<PAGE> 1
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant x
Filed by a party other than the registrant
Check the appropriate box:
<TABLE>
<S> <C> <C>
x Preliminary proxy statement Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e) (2))
Definitive proxy statement
Definitive additional materials
Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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):
<TABLE>
<S> <C>
x No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it
was determined):
------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------------
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and
identify the filing for which the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
------------------------------------------------
(3) Filing party:
--------------------------------------------------------------------------------
(4) Date filed:
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</TABLE>
<PAGE> 2
MIAMI SUBS CORPORATION
6300 N.W. 31st Avenue
Fort Lauderdale, Florida 33309
(954) 973-0000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
November 30, 1998
The annual meeting of the shareholders (the "Annual Meeting") of Miami Subs
Corporation, a Florida corporation (the "Company"), will be held at Sheraton
Suites, 555 N.W. 62nd Street, Fort Lauderdale, Florida, 33309, on Monday,
November 30, 1998, at 9:00 a.m., local time, for the following purposes:
(1) To elect six members to the Company's Board of Directors to hold
office until the Company's next Annual Meeting of Shareholders or until their
respective successors are duly elected and qualified;
(2) To approve an amendment to the Company's Articles of Incorporation to
effect a one-for-four reverse stock split as a result of which shareholders of
the Company will receive one share of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), in exchange for each four shares of Common
Stock owned as of the effective date of the reverse stock split;
(3) To ratify the appointment of KPMG Peat Marwick LLP, as the Company's
independent auditors for the current fiscal year; and
(4) To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
The close of business as of October 12, 1998 has been fixed by the Board of
Directors of the Company 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 Annual 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.
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE PROMPTLY COMPLETE, SIGN AND
DATE THE ENCLOSED PROXY CARD WHICH IS SOLICITED BY THE COMPANY'S BOARD OF
DIRECTORS AND RETURN IT IN THE ENCLOSED RETURN ENVELOPE WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. RETURNING YOUR PROXY DOES NOT DEPRIVE
YOU OF YOUR RIGHT TO ATTEND THE MEETING AND VOTE YOUR SHARES IN PERSON.
<TABLE>
<S> <C>
By Order of the Board of Directors,
Donald L. Perlyn
President and Chief Operating Officer
Fort Lauderdale, Florida
October , 1998
----
</TABLE>
<PAGE> 3
MIAMI SUBS CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 30, 1998
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Miami Subs Corporation, a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par
value $.01 per share (the "Common Stock"), for use at its Annual Meeting of
Shareholders, to be held at Sheraton Suites, 555 N.W. 62nd Street, Fort
Lauderdale, Florida, 33309, on Monday, November 30, 1998, at 9:00 a.m., local
time, and any and all adjournments thereof ("Annual Meeting"). The Company's
principal office is located at 6300 N.W. 31st Avenue, Fort Lauderdale, Florida
33309. The Annual Report of the Company for the fiscal year ended May 31, 1998
accompanies this Proxy Statement (the "Annual Report"). This Proxy Statement,
the accompanying Notice of Annual Meeting of Shareholders, the Annual Report
and the enclosed proxy are first being mailed to the Company's shareholders on
or about October ______, 1998.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and vote
upon the following matters:
(1) The election of six members to the Company's Board of Directors to
serve until the Company's next Annual Meeting of Shareholders or until their
respective successors are duly elected and qualified;
(2) The approval of an amendment to the Company's Articles of
Incorporation to effect a one-for-four reverse stock split (the "Reverse Stock
Split") as a result of which shareholders of the Company will receive one share
of Common Stock in exchange for each four shares of Common Stock owned as of
the effective date of the reverse stock split;
(3) The ratification of the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for the current fiscal year; and
(4) Such other business as may properly come before the Annual Meeting or
any adjournment or postponement thereof.
The Board knows of no other matters which are likely to be brought before
the Annual Meeting. If any other matters properly come before the Annual
Meeting, or any adjournments thereof, however, the persons named in the
enclosed proxy card, or their duly constituted substitutes, will be authorized
to vote or otherwise act thereon in accordance with their judgment on such
matters. The Board has unanimously approved the amendment to the Articles of
Incorporation to effect the Reverse Stock Split and recommends that the
shareholders vote "FOR" such proposal. The Board has also unanimously approved
the nomination of each of the six persons named elsewhere herein as nominees
for election as Company directors for the ensuing year, as well as the
selection of KPMG Peat Marwick LLP as the Company's independent auditors and
recommends that the shareholders vote "FOR" each of such proposals.
-1-
<PAGE> 4
If the enclosed proxy card is properly executed and returned prior to
voting at the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. IN THE ABSENCE OF
INSTRUCTIONS, EXECUTED PROXIES WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS,
"FOR" THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO EFFECT THE REVERSE
STOCK SPLIT, AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT
AUDITORS.
INFORMATION CONCERNING PROXY
The enclosed proxy is being solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have the right
to revoke their proxy at any time prior to the exercise thereof, either in
person at the Annual Meeting or by filing with the Company's Secretary at the
Company's principal office a written revocation or duly executed proxy bearing
a later date; however, no such revocation will be effective until written
revocation is received by the Company at or prior to the Annual Meeting.
The cost of preparing, printing, assembling and mailing the Proxy Statement
and other material furnished to shareholders in connection with the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, officers, directors and employees
of the Company may solicit proxies by written communication, telephone,
telegraph or personal call. Such persons will not receive special compensation
for any solicitation activities. The Company will reimburse brokerage houses
and other nominees for their expenses in forwarding proxy materials to
beneficial owners of Common Stock.
OUTSTANDING STOCK AND VOTING RIGHTS
The Board of Directors has fixed the close of business on October 12, 1998,
as the record date for determination of shareholders entitled to notice of and
to vote at the Annual Meeting (the "Record Date"). Only shareholders of record
on that date will be entitled to vote at the Annual Meeting.
As of the Record Date, there were issued and outstanding 27,119,340 shares
of Common Stock. On each matter brought before the Annual Meeting, each share
of Common Stock entitles the holder thereof to one vote. A majority of the
shares of Common Stock issued and outstanding and entitled to vote must be
present at the Annual Meeting in person or by proxy in order to constitute a
quorum for the transaction of business. 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. Directors will be elected by a plurality of the
votes cast by shares present at the meeting or voting by proxy thereon. The
amendment to the Company's Articles of Incorporation to effect the Reverse
Stock Split will be approved if the number of shares of Common Stock voted for
the amendment exceeds the number of shares voted against the amendment. The
appointment of the Company's independent auditors will be ratified if the
number of shares of Common Stock voted for ratification is greater than the
number voted against it. Any other matter properly brought before the Annual
Meeting will be approved if the number of shares of Common Stock voted in favor
of the matter exceeds the number of shares voted in opposition, unless such
matter is one for which a greater vote is required by law.
-2-
<PAGE> 5
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.
The Board is soliciting proxies so that each shareholder on the Record Date
has the opportunity to vote on the proposals to be considered at the Annual
Meeting. When a proxy card is returned properly signed and dated, the shares
represented thereby will be voted in accordance with the instructions on the
proxy card. If a shareholder does not return a signed proxy card, his or her
shares will not be voted, unless such shareholder attends and votes at the
Annual Meeting. 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). Because the directors nominated for election at the Annual Meeting
will be elected by a plurality of the votes cast and the other matters to be
brought before the Annual Meeting will be approved if the number of votes cast
in favor thereof exceeds the number of votes cast in opposition, abstentions
and broker non-votes will have no effect on the outcome of the vote on these
matters.
A list of shareholders entitled to vote at the Annual Meeting will be
available for examination by any shareholder at the Company's principal office
for a period of ten days prior to the Annual Meeting and at the Annual Meeting
itself.
ELECTION OF DIRECTORS
(ITEM NO. 1)
The Board of Directors has established the size of the Board to consist of
six members. The following table sets forth information with respect to the
persons nominated for election at the Annual Meeting. Directors elected at the
Annual Meeting will hold office for a term of one year or until their
successors are duly elected and qualified.
-3-
<PAGE> 6
<TABLE>
<CAPTION>
Director
Nominee Age Since Business Experience During Past Five Years
----------------- ------- --------- ----------------------------------------------
<S> <C> <C> <C>
Gus Boulis 49 1990 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.
Donald L. Perlyn 55 1997 Mr. Perlyn has been a member of the Company's Board of Directors
since March 1997. In July 1998, Mr. Perlyn was appointed President
and Chief Operating Officer of the Company. Prior thereto, Mr.
Perlyn had been the Company's Executive Vice President of Franchise
Development since March 1992. From September 1990 to February 1992,
Mr. Perlyn served as the Company's Senior Vice President of
Franchising and Development. 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 former franchisee of the Company.
Bruce R. Galloway 40 1997 Mr. Galloway has been a member of the Company's Board of Directors
since March 1997. He has been Chairman of the Board of Arthur
Treacher's, Inc. since June 1996, and a managing director at Burnham
Securities, Inc. since 1993. From 1991 to 1993 Mr. Galloway was
Senior Vice President at Oppenheimer & Co.
Greg Karan 41 1996 Mr Karan has been a member of the Company's Board of Directors since
June, 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.
Peter Nasca 50 1997 Mr. Nasca has been a member of the Company's Board of Directors
since March 1997. Since 1984, Mr. Nasca has been president of Peter
Nasca Associates, Inc., a corporate communications firm, and a
principal and director of Paradigm Marketing, a private marketing
company.
</TABLE>
-4-
<PAGE> 7
<TABLE>
<CAPTION>
Director
Nominee Age Since Business Experience During Past Five Years
----------------- ------- --------- ----------------------------------------------
<S> <C> <C> <C>
Joseph Zappala 64 1994 Mr. Zappala has been a member of the Company's Board of Directors
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.
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors currently has 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 issued by the Company's
independent auditors. The Audit Committee's current members are Joseph Zappala
(Chairman), Bruce R. Galloway, and Peter Nasca, all independent directors of
the Company. During fiscal year 1998, the Audit Committee did not meet or take
any actions; the full Board of Directors performed the functions of the Audit
Committee during fiscal year 1998.
Compensation Committee. The Compensation Committee is responsible for
reviewing and approving 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 which administers the Company's 1990 Executive
Option Plan. The present members of the Committee are Messrs. Bruce R.
Galloway (Chairman) Peter Nasca, and Greg Karan. During fiscal year 1998, the
Compensation Committee did not meet or take any actions; the full Board of
Directors performed the functions of the Compensation Committee during fiscal
year 1998.
The Company does not have a nominating committee charged with the
search for and recommendation to the Board of potential candidates for Board
membership. The function is performed by the Board as a whole.
During fiscal year 1998, the Board of Directors met eight times. All
Directors attended at least 75% of meetings of the Board of Directors that were
held in fiscal year 1998 during their term of office.
COMPENSATION OF DIRECTORS
Upon election of the nominees proposed herein, the Board of Directors will
consist of six 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 employees of the Company
("non-employee Directors") are paid a fee of $4,000 per year, and are
reimbursed for 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 Annual
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<PAGE> 8
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.
MANAGEMENT
The following table contains information regarding the current Executive
Officers of the Company.
<TABLE>
<CAPTION>
Name Position Age
-------------- -------------------- ------
<S> <C> <C>
Gus Boulis Chairman of the Board and Chief Executive Officer 49
Donald L. Perlyn President and Chief Operating Officer 55
Gus Bartsocas Senior Vice President of International and Non-Traditional 46
Development
Jerry W. Woda Senior Vice President of Finance, Chief Financial Officer, and 48
Treasurer
</TABLE>
Officer terms of office are within the discretion of the Board.
For a description of the business experience of Mr. Boulis and Mr.
Perlyn, see the section above entitled "Election of Directors."
Mr. Bartsocas has been principally responsible for franchise operations
since December 1996, and Senior Vice President of International and
Non-Traditional Development since March 1995. From December 1996 until January
1998 Mr. Bartsocas was also responsible for Company restaurant operations.
From April 1994 to March 1995, Mr. Bartsocas served as Senior Vice President of
Franchise Operations and Procurement of the Company. From August 1992 to April
1994, Mr. Bartsocas served as Vice President of Restaurant Development and
Procurement of 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"), and president
and sole shareholder of Gustos, Inc., a 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. To the Company's knowledge, based solely on a review of copies of
such reports furnished to the Company, during the fiscal year ended May 31,
1998, 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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<PAGE> 9
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the
ownership of Common Stock as of October ______, 1998 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
Name of Beneficial Owner Beneficial Ownership(1) Percent of Class(2)
------------------------ ----------------------- -------------------
<S> <C> <C>
Gus Boulis 8,121,000 29.9%
Donald L. Perlyn 650,000(3) 2.3%
Bruce R. Galloway 50,000(3) *
Greg Karan 100,000(3) *
Peter Nasca 50,000(3) *
Joseph Zappala 160,000(4) *
Gus Bartsocas 560,000(3) 2.0%
Jerry W. Woda 325,000(3) 1.2%
All current directors and executive
officers of the Company, including those named
above, as a group (8 persons) 10,016,000(5) 34.5%
</TABLE>
- ---------------------------
* 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 October _____, 1998, 27,119,340 shares of Common Stock were
outstanding.
(3) Consists of currently exercisable options to acquire shares of Common
Stock issued under the Company's 1990 Executive Option Plan.
(4) Includes currently exercisable options to acquire 150,000 shares of
Common Stock issued under the Company's 1990 Executive Option Plan.
(5) Includes currently exercisable options to acquire 1,885,000 shares of
Common Stock issued under the Company's 1990 Executive Option Plan.
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 1998 was $100,000 or more (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------ -------------------
<S> <C>
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND FISCAL COMPENSATION(A) SECURITIES UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS (#) ($)
------------------ ---- ---------- --------- --------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Gus Boulis 1998 - - - - -
Chairman of the Board and Chief 1997 - - - - $3,000
Executive Officer (b) 1996 - - - - $4,000
Donald L. Perlyn, 1998 $149,520 $7,500 - 650,000(d) -
President and Chief Operating 1997 $142,400 - - - -
Officer (c) 1996 $142,400 - - 50,000 -
Gus Bartsocas, Senior Vice 1998 $126,000 $7,500 - 560,000(e) -
President of International and 1997 $123,577 - - - -
Non-Traditional Development 1996 $100,000 - - 200,000 -
Jerry W. Woda, Senior Vice 1998 $96,000 $7,500 - 325,000(f) -
President and Chief Financial 1997 $96,000 - - - -
Officer 1996 $96,000 - - 100,000 -
</TABLE>
- -----------------------------------------
(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) Gus Boulis became Chairman of the Board and Chief Executive Officer in
March 1997. Mr. Boulis was paid standard director fees in fiscal year
1997 and 1996 during periods that he was not an officer of the Company,
of $3,000 and $4,000, respectively, which amounts are included in "All
Other Compensation."
(c) Donald L. Perlyn was appointed President and Chief Operating Officer in
July 1998. During fiscal year 1996, 1997, and 1998, Mr. Perlyn served
as Executive Vice President of Franchise Development.
(d) On June 25, 1997, (i) 100,00 options were granted to Mr. Perlyn under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 550,000
options previously issued to Mr. Perlyn under the Plan were amended to
change the exercise prices and other terms thereof. See "Executive
Compensation - Option Repricing."
(e) On June 25, 1997, (i) 100,000 options were granted to Mr. Bartsocas
under the Company's 1990 Executive Option Plan (the "Plan") and (ii)
460,000 options previously issued to Mr. Bartsocas under the Plan were
amended to change the exercise prices and other terms thereof. See
"Executive Compensation - Option Repricing."
(f) On June 25, 1997, (i) 100,000 options were granted to Mr. Woda under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 225,000
options previously issued to Mr. Woda under the Plan were amended to
change the exercise prices and other terms thereof. See "Executive
Compensation - Option Repricing."
COMPENSATION PURSUANT TO CONTRACTS
The Company entered into Change of Control Agreements with each of Donald
Perlyn, Gus Bartsocas and Jerry Woda (the "Agreements"). The 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
-8-
<PAGE> 11
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 where 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.
The Agreements provide that 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 highest annual base salary during the term of the
Agreement, 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 $1,000,000
annual limit on deductions to the Company from compensation paid to certain
employees, if applicable.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Although the Company has established a Compensation Committee comprised of
non-employee directors (the members of the Compensation Committee in fiscal
year 1998 being Messrs. Bruce R. Galloway, Peter Nasca and Greg Karan), the
Compensation Committee did not meet or take action during fiscal year 1998.
See "Board of Directors and Committees of the Board." The functions of the
Compensation Committee were performed by the entire Board of Directors. Gus
Boulis and Donald L. Perlyn, each of whom are officers of the Company,
participated in deliberations of the Company's Board of Directors concerning
executive officer compensation.
During fiscal year 1998, no executive officer of the Company (i) served on
the compensation committee (or other Board committee performing equivalent
functions) of another entity one of whose executive officers served on the Board
of Directors of the Company, or (ii) served as a director of another entity one
of whose executive officers served on the Compensation Committee or the Board of
Directors of the
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<PAGE> 12
Company.
OPTION GRANTS
The following table provides information on stock options granted during
fiscal year 1998 under the Company's 1990 Stock Option Plan to each of the
executive officers named in the "Summary Compensation Table."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of Stock
Individual Price Appreciation for
Grants Option Term (2)
--------------------------------------------------------------- ----------------
Number of
Securities Percent of Total
Underlying Options Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted (#) Fiscal Year ($/Sh)(1) Date 5%($) 10%($)
- -------------------- ----------- ----------- ------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Perlyn 650,000(3) 33.3% $ .75 (3) $157,340 $375,572
Gus Bartsocas 560,000(4) 28.7% $ .75 (4) $155,825 $379,940
Jerry W. Woda 325,000(5) 16.7% $ .75 (5) $118,075 $282,825
</TABLE>
- -----------------------------
(1) All options were granted at market value (closing price for the Company's
common stock) at the date of grant.
(2) The dollar amounts in these columns are the result of calculations at the
five percent and ten percent rates required by the regulations of the
Securities and Exchange Commission and are not intended to forecast future
appreciation of the Company's stock price.
(3) On June 25, 1997, (i) 100,00 options were granted to Mr. Perlyn under the
Company's 1990 Executive Option Plan (the "Plan") and (ii) 550,000 options
previously issued to Mr. Perlyn under the Plan were amended to change the
exercise prices and other terms thereof. See "Executive Compensation -
Option Repricing." All options granted are currently exercisable, and
expire on various dates through 2007.
(4) On June 25, 1997, (i) 100,00 options were granted to Mr. Bartsocas under
the Company's 1990 Executive Option Plan (the "Plan") and (ii) 460,000
options previously issued to Mr. Bartsocas under the Plan were amended to
change the exercise prices and other terms thereof. See "Executive
Compensation - Option Repricing." All options granted are currently
exercisable and expire on various dates through 2007.
(5) On June 25, 1997, (i) 100,00 options were granted to Mr. Woda under the
Company's 1990 Executive Option Plan (the "Plan") and (ii) 225,000 options
previously issued to Mr. Woda under the Plan were amended to change the
exercise prices and other terms thereof. See "Executive Compensation -
Option Repricing." All options granted are currently exercisable and
expire on various dates through 2007.
OPTION REPRICINGS
-10-
<PAGE> 13
The following table sets forth certain information with respect to the
repricing during fiscal year 1998 of stock options previously granted to each
of the executive officers named in the "Summary Compensation Table."
<TABLE>
<CAPTION>
Weighted Average
Market Price Exercise Price Length of Original
Number of Securities of Stock at at Option Term
Underlying Options Time of Time of New Exercise Remaining on Date
Name Date Repriced Repricing Repricing Price of Repricing
-------------------- -------- -------- --------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Donald L. Perlyn, 6/25/97 328,000 $ .75 $2.25 $ .75 3.4 years
President and Chief 6/25/97 172,000 $ .75 $2.69 $ .75 6.4 years
Operating Officer 6/25/97 50,000 $ .75 $1.81 $ .75 8.2 years
Gus Bartsocas, 6/25/97 260,000 $ .75 $2.25 $ .75 3.4 years
Senior Vice President 6/25/97 200,000 $ .75 $1.81 $ .75 8.2 years
of International and
Non-Traditional
Development
Jerry W. Woda, 6/25/97 125,000 $ .75 $2.69 $ .75 6.4 years
Senior Vice President 6/25/97 100,000 $ .75 $1.81 $ .75 8.2 years
and Chief Financial
Officer
</TABLE>
BOARD OF DIRECTORS REPORT ON OPTION REPRICING
On June 25, 1997, the Company's Board of Directors authorized the repricing
of all outstanding options previously granted to employees (including executive
officers) under the Company's 1990 Executive Option Plan. Of the total number
of options repriced, approximately 90.4% were options held by executive
officers of the Company. Prior to the repricing, the exercise prices under
outstanding options ranged from $0.875 to $3.00. Pursuant to the repricing,
these options were amended to change the per share exercise prices thereunder
to $0.75, the closing price of the Company's Common Stock on June 25, 1997, as
reported by the NASDAQ National Market. At the time the repricing was
authorized by the Board of Directors, the majority of the outstanding options
had been "under water" for a period of over one year. The Board therefore
believed that the stock options no longer served as an effective means to
promote long-term retention of its employees and to motivate their performance.
During the months prior to the Board's authorization of the repricing, the
Company had lost a significant number of its management personnel. In light of
this, the Board felt it was absolutely critical in fostering the best interests
of the Company to reprice outstanding options to provide an incentive for the
remaining employees to continue in the employ of the Company.
Gus Boulis
Donald L. Perlyn
Bruce R. Galloway
-11-
<PAGE> 14
Greg Karan
Peter Nasca
Joseph Zappala
OPTION EXERCISES AND YEAR END OPTION VALUES
The following table sets forth certain information regarding unexercised
stock options to purchase Common Stock granted under the Company's 1990
Executive Option Plan to each of the executive officers named in the "Summary
Compensation Table." None of the individuals named in the Summary Compensation
Table exercised any options to purchase Common Stock during the fiscal year
ended May 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT MAY
AT MAY 31, 1998 (#) 31, 1998 ($)(1)
------------------- ------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald L. Perlyn 650,000 0 0 0
Gus Bartsocas 560,000 0 0 0
Jerry W. Woda 325,000 0 0 0
</TABLE>
- -----------------------
(1) None of the options listed in this table were "in-the-money" as of May 31,
1998 because the exercise prices of all of the options listed in this table
were the same as the closing price of the Company's Common Stock on May 31,
1998 as reported by NASDAQ.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
At May 31, 1998, the Company leased six restaurant properties from Kavala,
Inc., a private company owned by the Company's chairman of the board and chief
executive officer, Gus Boulis. Rent expense for all leases between the Company
and Kavala was $424,000 in fiscal year 1998. The Company leases a formerly
vacant, non-Miami Subs property to a company owned by Mr. Boulis for $66,000
per year through December 1998, and increasing to $72,000 per year thereafter
through December 2003. The Company believes that rents charged under these
leases are not materially different from the rents that would have been
incurred or obtained from leasing arrangements with unaffiliated parties.
In February 1998, the Company entered into a management agreement with Mr.
Boulis providing for the Company to manage an existing Miami Subs Grill
restaurant owned by Mr. Boulis for a fee of 5.0% of the restaurant's gross
restaurant sales. The agreement was terminated in June 1998 upon the sale of
the
-12-
<PAGE> 15
restaurant to a third party franchisee.
Mr. Bartsocas, an officer of the Company, is also an officer and director
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 for each of five restaurants developed by
Subies, and Subies was exempt from paying royalty fees on the restaurants as
long as the restaurants were owned by Subies. Three of the restaurants have
been subsequently sold to independent franchisees.
Mr. Donald L. Perlyn, who has been an officer of the Company since 1990 and
a director since 1997, was appointed president and chief operating officer of
the Company in July 1998. Mr. Perlyn is also an officer and principal of DEMAC
Restaurant Corp. which owned and operated a Miami Subs Grill restaurant in
Florida. In connection with his appointment in July, Mr. Perlyn agreed to sell
to the Company the Miami Subs restaurant owned by DEMAC for approximately
$260,000. Mr. Perlyn is also indebted to the Company in the amount of $85,000.
The loan accrues interest at a rate of prime plus 1.5%, and the principal and
all accrued interest thereunder is due in full in June 1999.
Two existing Miami Subs Grill restaurants owned by the Company are
co-branded with Arthur Treacher's, Inc. ("Treacher's"). Treacher's is
operating and managing the restaurants, the Company and Treacher's share in the
operating profits of the restaurants, and Treacher's has an option to acquire
each of the restaurants from the Company. Mr. Bruce Galloway, a member of the
board of directors of the Company, is the Chairman of the Board of Treacher's.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange
Act of 1934 that might incorporate future filings, including this Proxy
Statement, in whole or in part, the following Board Compensation Committee
Report on Executive Compensation and the Performance Graph shall not be
incorporated by reference into any such filings.
-13-
<PAGE> 16
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
Although the Board of Directors has established a Compensation Committee
that is currently comprised of three non-employee Directors (the "Committee")
the functions of this Committee were performed by the entire Board of Directors
during fiscal year 1998. Accordingly, this report is provided by the entire
Board of 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 1990 Executive Stock Option Plan and any future
equity incentive plans.
Mr. Gus Boulis, the founder of the Miami Subs concept, was appointed
Chairman of the Board and Chief Executive Officer in March, 1997. Mr. Boulis
is not paid a salary and does not receive any other form of compensation or
benefits from the Company. None of the executive officers of the Company
received an increase in base salary during fiscal year 1998. In addition, the
Board of Directors awarded bonuses to each of its executive officers, including
a $7,500 bonus to each of the officers name in the "Summary Compensation
Table." The basis for the Board's decision to grant the salary increases and
award the bonuses, was its belief that the efforts of its executive officers
were a significant contributing factor to the increase in the Company's
profitability from fiscal year 1997 to fiscal year 1998.
The Board's general philosophy with respect to the compensation of its
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 have been used in
determining 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 align the interests of management with those
of the Company's shareholders.
Gus Boulis
Donald L. Perlyn
Bruce R. Galloway
Greg Karan
Peter Nasca
Joseph Zappala
-14-
<PAGE> 17
PERFORMANCE GRAPH
The following performance graph compares the yearly percentage change in
the Company's cumulative total shareholder 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, 1993 through May 31, 1998. This table assumes that $100 was invested on
June 1, 1993 in the Company's Common Stock and in each of the indexes, and that
all dividends were reinvested.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
5/93 5/94 5/95 5/96 5/97 5/98
<S> <C> <C> <C> <C> <C> <C>
Miami Subs Corporation 100.00 79.63 57.41 51.85 29.63 22.22
NASDAQ Stock Market (U.S.) 100.00 105.28 125.24 182.03 205.07 260.58
S & P Restaurants 100.00 122.73 145.56 181.99 189.28 240.40
</TABLE>
APPROVAL OF REVERSE STOCK SPLIT
(ITEM NO.2)
GENERAL
The Board of Directors has unanimously adopted resolutions declaring the
advisability of, and hereby submits to the Company's shareholders for approval,
a proposal to amend the Company's Articles of Incorporation to effect a
one-for-four reverse stock split of the Common Stock (the "Reverse Stock
Split"), pursuant to which each four shares of Common Stock will be converted
into one share of Common Stock. No fractional shares will be issued in
connection with the Reverse Stock Split. In lieu thereof, the Company will pay
each holder of a fractional interest an amount in cash equal to the value of
such fractional interest as provided in the section below entitled "Payment for
Fractional Shares." There will be no change in the number of the Company's
authorized shares of Common Stock and no change in the par value thereof.
The Reverse Stock Split will take effect, if at all, after it is approved
by the Company's shareholders and after filing the amendment to the Company's
Articles of Incorporation with the Secretary of State of the State of Florida
(the "Effective Date"). The Board of Directors reserves the right,
notwithstanding shareholder approval and without further action by the
shareholders, to decide not to proceed with the Reverse Stock Split if, at any
time prior to its effectiveness, it determines in its sole discretion that it
is no longer in the best interests of the Company and its shareholders.
BACKGROUND AND REASONS FOR THE PROPOSAL
The Common Stock is currently quoted on The Nasdaq Stock Market, Inc.'s
("Nasdaq's") National Market. By letter dated February 27, 1998, the Company
received notice from Nasdaq that the Common Stock was not in compliance with
the new minimum bid price requirement pursuant to NASD Marketplace
-15-
<PAGE> 18
Rule 4450(a)(5), which became effective February 23, 1998. The new Nasdaq
listing criteria require that for continued listing all securities, except
warrants and rights, must maintain a minimum closing bid price of $1.00 per
share. The Nasdaq notice afforded the Company a 90-day period to demonstrate
compliance with the $1.00 minimum bid price or to adopt a plan to achieve
compliance. On May 29, 1998, the Company was notified by Nasdaq that, in view
of the continuing non-compliance of the Common Stock with the minimum bid price
requirement, Nasdaq was initiating formal de-listing proceedings. The Company,
by letter dated June 3, 1998, requested a temporary exception to the minimum
bid price requirement based on a proposed acquisition of the Company by Arthur
Treacher's, Inc. ("Treacher's"). On July 17, 1998, the Company notified
Nasdaq that the merger negotiations with Treacher's had been terminated. On
July 25, 1998, the Company received a letter from Nasdaq denying its request
for a temporary exception to the minimum bid price requirement. On August 4,
1998, the Company requested an oral hearing to appeal Nasdaq's decision. The
oral hearing is scheduled to be held on September 25, 1998. The Common Stock
will remain listed on the Nasdaq National Market pending the outcome of the
hearing.
The Board of Directors hopes that the decrease in the number of shares of
the Common Stock outstanding as a consequence of the Reverse Stock Split will
result in an anticipated corresponding increase in the price per share,
enabling the Common Stock to meet the requirements for continued listing on the
Nasdaq National Market, as well as creating a greater interest in the Common
Stock by the financial community and the investing public. The Board of
Directors believes that the relatively low share price of the Common Stock,
when compared with the market prices of the common stock of similarly-situated
publicly held companies in the same or comparable industries, impairs the
marketability of the Common Stock and creates a negative impression of the
Company. There can be no assurance, however, that the Reverse Stock Split will
increase the market price of the Common Stock by a multiple equal to the
exchange ratio of the Revenue Stock Split (i.e., four) or that the financial
community and/or public investors will show greater interest in the Common
Stock. The Company believes that following a reverse stock split, a company's
stock price will frequently fail to reach or sustain a price equal to the
pre-split price multiplied by the reverse split multiple. Even if the price of
the Common Stock does increase following the effectiveness of the Reverse Stock
Split, there can be no assurance that such increase can be maintained for any
period of time.
In the event that the shareholders fail to approve the Reverse Stock Split,
it is uncertain whether the Company's Common Stock will trade at a price above
$1.00 per share. Since maintaining a minimum bid price of $1.00 per share is a
requirement of Nasdaq for the continued listing of the Company's Common Stock
on the National Market, the failure to satisfy this requirement will cause the
Common Stock to be delisted from the National Market. If the Company's Common
Stock is delisted from the National Market, it would likely commence trading in
the over-the-counter market on the OTC Bulletin Board or what is referred to as
the "pink sheets." In such event, an investor could find it more difficult to
dispose of, or to obtain accurate quotations as to the market value of, the
Common Stock. In addition, if the Common Stock were to be delisted from
trading on Nasdaq and the trading price of the Common Stock were to remain
below $5.00 per share, trading in the Common Stock would also be subject to the
requirements of certain rules promulgated under the Securities Exchange Act of
1934, which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a "penny stock" (generally, any
non-Nasdaq equity security that has a market price of less than $5.00 per
share, subject to certain exceptions). The additional burdens imposed upon
broker-dealers by such requirements could discourage broker-dealers from
effecting transactions in the Common Stock, which could severely limit the
market liquidity of the Common Stock and the ability of investors to trade the
Common Stock.
-16-
<PAGE> 19
IMPLEMENTATION OF THE PROPOSED REVERSE STOCK SPLIT
It is anticipated that the Reverse Stock Split will be implemented
immediately upon its approval by the Company's shareholders, if the Board of
Directors then believes the Reverse Stock Split to be in the best interests of
the Company and its shareholders.
The Reverse Stock Split will be effectuated by amending the Company's
Articles of Incorporation to add the following provision:
"As of 5:00 p.m., Eastern time, on the date of filing this amendment
to the Articles of Incorporation, each share of the Common Stock
issued and outstanding at such time shall be converted, without any
action on the part of the holder thereof, into one-fourth (1/4) of a
share of Common Stock, provided that no less than one whole share will
be issued pursuant to such conversion. Each holder of a certificate
or certificates which immediately prior to the effective date of this
amendment represented Common Stock in respect of which the holder
would otherwise be entitled to less than one whole share as a result
of such conversion shall be entitled to receive, upon surrender of
such certificate or certificates, the cash value of such fractional
shares based upon the average closing price per share of the Common
Stock as reported on the Nasdaq National Market for the ten trading
days immediately preceding the date this amendment to the Company's
Articles of Incorporation was approved by the Company's shareholders."
The Reverse Stock Split will become effective at 5:00 p.m., Eastern time,
on the date of such filing (the "Effective Date"). It is expected that such
filing will take place on the date of the Annual Meeting, or as soon thereafter
as possible, assuming the shareholders approve the Reverse Stock Split. The
shares of Common Stock held by the shareholders of record will be converted at
5:00 p.m., Eastern time, on the Effective Date without any further action on
the part of the Company or the shareholders, into that number of whole shares
of Common Stock equal to the number of shares owned immediately prior to the
effectiveness of the Reverse Stock Split divided by four, adjusted for any
fractional shares.
As soon as practicable after the Effective Date, shareholders will be
notified that the Reverse Stock Split has been effected. The Company's
transfer agent will act as the Company's exchange agent (the "Exchange Agent")
to act for holders of shares of Common Stock (the "Old Shares") in implementing
the exchange of their certificates. Holders of Old Shares will be asked to
surrender to the Exchange Agent certificates representing Old Shares in
exchange for certificates representing new shares ("New Shares") in accordance
with the procedures to be set forth in a letter of transmittal to be sent by
the Company. No new certificates will be issued to a shareholder until such
shareholder has surrender such outstanding certificate(s), together with the
properly completed and executed letter of transmittal to the Exchange Agent.
Stockholders should not destroy any stock certificates and should not submit
any certificate until requested to do so.
Any shareholder whose certificate for Old Shares has been lost, destroyed
or stolen will be entitled to issuance of a certificate representing New Shares
upon compliance with such requirements as the Company and the Company's
transfer agent customarily apply in connection with lost, stolen or destroyed
certificates.
PAYMENT FOR FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with the
Reverse Stock Split. Instead, shareholders who would otherwise be entitled to
receive fractional shares because they hold a number of Old
-17-
<PAGE> 20
Shares not evenly divisible by four will be entitled, upon surrender to the
Exchange Agent of certificates representing such shares, to receive a cash
payment in lieu thereof based upon the average closing price per share of the
Common Stock as reported on the Nasdaq National Market for the ten trading days
immediately preceding the date upon which the Reverse Stock Split is approved
by the Company's shareholders. The ownership of a fractional interest will not
give the holder thereof any voting, dividend or other rights except to receive
payment therefor as described herein.
CERTAIN EFFECTS OF REVERSE STOCK SPLIT
The principal effect of the Reverse Stock Split will be to reduce the
number of outstanding shares of Common Stock from 27,119,340 shares to
approximately 6,779,835 shares. In addition, on the Effective Date each option
to purchase Common Stock outstanding on the Effective Date will be adjusted so
that the number of shares of Common Stock issuable upon exercise of such option
shall be divided by four (and corresponding adjustments will be made to the
number of shares vested under each outstanding option) and the exercise price
of each option shall be multiplied by four. The proposed Reverse Stock Split
will not affect any shareholder's percentage equity interest in the Company,
except for minor differences resulting from adjustments for fractional shares.
The relative rights and preferences of the New Shares will be identical to the
relative rights and preferences of the Old Shares. The Common Stock issued
pursuant to the Reverse Stock Split will remain fully paid and non-assessable.
The Company will continue to be subject to the periodic reporting requirements
of the Securities Exchange Act of 1934.
The Reverse Stock Split will have the effect of creating additional
authorized shares of Common Stock. The Company has no current plans to issue
such shares. As of October __, 1998, the Company had 50,000,000 authorized
shares of Common Stock of which 27,119,340 were issued and outstanding. As of
October __, 1998, an aggregate of 7,500,000 shares are issuable under the
Company's 1990 Executive Option Plan. Of these, 4,982,300 shares remained
available for issuance for exercise of options under such Plan.
In order for the Company to avoid the expense and inconvenience of issuing
and transferring fractional shares of Common Stock, shareholders who would
otherwise be entitled to receive fractional shares of Common Stock (the
"Fractional Shareholders") shall receive payment in cash in lieu of receiving
such fractional shares. On the Effective Date, the interest of each
shareholder of record who owns less than four shares of Common Stock will
thereby be terminated, and he or she will have no right to vote as a
shareholder or share in the assets or future earnings of the Company.
If approved, the Reverse Stock Split will result in some shareholders
owning "odd-lots" of less than 100 shares of Common Stock. Brokerage
commissions and other costs of transactions on odd-lots are generally somewhat
higher than the costs of transactions in "round-lots" of even multiples of 100
shares.
The following table illustrates the principal effects of the Reverse Stock
Split of the Common Stock on the capitalization of the Company (without giving
effect to any adjustments for fractional shares):
-18-
<PAGE> 21
NUMBER OF SHARES AS OF OCTOBER 12, 1998
<TABLE>
<CAPTION>
Prior to Reverse After Reverse
Stock Split Stock Split
---------------- -------------
<S> <C> <C>
Authorized
Preferred Stock 8,000,000 8,000,000
Common Stock 50,000,000 50,000,000
Outstanding
Preferred Stock - -
Common Stock(1) 27,119,340 6,779,835
Common Stock Issuable upon exercise of Options and Warrants
3,027,300 756,825
Shareholders' Equity as of May 31, 1998
Common Stock
Additional Paid-in Capital 283,000 70,750
24,565,000 24,777,250
Total Shareholders' Equity as of May 31, 1998
$16,033,000 $16,033,000
Shareholders' equity per share as of May 31, 1998(2)
$0.59 $2.36
Net income for fiscal year ended May 31, 1998
$525,000 $525,000
Net income per share for fiscal year ended May 31, 1998
Basic
Diluted $.02 $.08
$.02 $.08
</TABLE>
Shareholders have no right under Florida law or under the Company's
Articles of Incorporation or Bylaws to dissent from the Reverse Stock Split, or
to dissent from the payment of cash for any fractional share resulting from the
Reverse Stock Split in lieu of issuing fractional shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material U.S. federal income tax
consequences of the Reverse Stock Split based on the Internal Revenue Code,
applicable Treasury Regulations promulgated thereunder, judicial authority and
current administrative rulings and practices as in effect on the date of this
Proxy Statement. This discussion is for general information purposes only and
does not address all the tax consequences that may be relevant to a particular
shareholder (such as non-resident aliens, broker-dealers
- ----------------------------------
(1) Because the Company can not accurately predict the amount of
fractional shares that will result from the Reverse Stock Split, this
number has not been adjusted to give effect to any fractional shares
that may result from the Reverse Stock Split. The actual number of
shares Common Stock outstanding after the effectiveness of the Reverse
Stock Split will be less than the 6,779,835 set forth in this table
because of the adjustments made for fractional shares.
(2) Based upon a weighted average number of shares outstanding before the
Reverse Stock Split of 27,119,340 and an estimated weighted average
number of shares outstanding after the Reverse Stock Split of
6,779,835.
-19-
<PAGE> 22
or insurance companies). Furthermore, no foreign, state or local tax
consequences are discussed herein. Accordingly, shareholders are urged to
consult their own tax advisors to determine the specific tax consequences of
the Reverse Stock Split to them.
The exchange of Old Shares for New Shares will not result in recognition of
gain or loss (except in the case of cash received for fractional shares as
described below). The holding period of the New Shares will include the
shareholder's holding period for the shares of stock exchanged therefor. The
tax basis of the New Shares will be equal to the shareholder's tax basis for
the shares of stock exchanged therefor, reduced by the tax basis allocable to
the receipt of cash in lieu of fractional shares.
A shareholder who receives cash in lieu of fractional shares will be
treated as if the Company has issued fractional shares to him or her and then
immediately redeemed them for cash. Such shareholder should generally
recognize gain or loss, as the case may be, measured by the difference between
the amount of cash received and the basis of such shareholder's pre-split stock
allocable to such fractional shares, had such fractional shares actually been
issued. Such gain or loss will be capital gain or loss (if such stock was held
as a capital asset), and any such capital gain or loss will generally be
long-term capital gain or loss to the extent such shareholder's holding period
for his or her stock exceeds 12 months.
RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S AUDITORS
(ITEM NO. 3)
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, 1999.
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.
-20-
<PAGE> 23
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the fiscal year 1999
annual meeting of shareholders of the Company pursuant to the provisions of
Rule 14a-8, promulgated under the Securities Exchange Act of 1934, 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 _____________, 1999, for inclusion in the Proxy Statement
and form of proxy relating to the 1999 annual meeting of shareholders and must
comply with requirements of federal securities laws, applicable provisions of
the Articles of Incorporation and Bylaws of the Company, and the Florida
Business Corporation Act, as amended.
<TABLE>
<S> <C>
By Order of the Board of Directors
Donald L. Perlyn
President and Chief Operating Officer
Fort Lauderdale, Florida
October , 1998
----
</TABLE>
The financial statements, financial information and management's discussion and
analysis of financial conditional and results of operations set forth in the
Company's 1998 Annual Report are incorporated herein by reference. A copy of
the Company's 1998 Annual Report is provided with this Proxy Statement.
-21-
<PAGE> 24
MIAMI SUBS CORPORATION
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 30, 1998
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Donald L. Perlyn and Jerry W. Woda and each
of them acting individually, each with full power of substitution, the true and
lawful attorneys and proxies of the undersigned, with all powers which the
undersigned would have if personally present at the Annual Meeting of
Shareholders of Miami Subs Corporation (the "Company") to be held at Sheraton
Suites, located at 555 N.W. 62nd Street, Fort Lauderdale, Florida 33309 on
November 30, 1998 at 9:00 a.m., local time, and any adjournment or adjournments
thereof, to vote all shares of common stock ("Common Stock") of the Company
which the undersigned may be entitled to vote at such meeting as follows:
(Continued and to be signed on other side)
A [x] Please mark your
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF ALL
DIRECTORS, "FOR" AN AMENDMENT TO THE COMPANY'S ARTICLES OF INCORPORATION TO
EFFECT A ONE-FOR-FOUR STOCK SPLIT, AND "FOR" RATIFICATION OF THE APPOINTMENT OF
AUDITORS.
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<S> <C>
NOMINEES: GUS BOULIS For Against Abstain
FOR WITHHELD DONALD L. PERLYN
1. ELECTION BRUCE R. GALLOWAY 3. Proposal to ratify the appointment [ ] [ ] [ ]
OF [ ] [ ] GREG KARAN of KPMG Peat Marwick LLP as the Company's independent
DIRECTORS PETER NASCA auditors for fiscal year 1999.
JOSEPH ZAPPALA
For. all nominees, except vote withheld from
the following nominee(s): 4. In their discretion, the proxies are authorized to act and
vote on such other matters as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED
- ---------------------------------------------- IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS GIVEN THIS PROXY
For Against Abstain WILL BE VOTED FOR ITEMS 1, 2, AND 3 AND AS THE PROXIES
2. Proposal to approve an amendment to DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY
the Company's Articles of [ ] [ ] [ ] COME BEFORE THE MEETING.
Incorporation to effect a Whether or not you plan to attend the meeting, you are urged
one-for-four to execute and Return this proxy, which may be revoked at any
reverse stock split of the Company's time prior to its use. The undersigned hereby acknowledges
Common Stock par value $ .01 per share. receipt of (I) the Notice of Annual Meeting (II) the Proxy
Statement and (III) the Company's 1998 Annual Report to
Shareholders.
</TABLE>
<TABLE>
<S> <C> <C> <C>
SIGNATURE DATE SIGNATURE DATE
------------------------ ------------ ------------------- -------------
</TABLE>
NOTE: Please sign exactly as your name appears. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, please sign full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name
by authorized person.
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