<PAGE>
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:
[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 (S)240.14a-11(c) or (S)240.14a-12
FOODQUEST, Inc.
----------------------------------------------
(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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
.......................................................................
2) Aggregate number of securities to which 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.:
....................................................
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4) Date Filed:
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<PAGE>
PRELIMINARY PROXY MATERIALS
---------------------------
FOODQUEST, INC.
899 W. Cypress Creek Road, Suite 500
Fort Lauderdale, Florida 33309
(954) 938-0330
-----------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
September 3, 1996
-----------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of FOODQUEST, Inc., a Florida corporation (the "Company"), will be
held on September 3, 1996, beginning at 11:00 o'clock a.m., Eastern Time, at the
Doubletree Guest Suites, 555 N.W. 62nd Street, Fort Lauderdale, Florida 33309,
for the following purposes, all of which are set forth more completely in the
accompanying proxy statement:
1. To elect Nico B.M. Letschert as the one member of the Company's Board
of Directors for a one-year term until the next annual shareholders'
meeting and until his successor shall have been elected and qualified,
or until his earlier resignation, removal from office or death;
2. To approve the sale of the Company's four Kenny Rogers Roasters/(R)/
restaurants in Dade County, Florida (the "Dade County Restaurants"),
to Roasters Corp. pursuant to the terms and conditions of that certain
Purchase and Sale Agreement dated March 31, 1996, between the Company
and Roasters Corp. (the "Restaurant Sale Agreement");
3. To ratify the selection of Coopers & Lybrand L.L.P. as the Company's
independent auditors for the current fiscal year; and
4. To transact such other business as may properly come before the
meeting.
Pursuant to the Company's Bylaws, the Board of Directors has fixed the
close of business on August 5, 1996, as the record date for the determination of
shareholders entitled to notice of and to vote at the Annual Meeting. A form of
proxy and a copy of the Company's Annual Report to Shareholders for the fiscal
year ended March 31, 1996, are enclosed.
With respect to the vote on the sale of the Company's Dade County
Restaurants pursuant to the Restaurant Sale Agreement, any shareholder of the
Company who votes against the approval has the statutory right to dissent and to
be paid the fair value of such shareholder's shares upon compliance with the
applicable provisions of the Florida Business Corporation Act regarding the
rights of dissenting shareholders. Copies of those applicable provisions,
Sections 607.1301, 607.1302 and 607.1320 of the Florida Statutes, are attached
to this Proxy Statement as Exhibit A and made a part hereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO BE PRESENT IN PERSON AT THE ANNUAL MEETING, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH DOES NOT
REQUIRE POSTAGE IF MAILED WITHIN THE UNITED STATES OF AMERICA.
BY ORDER OF THE BOARD OF DIRECTORS
Ronald T. Linares,
Vice President and Chief Financial Officer
Fort Lauderdale, Florida
August 16, 1996
<PAGE>
PRELIMINARY PROXY MATERIALS
---------------------------
FOODQUEST, INC.
899 W. Cypress Creek Road, Suite 500
Fort Lauderdale, Florida 33309
(954) 938-0330
------------------------
PROXY STATEMENT
------------------------
The enclosed proxy is solicited by the Board of Directors of FOODQUEST,
Inc., a Florida corporation (the "Company"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on September 3, 1996, beginning
at 11:00 a.m. Eastern Time, at the Doubletree Guest Suites, 555 N.W. 62nd
Street, Fort Lauderdale, Florida 33309. The approximate date on which this
Proxy Statement and the enclosed proxy will be sent to shareholders is
August 16, 1996.
You are urged to indicate your vote on each matter in the space provided
on the form of proxy. Proxies will be voted as marked. The form of proxy
provides a space for you to withhold your vote for any proposal. Whether or not
you plan to attend the meeting, please fill in, sign, date and return your proxy
card to the transfer agent in the enclosed envelope, which requires no postage
if mailed within the United States of America. If no space is marked on a
properly executed proxy card, the shares represented thereby will be voted by
the persons therein named at the meeting: (1) FOR the election of one director
for the term described in this Proxy Statement; (2) FOR approval of the sale of
the Company's four Dade County Restaurants to Roasters Corp. pursuant to the
terms and conditions of the Restaurant Sale Agreement; (3) FOR the ratification
of the selection of Coopers & Lybrand L.L.P. as the Company's independent
auditors for the current fiscal year; and (4) in their discretion, upon such
other business as may properly come before the meeting.
The cost of the Board of Directors' proxy solicitation will be borne by
the Company. In addition to solicitation by mail, directors, executive officers
and employees of the Company may solicit proxies personally and by telephone and
telegraph, all without extra compensation.
At the record date for the meeting, the close of business on August 5,
1996, the Company had outstanding 3,218,271 shares of common stock, $.01 par
value per share (the "Common Stock").
Only shareholders of record at the close of business on August 5, 1996,
are entitled to notice of and to vote at the Annual Meeting. In the event that
there are not sufficient votes in attendance at the meeting in person or by
proxy for approval of any of the matters to be voted upon at the Annual Meeting,
the Annual Meeting may be adjourned in order to permit further solicitation of
proxies.
The quorum necessary to conduct business at the Annual Meeting consists
of a majority of the outstanding Common Stock. The election of directors will
be by a plurality of votes cast, either in person or by proxy, at the Annual
Meeting. The approval of the sale of the Company's four Dade County Restaurants
to Roasters Corp. will require an affirmative vote of the holders of a majority
of the outstanding shares of the Company's Common Stock. The approval of the
other proposal covered by this Proxy Statement will require an affirmative vote
of the holders of a majority of the shares of Common Stock of the Company voting
in person or by proxy at the Annual Meeting. In addition to the foregoing
voting
<PAGE>
requirements and at the request of Roasters Corp., the Company is requiring the
affirmative vote of a majority of the shares of Common Stock represented in
person or by proxy at the Annual Meeting held of record or owned beneficially by
persons other than those owned of record by Roasters Corp. for approval of the
sale of the Company's four Dade County Restaurants to Roasters Corp.
With respect to the election of directors, votes cast as abstentions will
not be counted as votes for or against the election of directors and therefore
will have no effect on the number of votes necessary to elect directors. With
respect to the proposal to approve the sale of the Company's four Dade County
Restaurants to Roasters Corp., votes cast as abstentions will not be counted as
votes for or against any such proposal, but nevertheless will have the same
effect as a vote against such proposal. With respect to any other proposal
covered by this Proxy Statement, votes cast as abstentions will not be counted
as votes for or against the proposal, but nevertheless will have the effect of
increasing the total votes cast on the proposal, thereby increasing the number
of votes necessary to approve the proposal. So-called "broker non-votes"
(brokers failing to vote by proxy those shares of the Company's Common Stock
held in nominee name for customers) will not be counted at the Annual Meeting
and will have no effect on the number of votes necessary to approve any proposal
covered by this Proxy Statement.
A SHAREHOLDER WHO SUBMITS A PROXY ON THE ACCOMPANYING FORM HAS THE POWER TO
REVOKE IT AT ANY TIME PRIOR TO ITS USE BY DELIVERING A WRITTEN NOTICE TO THE
SECRETARY OF THE COMPANY, BY EXECUTING A LATER-DATED PROXY OR BY ATTENDING THE
ANNUAL MEETING AND VOTING IN PERSON. UNLESS AUTHORITY IS WITHHELD, PROXIES THAT
ARE PROPERLY EXECUTED WILL BE VOTED FOR THE PURPOSES SET FORTH THEREON.
-2-
<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
In Office
Name Age Position(s) Since
- - - ---- --- ----------- --------
<S> <C> <C> <C>
Ronald T. Linares 33 Vice President and
Chief Financial Officer 1994
Nico B. M. Letschert 41 Director 1994
</TABLE>
Each director holds office until the next annual meeting of shareholders
and until his successor has been elected and qualifies or until his earlier
resignation, removal from office or death. Pursuant to the underwriting
agreement between the Company and Noble Investment Co. of Palm Beach ("Noble")
regarding the 1992 initial public offering of the Company's Common Stock and the
placement agreement between the Company and Noble regarding the 1993-1994
Regulation S off-shore private placements, the Company has granted Noble the
right to designate two members of the Company's Board of Directors. Mr.
Letschert is the only Director whom Noble has currently designated. As a
result, Noble may subsequently appoint a person to the Company's Board of
Directors without shareholder consent or approval who will serve until the next
annual meeting of shareholders.
Mr. Letschert, an outside director, is currently the only director of the
Company. He has remained a director in order to oversee, for the benefit of the
Company's shareholders, the Company's efforts to achieve its primary business
objectives, the accomplishment of which there is no assurance. At his request,
Mr. Linares, who is currently the only officer of the Company, has agreed to
remain as the Company's Vice President and Chief Financial Officer at least
through the Company's 1996 Annual Meeting of Shareholders to provide necessary
operational management for the Company during that time.
Business Experience
Ronald T. Linares has been the Vice President and Chief Financial Officer
of the Company since November 1994. Prior to such appointment, from September
1993 until November 1994, Mr. Linares served as Assistant Controller for
Roasters with responsibilities for budgeting and finance. Mr. Linares served as
Director of Restaurant Accounting for Arby's Inc. from 1991 through August 1993.
Nico B. M. Letschert has been a director of the Company since July 1994.
Mr. Letschert was the President of Noble from 1984 to July 12, 1995, and is
currently the Chief Executive Officer of Noesis Capital Corp., a firm engaged in
corporate finance and money management. Mr. Letschert is also a member of the
Board of Directors of Capital Multimedia, Inc.; Futuremedia PLC; and Watermarc
Food Management Co. Prior to Mr. Letschert's election to the Company's Board of
Directors, Noble acted as the Company's underwriter and placement agent with
respect to offers and sales of certain securities of the Company and also acted
as a consultant to the Company.
-3-
<PAGE>
Family Relationships
There are no family relationships between or among any of the Directors
or executive officers of the Company.
Additional Information
During the fiscal year ended March 31, 1996, the Company's Board of
Directors held four meetings. Each director attended at least 75% of all
meetings of the Board of Directors. There is no audit, compensation or
nominating committee.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
persons who own more than 10% of any class of equity securities of the Company
registered pursuant to Section 12 of the Exchange Act to file with the
Securities and Exchange Commission initial reports of ownership of the Company's
equity securities on Form 3 and reports of changes therein on Forms 4 and 5.
Based solely on copies of such reports furnished to the Company pursuant to Rule
16a-3(a) under the Exchange Act and upon written representations by such
persons, all persons subject to the reporting requirements of Section 16(a) of
the Exchange Act filed the required reports on a timely basis during the fiscal
year ended March 31, 1996.
EXECUTIVE COMPENSATION
The following table (the "Summary Table") sets forth all plan and non-
plan compensation awarded to, earned by, or paid to the Company's former Chief
Executive Officer (the "Named Officer") during fiscal 1996. None of the
Company's other executive officers at March 31, 1996, has total fiscal 1996
annual salary and bonus in excess of $100,000.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------
Annual Compensation Awards
--------------------------- ------
Securities
Other Underlying
Annual Options/ All Other
Name and Principal Position Year Salary Bonus Compensation SARs Compensation
($) ($) ($) (#) ($)
- - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Gregory G. Dollarhyde, 1996 0(1) 0(1) 0(1) 0(1) 0(1)
Chief Executive Officer 1995 0(1) 0(1) 0(1) 50,000 0(1)
</TABLE>
_________________________
(1) Mr. Dollarhyde's compensation, other than stock options, was earned at
Roasters Corp. in conjunction with his responsibilities as Vice Chairman of
that company.
-4-
<PAGE>
During the fiscal year ended March 31, 1996, no other compensation not
otherwise referred to herein was paid or awarded by the Company to any Named
Officer, the aggregate amount of which compensation, with respect to any such
person, exceeded the lesser of $50,000 or 10% of the annual salary and bonus
reported in the Summary Table for such person.
There are no standard or other arrangements pursuant to which any
director of the Company is or was compensated during the Company's last fiscal
year for services as a director, for committee participation or special
assignments.
The Company does not have any compensatory plan or arrangement, including
payments to be received from the Company with respect to any Named Officer,
which plan or arrangement results or will result from the resignation,
retirement or any other termination of such person's employment with the
Company and its subsidiaries or from a change in control of the Company or a
change in such person's responsibilities following a change in control and the
amount involved, including all periodic payments or installments, exceeds
$100,000.
Options Granted During Last Fiscal Year
The following table sets forth information concerning option grants
during the fiscal year ended March 31, 1996, to the Named Officer.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------
Shares % of Total
Underlying Options
Options Granted to Exercise
Granted(1) Employees in Price Expiration
Name (#) Fiscal Year(1) ($/Share) Date
- - - --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gregory G. Dollarhyde 75,000 52.26% $4.75 6/1/99
</TABLE>
_________________________
(1) The vesting of these options was contingent upon the Company's
acquisition of Paradise Bakery, Inc. Because that acquisition did not
occur, these options never vested.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of August 5, 1996,
regarding the Company's Common Stock owned of record or beneficially by (i)
each shareholder who is known by the Company to beneficially own in excess of
5% of the outstanding shares of Common Stock, (ii) each director and executive
officer and (iii) all directors and executive officers as a group. As
-5-
<PAGE>
of August 5, 1996, there were 3,218,271 shares of Common Stock of the Company
issued and outstanding. Except as noted, the address of each beneficial owner
is the Company's address.
<TABLE>
<CAPTION>
Approximate
Name and Address Number of Shares Percent
of Beneficial Owner Beneficially Owned(1) of Class
------------------------------ --------------------- -----------
<S> <C> <C>
Roasters Corp. 3,731,386 (2) 71.8% (2)
899 West Cypress Creek Road
Suite 500
Fort Lauderdale, Florida
33309
Nico B. M. Letschert 381,167 (3) 10.9% (3)
1801 Clint Moore Road
Boca Raton, Florida 33487
David L. Scharps 319,000 (4) 9.5% (4)
540 Brickell Avenue
#421
Miami, Florida 33131
Ronald T. Linares 105,000 (5) 3.2% (5)
899 West Cypress Creek Road
Suite 500
Fort Lauderdale, Florida 33309
2 Officers and
Directors as a Group 486,167 (6) 14.2% (6)
</TABLE>
__________________
(1) Unless otherwise noted, the Company believes that all persons named in the
table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them.
(2) Includes warrants to purchase an additional 1,980,000 shares of Common
Stock at an exercise price of $6.00 per share.
(3) Includes 130,000 shares of Common Stock that may be acquired upon exercise
of options granted to Mr. Letschert and 249,500 shares of Common Stock
that may be acquired upon exercise of certain warrants.
(4) Includes 100,000 shares of Common Stock that may be acquired upon the
exercise of warrants and 125,000 shares of Common Stock that may be
acquired upon the exercise of options.
(5) Represents shares of Common Stock that may be acquired upon exercise of
options.
(6) Includes an aggregate of 484,500 shares of Common Stock that may be
acquired upon the exercise of options and warrants.
-6-
<PAGE>
CERTAIN TRANSACTIONS
Transactions with Roasters
1995 Transactions
Master Development Agreement and Franchise Agreements
The Company and Roasters Corp. entered into a Master Development Agreement
and International Master Development Agreement pursuant to which the Company
could have developed Roasters' restaurants in the territories of Dade County,
Florida; Atlanta, Georgia; Dallas/Fort Worth, Texas; and the countries of
Belgium, the Netherlands and Luxembourg. The agreement's minimum development
schedule required the Company to develop nine restaurants in 1995, two in Dade
County, three in the Atlanta area; and four in Dallas/Fort Worth, Texas;
however, Roasters Corp. informed the Company that the development requirement
for Dallas/Fort Worth, Texas, had been eliminated. It required the Company to
develop 12 restaurants in 1996, two in Dade County, Florida; four in the
Atlanta area; and six in Dallas/Fort Worth, Texas; however, Roasters Corp.
informed the Company the development requirements for Dallas/Fort Worth,
Texas, had been eliminated. Thereafter, the Company would have been required
to develop two restaurants per year in the Atlanta area and four per year in
Dallas/Fort Worth, Texas, until a target population of 70,000 per restaurant
is achieved. Roasters Corp. verbally agreed to extend each time period
specified in the agreement by one year.
The number of potential restaurants covered by the Master Development
Agreement was determined by negotiation between Roasters Corp. and the
Company. In the event the Company would have been unable to meet its
performance schedule, and Roasters Corp. would have given 60 days' written
notice to the Company of such default, the rights of the Company pursuant to
the Master Development Agreement would have terminated. All rights and duties
under existing individual franchise agreements would have continued provided
no defaults existed thereunder. Roasters Corp. has on occasion temporarily
waived defaults of defaulting franchisees, and may have done so with respect
to the Company in the future, provided the Company could demonstrate a
substantial likelihood of curing such default.
The Company and Roasters Corp. also entered into Franchise Agreements for
each of the Roasters restaurants acquired by the Company pursuant to the
Restaurant Acquisition Agreement. The Company was to pay Roasters Corp. a
royalty fee of 4% of the net sales of each of these restaurants instead of
Roasters Corp.'s standard royalty fee of 4.5% of net sales.
Pursuant to the Master Development Agreement, the specific locations
selected by the Company for future restaurants in the foregoing territories
would have been subsequently designated in separate franchise agreements. The
Company would have been required to pay Roasters Corp. the standard $29,500
franchise fee upon signing a franchise agreement for a new location.
Generally, a franchise agreement would have been executed once the Company
entered into a lease for the new location.
-7-
<PAGE>
Roasters Corp.'s current standard franchise agreement provides for a term
of 20 years, payment to Roasters Corp. of a royalty fee of 4.5% of net sales
and payment to Roasters Corp. advertising fund of 3/4% of gross sales (1/2% of
gross sales at January 1, 1996), which may be increased to 1% of gross sales.
The agreement also provided that the franchisee would spend at least 3% of net
sales for local or regional advertising. In addition, Roasters Corp. requires
each franchisee to have an approved full-time operator for the supervision and
conduct of the franchise.
In conjunction with the agreement for the sale of the Dade County
restaurants to Roasters Corp. and subject to the occurrence of the closing
pursuant thereto, the Company's Master Development Agreement and International
Master Development Agreement, as well as the individual Franchise Agreements
for the restaurants located in Dade County, Florida, would terminate.
Restaurant Acquisition Agreement
Effective December 1, 1994, the Company entered into a Purchase and Sale
Agreement (the "Restaurant Acquisition Agreement") with Roasters Corp.,
pursuant to which the Company acquired all of the assets of two Roasters
restaurants located in Dade County, Florida, and two Roasters restaurants
located in Alpharetta and Marietta, Georgia, respectively. The Company also
acquired Roasters Corp.'s 50% partnership interest in an additional two
Roasters restaurants located in Dade County, Florida (the six restaurants are
hereinafter collectively referred to as the "Restaurants"). Each of the
Restaurants or the interests therein was purchased at its net book value.
The aggregate purchase price for the Restaurants was $3,053,717 (the
"Purchase Price"). The Purchase Price was comprised of (i) cash from working
capital in the amount of $1,838,184; (ii) accounts receivable of $61,533; and
(iii) a $1,153,657 principal amount promissory note (the "Note"). The Note
bears interest at the rate of 10% per annum. Quarterly interest payments were
required to be made by the Company; however, with Roasters Corp.'s consent,
the Company accrued but did not pay such quarterly interest payments, which
are still owed to Roasters Corp. The entire principal balance, plus all
accrued but unpaid interest thereon, was originally due and payable on
June 1, 1996. There is no prepayment penalty. The Note is secured by the
assets of two of the four Restaurants purchased and the partnership interest
purchased in each of the two other Restaurants. The maturity date of the Note
was extended to May 1, 1997, in December 1995.
Under the Restaurant Acquisition Agreement, Roasters Corp. assigned its
interest in the leases for each of the Restaurants and the Company assumed the
obligations thereunder. In addition, the Company entered into a standard
Roasters franchise agreement for each of the Restaurants. However, the
Company would have paid Roasters Corp. a royalty fee of 4% of the gross sales
of each of the Restaurants instead of the standard royalty fee of 4.5% of
gross sales.
Loan to Company
In accordance with the provisions of the Stock Purchase Agreement dated
August 16, 1994 (the "Company Agreement"), by and among the Company,
Roasters Corp. and David L. Scharps, Roasters Corp. on August 18, 1994,
made a loan of $300,000 to the Company for working capital purposes. The
loan initially bore interest at 6% per annum and was secured by the
Company's restaurant in Tucker, Georgia. On each of October 13 and October
26, 1994, Roasters Corp. lent the Company an additional $100,000, for an
aggregate additional amount of $200,000, for the same purposes and on the
same
-8-
<PAGE>
terms. The $500,000 loan was originally payable on November 11, 1994.
However, the Company and Roasters Corp. modified the loan to provide for
payment upon the sale of the Tucker property. The Tucker property was sold in
March 1995, and full payment was made to Roasters Corp. upon such sale.
Company Agreement
Pursuant to the Company Agreement, Roasters Corp. paid $5 million to the
Company in exchange for (a) 896,057 shares of Common Stock, subject to certain
post-closing upward adjustments; and (b) warrants to purchase an additional
2,000,000 shares of Common Stock exercisable at a purchase price of $6.00 per
share on or prior to November 10, 1995 (the "Roasters Warrants"). The $6.00
issuance price per share of Common Stock and the $6.00 warrant price per share
were determined with respect to the trading price of the Common Stock on
NASDAQ prior to July 22, 1994, the date upon which the Company and Roasters
Corp. executed the letter of intent relating to the Company Agreement.
The Roasters Warrants are subject to the same terms and conditions as the
Company's public warrants (the "Public Warrants"), which also have an exercise
price of $6.00 per share and were sold in the Company's 1992 initial public
offering. In the event that the Company calls the Public Warrants for
redemption or extends their expiration date, the Roasters Warrants will also
be called or extended upon the same terms and conditions. To date, Roasters
Corp. has not exercised any of the Roasters Warrants.
Also pursuant to the Company Agreement, the Company dismissed with preju-
dice previously instituted legal proceedings against Roasters Corp.,
John Y. Brown, Jr. and Kenny Rogers and certain of their affiliates (the
"Roasters Litigation"). The basis for the Roasters Litigation had been alleged
trade dress infringement, unfair competition and deceptive and unfair business
practices by Roasters Corp. and other defendants.
In September 1995, the Company extended the expiration date on the Public
Warrants and the Roasters Warrants to November 10, 1996.
1996 Transactions
Restaurant Sale Agreement
Effective March 31, 1996, the Company entered into a contract (the "Sale
Contract") to sell its four Roasters concept restaurants in Dade County,
Florida (collectively, the "Restaurants"), to Roasters Corp. for an aggregate
purchase price of $3,393,918. Each of the restaurants will be sold at
approximately its book value.
The purchase price in the Sale Contract to sell the Restaurants includes
(a) cancellation of $1,653,657 in debt owed to Roasters Corp., (b) assumption
by Roasters Corp. of $843,127 in other obligations owed by the Company to
Roasters Corp. and its affiliates, and (c) assumption by Roasters Corp. of
$843,460 in third party debt and equipment lease obligations of the Company.
The sale is subject to receipt of the Company's shareholders' and landlords'
and lenders'
-9-
<PAGE>
consents. The offer from Roasters Corp. was the best offer received and is
slightly above the valuation of the Restaurants that the Company obtained from
an outside valuation consultant.
The closing of the sale is to occur by September 30, 1996. Pending the
sale, Roasters Corp. will manage the Restaurants pursuant to a Management
Agreement (the "Roasters Management Agreement") dated March 31, 1996.
Pursuant to the Roasters Management Agreement, Roasters Corp will receive all
of the net revenues from the operation of the Restaurants until the closing
as a management fee.
Under the Sale Contract, the Company will assign its interest in the
leases for each of the Restaurants and Roasters Corp. will assume the
obligations thereunder.
Second Loan to Company
In accordance with the provisions of the Sale Contract, Roasters Corp. on
March 31, 1996, made a loan (the "Second Loan") of $500,000 to the Company for
working capital purposes. The Second Loan is interest-free and is secured by
substantially all of the assets of the Restaurants. The Second Loan is due
upon the earlier of the date on which the Company's shareholders approve the
sale to Roasters Corp. or September 30, 1996.
Sale of Partnership Interest
Effective January 1, 1996, the Company entered into a Purchase and Sale
Agreement (the "Partnership Sale Agreement") with Roasters Corp. pursuant to
which the Company sold its 50% partnership interest in Roosters J.V. (the
"Partnership"), a Florida partnership which owns two Roasters restaurants
(the "Partnership Restaurants") located in Dade County, Florida.
The aggregate purchase price in the Partnership Sale Agreement was
$438,000 (the "Purchase Price"). The Purchase Price was comprised of (a) cash
in the amount of $213,833, (b) the satisfaction of amounts owed by the Company
to certain affiliates of Roasters Corp. in the amount of $99,661, and (c) an
adjustment to the Purchase Price for a working capital shortfall in the joint
venture of $124,506.
The Company continued managing the Partnership until March 31, 1996, for a
fee of 3.5% of gross sales of the Partnership Restaurants. Effective March
31, 1996, pursuant to the Sale Contract executed with Roasters Corp., the
Company terminated its Management Contract with the Partnership.
Transactions with Helen B. Scharps and/or David L. Scharps
Formation of the Company
Prior to June 1992, Helen B. Scharps ("H. Scharps") had been the sole
owner of the entire equity interest in each of the Company's wholly owned
operating subsidiaries (the "Operating Companies") since their respective
dates of organization, for which she paid the Operating Companies an aggregate
of approximately $78,000 between 1989 and 1992. David L. Scharps
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("D. Scharps"), a son of H. Scharps, was actively involved in the organization
of the Operating Companies and became the Chief Executive Officer of each of
them upon their organization.
In June 1992, H. Scharps sold 70% of the equity interest of the Operating
Companies to D. Scharps for his promissory note in the original principal
amount of $70,000 bearing interest at 10% per annum and due and payable in
June 1995. H. Scharps and D. Scharps then acquired 300,000 and 700,000 shares
of the Company's Common Stock and options to purchase 60,000 and 140,000
shares of the Company's Common Stock, respectively, from the Company in
exchange for the entire equity interest of the Operating Companies. The
options were exercisable at a price of $4.00 per share until June 30, 1995.
The 200,000 shares of Common Stock underlying the options were previously
registered pursuant to the Securities Act of 1933, as amended. H. Scharps and
D. Scharps had the right to require the Company to keep the Prospectus that is
a part of the registration statement current by means of post-effective
amendments so that they can publicly sell such stock.
In connection with the settlement of a claim by Isicoff & Ragatz, P. A., the
attorneys that represented the Company in the previous litigation against
Roasters Corp. (the "Litigation Attorneys"), H. Scharps and D. Scharps
assigned to the Litigation Attorneys options to purchase 20,000 and 15,000
shares, respectively. The options were exercised in October 1995 for a total
of 18,768 shares of the Company's Common Stock. On December 4, 1995, the
Company signed a promissory note in the amount of $162,075 payable to the
Litigation Attorneys. The note is payable over 12 months and bears interest
at 9% per annum. The note is guaranteed by Roasters Corp. against default.
Upon payment of the promissory note in full, the Litigation Attorneys will
tender the 18,768 shares of Common Stock to the Company for cancellation.
The expiration date for the remaining options to purchase 40,000 shares of
the Company's Common Stock held by H. Scharps has been extended by mutual
agreement to 45 days following the effective date of a registration statement
of the Company that included the shares underlying the options (the
"Registration Statement"). By letter dated June 16, 1995, the Company offered
to extend the expiration date for the remaining options to purchase 125,000
shares of the Company's Common Stock held by D. Scharps. However, D. Scharps
did not respond to the offer; therefore, his options expired on June 30, 1995,
in accordance with their terms. The Company has since issued options to
purchase an identical number of shares at the same exercise price to D.
Scharps subsequent to D. Scharps notifying the Company he intended to execute
the extension offer, but was unable to do so because he was out of the
country. Such newly-issued options expire 30 days following the effective
date of the Registration Statement. The Company decided to issue the
replacement options to avoid a dispute with D. Scharps regarding the Company's
registration obligations for the shares of Common Stock underlying the
original options.
Debt to H. Scharps
From 1989 to June 1992, H. Scharps lent an aggregate of approximately
$600,000 to the Operating Companies, which used the funds for expansion and
working capital. The Company in 1992 granted H. Scharps the option to convert
the loans into shares of the Company's Common Stock at a conversion price of
$4.00 per share. The option expires on the earlier of (a) the mandatory
conversion of the loans described in the next paragraph; (b) written notice
from the Company that it is prepaying in full one or more of the loans,
provided, however, that if the
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prepayment is not of all of the loans, then the optional conversion right
terminates only as to the loan(s) being prepaid in full; or (c) payment of any
of the loans in full in accordance with their terms. All of the loans made by
H. Scharps to the Operating Companies bear interest at the rate of 12% per
annum and are individually secured by substantially all of the assets of the
one of the Operating Companies to which the particular loan relates and
D. Scharps' shares of the Company's Common Stock. As of August 16, 1994, the
aggregate outstanding principal balance of the loans was $469,029.
Pursuant to the terms of a Stock Purchase Agreement dated August 16, 1994,
among the Company, D. Scharps, H. Scharps, Gary M. Scharps and Cathy Bayer
(the "Principal Shareholders Agreement"), the notes from the Company or any of
its subsidiaries that evidenced the aggregate debt to H. Scharps, any and all
documentation with respect to any and all collateral securing such notes, and
any and all necessary and appropriate documentation to effect the release of
such collateral were, contemporaneously with the closing pursuant to the
Company Agreement, placed in escrow (the "Escrow Agreement") with Broad and
Cassel, the Company's legal counsel. If the average closing bid price per
share for the Company's Common Stock for the 10 trading days immediately
preceding the effective date (the "Effective Date") of a registration
statement including the shares into which the loans can be converted (the
"Registration Statement") would have equalled or exceeded $4.25 per share,
then, upon such effectiveness, the aggregate debt would convert into 117,257
shares of the Company's Common Stock, the escrow would terminate and the
collateral would be released.
However, if the average closing bid price per share for the Company's Common
Stock for the 10 trading days immediately preceding the Effective Date did not
equal or exceed $4.25 per share, then the conversion would not occur on the
Effective Date but instead occur on the first business day thereafter upon
which both (a) the average closing bid price per share for the Company's
Common Stock on the 10 trading days immediately preceding such business day
equalled or exceeded $4.25 per share, and (b) the Prospectus contained in the
Registration Statement was current. If such conversion did not occur by
December 31, 1995, then the notes would be payable in accordance with their
respective current terms.
On January 2, 1996, pursuant to the terms of the Escrow Agreement, the
Company returned to H. Scharps the notes evidencing the Company's debt, the
documentation with respect to the collateral, and the documentation necessary
to effect the release of such collateral. In accordance with the Principal
Shareholders Agreement, the Company began making payments of principal and
interest on the debt owed to H. Scharps. As of March 31, 1996, the aggregate
outstanding principal balance of the loans was $351,764.
Consulting Agreement
In conjunction with the Company Agreement, the Company and D. Scharps
entered into a Consulting Agreement dated November 11, 1994 (the "Consulting
Agreement"), pursuant to which D. Scharps was to perform consulting services
for the Company on an exclusive basis to the extent requested by the Company
for a period of one year. D. Scharps received compensation of $85,000 during
such period pursuant to the Consulting Agreement.
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Noncompetition Agreement
D. Scharps and the Company also entered into a Noncompetition Agreement
dated November 11, 1994 (the "Noncompetition Agreement"), pursuant to which
D. Scharps agreed that, for a period of two years, he will not directly or
indirectly engage in any business activities, the substantial part of which is
the retail sale of rotisserie or roasted chicken meals or the granting of area
development rights or franchises for the same. During such period D. Scharps
is also prohibited from competing with the Company by soliciting or inducing
or influencing certain suppliers of the Company to discontinue or reduce their
relationship with the Company. D. Scharps is also prohibited from recruiting,
soliciting or influencing any of the Company's employees for competitive
purposes or from interfering with certain relations of the Company. In
consideration of his agreements pursuant to the Noncompetition Agreement, he
received warrants to purchase an aggregate of 100,000 shares of Common Stock
exercisable at purchase price of $6.00 per share on or prior to November 10,
1995. In conjunction with the extension of the Public Warrants and Roasters
Warrants, the expiration date on the warrants held by D. Scharps was extended
to November 10, 1996.
Transaction with Gary M. Scharps
Clucker's Wood Roasted Chicken, Inc.-Suniland, a Florida Corporation ("CWRI-
Suniland"), a wholly-owned subsidiary of the Company, and G.M.S. Enterprises,
Inc., a Florida corporation ("G.M.S."), of which Gary M. Scharps ("G.
Scharps"), a son of H. Scharps and the brother of D. Scharps, was the sole
shareholder, in March 1993, formed a general partnership known as Clucker's of
Suniland to own and operate a Clucker's restaurant in South Miami, Florida.
G.M.S. assigned to Michael Internoscia a 4% interest in the partnership. As a
result, CWRI-Suniland owned 50.1% of the partnership, G.M.S. owned 45.9% of
the partnership and Mr. Internoscia owned the remaining 4% of the partnership.
As of November 11, 1994, CWRI-Suniland and G.M.S. had contributed $227,984
and $178,500, respectively, to the partnership and had received distributions
from the partnership of $24,412 and $44,802, respectively. G. Scharps also
entered into an employment agreement with the partnership, pursuant to which
he was the general manager of the partnership's restaurant and received an
annual salary of $40,000.
Simultaneously with the closing of the Company Agreement, CWRI-Suniland
purchased G.M.S. and Mr. Internoscia's interests in the restaurant for a
purchase price of $225,000, which consisted of $185,000 determined pursuant to
a predetermined fixed price under the partnership agreement with respect to
the purchase of G.M.S.'s and Mr. Internoscia's partnership interests by CWRI-
Suniland and an additional $40,000 paid by CWRI-Suniland to G.M.S. in exchange
for the exclusive geographic area of operation by a Clucker's restaurant,
which $40,000 was negotiated by Roasters Corp., on behalf of the Company and
CWRI-Suniland, and by G. Scharps on behalf of G.M.S. The former management of
the Company was unable to determine if the $40,000 portion of the purchase
price is the price that would have been paid for exclusive geographic rights
by an unaffiliated third party. In addition, the employment agreement with
G. Scharps was terminated.
Options Granted to Directors
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The Company's former Board of Directors on July 18, 1994, granted options to
Nico B. M. Letschert for the purchase of 30,000 shares of the Company's Common
Stock at $4.625 per share. The options expire on July 18, 1997, or upon his
earlier resignation, removal from office or death. On April 4, 1996, Mr.
Letschert, as the Company's sole director, granted himself five-year options
for the purchase of 100,000 shares of the Company's Common Stock at $1.00 per
share, which exceeded the market price of the stock at the time of grant.
The Company's former Board of Directors on July 18, 1994, granted options to
Douglas Rudolph for the purchase of 30,000 shares of the Company's Common
Stock at $4.625 per share. The options vested immediately and expire on July
18, 1997.
The Company's former Board of Directors on August 23, 1993, granted options
to William J. Gallagher, then a director of the Company, for the purchase of
30,000 shares of the Company's Common Stock at $9.75 per share. The options
vested immediately and expire on August 23, 1996. Pursuant to an agreement
dated August 30, 1994, with Tex-Mex Ventures, Inc., one of the Company's area
developers in which Mr. Gallagher has an interest, the exercise price for the
options was reduced to $7.00 per share.
The Company's Board of Directors on November 17, 1994, granted options to
Gregory G. Dollarhyde and Andrew S. Howard, both Directors of the Company, for
the purchase of 50,000 and 15,000, respectively, shares of the Company's
Common Stock at $6.00 per share. The options vested immediately and expire on
November 17, 1999, or their respective earlier cessation to be either a
director, officer or consultant of the Company. Mr. Howard tendered his
resignation to the Company on November 30, 1996. Mr. Dollarhyde resigned as
Chairman and Chief Executive Officer on March 4, 1996.
Transactions with Atlanta FOODQUEST, LLC
Operating Agreement
On March 31, 1996, the Company entered into a joint venture agreement (the
"Operating Agreement") with Atlanta Roasters, Inc. ("Atlanta Roasters"),
another area developer of Kenny Rogers Roasters, for the ownership, operation
and development of the Roasters concept in the metropolitan Atlanta area. The
joint venture (the "Venture") was formed as Atlanta FOODQUEST, LLC, in the
state of Georgia. The Venture is comprised of four restaurants including two
formerly owned by the Company in Alpharetta and Marietta, Georgia. The
Company has a 49.9% interest in the Venture. Atlanta Roasters has a 50.1%
interest in the venture, and will manage the Venture for a management fee
equal to 2% of gross sales. Additionally, Atlanta Roasters will receive $250
per restaurant per month for accounting services provided. The term of the
Operating Agreement is through December 31, 2020. Under the Operating
Agreement, the Company assigned its interest in the leases of each of the
Restaurants and the Venture assumed the obligations thereunder.
Purchase and Sale Agreement
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In conjunction with the Operating Agreement, the Company entered into a
Purchase and Sale Agreement (the "Atlanta Sale Agreement"), in which the
Company sold its Alpharetta and Marietta Roasters concept restaurants to the
Venture for approximately $1,300,000. The sale price (the "Atlanta Sale
Price") in the Atlanta Sale Agreement was comprised of (a) assumption by the
Venture of $258,903 of equipment lease obligations, (b) assumption by the
Venture of $29,674 in unpaid royalty fees owed to Roasters Franchise Corp.,
(c) assumption by the Venture of $24,952 in trade payables, and (d) a
promissory note (the "Atlanta Note") for the $1,011,423 balance of the Atlanta
Sale Price. The Atlanta Note bears interest at 8% per annum and is payable
interest only for one year, then in monthly payments of principal and interest
based on a seven year amortization for two years, and then by payment of the
remaining amount due on April 1, 1999. The Atlanta Note is secured by
substantially all of the assets of the Alpharetta and Marietta restaurants.
PROPOSALS TO THE SHAREHOLDERS
The Board of Directors has unanimously approved each of the following
proposals for presentation to the Company's shareholders. The Board
recommends adoption of each of these proposals.
PROPOSAL 1. ELECTION OF DIRECTORS
It is intended that proxies will be voted for the election of Nico B. M.
Letschert as the one Director of the Company, unless otherwise instructed on
such proxies.
The term of Mr. Letschert, if elected, would commence upon the adjournment
of the Annual Meeting and would continue until the Company's next annual
meeting of shareholders and until his successor has been elected and
qualified, or until his earlier resignation, removal from office or death. Mr.
Letschert has consented to serve, if elected. If he should unexpectedly become
unable to serve as a director, proxies will be voted for the election of a
substitute nominee designated by the then members of the Company's Board of
Directors.
The Board recommends a vote in favor of the proposed nominee for election to
the Board.
PROPOSAL 2. APPROVAL OF SALE OF RESTAURANTS TO ROASTERS CORP.
The Restaurant Sale Agreement
On March 31, 1996, the Company entered into the Restaurant Sale Agreement
for the sale of its four Dade County Restaurants to Roasters Corp. (the
"Restaurants Sale") for an aggregate purchase price of $3,393,918 and borrowed
$500,000 from Roasters Corp. on a secured basis. On April 3, 1996, the day
before the Company publicly announced the Restaurant Sale Agreement, the high
and low sale prices for the Company's Common Stock were both $0.875 per share.
Roasters Corp. owns approximately 54% of the Company's outstanding common
stock and has its principal executive offices at 899 W. Cypress Creek Road,
Suite 500, Fort Lauderdale, Florida 33309, telephone number (954) 938-0330.
Roasters Corp. is a private company engaged
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in the business of developing, owning and franchising Kenny Rogers Roasters(R)
restaurants, which are quick-service restaurants that utilize wood-fire
rotisseries and serve freshly prepared meals for eat-in, drive-thru or take-
out.
The purchase price in the Restaurant Sale Agreement includes (a)
cancellation of $1,653,657 in debt owed by the Company to Roasters Corp., (b)
assumption by Roasters Corp. of $843,127 in other obligations currently owed
by the Company to Roasters Corp. and its affiliates, and (c) assumption by
Roasters Corp. of $843,460 in third-party debt and equipment lease obligations
of the Company. The Restaurants Sale is subject to approval by the Company's
shareholders and receipt of all necessary landlords' and lenders' consents,
the receipt of which may not necessarily occur. The Restaurants Sale is not
subject to any federal or state regulatory approval or requirements.
The closing of the Restaurants Sale is to occur on or before September
30, 1996. The Company expects the Restaurants Sale to close as soon after the
Company's shareholders approve it as all of the other closing conditions have
been met or waived. Pending the approval of the Restaurants Sale, Roasters
Corp. has been managing the Dade County Restaurants pursuant to a Management
Agreement dated March 31, 1996, with the Company and receives all of the net
revenues from the operation of the Dade County Restaurants as a management
fee.
The $500,000 loan from Roasters Corp. is interest-free and is due upon
the earlier of the date on which the Company's shareholders approve the
Restaurants Sale or September 30, 1996. The loan is secured by the assets of
the Dade County Restaurants.
For information concerning the Company, please see the following items,
which are hereby incorporated by reference and made a part of this Proxy
Statement, in the Company's Form 10-KSB for the fiscal year ended March 31,
1996, a copy of which accompanies this Proxy Statement:
1. Item 1 entitled "Description of Business."
2. Item 2 entitled "Description of Property."
3. Item 3 entitled "Legal Proceedings."
4. Item 5 entitled "Market for Common Equity and Related Stockholder
Matters."
5. Item 6 entitled "Management's Discussion and Analysis or Plan of
Operations."
6. Item 7 entitled "Financial Statements." The Company's consolidated
financial statements as of March 31, 1996, and for the two years
then ended are unaudited because the Company's independent
accountants of record have not completed an audit of those
financial statements. However, the Company's management is of the
opinion that those financial statements fairly present the
consolidated financial position, results of operations and cash
flows and contain all of the disclosures required by generally
accepted accounting principles, assuming the Company can continue
as a going concern.
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7. Item 8 entitled "Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures."
Unaudited pro forma condensed consolidated financial information
concerning the Company is attached to this Proxy Statement as Exhibit B and
made a part hereof. The pro forma information indicates the effect of the
Restaurants Sale and the joint venture of the two Atlanta area restaurants as
if they both had occurred on March 31, 1996, for purposes of the pro forma
condensed consolidated balance sheet and on March 27, 1995, for purposes the
pro forma condensed consolidated statement of operations. The pro forma
information was filed as an exhibit to the Company's Form 8-K/A dated March
31, 1996, that was filed with the Securities and Exchange Commission on May
30, 1996.
Factors Considered by the Company's Board of Directors in Approving the
Proposed Sale
The Company's Board of Directors has considered and approved the
Restaurants Sale pursuant to the Restaurant Sale Agreement. In evaluating the
Restaurants Sale, the Board considered the following factors, among others:
(a) The Company has determined that the strategy of operating franchised
restaurants of a developing concept such as Kenny Rogers Roasters(R)
in only two territories; Dade County, Florida, and Atlanta, Georgia,
does not provide enough current upside potential for net income
growth in a public company. Additionally, the Company's ability to
raise expansion capital was negatively impacted by the Company's
history (prior to the November 1994 change in control) of extensive
litigation, and poorly performing in-line Clucker's concept
restaurants. The lack of expansion capital prevented the Company
from expanding its base of Roasters concept restaurants quickly
enough to offset general and administrative expenses. This hampered
the Company's ability to reduce operating losses.
(b) Early in calendar 1996, the Company's Board of Directors adopted a
short-term strategy to improve its financial position consisting of
the sale of its Kenny Rogers Roasters(R) restaurants to improve
liquidity, the reduction of operating losses by streamlining its
general and administrative costs, and the improvement of restaurant
level margins by implementing tighter administrative controls. The
sale of the Dade County Restaurants to Roasters Corp. would
implement one piece of that strategy.
(c) The Company had received offers for the Dade County Restaurants from
unaffiliated third parties. However, the offer from Roasters Corp.
was the best offer received and is slightly above the valuation of
the Dade County Restaurants that the Company obtained from an
outside valuation consultant.
(d) The Restaurant Sale Agreement made possible the $500,000 secured
loan from Roasters Corp. The loan allowed the Company to negotiate
down the outstanding amount of various trade payables and pay a
substantial number of the adjusted trade payables in full.
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(e) Consummation of the Restaurants Sale will substantially reduce its
overall debt, in particular its long-term debt. Furthermore, it
will also significantly pay down the Company's debt to Roasters
Corp. and its affiliates, which was a large portion of the Company's
liabilities.
(f) Also early in calendar 1996, the Company's Board of Directors
adopted a long-term strategy of marketing the Company as a vehicle
for the reverse acquisition or merger of a restaurant concept that
would provide the potential for both income and unit growth. At
March 31, 1996, the Company had a tax-loss carry-forward of
approximately $10.8 million that would offer some tax benefits to an
appropriate restaurant concept. Consummation of the Restaurant Sale
is consistent with the implementation of this long-term strategy
because it would significantly reduce the size of the Company, which
would make the Company more attractive to such a restaurant concept
as a vehicle for growth.
The Board recommends that the Company's shareholders vote FOR approval of
the Restaurants Sale as described in this proposal.
Dissenters' Rights with Respect to the Restaurants Sale
Section 607.1202 of the Florida Statutes requires shareholder approval of
a Florida corporation's sale of all, or substantially all, of its property,
other than in the usual and regular course of business. The Dade County
Restaurants constitute approximately 55% of the Company's consolidated assets
and generated approximately 75% of its fiscal 1996 revenues. In addition,
consummation of the Restaurants Sale would change the business of the Company
from being an operator of Kenny Rogers Roasters(R) restaurants to a
corporation in search of an appropriate restaurant concept to be brought into
the Company by reverse acquisition or merger. Based on these factors, the
Company's Board considers the Restaurants Sale to be subject to the provisions
of Section 607.1202 and to require approval of the Company's shareholders.
Pursuant to Section 607.1302 (1)(b) of the Florida Statutes, any shareholder
of the Company has a right to dissent from, and obtain payment of the fair
value of such shareholder's shares in cash because the Restaurants Sale is
subject to the provisions of Section 607.1202.
Any shareholder of the Company electing to exercise dissenters' rights and
receive payment of the fair value of such shareholder's shares in cash must do
each of the following:
1. File with the Company, prior to the taking of the vote on Proposal 2
at the Annual Meeting, a written notice of the shareholder's intent
to demand payment for the shareholder's shares if Proposal 2 is
adopted;
2. Not vote in favor of Proposal 2; and
3. Within 20 days after the Company notifies the shareholder of the
approval of Proposal 2, (a) file with the Company a written notice
of election to dissent, stating the shareholder's name and address
and the number of shares of Common Stock to which the dissent
pertains, and demanding payment of the fair value of those shares,
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and (b) simultaneously deposit with the Company the certificates
representing those shares.
Any shareholder of the Company who fails to comply with these requirements
will not be entitled to receive the fair value of such shareholder's shares in
cash because of the consummation of the Restaurants Sale. A vote against
Proposal 2 alone does not constitute the required notice to the Company. A
shareholder may dissent as to less than all of the shares of Common Stock
registered in such shareholder's name.
A shareholder may withdraw a demand for payment at any time before the
Company offers to purchase the shareholder's shares. Thereafter, a
shareholder may not withdraw an election to dissent unless the Company agrees
to the withdrawal. Fair value will be determined as of the close of business
on the day prior to the Annual Meeting and, by statute, will exclude any
appreciation or depreciation in anticipation of the action to be taken at the
Annual Meeting, unless such exclusion would be inequitable.
Within 10 days after the Annual Meeting, the Company will deliver to each
dissenting shareholder written notice of the approval of Proposal 2. Within
10 days after the expiration of the period in which shareholders may file
their notices of election to dissent or within 10 days after the consummation
of the Restaurants Sale, whichever is later (but in no case later than 90 days
after the Annual Meeting), the Company will make a written offer to each
dissenting shareholder who has filed the required election to dissent, to pay
an amount the Company estimates to be the fair value of the shares. By
statute, the offer would be accompanied by the Company's Consolidated Balance
Sheet as of March 31, 1996, and the Company's Consolidated Statement of
Operations for the fiscal year then ended.
If, within 30 days after the making of the offer by the Company, any
dissenting shareholder accepts the offer, the Company must pay such
shareholder for the shares of Common Stock within 90 days after making the
offer or the consummation of the Restaurants Sale, whichever is later.
If the Company fails to timely make the statutorily required offer, or if
any dissenting shareholder fails to accept the offer within 30 days after the
offer is made, then the Company, within 30 days after receipt of written
demand of any dissenting shareholder given within 60 days after the date upon
which the consummation of the Restaurants Sale occurs, shall or, at its
election during such period of 60 days, may file an action in any court of
competent jurisdiction in the Florida county where the Company's registered
office is located requesting that the fair value of the shares of dissenting
shareholders be determined. The court shall also determine whether each
dissenting shareholder is entitled to receive payment for such shareholder's
shares of Common Stock and may appoint one or more appraisers to determine the
fair value of such shares. If the Company fails to institute such action, any
dissenting shareholder may institute such action in the name of the Company.
Any judgment entered by the court may include a fair rate of interest, as
determined by the court. The costs and expenses of the action, excluding
experts' and attorneys' fees of any party, shall be determined by the court
and assessed against the Company and/or any dissenting shareholders whose
refusal to accept the Company's written offer to purchase the court finds to
be arbitrary, vexatious or not in good faith.
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A dissenting shareholder that demanded payment for shares will not have
the right to receive dividends or distributions payable to holders of record
after the close of business on the date upon which the shareholder's notice of
election to dissent is filed with the Company and will cease to have any
rights as a shareholder of the Company with respect to those shares, except
the right to receive their fair value from the Company. Such dissenting
shareholder's rights as a shareholder of the Company may be restored only if
one of the following occur:
1. The shareholder properly withdraws the demand for payment in
accordance with the statutory requirements for withdrawal.
2. The Restaurants Sale is abandoned or rescinded.
3. The Company's shareholders revoke their approval of the Restaurants
Sale.
4. No demand or petition for the determination of fair value by a court
has been made or filed within the time provided by the applicable
provisions of the Florida Business Corporation Act.
5. A court of competent jurisdiction determines that the shareholder is
not entitled to receive payment of the fair value for such
shareholder's shares.
The foregoing summary of the rights of dissenting shareholders does not
purport to constitute a complete statement of the procedures to be followed by
shareholders of the Company desiring to exercise dissenters' rights. The
preservation and exercise of dissenters' rights require strict adherence to
the applicable provisions of the Florida Business Corporation Act regarding
the rights of dissenting shareholders. Each shareholder desiring to exercise
dissenters' rights should read Sections 607.1301, 607.1302 and 607.1320 of the
Florida Statutes, copies of which are attached to this Proxy Statement as
Exhibit A and made a part hereof, for a complete statement of the
shareholder's rights and the steps that must be followed in connection with
the exercise of those rights.
Proposal 3. RATIFICATION OF SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has engaged Coopers & Lybrand L.L.P. as the
Company's independent auditors. The Board of Directors believes that Coopers
& Lybrand L.L.P. has the personnel, professional qualifications and
independence necessary to act as the Company's independent auditors. Coopers
& Lybrand L.L.P. audited the Company's consolidated financial statements at
March 26, 1995, and for the year then ended. Representatives of Coopers &
Lybrand L.L.P. are expected to appear at the Annual Meeting, have an
opportunity to make a statement, if they wish to do so, and will be available
to answer appropriate questions from shareholders at that time.
Shareholder approval of the Company's auditors is not required under
Florida law. The Board is submitting its selection of Coopers & Lybrand
L.L.P. to its shareholders for ratification in order to determine whether the
shareholders generally approve of the Company's auditors. If the
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selection of Coopers & Lybrand L.L.P. is not approved by the shareholders, the
Board will reconsider its selection.
The Board recommends a vote in favor of this proposal.
OTHER MATTERS
The Board of Directors is not aware of any other business that may come
before the Annual 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 1997 Annual Meeting
of Shareholders must be received by the Company not later than April 11, 1997,
at its principal executive offices, Attention: Ronald T. Linares, Chief
Financial Officer, for possible inclusion in the Proxy Statement and form of
Proxy relating to that meeting.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year
ended March 31, 1996, including the financial statements that are a part
thereof, accompanies this Proxy Statement.
BY ORDER OF THE BOARD OF DIRECTORS
Ronald T. Linares,
Vice President and Chief Financial Officer
Fort Lauderdale, Florida
August 16, 1996
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EXHIBIT A
---------
607.1301 Dissenters' rights; definitions.-- The following definitions
apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value
of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in the
case of a merger pursuant to s. 607.1104, the day prior to the date on which a
copy of the plan of merger was mailed to each shareholder of record of the
subsidiary corporation.
607.1302 Right of shareholders to dissent.--
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 607.1104, and the shareholders would have been entitled to
vote on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be distributed
to the shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which will be
acquired, if the shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such amendment would
adversely affect such shareholder by:
<PAGE>
1. Altering or abolishing any preemptive rights attached to any
of his shares;
2. Altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage of equity in
the corporation, or effecting a reduction or cancellation of accrued dividends
or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking fund for
the redemption or purchase of any of his shares, or making any of his shares
subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of any
of his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his
preferred shares; or
7. Reducing any stated preferential amount payable on any of
his preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered
in his name. In that event, his rights shall be determined as if the shares
as to which he has dissented and his other shares were registered in the names
of different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class
or series which, on the record date fixed to determine the shareholders
entitled to vote at the meeting of shareholders at which such action is to be
acted upon or to consent to any such action without a meeting, were either
registered on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc., or held of record by not fewer than
2,000 shareholders.
A-2
<PAGE>
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 Procedure for exercise of dissenters' rights.--
(1)(a) If a proposed corporate action creating dissenters' rights under
s. 607.1302 is submitted to a vote at a shareholders' meeting, the meeting
notice shall state that shareholders are or may be entitled to assert
dissenters' rights and be accompanied by a copy of ss. 607.1301, 607.1302, and
607.1320. A shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action
is effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of intent
to demand payment.
(b) If proposed corporate action creating dissenters'
rights under s. 607.1302 is effectuated by written consent without a meeting,
the corporation shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320
to each shareholder simultaneously with any request for his written consent
or, if such a request is not made, within 10 days after the date the
corporation received written consents without a meeting from the requisite
number of shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to
paragraph (1)(a) or, in the case of action authorized by written consent, to
each shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares.
Any shareholder failing to file such election to dissent within the period set
forth shall be bound by the terms of the proposed corporate action. Any
shareholder filing an election to dissent shall deposit his certificates for
certificated shares with the corporation simultaneously with the filing of the
election to dissent. The corporation may restrict the transfer of
uncertificated shares from the date the shareholder's election to dissent is
filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall
not be entitled to vote or to exercise any other rights of a shareholder. A
notice of election may be withdrawn in writing by the shareholder at any time
before an offer is made by the corporation, as provided in subsection (5), to
pay for his shares. After such offer, no such notice of election may be
withdrawn unless the corporation consents thereto. However, the right of such
shareholder to be paid the fair value of his shares shall cease,
A-3
<PAGE>
and he shall be reinstated to have all his rights as a shareholder as of the
filing of his notice of election, including any intervening preemptive rights
and the right to payment of any intervening dividend or other distribution or,
if any such rights have expired or any such dividend or distribution other
than in cash has been completed, in lieu thereof, at the election of the
corporation, the fair value thereof in cash as determined by the board as of
the time of such expiration or completion, but without prejudice otherwise to
any corporate proceedings that may have been taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand
as provided in this section to pay an amount the corporation estimates to be
the fair value for such shares. If the corporate action has not been
consummated before the expiration of the 90-day period after the shareholders'
authorization date, the offer may be made conditional upon the consummation of
such action. Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was not
in existence throughout such 12-month period, for the portion thereof during
which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after
the making of such offer or the consummation of the proposed action, whichever
is later. Upon payment of the agreed value, the dissenting shareholder shall
cease to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within the
period of 30 days thereafter, then the corporation, within 30 days after
receipt of written demand from any dissenting shareholder given within 60 days
after the date on which such corporate action was effected, shall, or at its
election at any time within such period of 60 days may, file an action in any
court of competent jurisdiction in the county in this state where the
A-4
<PAGE>
registered office of the corporation is located requesting that the fair value
of such shares be determined. The court shall also determine whether each
dissenting shareholder, as to whom the corporation requests the court to make
such determination, is entitled to receive payment for his shares. If the
corporation fails to institute the proceeding as herein provided, any
dissenting shareholder may do so in the name of the corporation. All
dissenting shareholders (whether or not residents of this state), other than
shareholders who have agreed with the corporation as to the value of their
shares, shall be made parties to the proceeding as an action against their
shares. The corporation shall serve a copy of the initial pleading in such
proceeding upon each dissenting shareholder who is a resident of this state in
the manner provided by law for the service of a summons and complaint and upon
each nonresident dissenting shareholder either by registered or certified mail
and publication or in such other manner as is permitted by law. The
jurisdiction of the court is plenary and exclusive. All shareholders who are
proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may,
if it so elects, appoint one or more persons as appraisers to receive evidence
and recommend a decision on the question of fair value. The appraisers shall
have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each
dissenting shareholder the amount found to be due him within 10 days after
final determination of the proceedings. Upon payment of the judgment, the
dissenting shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the
shares, if the court finds that the action of such shareholders in failing to
accept such offer was arbitrary, vexatious, or not in good faith. Such
expenses shall include reasonable compensation for, and reasonable expenses
of, the appraisers, but shall exclude the fees and expenses of counsel for,
and experts employed by, any party. If the fair value of the shares, as
determined, materially exceeds the amount which the corporation offered to pay
therefor or if no offer was made, the court in its discretion may award to any
shareholder who is a party to the proceeding such sum as the court determines
to be reasonable compensation to any attorney or expert employed by the
shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of
a merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of
such dissenting shareholders would have been converted had they assented to
the merger shall have the status of authorized but unissued shares of the
surviving corporation.
A-5
<PAGE>
EXHIBIT B
---------
FOODQUEST, INC.
INTRODUCTION TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
------------
The accompanying unaudited pro forma condensed consolidated statement of
operations for the year ended March 31, 1996, and pro forma condensed
consolidated balance sheet as of March 31, 1996, present the sale to Atlanta
FOODQUEST, LLC of the Company's two Atlanta area restaurants (the "Atlanta
Restaurants") and the contract to sell its Dade County restaurants to Roasters
Corp. (the "Dade Restaurants") as if the transactions had taken place at March
27, 1995, for the pro forma condensed consolidated statement of operations and
March 31, 1996, for the pro forma condensed consolidated balance sheet.
The pro forma adjustments described in the notes to the pro forma consolidated
financial information reflect a preliminary estimated allocation of the sale
price to net assets and are subject to final determination.
The pro forma financial information does not purport to be indicative of the
results which would have actually been obtained had the transactions been
consummated as of the assumed dates and for the period presented or which may be
obtained in the future. The pro forma financial information should be read in
conjunction with the historical consolidated financial statements of FOODQUEST.
<PAGE>
FOODQUEST, INC.
PRO FORMA CONDENSED BALANCE SHEET
March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
FOODQUEST FOODQUEST
Historical Pro Forma Consolidated
March 31, Adjustments Pro Forma
1996 Dr(Cr) Condensed
---- ------ ---------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 176,299 $ 490,595 k, l $ 666,894
Receivables and refundable 96,940 (19,524) k, l 77,416
deposits
Inventory 54,341 (50,033) k, l 4,308
Prepaid expenses and other 75,187 (18,627) k, l 56,560
current assets
Due from joint venture 5,734 - 5,734
--------- --------- ----------
Total current assets 408,501 402,411 810,912
Property and equipment 4,393,622 (3,710,090) k,l 683,532
Intangible assets 275,789 (275,789) k,l -
Notes receivable, net of - 795,459 k, l, m 795,459
allowance for --------- --------- ---------
doubtful accounts
Total assets 5,077,912 (2,788,009) 2,289,903
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 911,156 (24,952) k, l 886,204
Accrued liabilities 672,412 (190,639) k, l 481,773
Notes payable, current portion 567,326 (343,018) k, l 224,308
Other current liabilities 269,558 - k, l 269,558
Due to affiliate 685,320 (685,320) k, l -
Capital leases, current
portion 127,566 (99,996) k, l 25,570
--------- --------- ---------
Total current liabilities 3,233,338 (1,343,925) 1,889,413
Notes payable, net of
current portion 1,628,514 (1,483,402) k, l 145,112
Capital leases, net of
current portion 452,654 (326,446) k, l 126,208
Deferred rent 3,218 - 3,218
--------- --------- ---------
Total liabilities 5,317,724 (3,153,773) 2,163,951
--------- --------- ---------
Common stock 32,183 - 32,183
Additional paid-in capital 12,065,258 365,764 k, l 12,431,022
Accumulated deficit (12,337,253) - (12,337,253)
--------- --------- ---------
Total shareholders'
equity (239,812) 365,764 125,952
--------- --------- ---------
Total liabilities and
shareholders' equity $ 5,077,912 $(2,788,009) $ 2,289,903
========== ========== ===========
</TABLE>
See notes to unaudited pro forma statements
<PAGE>
FOODQUEST, INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
for the year ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
FOODQUEST
Historical FOODQUEST
Year ended Pro Forma Consolidated
March 31, Adjustments Pro Forma
1996 Dr(Cr) Condensed
---- ------ ---------
<S> <C> <C> <C>
Restaurant revenues $ 7,652,030 $ (6,047,457) a, b $ 1,604,573
Franchise revenues 421,795 - 421,795
Management fee income 76,188 (76,188) n -
--------- --------- ---------
Total revenues 8,150,013 (6,123,645) 2,026,368
Restaurant operating expenses 7,676,205 (5,740,335) c, d 1,935,870
General and administrative 1,325,170 - 1,325,170
Other expense 2,360,747 - 2,360,747
Depreciation and amortization 491,591 (370,112) e,f,g 121,479
--------- --------- ---------
Total operating expenses 11,853,713 (6,110,447) 5,743,266
--------- --------- ---------
Operating loss (3,703,700) (13,198) (3,716,898)
Interest expense, net (277,573) 233,773 h,i,j (43,800)
Equity in loss of joint venture (103,392) - (103,392)
--------- --------- ---------
Net loss before income tax benefit (4,084,665) 220,575 (3,864,090)
Income tax (provision)/benefit - - -
--------- --------- ---------
Net loss $ (4,084,665) $ 220,575 $ (3,864,090)
=========== ========== ===========
Net loss per common share $ (1.27) $ (1.20)
=========== ===========
Weighted average number of common shares
outstanding 3,218,271 3,218,271
=========== ===========
</TABLE>
See notes to unaudited pro forma statements
B-3
<PAGE>
NOTES TO CONDENSED CONSOLIDATED PRO FORMA FINANCIAL
STATEMENTS
(Unaudited)
-----------
1. Basis of presentation
---------------------
The accompanying unaudited pro forma condensed balance sheet as of March 31,
1996, and pro forma condensed statement of operations for the year ended March
31, 1996, is presented as if the Company had completed the sale of the Atlanta
Restaurants and Dade Restaurants on March 27, 1995, for the pro forma
condensed statement of operations and on March 31, 1996, for the pro forma
condensed balance sheet.
The historical pro forma condensed balance sheet as of March 31, 1996, was
derived from the Company's unaudited financial statements dated March 31,
1996. The historical pro forma statement of operations for the year ended
March 31, 1996, was derived from the Company's unaudited financial statements
dated March 31, 1996.
2. Unaudited Pro Forma Adjustments
-------------------------------
A description of the adjustments included in the unaudited pro forma
consolidated statement of operations are as follows:
a. To reflect a reduction in restaurant sales of $4,350,253 in conjunction
with the Company's contract to sell the Dade Restaurants.
b. To reflect a reduction in restaurant sales of $1,697,204 in conjunction
with the Company's agreement to sell the Atlanta Restaurants.
c. To reflect a reduction in restaurant operating expenses of $4,013,647 in
conjunction with the Company's contract to sell Dade Restaurants.
d. To reflect a reduction in restaurant operating expenses of $1,726,688 in
conjunction with the Company's agreements to sell the Atlanta Restaurants.
e. To reflect a reduction in depreciation expense of $244,148 in conjunction
with the Company's contract to sell the Dade Restaurants.
f. To reflect a reduction in depreciation expense of $114,597 in conjunction
with the Company's agreement to sell the Atlanta Restaurants.
g. To reflect a reduction in goodwill amortization expense of $11,367 in
conjunction with the Company's contract to sell the Dade Restaurants.
B-4
<PAGE>
h. To reflect a reduction in interest expense from the elimination of the
following notes payable in conjunction with the Company's contract to sell
the Dade Restaurants:
(1) a note payable principal amount $139,542, with interest payable at 7%.
(2) a note payable principal amount $161,672, with interest payable at 9%.
(3) a note payable principal amount $146,000, with interest payable at the
prime rate plus 2%.
(4) a note payable principal amount $1,153,657, with interest payable at
10%.
(5) a note payable principal amount $180,164, with interest payable at 12%.
(6) a note payable principal amount $45,296, with interest payable at 10%.
i. To reflect a reduction in interest expense from the elimination of the
following capital leases in conjunction with the Company's contract to sell
the Dade Restaurants:
(1) a capital lease principal amount $170,697 with interest payable at
13.4%.
(2) a capital lease principal amount $155,958 with interest payable at 13%.
(3) a capital lease principal amount $155,958 with interest payable at 13%.
j. To reflect a reduction in interest expense from the elimination of the
following capital leases in conjunction with the Company's agreement to
sell the Atlanta Restaurants:
(1) a capital lease principal amount $139,510 with interest payable at
13.3%.
(2) a capital lease principal amount $119,394 with interest payable at 10%.
k. To reflect the sale of the Dade Restaurants in accordance with the terms of
the contract by and between the Company and Roasters Corp. The Company will
sell its Dade Restaurants for $3,393,918 comprised of cash, the assumption
of third party debt and the cancellation of debt owed by the Company to
Roasters Corp. In accordance with the terms of the contract the Company
issued to Roasters a note payable principal amount $500,000 to be repaid at
the time of the contract closing. This is a preliminary allocation of the
sale price and is subject to final determination.
l. To reflect the sale of the Atlanta Restaurants in accordance with the terms
of the agreement by and between the Company and Atlanta FOODQUEST, LLC.
The Company sold its interest in the Atlanta Restaurants on March 31, 1996,
for approximately $1,300,000, to Atlanta FOODQUEST in exchange for a 49.9%
interest in that partnership. The purchase price is comprised of a note
receivable principal amount $1,011,423, the assumption of amounts owed to
Roasters Corp., and the assumption of third party debt.
m. To reflect a valuation allowance of $215,964 on the note receivable,
principal amount $1,011,423, received in the sale of the Atlanta
Restaurants to Atlanta FOODQUEST.
n. To reflect a reduction in management fee income of $76,188 in accordance
with the terms of the contract to sell the Dade Restaurants.
B-5
<PAGE>
PRELIMINARY FORM OF PROXY
-------------------------
FOODQUEST, INC.
Proxy Solicited on Behalf of the Board of Directors of
the Company for the Annual Meeting of Shareholders
September 3, 1996
The undersigned hereby appoints Nico B.M. Letschert Ronald T. Linares (each
with the power to act alone and with full power of substitution) as proxies to
vote at the Annual Meeting of the Shareholders of FOODQUEST, Inc. (the
"Company"), to be held at the Doubletree Guest Suites, 555 N.W. 62nd Street,
Fort Lauderdale, Florida 33309, on Tuesday, September 3, 1996, at 11:00 a.m.,
E.D.T., and at any adjournments thereof, the shares of the Common Stock held of
record by the undersigned at the close of business on Monday, August 5, 1996, on
each of the following proposals as specified.
1. ELECTION OF DIRECTORS
[_] FOR THE NOMINEE listed below [_] WITHHOLD AUTHORITY
(except as marked to the contrary to vote for all nominees)
The nominee is Nico B.M. Letschert.
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s),
strike a line through the nominee's name in the list above.
2. SALE OF RESTAURANTS: To approve sale of the Company's four restaurants in
Dade County, Florida, to Roasters Corp.
[_] FOR [_] AGAINST [_] ABSTAIN
3. RATIFICATION OF COOPERS & LYBRAND L.L.P. AS INDEPENDENT AUDITORS: To
ratify the Company's selection of Coopers & Lybrand L.L.P. as independent
auditors for the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
(Proposal 4 and signature lines are on the reverse side.)
<PAGE>
4. OTHER MATTERS: In their discretion, the proxies are authorized to vote
upon such other matters that may properly come before the meeting,
including an adjournment of the meeting.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2, 3 and 4.
Date: ______________, 1996 __________________________________________________
__________________________________________________
Signature of Shareholder
Please date this proxy and sign exactly as your
name(s) appears hereon. If more than one owner is
registered as such, all must sign. If signing as
attorney, personal representative, administrator,
trustee or guardian, please give full title as
such. If a corporation, please sign in full
corporate name by President or other unauthorized
officer. If a partnership, please sign in
partnership name by authorized officer.
PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN
THIS PROXY CARD USING THE ENCLOSED ENVELOPE.
