms of the Plan.
Mr. Russo has been Chairman of the Board, President and Chief Executive
Officer of the Company since January, 1994. Prior to joining the Company, Mr.
Russo served as Group Chairman and Chief Executive Officer of Hanson
Housewares Group, a division of Hanson PLC, for more than five years.
Mr. Boulis, the founder of the Miami Subs concept, has been a director of the
Company since 1990. In January, 1994 Mr. Boulis resigned his positions as
Chairman of the Board, President and Chief Executive Officer. Mr. Boulis is a
private businessman and investor.
Mr. Jelinek has been a director of the Company since July 1994. Mr. Jelinek
is a partner in Dove Associates, Inc., a management consulting firm
headquartered in Boston, Massachusetts. Since 1990, Mr. Jelinek has served in
various management and consulting capacities with the General Electric
Company, including Vice President - Corporate Compensation and Benefits, and
Human Resources Officer for GE Plastics.
Mr. Karan has been a director of the Company since August 1996. Since
January, 1995, Mr. Karan has been Vice President of Operations for SunCruz
Casino Cruises, a private company owned by Mr. Boulis. He was a General
Manager of a Miami Subs Grill restaurant owned by Kavala, Inc. (a private
company owned by Mr. Boulis) from August 1993 through 1994. Prior thereto, he
was Project Manger from 1987 to March, 1993 for 710288 Ontario, Ltd., a
holding and development company owned by Mr. Boulis in Brampton, Ontario,
Canada.
Mr. Lucier has been a director of the Company since July 1994. Mr. Lucier is
a principal and director of Hartland & Co., pension financial consultants,
since 1989. He has been a management consultant since 1985. He was
President, Chief Executive Officer and/or Chairman of the Board of the Black &
Decker Corporation, a manufacturing company, from 1972 until his retirement in
1984. Mr. Lucier is a director of Beckman Instruments, Inc. and PHH
Corporation.
Mr. Paternotte has been a director of the Company since July 1994. Mr.
Paternotte is a Managing Director of Alex. Brown & Sons Incorporated for over
five years.
Mr. Zappala has been a director of the Company since July 1994. From 1989
until 1992, Mr. Zappala served as U.S. Ambassador to Spain. Since 1992, Mr.
Zappala has been a private businessman and investor.
Mr. Perlyn became Executive Vice President of Franchise Development in October
1994. He was Executive Vice President of Franchising and Development of the
Company from March 1992 and Senior Vice President of Franchising and
Development from September 1990 to February 1992. Between August 1990 and
December 1991, he was Senior Vice President of Franchising and Development for
QSR, Inc., one of the Company's predecessors and an affiliate. Mr. Perlyn is
also an officer, director and a principal of MADJEC Associates, Inc., a
franchisee of the Company.
Mr. Gunther became Executive Vice President of Marketing, Concept and Product
Development of the Company in January 1994. For the past five years, Mr.
Gunther has been the President, a director and principal of Gunther Restaurant
Group, Inc., a private company which owns and operates three Pizzeria Uno
restaurants in California. From 1980 until 1986, Mr. Gunther was President
and Chief Executive Officer of Pizza Hut, Inc., a subsidiary of PepsiCo, Inc.
Mr. Gunther resigned from the Company in August 1996 and will serve as a
consultant to the Company until January 1997.
Mr. Woda has been Senior Vice President of Finance, Chief Financial Officer,
and Treasurer of the Company since September, 1992, having acted as a
consultant to the Company since March, 1992. From 1989 until joining the
Company, Mr. Woda was the Chief Financial Officer of Kavala, Inc., a private
company owned by Mr. Boulis.
Mr. Bartsocas has been Senior Vice President of International and
Non-Traditional Development since March 1995. He had been Senior Vice
President of Franchise Operations and Procurement since April 1994, and prior
to that he was Vice President of Restaurant Development and Procurement of the
Company since August 1992. Since March 1990, Mr. Bartsocas was Director of
Supply Management and Research and Development for the Company. Mr. Bartsocas
is also a Vice President and director of Subies Enterprises, Inc., a
franchisee of the Company (see section below entitled "Certain Relationships
and Related Transactions").
Robert J. Hoffman has been Vice President of Operations since March, 1994.
From 1990 until joining the Company, Mr. Hoffman was Senior Vice President for
Metromedia Steakhouses Company, L.P. (Ponderosa).
Frank M. Puthoff joined the Company in July, 1994 as Vice President, General
Counsel and Secretary. Since August, 1990, Mr. Puthoff has been in various
management positions with Ground Round Restaurants, Inc., serving most
recently as Senior Vice President, General Counsel and Secretary. In
September 1996, Mr. Puthoff resigned from the Company.
Richard D. Palmisciano became Vice President of Real Estate and Construction
in January 1995. From 1980 through 1994, he was employed by Burger King
Corporation in various construction and real estate positions, most recently
as Vice President of Construction. In September 1996, Mr. Palmisciano's
employment with the Company was terminated.
Robert Yiannas has been Vice President of Operations since January, 1995.
From 1991 until joining the Company, Mr. Yiannas was the Chief Operating
Officer for MG III, Inc., a former Miami Subs franchisee and joint venture
partner acquired by the Company. Prior to 1991, Mr. Yiannas was Director of
Operations for Davgar Restaurants, Inc., a Burger King franchisee and former
parent of MG III, Inc.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10 percent of
the Company's 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. In addition these individuals are also required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, during the fiscal year ended May 31,
1996, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than ten percent beneficial owners were
complied with.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the compensation paid during the past three
fiscal years to the Company's Chief Executive Officer and the other four most
highly compensated executive officers of the Company (the "Named Executive
Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
---------------------
Compensation Awards
----------------------
Other Annual
Name and Fiscal Compensation(a) Securities Underlying
Principal Position Year Salary ($) Bonus ($) ($) Options (#)
- -------------------------------- ------ --------------------- ---------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
Thomas J. Russo, Chairman, 1996 $ 280,000 - - -
President, and Chief Executive 1995 $ 280,000 - - -
Officer (b) 1994 $ 139,318 - - 2,100,000
Gus Boulis 1996 - - - -
Chairman, President, and Chief 1995 - - - -
Executive Officer (c) 1994 $ 78,125 - - -
Donald L. Perlyn, 1996 $ 142,400 - - 50,000
Executive Vice President 1995 $ 142,400 - - -
of Franchise Development 1994 $ 128,280 - - 172,000
Arthur G. Gunther, 1996 $ 150,000 - - 50,000
Executive Vice President of 1995 $ 150,000 - - -
Marketing, Concept, and Product 1994 $ 62,500 - - 450,000
Development (d)
Robert J. Hoffman, 1996 $ 100,000 $ 25,000 - 200,000
Vice President of 1995 $ 100,000 $ 25,000 - -
Operations(e) 1994 $ 19,792 - - 90,000
Richard D. Palmisciano, 1996 $ 125,000 $ 25,000 - 200,000
Vice President of Real Estate 1995 $ 56,583 - - 100,000
and Construction (f) 1994 - - - -
================================ ====== ===================== ========== =============== ======================
All Other
Name and Compensation
Principal Position ($)
- -------------------------------- --------------
<S> <C>
Thomas J. Russo, Chairman, -
President, and Chief Executive -
Officer (b) -
Gus Boulis -
Chairman, President, and Chief $ 100,000
Executive Officer (c) $ 50,000
Donald L. Perlyn, -
Executive Vice President -
of Franchise Development -
Arthur G. Gunther, -
Executive Vice President of $ 15,000
Marketing, Concept, and Product $ 8,000
Development (d)
Robert J. Hoffman, $ 13,349
Vice President of $ 32,454
Operations(e) -
Richard D. Palmisciano, -
Vice President of Real Estate -
and Construction (f) -
================================ ==============
<FN>
(a) Does not include the value of personal benefits since the aggregate value of such benefits for each of these
officers in the periods for which amounts are not shown was less than 10% of such officer's salary and bonus.
(b) Thomas J. Russo became Chairman of the Board, President and Chief Executive Officer in January 1994. See
"Compensation Pursuant to Contracts."
(c) In January, 1994 Mr. Boulis resigned his positions with the Company, at which time the Company retained Mr.
Boulis as a consultant. Amounts paid pursuant to the consulting agreement are included in the column "All Other
Compensation." The Consulting Agreement was terminated in January 1995. See "Compensation Pursuant to
Contracts."
(d) Arthur G. Gunther became Executive Vice President of Marketing, Concept and Product Development in January
1994. See "Compensation Pursuant to Contracts." Amounts shown under "All Other Compensation" in 1995 represent
payments made as reimbursement of relocation costs, and in 1994 represent temporary housing allowance payments
made pursuant to his employment contract. Mr. Gunther resigned in August, 1996.
(e) Robert J. Hoffman became Vice President of Operations in March 1994. See "Compensation Pursuant to Contracts."
Amounts shown under "All Other Compensation" in 1996 and in 1995 represent payments made as reimbursement of
relocation costs.
(f) Richard D. Palmisciano became Vice President of Real Estate and Construction in January 1995. In September
1996, Mr. Palmisciano's employment with the Company was terminated.
</TABLE>
COMPENSATION PURSUANT TO CONTRACTS
On January 14, 1994, the Company entered into an Employment Agreement with
Thomas J. Russo. On June 26, 1996, the Board of Directors renewed the
agreement for an additional three year term to expire on January 20, 2000. In
addition, his agreement was also amended at that time and on February 13, 1996
to clarify that his annual current base salary is $280,000, and, in the event
of a change of control (as defined in the February 13, 1996 Amendment), he
would receive, in addition to (three times) his then current base salary, an
amount equal to three times his maximum potential bonus, which is 100% of his
then current annual base salary. During the term of the agreement, Mr. Russo
is entitled to (i) minimum annual base compensation of $280,000, subject to
annual increases as determined appropriate by the Board of Directors, (ii)
participate in a proposed executive bonus plan with an annual incentive bonus
of up to 100 percent of base salary, (iii) use of a Company automobile, (iv)
term life insurance payable to Mr. Russo's beneficiary in the amount of $2.0
million, (v) short and long term disability insurance benefits equal to
two-thirds of his base salary, (vi) options to acquire 2.1 million shares of
Common Stock, and (vii) such other fringe benefits and perquisites as may be
provided to the Company's senior officers.
The stock option grant includes options to acquire (i) 1.1 million shares of
Common Stock at $2.69 per share, of which 900,000 shares are vested and
exercisable, and 200,000 shares become vested and exercisable on January 19,
1997, (ii) 266,000 shares at $4.00 per share which are vested and exercisable,
(iii) 334,000 shares at $5.00 per share which are vested and exercisable, and
(iv) 400,000 shares at $6.00 per share becoming vested and exercisable on
January 19, 1997. In June, 1996, the term of Mr. Russo's options were
extended to January 20, 2004.
Mr. Russo may be terminated for "cause," as defined in the agreement. If he
is terminated for cause, he will be entitled to base salary earned, and he
will retain all vested stock options, which shall remain exercisable for 180
days after the date of termination. If Mr. Russo is terminated "without
cause," then he would be entitled to receive (i) an amount equal to three
times his current base salary plus an amount equal to the bonus received in
the previous year, payable monthly over one year, and (ii) all options granted
under this agreement would immediately become vested and exercisable, and
would remain exercisable for one year.
In the event of Mr. Russo's death, Mr. Russo or his estate would be entitled
to receive any compensation earned but unpaid and all vested stock options
would remain exercisable until January 20, 2004.
In the event Mr. Russo becomes disabled (as defined in the agreement), Mr.
Russo would be entitled to receive benefits under applicable short and long
term disability insurance plans, including continued benefits equal to
two-thirds of his base salary. Additionally, notwithstanding anything to the
contrary in the disability plans, Mr. Russo would be entitled to receive all
benefits under the agreement, including his base salary, for a period of six
months following such disability. Mr. Russo would also be entitled to retain
all vested stock options, which would remain exercisable until January 20,
2004. Mr. Russo's agreement also prohibits him from competing with the
Company for two years after termination of his employment with the Company.
(See below and the section below entitled "Compensation Committee Report on
Executive Compensation" regarding Mr. Russo's and other officers' Change of
Control Agreements.)
In January, 1994 the Company entered into a consulting agreement with Mr. Gus
Boulis, the founder of the Company and a current director. Prior to January
24, 1994, he served as the Company's Chairman, President and Chief Executive
Officer. The agreement, which was terminated in January 1995, prohibits him
from competing with the Company for two years following such termination of
the agreement.
In January, 1994, the Company entered into an Employment Agreement with Arthur
G. Gunther. During the term of the agreement, Mr. Gunther is entitled to (i)
a minimum annual base salary of $150,000, subject to increases as determined
appropriate by the Board of Directors, (ii) participate in a proposed
executive bonus plan with an annual incentive bonus of up to 100 percent of
base salary, (iii) temporary housing allowance of $4,000 per month for up to
six months, reimbursement of relocation costs, and a loan in the amount of
$70,000 to defray the cost of relocation, (iv) an automobile allowance of $450
per month, (v) term life insurance payable to Mr. Gunther's beneficiary in the
amount of $1.0 million, (vi) options to acquire 450,000 shares of Common Stock
at $2.69 per share of which 300,000 are vested and exercisable, and (vii) such
other fringe benefits and perquisites as may be provided to the Company's
senior executives. In August 1996, Mr. Gunther resigned his positions with
the Company and the Employment Agreement was terminated. Mr. Gunther
currently serves in a consulting capacity for the Company through January
1997.
In June 1994, the Company entered into an Employment Agreement with Donald L.
Perlyn. The agreement expires on May 31, 1997. During the term of the
agreement, Mr. Perlyn is entitled to (i) a minimum annual base salary of
$142,400, subject to increases as determined appropriate by the Board of
Directors, (ii) participate in a proposed executive bonus plan with an annual
incentive bonus of up to 50 percent of base salary, (iii) term life insurance
payable to Mr. Perlyn's beneficiary in the amount of $1.0 million, and (iv)
such other fringe benefits and prerequisites as may be provided to the
Company's senior executives. In the event of termination for "cause," Mr.
Perlyn would be entitled to compensation earned but not paid and prorated
bonus, if applicable. If Mr. Perlyn is terminated "without cause," he would
be entitled to receive the base salary for the balance of the term of the
agreement. In the event a third party other than Mr. Boulis assumes control
(as defined in his agreement) by a hostile or unfriendly takeover of the
Company, and Mr. Perlyn is discharged or resigns his employment with the
Company within 120 days of such event, he would then be entitled to receive up
to three times his current base salary and up to three times his maximum
potential bonus. Mr. Perlyn's agreement also prohibits him from competing
with the Company for two years after termination of his employment with the
Company.
In March, 1994, the Company entered into an Employment Agreement with Robert
J. Hoffman. The Agreement expires March 20, 1997. During the term of the
Agreement, Mr. Hoffman is entitled to (i) a minimum annual base salary of
$100,000, subject to increase as determined appropriate by the Board of
Directors, (ii) participate in a proposed Executive Bonus Plan with an annual
incentive bonus of up to forty (40%) percent of base salary and, in any event,
a guarantee of at least $25,000 bonus at the completion of each year of the
term, (iii) term life insurance payable to Mr. Hoffman's beneficiary in the
amount of $500,000, and (iv) options to acquire 90,000 shares of common stock
at $2.94 per share of which 60,000 are vested and exercisable and 30,000
becoming vested and exercisable on March 20, 1997, and (v) such other fringe
benefits and perquisites as may be provided to the Company's senior
executives. In the event of termination for "cause", Mr. Hoffman would be
entitled to compensation earned but not paid, prorated bonus, if applicable.
He would retain all vested stock options, which would remain exercisable for
thirty (30) days after the date of termination. If Mr. Hoffman is terminated
"without cause", he would be entitled to receive the base salary for the
balance of the term of the Agreement, and he would retain all vested stock
options, which would remain exercisable for one hundred eighty (180) days.
Mr. Hoffman's agreement also prohibits him from competing with the Company for
two (2) years after termination of his employment with the Company.
Since July, 1995, the Compensation Committee and the Board of Directors have
been considering the implementation of change of control agreements to be
offered to all officers and which would amend Mr. Russo's Change of Control
Agreement as contained in his Employment Agreement dated January 14, 1994. On
February 13, 1996, the Compensation Committee approved and recommended to the
Board, and the Board, after determining that change of control agreements were
in the best interest of the Company and its shareholders, approved the form
and terms of such change of control agreements to be offered each officer of
the Company as outlined below. Currently Messrs. Russo, Bartsocas, Hoffman,
Woda, and Yiannas have change of control agreements with the Company. The
change of control agreements for each individual are the same, except for Mr.
Russo's as noted below. The change of control agreements became effective on
February 13, 1996 and expire on January 20, 2000.
A "Change of Control" is a defined term in the agreements but, generally, is
deemed to have taken place if (i) any person other than Mr. Boulis is or
becomes the beneficial owner of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities, (ii) Mr. Boulis or any of his affiliates or associates is or
becomes the beneficial owner of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities, (iii) the shareholders of the Company shall have approved (A) a
reorganization, merger or consolidation with the shareholders of the Company
immediately prior to such transaction, did not, immediately thereafter, own
more than 50% of the reorganized, merger or consolidated companies then
outstanding voting securities, (B) a liquidation or dissolution of the
Company, or (C) a sale of substantially all of the assets of the Company, or
(iv) as a result of a tender offer, exchange offer, merger, consolidation,
sale of assets or contested election or any combination of the foregoing, the
persons who are directors of the Company immediately before shall cease to
constitute a majority of the Board of Directors immediately after such
transaction occurs.
In the event that (i) within six months after a Change of Control the officer
dies, becomes disabled or terminates his employment with the Company for "Good
Reason" (as defined in the Change of Control Agreements and includes such
events as diminution of position, reduction of compensation and benefits,
relocation or material impairment of the assets of the Company), (ii) within
12 months after a Change of Control the officer's employment with the Company
is terminated by the Company for any reason other than "Cause" (as defined in
the Change of Control Agreements), or (iii) within the period beginning on the
sixth month anniversary of a Change of Control of the Company and ending on
the twelfth month anniversary thereof, the officer terminates his employment
for any reason, then in such event the officer shall be entitled to receive
lump sum compensation in an amount equal to two times (a) his annual then
current base salary, plus (b) bonuses paid, if any, for the two most recently
ended fiscal years prior to the Change of Control. In addition, all options
shall vest, and the officer shall receive at least the equivalent of the same
benefits he received immediately before the Change of Control for two years
after such termination. Any payments shall be grossed up unless such gross-up
would cause such payments to be subject to (i) the excise tax imposed by
Section 4999 of Internal Revenue Code of 1986, as amended ("Code"), in which
case the gross-up would be reduced so as not to trigger imposition of the
excise tax, or (ii) Section 162(m) of the Code, which imposes a $1,000,000
annual limit on deductions to the Company from compensation paid to certain
employees, if applicable.
Mr. Russo's Change of Control provisions in his Employment Agreement dated
January 14, 1994 were amended on February 13, 1996 (and further clarified by
an amendment dated June 26, 1996) to conform with the other Change of Control
Agreements adopted for the officers of the Company with the following
exceptions only: In the event Mr. Russo's employment with the Company
terminates after a Change of Control occurs and his employment is terminated
as described above, he would receive a lump sum compensation equal to three
times the sum of (a) his then current annual base salary, plus (b) three times
his maximum potential bonus, which is deemed to be in an amount equal to three
times his then current base salary. Further, payments to Mr. Russo under his
Change of Control provisions are "grossed up" for tax purposes and not subject
to any restrictions or caps as a result of Section 4999 of the Code and
Section 162(m) of the Code discussed above. In all other respects, the terms
of Mr. Russo's Change of Control provisions are identical to the other
officers.
Option Grants
The following table provides information on stock option grants during fiscal
year 1996 to each of the executive officers named in the "Summary Compensation
Table."
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
------------------
Potential Realizable Value
at Assumed Annual Rates
Percent of Total of Stock Price Appreciation
Number of Options Granted Exercise or for
Securities to Employees in Base Price Expiration Option Term (4)
-----------------------------
Underlying Options
<S> <C> <C> <C> <C> <C>
Name Granted (#)(1) Fiscal Year ($/Sh)(2) Date 5%($)
- ---------------------- ------------------- ------------------ ------------- ---------- -----------------------------
Thomas J. Russo NA NA NA NA NA
Donald L. Perlyn 50,000 3.9% $ 1.81 7/10/2005 $ 56,915
Arthur G. Gunther 50,000 3.9% $ 1.81 7/10/2005 $ 56,915
Robert J. Hoffman 200,000 15.6% $ 1.81 7/10/2005 $ 227,660
Richard D. Palmisciano 200,000 15.6% $ 1.81 7/10/2005 $ 227,660
====================== =================== ================== ============= ========== =============================
<S> <C>
Name 10%($)
- ---------------------- ---------
Thomas J. Russo NA
Donald L. Perlyn $ 144,235
Arthur G. Gunther $ 144,235
Robert J. Hoffman $ 576,940
Richard D. Palmisciano $ 576,940
====================== =========
<FN>
(1) All options granted in fiscal year 1996 are exercisable in full two years from date of grant.
(2) All options were granted at market value (closing price for the Company's common stock) at the date of grant.
(3) All options granted in fiscal year 1996 were granted for a term of ten years, subject to termination 90 days
following termination of employment.
(4) The dollar amounts in these columns are the result of calculations at the five percent and ten percent rates set
by the SEC and are not intended to forecast future appreciation of the Company's stock price.
</TABLE>
Option Exercises and Year End Option Values
The following table sets forth certain information regarding stock options
exercised by and held by the Chief Executive Officer and each of the executive
officers named in the "Summary Compensation Table." Also reported are the
values for "in-the-money" options which represent the positive spread between
the exercise price of any such existing stock options and the closing price of
the Company's Common Stock on May 31, 1996 as reported by NASDAQ.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
<S> <C> <C> <C>
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS
AT MAY 31, 1996 (#)
SHARES ACQUIRED ON EXERCISE (#) VALUE REALIZED ($)
------------------------------- ----------------------
NAME EXERCISABLE
- ------------------------- --------------------------------
Thomas J. Russo NA NA 1,500,000
Donald L. Perlyn NA NA 533,333
Arthur G. Gunther(1) NA NA 333,333
Robert J. Hoffman NA NA 193,333
Richard D. Palmisciano(2) NA NA 166,666
<S> <C> <C> <C>
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS AT
MAY 31, 1996 ($)
NAME UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ------------- ------------------------ -------------
Thomas J. Russo 600,000 0 0
Donald L. Perlyn 16,667 0 0
Arthur G. Gunther(1) 166,667 0 0
Robert J. Hoffman 96,667 0 0
Richard D. Palmisciano(2) 133,334 0 0
<FN>
(1) Mr. Gunther resigned from the Company in August 1996 and all unexercised options will expire in November 1996.
(2) Mr. Palmisciano's employment with the Company was terminated in September 1996 and all unexercised options
will expire in December 1996.
</TABLE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of
Common Stock as of September 3, 1996 by persons known by the Company to own of
record or beneficially more than five percent of its outstanding Common Stock,
each director of the Company, each of the Company's Named Executive Officers
and by all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF
NAME OF BENEFICIAL OWNER OWNERSHIP (1) CLASS(2)
- -------------------------------------- -------------------------------- -----------
<S> <C> <C>
Gus Boulis 8,556,000 (3) 30.8%
647 East Dania Beach Boulevard
Dania, Florida 33004
Thomas J. Russo 1,991,000 (4) 6.8%
Richard U. Jelinek 32,000 (5) *
Greg Karan 30,000 (5) *
Francis P. Lucier 34,000 (6) *
William L. Paternotte 32,000 (5) *
Joseph Zappala 82,000 (6) *
Donald L. Perlyn 533,333 (5) 1.9%
Arthur G. Gunther 333,333 (7) 1.2%
Robert J. Hoffman 204,333 (8) *
Richard D. Palmisciano 200,000 (9) *
All directors and executive officers
of the Company, including those
named above, as a group (15 persons) 12,844,331 (10) 40.8%
<FN>
* Represents less than one percent of shares outstanding.
(1) Unless otherwise indicated, each person has sole voting and investment power
with respect to such shares.
(2) As of September 3, 1996, 27,738,840 shares of Common Stock were outstanding.
(3) Includes 50,000 shares as to which Kavala, Inc. (a company owned by Mr.
Boulis) has a presently exercisable warrant. As a result of Mr. Boulis' relationship
with the Company, Mr. Boulis may be deemed to be a control party with respect to the
Company.
(4) Includes options for 1,500,000 shares deemed outstanding, representing
presently exercisable options under the Company's 1990 Executive Option Plan that may
be acquired under stock options exercisable within 60 days of September 3,1996.
(5) Consists of options deemed outstanding, representing presently exercisable
options under the Company's 1990 Executive Option Plan that may be acquired under
stock options exercisable within 60 days of September 3, 1996.
(6) Includes options for 32,000 shares deemed outstanding, representing presently
exercisable options under the Company's 1990 Executive Option Plan that may be
acquired under stock options exercisable within 60 days of September 3, 1996.
(7) Consists of options deemed outstanding, representing presently exercisable
options under the Company's 1990 Executive Option Plan that may be acquired under
stock options exercisable within 60 days of September 3, 1996. In August 1996, Mr.
Gunther resigned from the Company and all options outstanding will expire in November
1996.
(8) Includes options for 193,333 shares deemed outstanding, representing
presently exercisable options under the Company's 1990 Executive Option Plan that may
be acquired under stock options exercisable within 60 days of September 3, 1996.
(9) Consists of options deemed outstanding, representing presently exercisable
options under the Company's 1990 Executive Option Plan that may be acquired under
stock options exercisable within 60 days of September 3, 1996. In September 1996,
Mr. Palmisciano's employment with the Company was terminated and all options
outstanding will expire in December 1996.
(10) Includes options for 3,776,331 shares of Common Stock that may be acquired
under stock options exercisable within 60 days of September 3, 1996.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company leases seven restaurant properties from Kavala, Inc. (Kavala), a
private company owned by the Company's founder and director, Mr. Boulis. Rent
expense for all leases between the Company and Kavala was $494,000 in 1996.
Future minimum rental commitments due to Kavala at May 31, 1996 under existing
leases are approximately $497,000 for each of the next five years and
$3,090,000 for the remaining years thereafter. Since 1986, Mr. Boulis has
been the owner of a Miami Subs franchise in Key Largo, Florida and is exempt
from paying royalty fees.
In March 1995, Thomas J. Russo, the Company's Chairman of the Board and
President, exercised options to acquire 450,000 shares of common stock of the
Company. As payment for the stock, the Company received a non-interest
bearing note in the amount of $562,500 which is collateralized by the stock
and due in full in January 1999.
Mr. Bartsocas, an officer of the Company, is also an officer, director and
principal of Subies Enterprises, Inc. ("Subies"), a franchisee of the Company.
Under an agreement which was entered into in 1991 between the Company and
Subies, Subies paid a franchise fee of $5,000 per restaurant and is exempt
from paying royalty fees on five restaurants. Any additional restaurants will
be at then current fees.
Mr. Perlyn, an officer of the Company, is also an officer, director and
principal of Madjec Associates, Inc., a franchisee of the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
MIAMI SUBS CORPORATION
(Registrant)
Date: September, 1996 By: /s/ Jerry W. Woda
JERRY W. WODA
Senior Vice President and
Chief Financial Officer
