Preliminary Copy
Proxy Statement Pursuant to Section 14(a) of the
Securities ExchangeAct of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by the Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.
240.14a-11(c) or ss. 240.14a-12
JRECK SUBS GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii),
14a-6(i)(1), or 14a-
6(i)(2).
[ ] $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:
(4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as
provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee
was paid previously. Identify the previous filing by
registration
statement number, or the Form or Schedule and the date
of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
JRECK SUBS GROUP, INC.
2101 West State Road 434, Suite 100
Longwood, Florida 32779
NOTICE OF MEETING
To Be Held
October 23, 1998
NOTICE is hereby given that a meeting of shareholders
(the "Meeting") of Jreck Subs Group, Inc.(the
"Company") will be held as follows:
Place: Hampton Inn
151 Douglas Avenue
Altamonte Springs, Florida 32714
Telephone (407) 869-9000
Date: Friday, October 23, 1998
Time: 10:00 a.m.
The purposes of the Meeting are:
1. To elect a Board of Directors consisting of five
members to hold office until the next annual
meeting of shareholders or until their
respective successors are duly elected and qualified.
2. To adopt the 1998 Stock Option Plan.
3. To transact such other business as may properly
come before the Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business
on September 1, 1998, as the record date for the
determination of shareholders entitled to
notice of and to vote at the Meeting.
Shares can be voted at the Meeting only if the record
holder thereof is present at the meeting or
represented by proxy. To insure the presence of a
quorum at the Meeting, you are requested to sign
and date the accompanying Appointment of Proxy and
return it promptly in the enclosed return envelope.
The giving of such Appointment of Proxy will not
affect your rights to vote in person in the event you
attend the Meeting.
By Order of The Board of Directors
October 3, 1998 _____________
Secretary
JRECK SUBS GROUP, INC.
2101 West State Road 434, Suite 100
Longwood, Florida 32779
PROXY STATEMENT
Mailing Date: October 3, 1998
MEETING OF SHAREHOLDERS
To Be Held
October 23, 1998
General
This Proxy Statement is furnished to the holders of
Common Stock, no par value per share (the "Common
Stock"), of JRECK Subs Group, Inc. (the
"Company") on behalf of the Company in connection
with its solicitation of
Appointments of Proxy in the form enclosed herewith
for use at a meeting of
shareholders (the "Meeting") to be held on October 23,
1998, and at any adjournments thereof. The Meeting
will be held at 10:00 a.m. Florida time on the
above date at the Hampton Inn, 151 Douglas Avenue,
Altamonte Spings, Florida
32714, Telephone (407) 869-9000. The matters to be
acted upon at the Meeting
are set forth in the accompanying Notice of Meeting of
Shareholders and are
described herein.
The cost of this solicitation of Appointments of Proxy
will be borne by the Company. In addition to the
solicitation of Appointments of Proxy by mail,
certain officers, directors and regular employees
of the Company, without additional remuneration,
may solicit Appointments of Proxy personally or by
telephone, telegraph or cable. Arrangements
will also be made with brokerage
firms and other nominee holders for forwarding proxy
materials to the beneficial
owners of shares of the Common Stock, and the Company
will reimburse such
persons for reasonable out-of-pocket expenses incurred
by them in connection
therewith.
Voting of Appointments of Proxy
The person named in the enclosed Appointment
of Proxy as proxies to
represent shareholders at the Meeting is Eric Swartz.
An Appointment of Proxy
which is properly executed and returned, and not
revoked, will be voted in
accordance with the directions contained therein.
If no directions are given,
that Appointment of Proxy will be vote FOR the
election of the five nominees for
directors named in Proposal 1 by casting an equal
number of votes for each such
nominee, and FOR approval of the 1998 Stock Option
Plan described named in
Proposal 2 described herein. If, at or before the
time of the Meeting, any
nominee named in Proposal 1 has become unavailable for
any reason, the proxies
shall have the discretion to vote each Appointment of
Proxy for any substitute
nominee named by the Board of Directors. On any other
matters that may come
before the meeting, each Appointment of Proxy will be
voted in accordance with
the best judgment of the proxies.
Revocability of Appointments of Proxy
1
An Appointment of Proxy may be revoked by the
shareholder at any time
before it is exercised by filing, with the Secretary
of the Company, a written
revocation or a duly executed Appointment of Proxy
bearing a later date, or by
attending the Meeting and announcing his intention to
vote in person.
2
Record Date and Voting Rights
The close of business on September 1, 1998 has been
fixed as the record
date for the determination of shareholders entitled to
notice of and to vote at
the Meeting. Only those shareholders of record on that
date will be entitled to
vote on the proposals described herein.
The voting securities of the Company are the shares
of its Common
Stock, of which 16,678,836 shares were issued and
outstanding as of September 1,
1998. All other outstanding shares are entitled to
one vote on each matter submitted for voting at the
Meeting.
Beneficial Ownership of Common Stock
Principal Shareholders. The following table sets forth
the beneficial ownership of the Company's Common
Stock as of September 1, 1998 by each person
known to the Company to own more than five percent
(5%) of the Company's Common
Stock. The table has been prepared based on
information provided to the Company
by each shareholder.
Percentage
Name of Number of of Outstanding
Stockholder Shares Owned(1) Common Stock
Christopher M. Swartz(2)(3)(4) 5,569,500 27.9%
Bradley L. Gordon 1,095,113 5.5%
Michael F. Cronin 500,000 2.5%
Eric T. Swartz -0- --
Kelly A. Swartz -0- --
Jeremiah J. Haley(5) 190,000 1.0%
All executive officers and
directors as a group (5 persons)(2)(3)(4) 7,354,613 36.8%
(1) As used in this table, "beneficial ownership" means the sole or
shared power to vote, or to direct the voting of, a security, or
the sole or shared investment power with respect to a security
(i.e., the power to dispose of, or to direct the disposition of, a
security). In addition, for purposes of this table, a person is
deemed, as of any date, to have "beneficial ownership" of any
security that such person has the right to acquire within 60 days
after such date.
(2) Includes 350,000 shares from the full conversion of Series B Preferred
Stock into the Company's Common Stock in June 1998.
(3) Includes 3,344,500 shares of common stock owned by Tri-Emp Enterprises,
Inc. Mr. Christopher M. Swartz is President and the sole shareholder of
Tri-Emp Enterprises, Inc and as such is deemed to have beneficial
ownership of the shares of the Company's stock owned by Tri-Emp
Enterprises, Inc.
(4) Includes 2,000,000 shares subject to options currently exercisable by
Mr. Christopher M. Swartz and 225,000 shares subject to options
currently exercisable by Tri-Emp Enterprises, Inc.
(5) Mr. Haley owns 25,000 shares of Common Stock and 165,000 shares of
Common Stock from his conversion of 150,000 shares of the Series A
Preferred Stock into the Company's Common Stock in June 1998.
3
4
PROPOSAL NO. 1: ELECTION OF DIRECTORS
Pursuant to the Bylaws, the Board of Directors has set the number of
directors of the Company at five. Set forth below are the names of the five
nominees for election as directors of the Company, together with certain
information concerning each such nominee. Each of the nominees currently serves
as a director of the Company. Each director elected at the Meeting will serve
until the Company's next annual meeting of shareholders or until his successor
shall be duly elected and shall qualify.
Christopher M. Swartz has been President, Chief Executive Officer,
and Chairman of the Company since April 1996 and of JRECK Subs, Inc.
since September 1995. From 1992 to September 1995, he was Director of
Operations of Lox, Stox & Bagels of Liverpool, Inc. Prior to 1992 Mr.
Swartz was a student at Syracuse University. Mr. Swartz is a magna cum
laude graduate of Syracuse University. He has worked in construction,
building sub shops and has managed sub shops. He is the second
generation of his family involved with JRECK. Mr. Swartz is also the
President of Tri-Emp Enterprises, Inc. and the brother of Eric T. Swartz
and Kelly A. Swartz.
Bradley L. Gordon has been Chief Operating Officer and Director of the
Company since September 1997. Prior to joining the Company, he was president
from September 1993 to September 1997 of Quality Franchise Systems, Inc.
("QFS"), the franchisor of Mountain Mike's Pizza, QFS's chief executive officer
since September 1992 and one of its directors since January 1993. Before joining
QFS, he held various positions at Pace Membership Warehouse, Inc. in Denver,
Colorado beginning in November 1983, including executive vice president - sales,
senior vice- president-operations and vice president-human resources.
Eric T. Swartz has been a Director and Secretary of the Company
since April 1996. He was awarded his J.D. degree from Syracuse
University College of Law and his Bachelor's Degree from Syracuse
University. He has been a partner in the Swartz Law Firm, P.C. from
October 1993 to the present. From September 1992 to May 1993 he was
associated with the law firm of Pease & Willer, which he joined after
his graduation from law school in 1992. Mr. Swartz is the brother of
Christopher M. Swartz and Kelly A. Swartz.
Kelly A. Swartz has been a Director of the Company since April
1996. She is a graduate of the State University of New York, at
Plattsburgh. Ms. Swartz is an elementary school teacher at Apollo
Elementary in Titusville, Florida 32779, where she has been employed
since September, 1991. From May 1990 to September 1991 she was employed
in various capacities with JRECK Subs, Inc., including the management of
several sub shops. Ms. Swartz is the sister of Eric T. Swartz and
Christopher M. Swartz.
Jeremiah J. Haley has been a Director of the Company since April
1996. He was one of the original founders of JRECK Subs, Inc. (the "J"
in the name JRECK stands for the first letter of Mr. Haley's first
name). Mr. Haley has a B.S. degree from Mansfield State College in
Mansfield, Pennsylvania. He also holds a Master's degree from the State
University of New York at Cortland. Mr. Haley has been President of
Haley Enterprises, Inc., a JRECK Subs, Inc. franchisee, from 1975 to the
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present. He had also been a teacher with the Carthage, New York Central School
District from 1965 until he retired in June 1993.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR LISTED ABOVE. THE FIVE
NOMINEES RECEIVING THE HIGHEST NUMBER OF VOTES SHALL BE DEEMED TO HAVE
BEEN ELECTED.
Meetings and Committees of the Board of Directors
The Company's Board of Directors met one time during Fiscal 1997. All
directors attended at least 75% of all meetings held during Fiscal 1997.
The Board of Directors has no audit, compensation or nominating
committees or other committees performing similar functions.
Executive Officers
In addition to the above persons listed above as directors, other
executive officers of the Company are as follows:
Michael F. Cronin has been Chief Financial Officer of the Company since
February 1998. He is a Certified Public Accountant who has managed his own
practice since February 1985 specializing in SEC audits and business and tax
planning. He has been licensed in New York State for 16 years. Mr. Cronin, a
graduate of St. John Fisher College, began his career in public accounting in
Rochester, NY in 1979. From 1979 to 1985 Mr. Cronin was employed as Staff
Accountant and Partner in a regional public accounting firm in upstate New York.
Prior to attending college, Mr. Cronin served for three years in the United
States Marine Corps.
Gary Rowe has been the Corporate Controller since September 1993.
Prior to joining the Company, Mr. Rowe was the controller of the quasi-
independent New York State government agency, the Development Authority
of the North Country. Mr. Rowe graduated from the State University of
New York at Albany in 1974 where he received a Bachelor of Science
Degree in accounting. Mr. Rowe is a Certified Public Accountant.
Executive Compensation
The following table sets forth the cash compensation of the Company's
executive officers and directors during each of the last three fiscal years. The
remuneration described in the table does not include the cost to the Company of
benefits furnished to the named executive officers, including premiums for
health insurance and other benefits provided to such individual that are
extended in connection with the conduct of the Company's business. The value of
such benefits cannot be precisely determined, but the executive officers named
below did not receive other compensation in excess of the lesser of $25,000 or
10% of such officer's cash compensation.
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Summary Compensation Table
ANNUAL COMPENSATION LONG TERM COMPENSATION
Name and Other Annual Awards Payouts All
Principal Position Year Salary Bonus Compensation Other
RestrictedOptions/ LTIP
Stock ($)SARs(#) Payouts ($)
1997 115,393 0 0 0 0 0 0
Christopher M. Swartz 1996 26,000 0 0 0 0 0 0
President
and CEO
1995 0 0 0 0 0 0
1997 52,600 0 0 0
Gary E. Rowe 1996 46,350 0 0 0 0 0
Controller
1995 39,000 0 0 0 0 0
Bradley R. Gordon 1997(a) 37,500 0 0 0 0 0 0
Chief Operations Officer
(a) For the period October 1, 1997 to December 31, 1997.
The Company carries no officers and directors liability insurance or
disability insurance benefits. The Company maintains a $3,000,000 key man life
insurance policy on Mr. Christopher Swartz of which the Company is the
beneficiary. No executive officer or director is currently covered by an
employment agreement except for Bradley L. Gordon. Other than 401(k) plans
maintained at the Mountain Mike's division of Admiral's Fleet, Inc. and Little
King, Inc., the Company does not maintain any pension plan, profit sharing plan
or similar retirement or employee benefit plans.
Mr. Bradley L. Gordon joined the Company as chief operating officer in
September 1997. Under the terms of his three-year employment agreement
commencing, Mr. Gordon receives an initial annual compensation of $150,000
subject to annual increases consistent with other executives of the Company. If
the employment agreement is terminated by the Company, Mr. Gordon continues to
receive his base salary until the earlier of Mr. Gordon finding new employment
or twelve months after such termination date. Mr. Gordon purchased 500,000
shares of the Company's common stock at a price of $3.00 per share which shares
were issued in November 1997. The purchase price of $1,500,000 was paid in the
form of a promissory note to the Company which calls for 9.5% with principal and
interest due in September 2000. At any time prior to September 2000, Mr. Gordon
has the right to require the Company to repurchase the 500,000 shares as
consideration for the cancellation of the promissory note.
Directors currently receive no compensation for their duties as
directors. On December 29, 1997 the Company granted to Christopher Swartz an
option to purchase of 1,000,000 shares of the Company's common stock at $2.75
per share. On August 3, 1998 the Board of Directors granted to Mr. Swartz
three-year options to purchase an additional 1,000,000 Shares at a price of
$1.55 per Share. The options are exercisable immediately and expire on December
29, 2000. No stock options have been issued to any other executive officers or
directors.
On August 3, 1998 the Company issued 500,000 shares to each of Bradley
L. Gordon, and Michael Cronin and 300,000 shares to Richard Silverman for
consideration of $1.375 per share (the closing sales price of the Common Stock
on that date) paid in the form of promissory notes with interest at 9.5% with
interest and principal due in August 2001. At any time prior to August 2001,
these individuals may require the Company to repurchase the 1,300,000 shares as
consideration for the cancellation of the notes.
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Options Granted in Fiscal 1997
Percentage of
Total Options
Granted to
Options Employees in Exercise Expiration
Granted Fiscal 1997 Price Date
Christopher Swartz 1,000,000 100% $ 2.75 December 29, 2000
The following table contains information concerning the exercise of
stock options and employment related options and information in unexercised
stock options held as of December 31, 1997 by the named executive officers:
Option Exercises and Year-end Value Table
Value of Unexercised
In-the-Money Options
Number of Unexercised at
Shares Options & Warrants December 31, 1997
Acquired on Value
Exercise Realized(1) Exercisable NonExercisable Exercisable(2)
Christopher Swartz -0- $ -0- 1,000,000 0 -0-
(1) Market Value at time of exercise less exercise price.
(2) The closing sale price of the Common Stock at December 31, 1997 was $2 9/16.
Value equals the difference between market value and exercise price, and is
$0 at December 31, 1997 since the exercise price was higher than market value.
Certain Relationships and Related Transactions
Kalin Enterprises, Inc. ("Kalin") is the franchisee for five JRECK Subs
restaurants. Mr. Christopher Swartz is a 25% shareholder and an officer of
Kalin.
Tri-Emp Enterprises, Inc. borrowed $445,000 from 20 investors secured by
445,000 shares of Tri-Emp Enterprises, Inc.
Common Stock. Tri-Emp Enterprises, Inc. loaned the $445,000 loan proceeds to
the Company. On October 8, 1997 the
Company issued 495,000 shares of common stock to the 20 noteholders in full
satisfaction of the amounts owed by Tri-Emp
Enterprises, Inc.
The Company issued options to purchase 375,000 shares of its common stock
to Gulf Atlantic Publishing Inc. on January 6, 1997, exercisable at $.75 per
share. On November 17, 1997 Gulf Atlantic assigned options to purchase 225,000
of these shares to Tri-Emp Enterprises, Inc. in conjunction with the purchase
from Tri-Emp Enterprises, Inc. of 225,000 shares of the Company's common stock
by Gulf Atlantic.
In February, 1998 the Company converted $277,404 in notes payable owed to
Sid Wertheim into 112,783 shares of common stock.
Mr. Jeremiah Haley, a director, received 175,000 shares of Series A
Preferred Stock in exchange for his shares of Jreck Subs, Inc. Series A
Preferred Stock on May 6, 1996. Mr. Haley was elected to the Board of Directors
pursuant to the right of holders of Series A Preferred Stock to elect one member
of the Board of Directors. Pursuant to the dividend rights of holders of Series
A Preferred Stock, Mr. Haley received $15,750 in dividends on his shares in
fiscal 1997. In July 1997, Mr. Haley converted 25,000 shares of Series A
Preferred Stock into 25,000 shares of Company Common Stock. In June 1998, Mr.
Haley converted the balance of 150,000 shares of Series A Preferred Stock into
165,000 shares of Company Common Stock.
Mr. Christopher Swartz, chairman and the Company's president and chief
executive officer, received (through Tri-Emp
Enterprises, a company of which he is the sole shareholder) 5,000,000 shares of
Company Common Stock in exchange for
all of the Common Stock of Jreck Subs, Inc. on May 6, 1996. Mr. Swartz also
received 350,000 shares of Series B Preferred
8
Stock for 50% of Pastry Products Producers LLC. Mr. Swartz was elected to the
Board of Directors pursuant to the right of holders of Series B Preferred Stock
to elect one member of the Board of Directors. In June 1998, Mr. Swartz
converted all 350,000 shares of Series B Preferred Stock into 350,000 shares of
Company Common Stock.
Mr. Bradley Gordon, director and the Company's chief operating officer,
purchased 500,000 shares of the Company's common stock for $1,500,000. The
Company received a promissory note from Mr. Gordon with interest at 10% per
annum with principal and interest due in September 2000. At any time prior to
September 2000, Mr. Gordon has the right to require the Company to repurchase
the 500,000 shares as consideration for the cancellation of the promissory note.
On August 3, 1998 the Company issued 500,000 shares to each of Bradley L.
Gordon, and Michael Cronin and 300,000 shares to Richard Silverman for
consideration of $1.375 per share (the closing sales price of the Common Stock
on that date) paid in the form of promissory notes with interest at 9.5% with
interest and principal due in August 2001. At any time prior to August 2001,
these individuals may require the Company to repurchase the 1,300,000 shares as
consideration for the cancellation of the notes.
Mr. R.T. Silberman, a shareholder of the Company, purchased 300,000 shares
of the Company's common stock for
$900,000. The Company received a promissory note from Mr. Silberman with
interest at 9.5% per annum with principal and
interest due in September 2000. At any time prior to September 2000, Mr.
Silberman has the right to require the Company
to repurchase the 300,000 shares as consideration for the cancellation of the
promissory note.
Compensation of Directors
The Company's directors do not currently receive any type of compensation
in conjunction with their services as directors, except that they are reimbursed
for travel and other out-of-pocket expenses incurred in attending Board
meetings.
PROPOSAL NO. 2: APPROVAL OF 1998 STOCK OPTION PLAN OF
JRECK SUBS GROUP, INC.
On September 3, 1998, the Board of Directors adopted, subject to the
approval of the Stockholders, the Stock Option Plan in order to strengthen the
commonality of interest among management, the Board and Stockholders and to
provide incentives for participants in the Stock Option Plan to remain employees
or Directors, as the case may be, of the Corporation.
The following is a general summary of the Stock Option Plan which is
qualified in its entirety by reference to the full text of the Stock Option Plan
attached to this Proxy Statement as Exhibit A.
ELIGIBILITY FOR PARTICIPATION
Key employees, including officers and Directors who are employees, of
the Corporation and its subsidiaries (the Eligible Employees) who are designated
by the Committee (as defined below under the heading "Administration") are
eligible to receive grants of options under the Stock Option Plan. No
determination has been made as to the designation of Eligible Employees or as to
any grants of options to Eligible Employees under the Stock Option Plan.
Therefore, it is not possible to state the number of Eligible Employees who will
receive such grants.
Furthermore, members of the Board of Directors who are not officers or
employees of the Corporation or its subsidiaries (the Eligible Directors) are
eligible to receive grants of certain options under the Stock Option Plan. As of
the close of business on the effective date of the Stock Option Plan (which
effective date is defined to be the date of the Stock Option Plan is approved by
the Corporation's Stockholders) there will be 2 Eligible Directors who will be
entitled to receive grants of options.
TYPES OF OPTIONS
Options granted under the Stock Option Plan may be either incentive
stock options (which qualify for special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended (the Code), or non-qualified options.
Eligible Employees may be granted either incentive stock options or
non-qualified options while Eligible Directors only may be granted non-qualified
options.
EXERCISE OF OPTIONS
The exercise price of any option granted under the Stock Option Plan
may not be less than the fair market value of the shares of Common Stock
underlying such option, determined as of the date of grant. If an Eligible
Employee owns more than 10% of the shares of Common Stock of the Corporation (a
10% Eligible Employee) at the time of grant of an incentive stock option, the
exercise price may not be less than 110% of the fair market value of the share
of Common Stock underlying such incentive stock option, determined as of the
date of grant. The exercise price of an option may be paid in cash, through the
delivery of other shares of Common Stock or through the delivery of a
combination of such shares of Common Stock and cash. If any such shares of
Common Stock to be delivered in payment of an exercise price were obtained
through the previous exercise of any option granted under the Stock Option Plan,
such shares must have been held for at least six months prior to such delivery.
The Committee may provide for other methods to pay for the exercise of an
option.
EXPIRATION OF OPTIONS
No option granted under the Stock Option Plan may be made exercisable
after the expiration of ten years from the date such option is granted. However,
an incentive stock option granted to a 10% Eligible Employee may not be made
exercisable after the expiration of five years from the date the option is
granted.
Before the expiration date of an option, such option is exercisable by
an Employee Optionee (i) while he is an Employee Optionee, or (ii) so long as
such option was then exercisable at the date of termination of employment for
reasons other than death or termination for cause within 90 days after the
termination of such employment. In the event of such termination because of
death while an option is exercisable by an Employee Optionee, the option will
terminate on the earlier of the expiration date of such option and the
expiration of one year after such death. In the event of such termination
because of retirement or disability while an option is exercisable by an
Employee Optionee, the option will terminate on the earlier of the expiration
date of such option and the expiration of one year after termination of
employment due to retirement or disability. In the event of termination for
cause, the option will terminate as of such date of termination even if such
option was then exercisable.
CORPORATE CHANGE
Upon a Corporate Change (as defined in the Stock Option Plan), all
outstanding options, including options which are then not exercisable, will
become exercisable in full; provided that the consent of a holder of an
accelerated incentive stock option is required if such acceleration will cause
such incentive stock option not to be treated as an incentive stock option under
the Code.
LIMITATION ON SHARES AVAILABLE UNDER STOCK OPTION PLAN
Subject to certain adjustments permitted under the Stock Option Plan,
the aggregate number of shares of Common Stock to be delivered upon exercise of
all options granted under the Stock Option Plan may not exceed 1,500,000 shares
of the Corporation's Common stock as now constituted. The shares of Common Stock
issuable upon exercise of options granted under the Stock Option Plan may be
authorized and unissued shares or reacquired shares. If the number of shares to
be delivered upon the exercise in full of any option granted under the Stock
Option Plan is reduced for any reason whatsoever or if any option granted under
the Stock Option Plan for any reason shall expire or shall terminate unexercised
as to all or any shares covered thereby, the number of shares no longer subject
to any such option will be released from such option and will be available to be
re-optioned under the Stock Option Plan.
LIMITATION ON GRANTS TO ELIGIBLE EMPLOYEES
There are statutory limits on the number of shares of Common Stock for
which qualified incentive stock options may be granted to a Key Employee in any
calendar year. Currently, the aggregate fair market value of such shares of
Common Stock (determined at the time the incentive stock option is granted) may
not exceed $100,000 for all shares covered by incentive stock options awarded to
a Key Employee which become exercisable for the first time in any calendar year.
ADMINISTRATION
The Stock Option Plan will be administered by the Compensation
Committee or such other committee of the Board of Directors which succeeds to
the functions and responsibilities of the Compensation Committee (the
Committee). The Committee will have the authority to (i) determine the
individuals to whom options will be granted under the Stock Option Plan and the
terms and provisions of such options, (ii) interpret the Stock Option Plan and
all options granted under the Stock Option Plan, (iii) adopt, amend or rescind
such rules as it deems necessary for the proper administration of the Stock
Option Plan, (iv) make all other determinations necessary or advisable for the
administration of the Stock Option Plan, and (v) correct
10
any defect or supply any omission or reconcile any inconsistency in the Stock
Option Plan or in any option granted under the Stock Option Plan in the manner
and to the extent that the Committee deems desirable to carry the Stock Option
Plan or any option into effect.
In determining which Eligible Employees will be granted options under
the Stock Option Plan, the Committee may consider such factors as the office or
position of an Eligible Employee, the degree of responsibility for, and
contribution to, the growth and success of the Corporation by such Eligible
Employee, the length of service, promotions, and potential of such Eligible
Employee as well as any other factors which the Committee may deem relevant.
AMENDMENTS
The Board of Directors may amend, suspend or terminate the Stock Option
Plan; provided, however, that each such amendment of the Stock Option Plan: (i)
extending beyond ten years the period within which options may be granted
thereunder; (ii) increasing the aggregate number of shares of Common Stock to be
optioned under the Stock Option Plan except as otherwise permitted in the Stock
Option Plan; (iii) materially modifying the requirements as to eligibility of
Eligible Employees or changing the class of Eligible Employees whom options may
be granted; (iv) materially increasing the benefits to optionees under the Stock
Option Plan; (v) modifying the provisions relating to the granting of
non-qualified options to Eligible Directors, or (vi) granting options to
Eligible Directors other than pursuant to the provisions referred to in clause
(v), will, in each case, be subject to approval by the Stockholders of the
Corporation; provided, further, however, that no amendment, suspension or
termination of the Stock Option Plan may cause the Stock Option Plan to fail to
meet the requirements of Rule 16b-3 (Rule 16b-3) under the Exchange Act, or may,
without the consent of the holder of an option, terminate such option or
adversely affect such person's rights in any material respect (except as set
forth in the Stock Option Plan). The Board of Directors may alter, amend,
suspend, discontinue or terminate the Stock Option Plan and any option granted
thereunder, without the approval of the Stockholders of the Corporation or any
holder of any option thereby affected, if necessary, in order to comply with
Rule 16b-3 or Sections 422 or 162(m) of the Code.
TERM OF STOCK OPTION PLAN
The Stock Option Plan will terminate ten years following the effective
date of the Stock Option Plan (the Termination Date), unless terminated by the
Board of Directors at an earlier date. No options will be granted under the
Stock Option Plan after the Termination Date, although the exercise periods for
previously granted options may extend beyond the Termination Date.
NONTRANSFERABILITY
No option is transferable by the optionee except by will or the laws of
descent and distribution.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. Upon the grant of an incentive stock option,
the optionee will not recognize any taxable income and the Corporation will not
be entitled to a tax deduction. Upon the exercise thereof while the optionee is
employed by the Corporation or a subsidiary or within 3 months after termination
of employment, the optionee will not recognize taxable income if certain holding
period requirements under the Code are met; however, under certain
circumstances, the excess of the fair market value of the shares of Common Stock
acquired upon such exercise over the exercise price may be subject to the
alternative minimum tax.
If the shares of Common Stock acquired pursuant to the exercise of an
incentive stock option are held for at least 2 years from the date of grant and
at least 1 year from the date of exercise, the optionee's gain or loss upon a
disposition of such shares of Common Stock will be a long-term capital gain or
loss and the Corporation will not be entitled to any tax deduction. If such
shares are disposed of prior to the expiration of these holding periods, the
optionee will recognize ordinary income on certain amounts in excess of the
option price and the Corporation will be entitled to a corresponding tax
deduction.
Non-qualified Options. Upon the grant of a non-qualified option, the
optionee will not recognize any taxable income.
Upon the exercise thereof, the optionee will recognize taxable income in an
amount equal to the difference between (i) the
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fair market value of the shares of Common Stock acquired upon such exercise, and
(ii) the exercise price. At that time, the Corporation will be entitled to a
corresponding tax deduction.
Upon a subsequent disposition of shares of Common Stock acquired upon
the exercise of a non-qualified option, the optionee will recognize long-term or
short-term capital gain or loss, depending on the holding period of such shares.
NEW PLAN BENEFITS
As stated above, the Committee has the authority to determine the
amounts, terms and grant dates of options to be granted to Eligible Employees
under the Stock Option Plan. To date, no such determinations have been made and,
as a result, it is not possible to state such information.
The affirmative vote of a majority of the shares of Common Stock
present in person or by proxy at the Special Meeting and entitled to vote on the
proposal to approve the 1998 Stock Option Plan is required to approve the Plan.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE 1998
STOCK
OPTION PLAN. PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN FAVOR OF THE
APPROVAL OF
THE PLAN UNLESS THE STOCKHOLDER SPECIFIES OTHERWISE.
PROPOSALS OF SHAREHOLDERS
It is expected that the next annual meeting of the Company's
shareholders will be held on or about June 15, 1999. Any proposal of a
shareholder which is intended to be presented at that Meeting must be received
by the Company at its principal executive offices in Longwood, Florida 32779, no
later than _________________, in order that such proposal be timely received for
inclusion in the proxy solicitation materials to be issued in connection with
the Meeting.
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OTHER MATTERS
The Board of Directors knows of no other business which will be brought
before the Meeting. Should other matters properly come before the Meeting, the
proxies will vote all Appointments of Proxy received according to their best
judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
Eric T. Swartz
Secretary
October 3, 1998
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APPOINTMENT OF PROXY
JRECK SUBS GROUP, INC.
Annual Meeting of Shareholders -- October 23, 1998
The undersigned hereby appoints Eric T. Swartz, the true and lawful proxy
of the undersigned, having full power to substitute, to represent the
undersigned and to vote all shares of stock of JRECK SUBS GROUP, INC. which the
undersigned would be entitled to vote if personally present at the Annual
Meeting of Shareholders of JRECK SUBS GROUP, INC. to be held at The Hampton Inn,
Altamonte Springs, Florida, on October 23, 1998, at the hour of 10:00 a.m.,
Florida time.
1. FOR [ ] WITHHOLD [ ] election of all of the following nominees in the
Notice of Annual Meeting and Proxy Statement as directors of the
Company:
Christopher M. Swartz Beverly L. Gordon Eric T. Swartz
Kelly A. Swartz Jeremiah J. Haley
2. FOR [ ] WITHHOLD [ ] approval of the adoption of the 1998 Stock
Option Plan.
3. Upon all such other matters that may promptly be brought before such
Special Meeting, as to which the undersigned hereby confers
discretionary authority upon said proxies.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR (1) THE
ELECTION OF THE BOARD'S (FIVE) NOMINEES AS DIRECTORS, AND (2) [ ] THE
RATIFICATION OF THE STOCK OPTION PLAN OR, IF A CONTRARY INSTRUCTION IS INDICATED
IN ACCORDANCE WITH SUCH INSTRUCTIONS. THE UNDERSIGNED MAY WITHHOLD AUTHORITY TO
VOTE FOR THE ELECTION OF ANY INDIVIDUAL NOMINEE AS DIRECTOR BY LINING THROUGH
THE NOMINEE'S NAME ABOVE.
All other proxies heretofore given by the undersigned to vote shares of
stock of JRECK SUBS GROUP, INC. which the undersigned would be entitled to vote
if personally present at said Annual Meeting or any adjournment thereof are
hereby expressly revoked. This proxy may be revoked at any time prior to the
voting hereof.
NOTE: Please date this proxy and sign it exactly as your name or names
appear on your shares. If signing as an attorney, executor, administrator,
guardian or trustee, please give full title as such. If a corporation, please
sign full corporate name by duly authorized officer or officers, affix corporate
seal and attached a certified copy of resolution or bylaws evidencing authority.
(Date)
(Signature)
(Signature)