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, 1997
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. [ X ]
As of August 25, 1997, 28,244,340 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 $13,916,000 (amount
computed based on the closing price on August 25, 1997).
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table contains information regarding the current Directors and
Executive Officers of the Company.
<TABLE>
<CAPTION>
Name Position Age
- ----------------- ------------------------------------------------------------------------ ---
<S> <C> <C>
Gus Boulis Chairman of the Board, Director, and Chief Executive Officer 48
Bruce R. Galloway Director 39
Greg Karan Director 40
Peter Nasca Director 49
Joseph Zappala Director 63
Donald L. Perlyn Director and Executive Vice President of Franchise Development 54
Gus Bartsocas Senior Vice President of International and Non-Traditional Development 45
Jerry W. Woda Senior Vice President of Finance, Chief Financial Officer, and Treasurer 47
================= ======================================================================== ===
</TABLE>
The size of the Board is currently set at seven directors, and there currently
is one vacancy on the Board. 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 employees of the
Company ("non-employee Directors") are paid a fee of $4,000 per year, together
with reimbursement of 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. Boulis, the founder of the Miami Subs concept, has been chairman of the
board and chief executive officer of the Company since March 1997, and a
director of the Company since 1990. Mr. Boulis was chairman of the board from
September 1990 to January 1994, and served as president and chief executive
officer from July 1992 to January 1994 Mr. Boulis is a private businessman
and investor.
Mr. Galloway was appointed to the Board of Directors in March 1997. He has
been chairman of the board of Arthur Treacher's, Inc. since June 1996, and
managing director of Burnham Securities, Inc. since 1993. From 1991 to 1993
Mr. Galloway was senior vice president at Oppenheimer & Co.
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 until January 1994.
Prior thereto, he was project manager from 1987 to March, 1993 for 710288
Ontario, Ltd., a holding and development company owned by Mr. Boulis in
Brampton, Ontario, Canada.
Mr. Nasca was appointed to the Board of Directors in March 1997. He has been
president of Peter Nasca Associates, Inc., a corporate communications firm
since 1984, and is also a principal and director of Paradigm Marketing, a
private company.
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 was appointed to the Board of Directors in March 1997, and has been
executive vice president of franchise development since 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 DEMAC Restaurant Corp., a franchisee of the
Company.
Mr. Bartsocas has been principally responsible for company and franchise
operations since December 1996, and 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 since
August 1992. 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"), and president and sole
shareholder of Gustos, Inc., a single unit casual restaurant operation.
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. Based on its review of the copies of such reports received by it,
the Company believes that during the fiscal year ended May 31, 1997, all
Section 16(a) filing requirements applicable to its executive officers,
directors and greater than ten percent beneficial owners were complied with.
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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 each of the
Company's other executive officers whose total annual salary and bonus for
fiscal year 1997 was $100,000 or more (the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
--------------------
Compensation Awards
----------------------
Other Annual
Name and Fiscal Compensation(a) Securities Underlying
Principal Position Year Salary ($) Bonus ($) ($) Options (#)
- -------------------------------- ------ ----------- -------------------- --------------- ----------------------
<S> <C> <C> <C> <C> <C>
Gus Boulis 1997 - - - -
Chairman of the Board and Chief 1996 - - - -
Executive Officer (b) 1995 - - - -
Thomas J. Russo, Chairman, 1997 $ 249,439 - - -
President, and Chief Executive 1996 $ 280,000 - - -
Officer (c) 1995 $ 280,000 - - -
Donald L. Perlyn, 1997 $ 142,400 - - -
Executive Vice President 1996 $ 142,400 - - 50,000
of Franchise Development 1995 $ 142,400 - - -
Gus Bartsocas, Senior Vice 1997 $ 123,577 - - -
President of International and 1996 $ 100,000 - - 200,000
Non-Traditional Development 1995 $ 100,000 - - -
================================ ====== =========== ==================== =============== ======================
All Other
Name and Compensation
Principal Position ($)
- -------------------------------- --------------
<S> <C>
Gus Boulis $ 3,000
Chairman of the Board and Chief $ 4,000
Executive Officer (b) $ 102,000
Thomas J. Russo, Chairman, $ 26,105
President, and Chief Executive -
Officer (c) -
Donald L. Perlyn, -
Executive Vice President -
of Franchise Development -
Gus Bartsocas, Senior Vice -
President of International and -
Non-Traditional Development -
================================ ==============
<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.
(b) Gus Boulis became Chairman of the Board and Chief Executive Officer in March 1997. During fiscal year 1995,
Mr. Boulis served as a consultant to the Company, and the Company paid to Mr. Boulis $100,000 pursuant to this
arrangement, which amount is included in the column "All Other Compensation." The consulting agreement was
terminated in January 1995. Mr. Boulis was paid standard director fees in fiscal years 1997, 1996, and 1995 during
periods that he was not an officer of the Company, of $3,000, $4,000, and $2,000, respectively, which amounts are
included in "All Other Compensation."
(c) Thomas J. Russo resigned as Chairman of the Board, President and Chief Executive Officer in March 1997.
Pursuant to the terms of his termination of employment with the Company, Mr. Russo's Employment Contract and Change
of Control Agreement with the Company were terminated, and the Company agreed for a period of up to 12 months, to
pay Mr. Russo $12,000 per month, continue his previous benefits, and pay an auto allowance of $500 per month.
Amounts paid pursuant to this agreement through May 31, 1997 are included in the column "All Other Compensation."
In addition, options to acquire 2.1 million shares of common stock of the Company remained outstanding until
September 1997, at which time they expired.
</TABLE>
COMPENSATION PURSUANT TO CONTRACTS
Mr. Thomas J. Russo received compensation in fiscal year 1997 pursuant to an
employment agreement until March, 1997, at which time Mr. Russo resigned from
the Company and the employment agreement was terminated (see "Executive
Compensation - Summary Compensation Table"). Among other provisions, the
employment agreement, which was entered into in January 1994 and renewed in
June 1996 for an additional three year term to expire in January 2000,
provided for a base annual salary of $280,000, participation in a proposed
executive bonus plan with an annual incentive bonus of up to 100 percent of
base salary, use of a Company automobile, $2.0 million in term life insurance,
and short and long term disability insurance benefits equal to two-thirds of
his base salary. The agreement also provided for the grant of options to
acquire 2.1 million shares of Common stock at prices between $2.69 per share
and $6.00 per share, and, as amended in February 1996, an amount equal to
three times the sum of his base salary and maximum potential bonus in the
event of a change of control (as defined in the agreement).
Mr. Donald L. Perlyn received compensation in fiscal year 1997 pursuant to an
employment agreement which expired on May 31, 1997. The agreement provided
for a minimum annual base salary of $142,400, participation in a proposed
executive bonus plan with an annual incentive bonus of up to 50 percent of
base salary, and $1.0 million in term life insurance. The agreement also
provided that in the event of a hostile or unfriendly takeover of the Company
and Mr. Perlyn resigned or was discharged 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.
In fiscal year 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 change of control agreements to be offered to each executive
officer of the Company. Messrs. Perlyn, Bartsocas, and Woda currently have
Change of Control Agreements. 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 $1,000,000
annual limit on deductions to the Company from compensation paid to certain
employees, if applicable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until their resignation in March 1997, the Compensation Committee of the Board
was comprised of two non-employee, independent and outside Directors. Since
March 1997, such Committee has been comprised of Messrs. Galloway (chairman),
Karan, and Nasca, each of whom is a non-employee, independent and outside
Director. No such Director is or was an officer or employee of the Company or
any of its subsidiaries, no executive officer of the Company serves or served
on the compensation committee of another entity (i) one of whose executive
officers served on the Compensation Committee of the Company or (ii) one of
whose executive officers served as a Director of the Company, and no executive
officer of the Company serves or served as a director of another entity who
has or had an executive officer serving on the Compensation Committee of the
Company.
YEAR END OPTION VALUES
The following table sets forth certain information with respect to unexercised
options to purchase Common Stock held by the individuals named in the "Summary
Compensation Table." None of the individuals named in the Summary
Compensation Table exercised any options to purchase Common Stock or were
granted options to purchase Common Stock during the fiscal year ended May 31,
1997.
<TABLE>
<CAPTION>
Number of Securities Underlying
Unexercised Options Value of Unexercised
at May 31, 1997 (#) In-The-Money Options at May 31, 1997 ($)(1)
-------------------------------- -------------------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------ -------------------------------- ------------- ------------------------------------------- -------------
<S> <C> <C> <C> <C>
Gus Boulis 0 0 0 0
Thomas J. Russo(2) 2,100,000 0 0 0
Donald L. Perlyn 550,000 0 0 0
Gus Bartsocas 460,000 0 0 0
================== ================================ ============= =========================================== =============
<FN>
(1) The exercise price of all of the options listed in this table was greater than the closing price of the Company's
Common Stock on May 31, 1997 as reported by NASDAQ.
(2) Mr. Russo resigned from the Company in March 1997 and all exercisable options shown above expired in September 1997.
</TABLE>
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<PAGE>
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 19, 1997 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
Name of Beneficial Owner(1) Beneficial Ownership(2) Percent of Class(3)
- ---------------------------------------------------------------- ----------------------- -------------------
<S> <C> <C>
Gus Boulis 8,506,000(4) 30.1%
Bruce R. Galloway 50,000(5) *
Greg Karan 100,000(5) *
Peter Nasca 50,000(5) *
Donald L. Perlyn 650,000(5) 2.2%
Joseph Zappala 200,000(6) *
Gus Bartsocas 560,000(5) 1.9%
Thomas J. Russo
2650 Edgewater Drive
Weston, Florida 33332 491,000(7) 1.7%
All current directors and executive officers of
the Company, including those named above, as a
group (8 persons) 10,449,000(8) 34.7%
================================================================ ======================= ===================
_______________________________________________________________
<FN>
* Represents less than one percent of shares outstanding.
(1) Unless otherwise indicated, the address of each person in this table is 6300 N.W. 31st Avenue, Fort
Lauderdale, Florida 33309.
(2) Unless otherwise indicated, each person has sole voting and investment power with respect to such shares.
(3) As of September 19, 1997, 28,244,340 shares of Common Stock were outstanding.
(4) 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.
(5) Consists of options deemed outstanding, representing presently exercisable options under the Company's
1990 Executive Option Plan.
(6) Includes options for 150,000 shares deemed outstanding, representing presently exercisable options
under the Company's 1990 Executive Option Plan.
(7) Includes 450,000 shares acquired through the exercise of options by Mr. Russo in 1995. As payment for
the shares, the Company received a non-recourse and non-interest bearing note in the amount of $562,500 which
is collateralized by the stock and due in full in January 1999. Mr. Russo resigned his employment with the
Company in March 1997.
(8) Includes options for 1,885,000 shares deemed outstanding, representing presently exercisable options
under the Company's 1990 Executive Option Plan.
</TABLE>
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At May 31, 1997 the Company leased six restaurant properties from Kavala, Inc.
("Kavala"), a private company owned by the Company's chairman of the board and
chief executive officer, Mr. Boulis. Rent expense for all leases between the
Company and Kavala was $412,000 in 1997. Future minimum rental commitments
due to Kavala at May 31, 1997 under existing leases are approximately $394,000
for each of the next five years, and $2,116,000 for all remaining years
thereafter. In fiscal year 1997, the Company leased a vacant, non-Miami Subs
property through December 2003 to a company owned by Mr. Boulis for $60,000
per year during the first year of the lease, $66,000 for the second year, and
$72,000 per year 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.
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 and director of the Company, is also an officer,
director and principal of DEMAC Restaurant Corp., a franchisee of the Company.
Mr. Perlyn has a personal loan outstanding from the Company in the principal
amount of $64,535, plus accrued interest at the rate of prime plus 1.5% (8.5%
at May 31, 1997) in the amount of $12,411. The loan and all accrued interest
is due in full in June 1998.
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<PAGE>
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 25, 1997 By: /s/ Jerry W. Woda
JERRY W. WODA
Senior Vice President and
Chief Financial Officer
