<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
Tweeter Home Entertainment 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):
[X] No fee required.
[ ] 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.:
3) Filing Party:
4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
TWEETER HOME ENTERTAINMENT GROUP, INC.
10 PEQUOT WAY
CANTON, MA 02021
Dear Stockholder:
You are cordially invited to attend Tweeter Home Entertainment Group,
Inc.'s ("Tweeter") special meeting in lieu of annual meeting on January 25,
2000. The meeting will begin promptly at 11:00 AM at the offices of Goulston &
Storrs, P.C., 400 Atlantic Avenue, Boston, Massachusetts.
The official Notice of Meeting, proxy statement and form of proxy are
included with this letter. The matters listed in the Notice of Meeting are
described in detail in the proxy statement. This year, in addition to the
election of two Directors and approval of the selection of Tweeter's
accountants, we are asking stockholders to approve an amendment to the Tweeter's
Amended and Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 30,000,000 to 60,000,000.
The vote of every stockholder is important. Please sign, date and promptly
mail your proxy using the enclosed return envelope. The Board of Directors and
management look forward to greeting those stockholders that are able to attend.
Sincerely,
/s/ Jeffrey Stone
JEFFREY STONE
President and Chief Operating Officer
<PAGE> 3
TWEETER HOME ENTERTAINMENT GROUP, INC.
10 PEQUOT WAY
CANTON, MA 02021
DECEMBER 22, 1999
NOTICE OF SPECIAL MEETING IN LIEU OF ANNUAL MEETING OF STOCKHOLDERS
The special meeting in lieu of annual meeting of stockholders (the "Annual
Meeting") of Tweeter Home Entertainment Group, Inc. ("Tweeter") will be held at
the offices of Goulston & Storrs, P.C., 400 Atlantic Avenue, Boston,
Massachusetts, on January 25, 2000, at 11:00 AM, for the following purposes:
1. To elect two Directors, each to serve for a three year term or until the
election and qualification of their respective successors.
2. To act upon the approval of the designation of Deloitte & Touche LLP to
audit the books, records and accounts of Tweeter for Fiscal Year 2000.
3. To act upon the approval of an amendment to Tweeter's Amended and
Restated Certificate of Incorporation to increase the number of
authorized shares of common stock from 30,000,000 to 60,000,000.
4. To consider and act upon all other matters which may properly come
before the Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors has set the close of business on Monday, December
20, 1999, as the record date for the purpose of determining the stockholders
entitled to notice of, and to vote at, the Annual Meeting or any adjournment
thereof, and only stockholders of record on that date shall be entitled to
notice of and to vote at said meeting.
Whether or not you plan to attend the meeting, please fill in, date, sign
and return the enclosed proxy promptly in the return envelope provided. You are
cordially invited to attend the meeting.
By Order of the Board of Directors,
/s/ Joseph McGuire
JOSEPH MCGUIRE
Chief Financial Officer
<PAGE> 4
TWEETER HOME ENTERTAINMENT GROUP, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Tweeter Home Entertainment Group,
Inc. (Nasdaq: "TWTR") for the special meeting in lieu of annual meeting of
stockholders to be held on January 25, 2000. Only stockholders of record at the
close of business on December 20, 1999 are entitled to notice of and to vote at
the meeting.
Returning your completed proxy will not prevent you from voting in person
at the meeting should you be present and wish to do so.
Unless contrary instructions are indicated on the proxy, all valid proxies
received pursuant to this solicitation (and not revoked before they are voted)
will be voted FOR the election of the nominees for Director named herein, FOR
the approval of the designation of Deloitte & Touche LLP to audit Tweeter's
books, records and accounts for Fiscal Year 2000, and FOR the approval of an
amendment to Tweeter's Amended and Restated Certificate of Incorporation to
increase the number of authorized shares of common stock from 30,000,000 to
60,000,000. If a stockholder specifies a different choice on the proxy, such
stockholder's shares of Common Stock will be voted in accordance with such
specifications.
Any person giving a proxy in the form accompanying this Proxy Statement has
the power to revoke it at any time before its exercise. A proxy may be revoked
by filing with Tweeter's Secretary an instrument revoking it, by presenting an
executed proxy bearing a later date at the Annual Meeting, or by attending the
Annual Meeting and voting in person.
The cost of soliciting proxies will be borne by Tweeter. Solicitations may
be made by mail, personal interview, telephone and/or telegram by Tweeter's
Directors, officers and employees, without additional compensation for such
solicitation activities. Tweeter will make arrangements with its transfer agent,
BankBoston, NA, to forward solicitation material to the beneficial owners of
Tweeter's common stock held of record. Tweeter will reimburse banks, brokerage
firms, other custodians, nominees and fiduciaries for reasonable expenses
incurred in sending proxy material to beneficial owners of common stock held in
their respective names.
Tweeter has selected Corporate Investor Communications, Inc. to distribute,
solicit and tabulate all proxies.
Copies of Tweeter's 1999 Annual Report are being mailed to stockholders
together with this Proxy Statement. The Annual Report contains Tweeter's
financial statements for the fiscal years ended September 30, 1999, September
30, 1998 and September 30, 1997.
VOTING SECURITIES
Holders of record of Tweeter's common stock at the close of business on
Monday, December 20, 1999 (the "Record Date") have the right to receive notice
of and to vote at the Annual Meeting and any adjournments of the meeting. At the
Record Date, there were 15,318,014 shares of common stock issued and
outstanding. Each share of common stock entitles the holder of that share to one
vote on each matter submitted to a vote at the Annual Meeting.
Under Tweeter's bylaws, the presence, in person or by proxy, of
stockholders holding a majority in interest of the issued and outstanding shares
of common stock entitled to vote at the Annual Meeting is necessary to
constitute a quorum. Abstentions and broker non-votes are each included for
purposes of determining the presence or absence of a sufficient number of shares
to constitute a quorum for the transaction of business. With respect to the
approval of any particular proposal, abstentions and broker non-votes are not
counted in determining the number of votes cast. Other than the election of
Directors, which requires a plurality of the votes cast in person or by proxy,
each matter to be submitted to the stockholders requires the affirmative vote of
a majority of the votes cast in person or by proxy at the meeting.
<PAGE> 5
PROPOSAL 1: ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR, DIRECTORS CONTINUING IN OFFICE AND EXECUTIVE OFFICERS
Tweeter's bylaws provide for a Board of Directors consisting of such number
of Directors as may be fixed from time to time by the Board. The Board is
divided into three classes, with each class holding office for a term of three
years and the term of office of one class expiring each year. The Board has
fixed the number of Directors to constitute the full Board for the ensuing year
at six, two of whom are to be elected at the Annual Meeting for a term expiring
at the 2003 annual meeting of stockholders, two whose terms expire at the 2002
annual meeting of stockholders, and two whose terms expire at the 2001 annual
meeting of stockholders. Michael Cronin, a Director since 1995, and Samuel
Bloomberg, a Director since Tweeter's inception, are in the class of Directors
whose term expires at the Annual Meeting. The Board has nominated Mr. Cronin and
Mr. Bloomberg for election to the class of Directors whose term will expire in
2003.
The persons named as proxies in the proxy card will vote the shares
represented by your proxy for the election of Mr. Cronin and Mr. Bloomberg as
Directors unless your proxy card specifies otherwise. If either of the nominees
for election to the Board should, for any reason not now anticipated, not be
available to serve as a Director, the persons named as proxies will vote the
shares for such other candidate as may be designated by the Board, unless the
Board reduces the number of Directors constituting the full Board in order to
eliminate the vacancy. The Board has no reason to believe that Mr. Cronin and
Mr. Bloomberg will be unable to serve if elected.
The table below sets forth certain information with respect to the nominees
for election to the Board of Directors, those Directors whose terms of office
will continue after the Annual Meeting and Tweeter's Executive Officers.
<TABLE>
<CAPTION>
EXPIRATION OF
CURRENT OR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE FIRST ELECTED PROPOSED
NAME AND AGE AND OTHER BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
------------ ----------------------------------------- ------------- --------------
<S> <C> <C> <C>
Samuel Bloomberg, 47................... Director, Chairman of the Board and Chief 1972 2003
Executive Officer of Tweeter. Mr.
Bloomberg has served as the Chief
Executive Officer since 1983 and
Chairman of the Board since 1986. Mr.
Bloomberg is a co-founder of Tweeter.
Mr. Bloomberg and Jeffrey Bloomberg are
brothers.
Jeffrey Stone, 42...................... Director, President and Chief Operating 1990 2001
Officer of Tweeter. Mr. Stone has
served as the President and Chief
Operating Officer of Tweeter since
October 1990. From 1987 to 1990 Mr.
Stone served as the Executive Vice
President of Bread & Circus, a
specialty natural foods supermarket
chain, and from 1983 to 1987 served as
Vice President of Human Resources and
Training for Scandinavian Design, a
specialty furniture retailer. Mr. Stone
is also a Director of PRO, the buying
group of specialty consumer electronic
retailers of which Tweeter is a member.
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
EXPIRATION OF
CURRENT OR
PRINCIPAL OCCUPATION, BUSINESS EXPERIENCE FIRST ELECTED PROPOSED
NAME AND AGE AND OTHER BUSINESS AFFILIATIONS DIRECTOR TERM OF OFFICE
------------ ----------------------------------------- ------------- --------------
<S> <C> <C> <C>
Jeffrey Bloomberg, 52 (1).............. Director of Tweeter. From 1994 to the 1989 2001
present, Mr. Bloomberg has served as
the President of Bloomberg Associates,
Inc., an investment banking company.
From 1985 to 1993, Mr. Bloomberg served
as a Managing Director at Bear Stearns
& Co., Inc., specializing in corporate
finance and mergers and acquisitions.
Mr. Bloomberg and Samuel Bloomberg are
brothers.
Matthew Bronfman, 40 (2)............... Director of Tweeter. Mr. Bronfman 1989 2002
founded, and from 1994 to the present
has served as Chairman and Chief
Executive Officer of, Perfumes Isabel,
a fragrance and gift company. In 1990,
Mr. Bronfman served as Director, and
from 1991 to 1994 Mr. Bronfman served
as Chairman and Chief Executive
Officer, of Sterling Cellular Holdings,
LP, a privately-held cellular telephone
company.
Michael Cronin, 45 (1)(2).............. Director of Tweeter. From 1991 to the 1995 2003
present Mr. Cronin has served as
Managing Partner of Weston Presidio
Offshore Capital C.V. Mr. Cronin also
serves as a Director of Tekni-plex,
Inc. and Casella Waste Systems, Inc.
Steven S. Fischman, 57................. Director of Tweeter. Since 1992, Mr. 1998 2002
Fischman has been the President of New
England Development (NED), a regional
mall developer based in New England.
From 1996 to August 1999, Mr. Fischman
also served as a Managing Director of
the General Partner of WellsPark Group
Limited Partnership, a mall management
company formed by NED and an unrelated
partner. Prior to joining NED, Mr.
Fischman was a Director and shareholder
in the Boston law firm of Goulston &
Storrs, P.C., Tweeter's legal counsel.
Mr. Fischman is also Chairman of the
Board of Trustees of Newton-Wellesley
Hospital.
Joseph McGuire, 39..................... Mr. McGuire has served as Tweeter's Vice
President, Chief Financial Officer and
Chief Information Officer since May
1996. Prior to joining Tweeter, Mr.
McGuire was the Chief Financial Officer
of Bryn Mawr Radio & Television Centre,
Inc. from 1987 to 1996.
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
3
<PAGE> 7
GENERAL INFORMATION RELATING TO
THE BOARD OF DIRECTORS
THE BOARD OF DIRECTORS
The Board of Directors held five meetings in the fiscal year ended
September 30, 1999. No member of the Board of Directors attended less than 80%
of the total number of meetings of the Board and committees thereof upon which
he served during the fiscal year ended September 30, 1999.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, consisting of Jeffrey
Bloomberg and Michael Cronin, which makes recommendations concerning the
engagement of independent public accountants, reviews the plans for and results
of the audit engagement with the independent public accountants, approves
professional services provided by the independent public accountants and reviews
the adequacy of Tweeter's internal accounting controls. The Audit Committee held
one meeting during the fiscal year ended September 30, 1999. The Audit Committee
recommended Tweeter's selection of Deloitte & Touche LLP to serve as Tweeter's
auditors for the fiscal year ended September 30, 2000.
The Compensation Committee of the Board of Directors establishes and
implements compensation policies and programs for Tweeter's executive officers
and exercises all powers of the Board of Directors in connection with Tweeter's
incentive compensation and benefit plans. The Compensation Committee of the
Board consists of Matthew Bronfman and Michael Cronin. The Compensation
Committee held one meeting during the fiscal year ended September 30, 1999.
Tweeter had no nominating committees of the Board of Directors or
committees performing similar functions during the year ended September 30,
1999.
COMPENSATION OF DIRECTORS
Tweeter currently pays each Director $1,875 per quarter, provided such
Director attends the meetings of the Directors scheduled for such quarter. All
Directors are reimbursed for reasonable expenses incurred in attending meetings.
Under current Director compensation arrangements, upon each subsequent election
or re-election, each Director who is not also an employee or affiliate of
Tweeter is granted options under Tweeter's 1998 Stock Option and Incentive Plan
exercisable for the purchase of 7,000 shares of common stock, with an exercise
price equal to the fair market value of the common stock at the date of grant.
Such options vest upon grant. A sitting Director will receive annual grants of
7,000 shares each year of his or her term, with an exercise price equal to the
fair market value of the common stock on the date of the grant. These options
vest upon grant.
BOARD OF DIRECTORS RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF
THE BOARD'S NOMINEES, MICHAEL CRONIN AND SAMUEL BLOOMBERG. A
PLURALITY OF THE VOTES CAST IN PERSON OR BY PROXY AT THE ANNUAL MEETING
IS REQUIRED TO ELECT EACH NOMINEE AS DIRECTOR.
4
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Tweeter's Common Stock as of the Record Date by (i) each person
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) known by
Tweeter to be the beneficial owner of more than 5% of Tweeter's Common Stock,
(ii) each of Tweeter's Named Executives (as defined below) and Directors, (iii)
all of Tweeter's executive officers and Directors as a group. Except as
otherwise indicated in the footnotes to this table, Tweeter believes that the
persons named in this table have sole voting and investment power with respect
to all of the shares of Common Stock indicated. All share numbers reflect the
two for one split of Tweeter's Capital stock effected December 2, 1999.
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY OWNED(1) PERCENT
AS OF OF
NAME DECEMBER 20, 1999 CLASS
---- --------------------- -------
<S> <C> <C>
Named Executive Officers
Samuel Bloomberg *........................................ 1,498,916(2) 9.4
Jeffrey Stone *........................................... 533,490(3) 3.4
Joseph McGuire............................................ 39,286(4) **
Directors/Director Nominees
Jeffrey Bloomberg......................................... 400,688(5) 2.5
Matthew Bronfman.......................................... 176,286(6) 1.1
Steven Fischman........................................... 9,400 **
Michael Cronin............................................ 1,400 **
Directors and Executive Officers as a Group (7 persons)..... 2,659,466(7) 16.7
Beneficial Owners of more than 5%
Gilder, Gagnon, Howe & Co., LLC
1775 Broadway, 26th Floor
New York, NY 10019........................................ 909,774(8) 5.7
</TABLE>
- ---------------
* Messrs. Bloomberg and Stone are also Directors of Tweeter.
** Represents less than 1% of class.
(1) Includes the number of shares and percentage ownership represented by such
shares determined to be beneficially owned by a person in accordance with
the rules of the Securities and Exchange Commission. The number of shares
beneficially owned by a person includes shares of common stock that are
subject to options or warrants held by that person that are currently
exercisable or exercisable within 60 days of the Record Date. Such shares
are deemed outstanding for the purpose of computing the percentage of
outstanding shares owned by such person. Such shares are not deemed
outstanding, however, for the purposes of computing the percentage ownership
of any other person.
(2) Includes 65,460 shares held, in the aggregate by the Samuel Bloomberg Family
Trusts for the benefit of Mr. Bloomberg's children and 15,080 shares held by
Carolina Bloomberg, the wife of Mr. Bloomberg. Carolina Bloomberg's 15,080
shares include 626 shares issuable upon the exercise of outstanding
warrants. Mr. Bloomberg expressly disclaims beneficial ownership of the
shares held by the Samuel Bloomberg Family Trusts and Carolina Bloomberg.
Also includes 436,262 shares subject to options granted by Tweeter to Mr.
Bloomberg exercisable within 60 days of the Record Date.
(3) Includes 52,480 shares held by trusts for the benefit of Mr. Stone's
children. Mr. Stone expressly disclaims beneficial ownership of these
shares. Also includes 253,156 shares subject to options granted by Tweeter
to Mr. Stone exercisable within 60 days of the Record Date.
(4) Includes 23,358 shares subject to options granted by Tweeter exercisable
within 60 days of the Record Date.
(5) Includes 22,896 shares held, in the aggregate, by trusts for the benefit of
Mr. Bloomberg's children. Mr. Bloomberg expressly disclaims beneficial
ownership of these shares. Also includes 14,520 shares subject to options
granted by Tweeter to Mr. Bloomberg exercisable within 60 days of the Record
Date.
(6) Includes 166,568 shares subject to options granted by Tweeter exercisable
within 60 days of the Record Date, and 168 shares issuable upon the exercise
of outstanding warrants.
(7) See notes (2) through (7)
(8) Information concerning beneficial ownership was obtained from a Schedule 13G
dated February 10, 1999.
5
<PAGE> 9
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires Directors, officers and persons who are beneficial owners of
more than ten percent of Tweeter's Common Stock to file with the Securities and
Exchange Commission reports of their ownership of Tweeter's securities and
changes in that ownership. Samuel Bloomberg, Chairman, Jeffrey Stone, President,
Joseph McGuire, Chief Financial Officer, Jeffrey Bloomberg, Director, Matthew
Bronfman, Director, Michael Cronin, Director and Steven Fischman, Director did
not file their respective Form 5 by November 15, 1999 but subsequently filed on
November 18, 1999. To Tweeter's knowledge, based upon a review of copies of
reports so filed, all other persons required to file such reports regarding
ownership and transactions during the fiscal year ended September 30, 1999 did
so by no later than the date the reports were due.
EXECUTIVE COMPENSATION
The following table sets forth the compensation earned by Tweeter's Chief
Executive Officer and each of the other executive officers of Tweeter (the
"Named Executives") for services rendered in all capacities to Tweeter during
fiscal 1997, 1998 and 1999:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL ------------
COMPENSATION(1) SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(2)
--------------------------- ---- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Samuel Bloomberg.......................... 1999 $337,320 $58,000 50,000 $ --
CEO and Chairman of the Board........... 1998 $258,769 $10,000 46,076 $ --
1997 $204,876 $20,000 132,480 $65,818
Jeffrey Stone............................. 1999 $352,761 $78,000 66,000 $ --
President and Chief Operating Officer... 1998 $249,106 $10,000 58,000 $ --
1997 $204,037 $20,000 97,220 $ 5,288
Joseph McGuire............................ 1999 $193,982 $35,200 18,000 $ --
Vice President, Chief Financial
Officer.............................. 1998 $164,635 $ 5,000 16,000 $ --
1997 $150,244 $ 5,300 5,248 $ --
</TABLE>
- ---------------
(1) The compensation described in this table does not include medical or other
benefits received by the Named Executives which are generally available to
all salaried employees of Tweeter.
(2) Represents amount distributed to cover personal tax liability from Tweeter's
prior status as a Subchapter "S" corporation for federal income tax
purposes. On November 25, 1995, as part of a recapitalization, Tweeter
elected to be treated as a "C" corporation for federal income tax purposes.
6
<PAGE> 10
The following table sets forth information relating to grants of stock
options made during fiscal 1999 to each of the Named Executive Officers under
Tweeter's 1998 Stock Option and Incentive Plan.
OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
PERCENT OF
TOTAL
NUMBER OPTIONS
OF GRANTED
SECURITIES TO EXERCISE GRANT
UNDERLYING EMPLOYEES PRICE DATE
OPTIONS IN FISCAL PER EXPIRATION PRESENT
NAME GRANTED YEAR SHARE DATE VALUE(1)
---- ---------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C>
Samuel Bloomberg............................... 50,000 7.1% $16.063 2005 $172,580
Jeffrey Stone.................................. 66,000 9.3% $16.063 2005 $227,806
Joseph McGuire................................. 18,000 2.5% $16.063 2005 $ 62,129
</TABLE>
- ---------------
(1) The fair value of each stock option granted in fiscal 1999 under Tweeter's
existing stock option plan was estimated using the Black-Scholes option
pricing model assuming an expected volatility of 66%, a risk-free interest
rate of 5.8%, an expected life of 3 years and no dividends.
The following table provides certain information with respect to options to
purchase common stock held by the Named Executives at September 30, 1999.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED VALUE FISCAL YEAR END FISCAL YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Samuel Bloomberg............. -- -- 436,262/ 77,646 $7,180,231/$412,894
Jeffrey Stone................ -- -- 253,156/100,800 $4,037,786/$527,775
Joseph McGuire............... 28,964 $433,467 26,606/ 28,912 $ 375,999/$164,819
</TABLE>
EMPLOYMENT AGREEMENTS
The summaries of the various employment agreements set forth below are
qualified in their entirety by reference to the full text of such agreements,
which are exhibits to Amendment No. 1 to Tweeter's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on June 8, 1998.
BLOOMBERG AND STONE AGREEMENTS
Upon completion of Tweeter's initial public offering in July 1998, Tweeter
entered into five-year employment agreements with Samuel Bloomberg, to serve as
Tweeter's Chairman of the Board and Chief Executive Officer, and with Jeffrey
Stone, to serve as Tweeter's President and Chief Operating Officer (the
"Employment Agreements"). The Employment Agreements provide that Messrs.
Bloomberg and Stone each receive a base salary of $300,000 per year through
September 30, 1998, $325,000 from October 1, 1998 to September 30, 1999, and
thereafter at the annual rate of at least $325,000, plus such increases as may
be determined by the Compensation Committee of the Board of Directors. Each of
Messrs. Bloomberg and Stone have the opportunity to earn incentive bonuses based
upon certain performance criteria, to be determined by the Compensation
Committee, and the opportunity to receive stock options and other incentive
awards under Tweeter's 1998 Stock Option and Incentive Plan.
The Employment Agreements provide for continued employment until
termination by either party. Tweeter, however, may terminate either Employment
Agreement with or without cause at any time. If either executive's employment is
terminated by Tweeter without cause, Tweeter is obligated to pay the respective
executive an amount equal to such executive's unvested accrued benefits under
any stock option plan, incentive plan or retirement plan plus severance pay
calculated as follows: (i) if the executive is terminated during the first three
years of the agreement, he will receive an amount equal to his annual base
salary in effect
7
<PAGE> 11
in the year of termination for three years following termination, (ii) if the
executive is terminated in the fourth year, he will receive an amount equal to
two times his annual base salary in effect in the year of termination for two
years following termination, and (iii) if the executive is terminated in the
fifth or any subsequent year of the agreement, he will receive an amount equal
to his annual base salary in the year of termination. The Employment Agreements
also provide that if Tweeter and Messrs. Bloomberg and Stone do not renew the
Employment Agreements upon expiration, Tweeter may elect to pay such executives
two years severance in exchange for a two-year non-competition arrangement.
MCGUIRE EMPLOYMENT AGREEMENT
Upon completion of Tweeter's initial public offering in July 1998, Tweeter
entered into an employment agreement with Joseph McGuire to serve as Tweeter's
Chief Financial Officer and Chief Information Officer. Under the terms of this
three-year agreement, Mr. McGuire earns a base annual salary of $185,000 and has
the opportunity to earn yearly incentive bonuses based on performance criteria
(determined by the Compensation Committee). Mr. McGuire is also entitled to
receive stock options and other incentive awards under Tweeter's stock option
and incentive plans. Tweeter may elect, upon the expiration and non-renewal of
the agreement, to pay Mr. McGuire two years of severance pay in exchange for a
two-year non-competition agreement from Mr. McGuire. If Mr. McGuire's employment
is terminated by Tweeter without cause, Tweeter is obligated to pay Mr. McGuire
an amount equal to his base salary in the year of termination, and must permit
his options and incentives to continue to vest for one year following
termination.
COMPENSATION COMMITTEE REPORT REGARDING EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors makes decisions
regarding cash compensation paid and stock options granted to Tweeter's
executive officers. The Compensation Committee has submitted the following
report concerning executive compensation:
COMPENSATION PHILOSOPHY
The Compensation Committee (the "Committee"), which is composed entirely of
outside independent Directors, reviews, evaluates and approves the amount,
design and implementation of Tweeter's compensation system for executive
officers. Tweeter believes that corporate performance and, in turn, stockholder
value will be best enhanced by a compensation system that supports and
reinforces Tweeter's key operating and strategic goals while aligning the
financial interests of Tweeter's executive officers with those of the
stockholders. Tweeter utilizes both short-term and long-term incentive
compensation programs to achieve these objectives. Executive officer incentive
compensation programs are tied to company-wide achievement of annual financial
goals and the market value of Tweeter's stock. The Committee believes that the
use of company-wide performance in setting goals promotes a unified vision for
senior management and creates common motivation among the executives. For other
salaried employees, the incentive compensation program is also tied to
divisional, departmental or store business goals and, in some cases, individual
performance.
For Tweeter's 1999 fiscal year, the Committee made its compensation
decisions based on a review of Tweeter's 1998 fiscal year performance, on
Tweeter's budget and other projections for the 1999 fiscal year, and on
Tweeter's performance in comparison to certain of its competitors. During the
1998 fiscal year, the Committee engaged a nationally known independent
compensation consultant to make an evaluation of the structure of Tweeter's
compensation practices in comparison to industry standards. The compensation
consultant determined that Tweeter's programs were generally consistent with
prevailing practices but also recommended some adjustments. As a result of these
recommendations, the Committee adjusted some aspects of Tweeter's compensation
practices in fiscal 1998.
COMPONENTS OF THE EXECUTIVE COMPENSATION PROGRAM
Tweeter's compensation program for executive officers consists generally of
three components: base salary, an annual performance-based cash bonus and
long-term stock incentives. In making compensation decisions, the Committee
generally compares the compensation of Tweeter's executive officers with compen-
8
<PAGE> 12
sation of officers at certain other retail companies and has utilized a
nationally known compensation consultant, as it deemed necessary.
The Committee generally compares various short- and long-term performance
measures, including total stockholder return, return on average stockholders'
equity, sales, and net income and earnings per share for Tweeter and other
companies with which it competes with for executive talent. The Committee has
not established any particular level at which overall compensation will be set
in respect to the compensation peer group. The Committee believes that the total
compensation of the named executive officers is supported by Tweeter's
competitive comparisons on the short- and long-term performance factors and is
appropriate given Tweeter's overall performance. The individual elements of the
executive compensation program are addressed below.
ANNUAL SALARY
Each year, the Committee establishes salaries for executive officers. Such
salaries are based on proposals submitted by Tweeter's Chief Executive Officer
("CEO") for annual salary for the executive officers other than himself. Based
on an analysis by the compensation consultant, the Committee set the executive
officer salaries for the 1999 fiscal year. The Committee believes that the
current level of annual salaries for executive officers is appropriate and that
it also provides for a large percentage of total compensation to be at risk
under the incentive programs. In evaluating individual executive officers, the
Committee may also consider, among other factors, (1) a qualitative evaluation
of the individual executive officer's performance provided by the CEO, (2) the
job responsibilities of the individual executive, including changes in those
responsibilities, and (3) Tweeter's performance in relation to its target
financial goals for the prior fiscal year.
ANNUAL PERFORMANCE-BASED BONUS
Tweeter's executive officers are eligible to receive cash bonuses under an
annual performance-based incentive program ("Incentive Program") established
each year by the Committee and approved by the Board of Directors. The Incentive
Program is designed to motivate Tweeter's employees to achieve Tweeter's annual
operating and financial goals. The executive officers participate in the
Incentive Program. The Incentive Program allows the Committee to establish
performance goals based on pre-tax earnings. The goals are established with the
purpose of continuing Tweeter's record of superior performance in comparison
with its competitors.
For the 1999 fiscal year, the Incentive Program measured Tweeter's
achievement of its target financial goals. The target goal was established early
in the fiscal year as part of Tweeter's budgeting process and was approved by
the Committee. Consistent with the Committee's compensation philosophy of tying
a large percentage of total compensation to performance, the potential maximum
bonus of each executive officer was a significant percentage of that
individual's salary for the year. For the 1999 fiscal year, the target bonus
amounts ranged from 5 percent of base salary to 35 percent of base salary. The
target bonus percentages were based upon the results of the current year's
compensation study and the recommendation of the compensation consultant.
The amount of bonus payments depends upon the extent to which Tweeter
achieves its target financial goals for the year. For the 1999 fiscal year, if
Tweeter did not achieve 100 percent of the goal, no bonuses would be paid. For
performance above the target, an additional bonus would be paid with a maximum
bonus of 100 percent of the target bonus.
Tweeter's performance for the 1999 fiscal year was above the requirement
for payment of a bonus. As a result, bonuses were paid at the 100 percent level
for the 1999 fiscal year.
LONG-TERM INCENTIVE COMPENSATION
Grants under Tweeter's Stock Incentive Plans provide long-term incentive
compensation and are a significant component of total compensation. These
programs are a part of Tweeter's performance-based incentive compensation
rewarding officers as total stockholder value increases. For executive officers,
grants
9
<PAGE> 13
under the Stock Incentive Plans are made in the form of Incentive Stock Options.
For non-employee Directors, grants under the plan are in the form of
nonqualified stock options.
The Committee considers stock-based grants to be an important means of
ensuring that executive officers have a continuing incentive to increase the
long-term return to stockholders and the value of Tweeter's stock. Stock-based
grants also aid in retention of executives.
Stock options generally vest and become exercisable ratably over a period
of three years from the date of grant. The number of stock options to be granted
to a particular executive officer is determined by the Committee. The Committee
primarily uses a formula based on an individual's target bonus for the fiscal
year and the market price of Tweeter's stock, as well as the results of
compensation surveys to determine the appropriate grant size. Because the value
of stock options is entirely a function of increases in the value of Tweeter's
stock, the Committee believes that this component of Tweeter's compensation
arrangement closely aligns the interests of the executive officers with those of
Tweeter's stockholders.
CHIEF EXECUTIVE OFFICER'S AND CHIEF OPERATING OFFICER'S COMPENSATION
The Committee determined the compensation of Samuel Bloomberg and Jeffrey
Stone, Tweeter's CEO and COO, respectively, for the 1999 fiscal year in a manner
consistent with the philosophy described above. The Committee approved an
increase in salary based upon a review of comparable officers in the
compensation peer group on a size-adjusted basis.
In establishing the CEO and COO compensation, the Committee has compared
their compensation with the compensation of the CEOs and COOs of the
compensation peer group in relation to the relative performance of Tweeter with
respect to the compensation peer group.
For setting the fiscal 1999 compensation, the Committee also considered
Tweeter's performance during the fiscal year. Tweeter's performance for the 1999
fiscal year was above the requirement for payment of a bonus. As a result,
bonuses were paid at the maximum level for the 1999 fiscal year. The Committee
recognized Mr. Bloomberg's and Mr. Stone's leadership skills in assembling and
developing a strong management team and guiding Tweeter through its significant
growth during the last nine years, resulting in Tweeter's continued financial
success.
The Committee believes that Mr. Bloomberg's and Mr. Stone's compensation
for the 1999 fiscal year was appropriate in light of all of the above
considerations.
COMPENSATION AND PERSONNEL COMMITTEE
Michael Cronin
Matthew Bronfman
10
<PAGE> 14
PERFORMANCE GRAPH
Since a nationally recognized index that would represent a peer group was
not available, Tweeter has used the Russell 2000 to measure its performance.
Tweeter believes that this index is representative of a peer group because it is
composed of companies with similar market capitalization.
<TABLE>
<CAPTION>
DATE RUSSCHG TWTRCHG
<S> <C> <C>
1-Oct-98 -18.0810% 34.7826%
2-Nov-98 -9.4734% 38.1271%
1-Dec-98 -6.6838% 53.8462%
4-Jan-99 -1.4135% 77.2575%
1-Feb-99 -0.2855% 81.9398%
1-Mar-99 -7.7018% 101.0033%
1-Apr-99 -6.6838% 85.2843%
3-May-99 1.3995% 82.9431%
1-Jun-99 2.3777% 75.5853%
1-Jul-99 6.3468% 95.6522%
2-Aug-99 3.5876% 89.2977%
1-Sep-99 0.8636% 91.3043%
</TABLE>
[Performance Graph]
PROPOSAL 2: RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected the firm of Deloitte & Touche LLP,
independent certified public accountants, to serve as auditors for the fiscal
year ending September 30, 2000. Deloitte & Touche LLP served as Tweeter's
auditors for fiscal year 1999. A majority of the votes cast by the stockholders
represented at the meeting, in person or by proxy, is required to approve this
proposal. Representatives of Deloitte & Touche LLP will be present at the
meeting to respond to appropriate questions, and they will have an opportunity,
if they desire, to make a statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE SELECTION OF DELOITTE & TOUCHE LLP AS AUDITORS.
PROPOSAL 3: AMEND TWEETER'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
The Board of Directors has recommended an amendment to the Company's
Amended and Restated Certificate of Incorporation to increase the authorized
number of shares of common stock from 30,000,000 shares to 60,000,000 shares. A
majority of the votes cast by the stockholders represented at the meeting, in
person or by proxy, is required to approve this proposal.
The additional common stock to be authorized by adoption of the amendment
would have rights identical to the currently outstanding common stock. Adoption
of the proposed amendment and issuance of the common stock would not affect the
rights of the holders of currently outstanding common stock, except for effects
incidental to increasing the number of shares of the Company's common stock
outstanding. If the
11
<PAGE> 15
stockholders approve the amendment, it will become effective upon filing of an
amendment to Tweeter's Amended and Restated Certificate of Incorporation with
the Secretary of State of the State of Delaware.
As of December 20, 1999, there were 15,318,014 shares of common stock
outstanding. As of the same date, there were an additional 2,376,132 shares of
common Stock reserved for issuance under Tweeter's stock option and employee
stock purchase plans.
Although the Board of Directors has no definitive plans to issue additional
shares of common stock, it believes it is desirable to have additional shares
available for various purposes including stock splits and stock dividends,
raising capital, providing equity incentives to employees, directors or
consultants, and expanding the Company's business through the acquisition of
other businesses.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL
OF THE AMENDMENT TO TWEETER'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
TO INCREASE THE AMOUNT OF AUTHORIZED COMMON STOCK.
OTHER BUSINESS
The Board of Directors of Tweeter is not aware of any matter, other than
those described above, that may come before the meeting. However, if any matters
are properly presented to the meeting for action, it is intended that the
persons named in the enclosed proxy will vote on such matters in accordance with
their best judgment.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
In order for a stockholder proposal to be considered for inclusion in
Tweeter's proxy materials for the 2001 annual meeting of stockholders, it must
be received by Tweeter at 10 Pequot Way, Canton, MA 02021, Attention: Joseph
McGuire, no later than August 1, 2000.
ANNUAL REPORT
A copy of Tweeter's 1999 Annual Report to Stockholders is being mailed with
this Proxy Statement to each stockholder entitled to vote at the Annual Meeting.
Stockholders not receiving a copy of such Annual Report may obtain one, without
charge, by writing to Joseph McGuire at Tweeter's address set forth in the
preceding paragraph, calling him at (781) 830-3314, or contacting him by e-mail
at [email protected].
12
<PAGE> 16
DETACH HERE
TWEETER HOME ENTERTAINMENT GROUP, INC.
10 Pequot Way
Canton, Massachusetts 02021
P
R SOLICITED BY THE BOARD OF DIRECTORS
O FOR THE ANNUAL MEETING OF STOCKHOLDERS
X
Y THE UNDERSIGNED HEREBY APPOINTS JEFFREY STONE AND JOSEPH MCGUIRE, EACH
WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES THEM TO
REPRESENT AND TO VOTE, AS DESIGNATED ON THE REVERSE SIDE, ALL SHARES OF
COMMON STOCK OF TWEETER HOME ENTERTAINMENT GROUP, INC. HELD OF RECORD
BY THE UNDERSIGNED ON DECEMBER 20, 1999 AT THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JANUARY 25, 2000 AND ANY ADJOURNMENTS
THEREOF.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN WITH RESPECT TO A PARTICULAR PROPOSAL, THIS PROXY WILL BE
VOTED FOR SUCH PROPOSAL.
PLEASE MARK, DATE, SIGN, AND RETURN THIS PROXY CARD PROMPTLY, USING THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
-------------
SEE REVERSE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SIDE
-------------
Dear Stockholder:
<PAGE> 17
Please take note of the important information enclosed with this Proxy. There
are a number of issues related to Tweeter's operations that require your
immediate attention.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on the proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy in the enclosed
postage paid envelope.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Tweeter Home Entertainment Group, Inc.
DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. Election of Directors 2. Ratify the appointment For Against Abstain
NOMINEES: Samuel Bloomberg, of Deloitte & Touche, [ ] [ ] [ ]
and Michael Cronin LLP as independent
auditors.
FOR WITHHELD 3. Approve the amendment For Against Abstain
[ ] [ ] of Tweeter's Amended [ ] [ ] [ ]
and Restated Certifi-
cate of Incorporation
to increase author-
ized shares of common
stock from 30,000,000
shares to 60,000,000
shares.
4. In their discretion the
proxies are authorized For Against Abstain
to vote upon any other [ ] [ ] [ ]
business that may
[ ]_________________________ properly come before the
For all nominees as noted meeting.
above
MARK HERE
FOR ADDRESS [ ]
CHANGE AND
NOTE AT LEFT
I AM A. SHAREHOLDER
100 MAIN STREET
ANYTOWN USA, 10000
Please sign exactly as name appears hereon. Joint owners should each sign.
Executors, administrators, trustees, guardians or other fiduciaries should
give full title as such. If signing for a corporation, please sign in full
corporate name by a duly authorized officer.
Signature:_______________ Date:________ Signature:_______________ Date:_________
