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
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(E) (2))
/X/ DEFINITIVE PROXY STATEMENT
/ / DEFINITIVE ADDITIONAL MATERIALS
/ / SOLICITING MATERIAL PURSUANT TO RULE 14A-11(C) OR RULE 14A-12
Miami Subs Corporation
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
MIAMI SUBS CORPORATION
6300 N.W. 31st Avenue
Fort Lauderdale, Florida 33309
(954) 973-0000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 6, 1996
The annual meeting of the shareholders of Miami Subs Corporation, a
Florida corporation ("MSC" or the "Company"), will be held at DoubleTree Guest
Suites, 555 N.W. 62nd Street, Fort Lauderdale, Florida, 33309, on Thursday,
December 12, 1996, at 9:00 a.m., Local Time, for the following purposes:
(1) To elect a Board of Directors to hold office until the next
Annual Meeting of Shareholders or until their respective successors in office
are duly elected and qualified;
(2) To ratify the appointment of KPMG Peat Marwick LLP, to act as the
Company's independent auditors for the current fiscal year; and
(3) To transact such other business as may properly come before the
meeting.
The close of business as of November 4, 1996 has been fixed by the Board
of Directors of MSC as the record date for determination of shareholders
entitled to receive notice of and to vote at the Annual Meeting.
The Annual Meeting may be postponed or adjourned from time to time
without any notice other than by announcement at the meeting of any
postponements or adjournments thereof, and any and all business for which
notice is hereby given may be transacted at any such postponed or adjourned
meeting.
We hope that you will be able to attend the meeting in person, but if you
are unable to do so, you are urged to complete, date and sign the enclosed
proxy card and return it promptly in the enclosed return envelope, so that
your shares may be voted in accordance with your wishes. The giving of your
proxy does not affect your right to vote in person in the event you attend the
meeting.
By Order of the Board of Directors,
Jerry W. Woda
Assistant Secretary
November 6, 1996
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, IN ORDER FOR
YOUR SHARES TO BE REPRESENTED AND VOTED AT THE MEETING PLEASE COMPLETE, DATE,
SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. SHAREHOLDERS WHO EXECUTE A PROXY
CARD MAY NONETHELESS ATTEND THE MEETING, REVOKE THEIR PROXY, AND VOTE THEIR
SHARES IN PERSON.
MIAMI SUBS CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 12, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Miami Subs Corporation, a Florida corporation (the
"Company" or "MSC"), of proxies for use at its Annual Meeting of Shareholders,
to be held at DoubleTree Guest Suites, 555 N.W. 62nd Street, Fort Lauderdale,
Florida, 33309, on December 12, 1996, at 9:00 a.m., local time, and any and
all adjournments thereof ("Annual Meeting"). The purpose of the meeting is to
(i) elect a Board of Directors, (ii) ratify the appointment of KPMG Peat
Marwick LLP to act as the Company's independent auditors for the current
fiscal year, and (iii) transact such other business as may properly come
before the meeting. The Company's principal office is located at 6300 N.W.
31st Avenue, Fort Lauderdale, Florida 33309. The fees, expenses and other
costs of this solicitation of proxies will be borne by the Company. The
Annual Report of the Company for the year ended May 31, 1996 accompanies this
Proxy Statement. The approximate date of mailing this Proxy Statement is
November 8, 1996.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on November 4,
1996, as the record date for determination of shareholders entitled to notice
of and to vote at the Annual Meeting. Only shareholders of record on that
date, on which the books of the Company remained open, will be entitled to
vote. When proxies are returned to the Board of Directors properly signed and
dated, the shares represented thereby will be voted in accordance with
shareholders' directions. Shareholders are urged to specify their choices by
marking the appropriate boxes on the enclosed proxy card. If no choices are
specified, the shares will be voted "for" the proposals to (i) elect a Board
of Directors, and (ii) ratify the appointment of KPMG Peat Marwick LLP to act
as the Company's independent auditors for the current fiscal year. A
shareholder who submits a proxy on the accompanying form may revoke it at any
time before it has been voted at the Annual Meeting by filing with the
Secretary of the Company an instrument revoking it or a duly executed proxy
bearing a later date. Although a shareholder may have submitted a proxy, such
shareholder may nevertheless attend the meeting, revoke the proxy, and vote in
person.
As of November 4, 1996, the record date for the determination of the
shareholders of the Company entitled to notice of and to vote at the Annual
Meeting, there were issued and outstanding 28,244,340 shares of the Company's
Common Stock, par value $.01 per share ("Common Stock"). On each matter
brought before the Annual Meeting, each share of Common Stock entitles the
holder thereof to one vote. The quorum necessary to conduct business at the
Annual Meeting consists of a majority of the number of outstanding shares of
Common Stock. Directors will be elected by a plurality of the votes cast by
shares present at the meeting or voting by proxy thereon. The appointment of
the Company's independent auditors will be ratified if the number of votes
cast for ratification is greater than the number cast against it.
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 Annual Meeting, the
existence of a quorum and the validity and effect of proxies, and shall
receive, count and tabulate ballots and votes and determine the results
thereof. Abstentions are considered as shares present and entitled to vote
for purposes of determining the presence of a quorum and for purposes of
determining the outcome of any matter submitted to the shareholders for a
vote, but are not counted as votes "for" or "against" any matter. The
inspector of elections will treat shares referred to as "broker or nominee
non-votes" (shares held by brokers or nominees as to which instructions have
not been received from the beneficial owners or persons entitled to vote and
the broker or nominee does not have discretionary voting power on a particular
matter) as shares that are present and entitled to vote for purposes of
determining the presence of a quorum. For purposes of determining the outcome
of any matter as to which the proxies reflect broker or nominee non-votes,
shares represented by such proxies will be treated as not present and not
entitled to vote on that subject matter and therefor would not be considered
by the inspectors when counting votes cast on the matter (even though those
shares are considered entitled to vote for quorum purposes and may be entitled
to vote on other matters). If less than a majority of the outstanding shares
of Common Stock are represented at the Annual Meeting, a majority of the
shares so represented may adjourn the Annual Meeting from time to time without
further notice.
ELECTION OF DIRECTORS
(ITEM NO. 1)
The Board of Directors has established the size of the Board to consist of
seven members. The following table sets forth certain current information
with respect to the nominees for Directors of the Company for which the
proxies are intended to be voted. Directors elected at the Annual Meeting
will hold office until their successors are elected.
<TABLE>
<CAPTION>
Director
Nominee Age Since Business Experience During Past Five Years
- --------------------- --- -------- ------------------------------------------------------------------
<S> <C> <C> <C>
Thomas J. Russo 55 1994 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.
Gus Boulis 47 1990 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.
Richard U. Jelinek 48 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.
Greg Karan 39 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.
Francis P. Lucier 68 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.
William L. Paternotte 51 1994 Mr. Paternotte is a Managing Director of Alex. Brown & Sons
Incorporated for over five years.
Joseph Zappala 62 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.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors currently has formed the following Committees:
Audit Committee. The Audit Committee has the responsibility to
ascertain that the Company's financial statements reflect fairly the Company's
financial condition and to appraise the soundness, adequacy and application of
accounting and operating controls. The Audit Committee also recommends
independent auditors to the Board, reviews the scope of the audit function of
independent auditors, and reviews audit reports rendered by the independent
auditors. The Audit Committee's current members are Joseph Zappala
(Chairman), William L. Paternotte, and Thomas J. Russo.
Compensation Committee. The Compensation Committee reviews and
approves the salaries and other forms of compensation for the Chief Executive
Officer and all other officers of the Company. It also serves as the Stock
Option Committee administering the Company's 1990 Executive Option Plan. The
present members of the Committee are Messrs. Francis P. Lucier (Chairman) and
Richard Jelinek.
Real Estate Committee. The Real Estate Committee reviews and approves
commitments for new Company-operated restaurants. The Real Estate Committee's
current members are Mr. Gus Boulis (Chairman) and Thomas J. Russo.
During fiscal 1996, the Board of Directors met seven times, the Audit
Committee met three times, the Compensation Committee met four times, and the
Real Estate Committee met twice. All Directors attended at least 75% of
meetings of the Board of Directors and Committees on which he served that was
held in fiscal 1996 during their term of office.
COMPENSATION OF DIRECTORS
Upon election of the nominees proposed herein, the Board of Directors
will consist of seven members, one of which is a salaried employee of the
Company. 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 other 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.
<TABLE>
<CAPTION>
MANAGEMENT
The following table contains information regarding the current Executive
Officers of the Company.
Name Position Age
- ----------------- ------------------------------------------------- ---
<S> <C> <C>
Thomas J. Russo Chairman of the Board, President and 55
Chief Executive Officer
Donald L. Perlyn Executive Vice President of Franchise 53
Development
Jerry W. Woda Senior Vice President of Finance, Chief Financial 46
Officer, and Treasurer
Gus Bartsocas Senior Vice President of International and 44
Non-Traditional Development
Robert J. Hoffman Vice President of Operations 49
Robert Yiannas Vice President of Operations 35
</TABLE>
Officer terms of office are within the discretion of the Board.
For a description of the business experience of Mr. Russo, see section
above entitled "Election of Directors."
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 (see section below entitled "Certain Relationships
and Related Transactions").
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).
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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
ownership of Common Stock as of November 4, 1996 by persons known by the
Company to own of record or beneficially more than five percent of its
outstanding Common Stock, each director and nominee for 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 8,506,000 (3) 30.1%
647 East Dania Beach Boulevard
Dania, Florida 33004
Thomas J. Russo 1,991,000 (4) 6.7%
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%
Robert J. Hoffman 204,333 (7) *
All current directors and executive officers
of the Company, including those
named above, as a group (12 persons) 12,160,999 (8) 38.8%
_______________________________________________________________
<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 November 4, 1996, 28,244,340 shares of Common Stock were outstanding.
(3) 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.
(5) Consists of options deemed outstanding, representing presently exercisable options under the Company's
1990 Executive Option Plan.
(6) Includes options for 32,000 shares deemed outstanding, representing presently exercisable options under
the Company's 1990 Executive Option Plan.
(7) Includes options for 193,333 shares deemed outstanding, representing presently exercisable options
under the Company's 1990 Executive Option Plan.
(8) Includes options for 3,092,999 shares deemed outstanding, representing presently exercisable options
under the Company's 1990 Executive Option Plan.
</FN>
</TABLE>
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 Long Term
--------------
Compensation Compensation Awards
-------------- ----------------------
Other Annual All Other
Name and Fiscal Compensation(a) Securities Underlying Compensation
Principal Position Year Salary ($) Bonus ($) ($) Options (#) ($)
- ---------------------------- ------ ----------- -------------- --------------- ---------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Russo, 1996 $ 280,000 - - - -
Chairman, President, and 1995 $ 280,000 - - - -
Chief Executive Officer (b) 1994 $ 139,318 - - 2,100,000 -
Gus Boulis 1996 - - - - -
Chairman, President, and 1995 - - - - $ 100,000
Chief Executive Officer (c) 1994 $ 78,125 - - - $ 50,000
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 - - - $ 15,000
Marketing, Concept, and 1994 $ 62,500 - - 450,000 $ 8,000
Product Development (d)
Robert J. Hoffman, 1996 $ 100,000 $ 25,000 - 200,000 $ 13,349
Vice President of 1995 $ 100,000 $ 25,000 - - $ 32,454
Operations(e) 1994 $ 19,792 - - 90,000 -
Richard D. Palmisciano, 1996 $ 125,000 $ 25,000 - 200,000 -
Vice President of Real 1995 $ 56,583 - - 100,000 -
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
"Management - 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 "Management - Compensation Pursuant to Contracts."
(d) Arthur G. Gunther became Executive Vice President of Marketing, Concept and Product Development in January 1994.
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 "Management - 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.
</FN>
</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, or earlier as provided in the agreement.
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 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
become 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 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. Messrs. Russo, Bartsocas, Hoffman, Woda, and
Yiannas currently have Change of Control Agreements. The 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 the 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 $1,000,000
annual limit on deductions to the Company from compensation paid to certain
employees, if applicable.
Mr. Russo's Change of Control provisions in his Employment Agreement
dated January 14, 1994 were amended on February 13, 1996 (and further
clarified by an amendment dated June 26, 1996) to conform with the other
Change of Control Agreements adopted for the officers of the Company with the
following exceptions only: In the event Mr. Russo's employment with the
Company terminates after a Change of Control occurs and his employment is
terminated as described above, he would receive a lump sum compensation equal
to three times the sum of (a) his then current annual base salary, plus (b)
three times his maximum potential bonus, which is deemed to be in an amount
equal to three times his then current base salary. Further, payments to Mr.
Russo under his Change of Control provisions are "grossed up" for tax purposes
and not subject to any restrictions or caps as a result of Section 4999 of the
Code and Section 162(m) of the Code discussed above. In all other respects,
the terms of Mr. Russo's Change of Control provisions are identical to the
other officers.
Option Grants
The following table provides information on stock option grants during
fiscal year 1996 to each of the executive officers named in the "Summary
Compensation Table."
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term (3)
------------------- -------------------------------
Number of
Securities Percent of Total
Underlying Options Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#)(1) Fiscal Year ($/Sh)(2) Date 5%($) 10%($)
- ---------------------- -------------- ------------------- ------------- ---------- ------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas J. Russo NA NA NA NA NA NA
Donald L. Perlyn 50,000 3.9% $ 1.81 7/10/2005 $ 56,915 $ 144,235
Arthur G. Gunther 50,000 3.9% $ 1.81 7/10/2005 $ 56,915 $ 144,235
Robert J. Hoffman 200,000 15.6% $ 1.81 7/10/2005 $ 227,660 $ 576,940
Richard D. Palmisciano 200,000 15.6% $ 1.81 7/10/2005 $ 227,660 $ 576,940
<FN>
(1) All options granted in fiscal year 1996 were granted for a term of ten years, subject to termination 90 days following
termination of employment. Two-thirds of the securities underlying options granted in fiscal year 1996 are currently exercisable,
and the balance become exercisable in July 1997.
(2) All options were granted at market value (closing price for the Company's common stock) at the date of grant.
(3) 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.
</FN>
</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
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT MAY 31, 1996 (#) MAY 31, 1996 ($)
--------------------- ------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- ------------------------- ------------ ------------ --------------------- ------------- ------------------------
<S> <C> <C> <C> <C> <C>
Thomas J. Russo - - 1,500,000 600,000 0
Donald L. Perlyn - - 533,333 16,667 0
Arthur G. Gunther(1) - - 333,333 166,667 0
Robert J. Hoffman - - 193,333 96,667 0
Richard D. Palmisciano(2) - - 166,666 133,334 0
- ------------------------- ------------ ------------ --------------------- ------------- ------------------------
NAME UNEXERCISABLE
- ------------------------- -------------
<S> <C>
Thomas J. Russo 0
Donald L. Perlyn 0
Arthur G. Gunther(1) 0
Robert J. Hoffman 0
Richard D. Palmisciano(2) 0
- ------------------------- -------------
<FN>
(1) Mr. Gunther resigned from the Company in August 1996 and all unexercised options 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.
</FN>
</TABLE>
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 all remaining years thereafter. Since 1986,
Mr. Boulis has been the owner of a Miami Subs franchise in Key Largo, Florida
and has been 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.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised of two non-employee, independent and outside Directors. The
Committee is responsible for administering, reviewing, and approving
compensation programs with respect to executive compensation, which includes
base salaries, annual incentives and long-term equity incentive plans, as well
as any executive benefits and/or perquisites. In addition, the Compensation
Committee is responsible for granting the awards and administration of the
Company's 1989 Stock Incentive Plan and the Company's 1990 Executive Stock
Option Plan and any future equity incentive plans.
Mr. Thomas J. Russo was appointed Chairman of the Board, President and
Chief Executive Officer in January, 1994. See section above entitled
"Compensation Pursuant to Contracts." The Board of Director's Report on
Executive Compensation for that period stated that Mr. Russo's compensation
was based on subjective factors rather than specific criteria or the Company's
performance, and that the prior Board believed that the compensation was
within the range of compensation paid to similarly situated executives at
other companies and similar industries. Mr. Russo's annual base salary
remains $280,000. Neither he nor any other executive officer received an
increase in base salary or annual bonus during fiscal year 1996. See section
above entitled "Summary Compensation Table" and "Compensation Pursuant to
Contracts."
The Committee's general philosophy with respect to the compensation of
the Chief Executive Officer and other executive officers is to offer
competitive compensation packages designed to attract and retain key
executives critical to the success of the Company. In general, subjective
factors rather than specific criteria of the Company's performance have been
used in determining and approving executive compensation. The Company's
compensation programs include a base salary, as well as the granting of stock
options designed to provide long-term incentives and aligning the interests of
management with those of the Company's shareholders.
Respectfully submitted,
FRANCIS P. LUCIER, Chair
RICHARD U. JELINEK
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the Company's cumulative total stockholder return on its Common Stock as
compared with the cumulative return of the S&P Composite 500 Stock Index and
the S&P Restaurant Composite Index for the period of five years commencing
June 1, 1991 through May 31, 1996.
<TABLE>
<CAPTION>
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN(1)
Total Return For: May 91 $ May 92 $ May 93 $ May 94 $ May 95 $ May 96 $
<S> <C> <C> <C> <C> <C> <C>
Miami Subs Corporation 100.00 104.00 96.00 77.00 55.00 50.00
S & P 500 100.00 110.00 123.00 128.00 154.00 197.00
S & P Restaurants 100.00 131.00 141.00 173.00 206.00 257.00
- ---------------------- -------- -------- -------- -------- -------- --------
<FN>
___________________
(1)The calculation of the total return for the Company includes both Miami Subs
Corporation and QSR, Inc., which merged with Miami Subs Corporation in October
1991.
</FN>
</TABLE>
RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S AUDITORS
(ITEM NO. 2)
The Board of Directors has selected KPMG Peat Marwick LLP to serve as
independent auditors for the Company for the fiscal year ending May 31, 1997.
Although it is not required to do so, the Board of Directors is submitting its
selection of the Company's auditors for ratification at the Annual Meeting, in
order to ascertain the views of shareholders regarding such selection. If the
selection is not ratified, the Board of Directors will reconsider its
selection and, if practicable, retain another independent auditor. The Board
of Directors also reserves the right to make any change in auditors at any
time which it deems advisable or necessary.
Representatives of KPMG Peat Marwick LLP are expected to be present at
the Annual Meeting and will be afforded the opportunity to comment if they so
desire. They will also be available to respond to appropriate questions from
shareholders at that time.
OTHER MATTERS
Management is not aware of any other business that may come before the
meeting. However, if additional matters properly come before the meeting,
proxies will be voted at the discretion of the proxy holders.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the fiscal year 1997
Annual Meeting of Shareholders of the Company must be received by the Company,
by certified mail return receipt requested at its principal executive offices,
6300 N.W. 31st Avenue, Ft. Lauderdale, Florida 33309, not later than July 9,
1997, for inclusion in the Proxy Statement and proxy relating to the 1997
Annual Meeting of the Shareholders and must comply with requirements of
federal securities laws, any applicable Articles and Bylaws of the Company,
and the Florida Business Corporation Act of 1994, as amended.
By Order of the Board of Directors
Jerry W. Woda
Assistant Secretary
Fort Lauderdale, Florida
November 6, 1996
