<PAGE> 1
SCHEDULE 14A
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 Section 240.14a-11(c) or Section
240.14a-12
SOUND DESIGNS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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): _________________
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(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
SOUND DESIGNS, INC.
14677 Midway Road, Suite 206
Addison, Texas 75001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
We are giving you this notice that the annual meeting of the
stockholders of Sound Designs, Inc., a Nevada corporation, will be held at the
Addison Marriott Courtyard Hotel, 4165 Proton Drive, Addison, Texas 75244. The
annual meeting will begin at 10:00 a.m., Dallas time, on Wednesday, May 17,
2000. The phone number of the Addison Marriott Courtyard Hotel is 972-490-7390.
At the annual meeting, you will vote to elect three directors of Sound
Designs. You will also vote with respect to three proposals:
o Proposal #1, which amends our articles of incorporation to change
the name of our corporation from "Sound Designs, Inc." to "Plus
Solutions, Inc."
o Proposal #2, which amends our articles of incorporation to allow
Sound Designs to issue shares of preferred stock and to allow the
board of directors to designate the rights of the preferred stock
o Proposal #3, which adopts a new stock plan.
Our current board of directors has nominated each of our current
directors for re-election. The board of directors recommends that you vote FOR
each of the nominees for director nominated by the board of directors and FOR
each of the proposals set forth above.
A record of our stockholders has been taken as of the close of business
on April 19, 2000. Only those stockholders that owned shares of our common stock
on April 19, 2000 will be entitled to vote at the annual meeting. A list of all
our identified stockholders will be available from May 5, 2000 to the date of
the annual meeting at our offices at 14677 Midway Road, Suite 206, Addison,
Texas 75001. The list will also be available at the annual meeting.
Your participation in this annual meeting is important. To ensure your
representation, if you do not expect to be present at the annual meeting, please
fill out and sign the enclosed proxy and return it promptly in the enclosed
postage-prepaid envelope which has been provided for your convenience. If you
prefer, you may also fax the signed proxy to our offices at 972-687-0051.
/s/ MAX GOLDEN
Max Golden
Chairman of the Board of Directors
and Chief Executive Officer
May 1, 2000
<PAGE> 3
SOUND DESIGNS, INC.
14677 Midway Road, Suite 206
Addison, Texas 75001
PROXY STATEMENT
regarding the
ANNUAL MEETING OF STOCKHOLDERS
to be held
MAY 17, 2000
This proxy statement is being mailed to all our stockholders on May 1,
2000 in connection with our solicitation of proxies to be voted at our annual
meeting of stockholders to be held in Dallas, Texas on Wednesday, May 17, 2000.
Your proxy will be voted in accordance with your directions as
specified in the proxy. If you do not provide directions, the proxy will be
voted as set forth below:
o FOR the three nominees for director named in the proxy
o FOR Proposal #1, which amends our articles of incorporation to
change the name of our corporation from "Sound Designs, Inc." to
"Plus Solutions, Inc."
o FOR Proposal #2, which amends our articles of incorporation to
allow Sound Designs to issue shares of preferred stock and to
allow the board of directors to designate the rights of the
preferred stock
o FOR Proposal #3, which adopts the proposed stock plan
Abstentions and shares not voted as a result of restrictions on votes
cast by securities brokers and dealers will be treated as present at the meeting
for purposes of determining whether a quorum is present, but will be disregarded
with respect to any particular issue. You may revoke a proxy by: (1) delivering
to us written notice of revocation, (2) delivering to us a proxy signed on a
later date or (3) appearing at the annual meeting and voting in person.
We will bear the costs of this proxy solicitation. In addition to
solicitations by mail, our employees may, if necessary to assure the presence of
a quorum, solicit proxies in person or by telephone. We do not expect any
matters other than those discussed to in this proxy statement to be presented
for action at the annual meeting. As the designated holder of the proxies, Max
Golden, our President and Chief Executive Officer, intends to exercise his
judgment in voting the proxies in the unlikely event that a matter other than
those discussed to in this proxy statement is presented for action at the annual
meeting.
May 1, 2000
<PAGE> 4
OUTSTANDING VOTING STOCK
As of April 19, 2000, the record date for determining stockholders
entitled to vote at the annual meeting, there were issued and outstanding
39,000,000 shares of Sound Designs common stock, par value $.01 per share. Each
share of Sound Designs common stock entitles the holder to one vote on all
matters presented at the Annual Meeting.
ELECTION OF DIRECTORS
At the annual meeting, three directors of Sound Designs will be
elected, each of whom will hold office until he resigns, chooses not to stand
for re-election, or is defeated in an election. Each of the current nominees is
currently serving as a director and has been nominated by the current board of
directors. If, for any reason, any nominee is unable to serve if elected, the
proxy may be voted for a substitute nominee selected by Max Golden or the number
of directors may be reduced accordingly. The board of directors is not aware of
any circumstances that would result in any nominee being unable to serve if
elected.
With respect to each of the three director positions, the nominee who
receives the most votes cast with respect to that position shall be the duly
elected director.
The board of directors recommends a vote FOR each of the nominees set
forth below.
INFORMATION REGARDING THE NOMINEES
Certain information regarding each of the Nominees is set forth in the
following table:
<TABLE>
<CAPTION>
NAME AGE CURRENT POSITION
---- --- ----------------
<S> <C> <C>
Max Golden 51 Chairman of the Board of Directors,
President and Chief Executive Officer
Mack Lawrence 53 Director
John Reynolds 57 Director
</TABLE>
Biographical information regarding each nominee is set forth below.
Information regarding shares of Sound Designs common stock owned by each nominee
is set forth under "Principal Stockholders".
Max Golden has been our Chairman of the Board of Directors, President
and Chief Executive Officer since March 10, 2000. Prior to joining the Company,
Mr. Golden was Chairman of the Board of Directors and President of Plus
Solutions since October 1998. From 1995 to 1998, he served as President and
Manager of Alliance Associates, LLC.
Mack Lawrence has been a Director since March 10, 2000. He is a
principal and president of Regency Gas Company, a position he has occupied since
1992. From 1985 to 1992, Mr. Lawrence served as a principal and officer in a
number of private companies, including American Central Gas Company. From 1969
to 1985, Mr. Lawrence served in several capacities at Texas Utilities Fuel
Company and Enserch Exploration, Inc.
John Reynolds has been a Director since March 10, 2000. He is currently
a Member of the Canadian House of Commons, a position he has occupied since
1997. He also serves as President of both Reynolds Enterprises Ltd. and Griney
Consultants Inc., positions he has held since 1994 and 1997, respectively. Mr.
Reynolds also serves as a director of Vitality Products, Inc.
2
<PAGE> 5
ACTIVITIES AND COMMITTEES OF THE BOARD OF DIRECTORS
Directors do not receive any cash compensation for their services, but
are eligible to receive options under the proposed stock plan. Our board of
directors does not currently have any committees. During 1999, the board of
directors met one time.
PROPOSAL #1
AMENDMENT OF THE ARTICLES OF INCORPORATION CHANGING THE NAME
FROM "SOUND DESIGNS, INC." TO "PLUS SOLUTIONS, INC."
On March 10, 2000, we acquired Plus Solutions, Inc. Following the
acquisition, we adopted the business plan and business strategy of Plus
Solutions. In order to take advantage of the previous marketing efforts of Plus
Solutions, we believe it is in our best interests and the best interests of our
stockholders to change the name of our corporation from "Sound Designs, Inc." to
"Plus Solutions, Inc." We have, therefore, proposed that the stockholders
approve an amendment to our articles of incorporation to effect the name change.
In order to amend our articles of incorporation, stockholders
representing a majority of the shares of our common stock eligible to vote at
the annual meeting must vote for the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL #1.
PROPOSAL #2
AMENDMENT OF THE ARTICLES OF INCORPORATION TO ALLOW THE
ISSUANCE OF PREFERRED STOCK AND TO ALLOW THE BOARD OF DIRECTORS
TO SET THE RIGHTS AND PROVISIONS OF THE PREFERRED STOCK
Our articles of incorporation currently do not permit us to issue
shares of preferred stock. We believe that preferred stock is commonly used as
an instrument to provide financing to development stage companies. As a result,
we believe our inability to issue preferred stock may hinder our financing
activities and interfere with the implementation of our business plan We have
concluded that it is in our best interests and the best interests of our
stockholders to amend our articles of incorporation to allow us to issue shares
of preferred stock with rights and provisions established by our board of
directors.
The current authorized capital stock of Sound Designs is 100 million
shares, all of which is designated as common stock. Our proposed amendment
retain the current aggregate amount of 100 million shares, but would designate
10 million of such shares as preferred stock and the remaining 90 million shares
as common stock. Like the common stock, the preferred stock would have a par
value of $0.001 per share. The preferred stock would available for issuance from
time to time for any purpose determined by our board of directors, including
making future acquisitions and raising additional equity capital. Shares of
preferred stock could be issued in series, on such terms and conditions, and at
such times and in such situations, as our board of directors determines to be
appropriate, without any further approval or action by the stockholders, unless
otherwise required by the Nevada corporation laws. If any shares of preferred
stock are redeemed, converted, canceled or for any other reason cease to be
outstanding, those shares would be added to the available number of shares of
preferred stock as if they had never been issued or outstanding.
Because our articles of incorporation would not prescribe the rights
and provisions of the preferred stock, our board of directors would have
virtually unlimited authority to set the rights and provisions of any shares of
preferred stock. The effects of the issuance of preferred stock on other
stockholders could include, among other things, (1) restrictions on dividends on
our common stock, (2) dilution of the equity interest of holders of common stock
if the series of preferred stock is convertible into common stock; and (3)
restrictions on the rights of holders of our common stock to share in our assets
upon liquidation. In addition, the ability to issue preferred stock could have
the effect of discouraging hostile attempts to acquire control of Sound Designs.
3
<PAGE> 6
In order to amend our articles of incorporation, stockholders
representing a majority of the shares of our common stock eligible to vote at
the annual meeting must vote for the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL #2.
PROPOSAL #3
ADOPTION OF PROPOSED STOCK PLAN
We have proposed that our stockholders approve our new Incentive Stock
Plan which was adopted by our board of directors as of April 19, 2000, subject
to the approval of our stockholders. The complete text of the proposed plan is
included as Exhibit A to this proxy statement. We recommend that you carefully
review the proposed plan.
We believe that the proposed plan will promote our long term financial
interests by attracting and retaining directors and executive, managerial and
other key employees of outstanding ability by providing a competitive
compensation program and by aligning the interests of our directors and
employees with those of our stockholders.
STOCK COVERED BY THE PROPOSED PLAN
Subject to adjustments described below, the proposed plan authorizes
total stock awards of up to 6,000,000 shares of our common stock which may take
the form of options to purchase common stock, appreciation rights tied to the
market price of common stock or direct grants of shares of common stock,
including grants on a deferred basis. If a stock award made under the proposed
plan expires, terminates, is canceled or settled in cash without the issuance of
all shares of common stock covered by the award, those shares will be available
for future awards under the proposed plan. Awards may not be transferred except
by applicable laws that require a transfer, unless the transfer is approved by
our board of directors. No awards may be granted under the proposed plan after
December 31, 2009.
ADMINISTRATION
The proposed plan is administered by our board of directors, which may
delegate its authority to a committee of the board of directors. The board of
directors has the authority to select employees to receive awards, to determine
the time and type of awards, the number of shares covered by the awards, and the
terms and conditions of such awards in accordance with the terms of the proposed
stock plan. In making such determinations, the board of directors may take into
account the recipient's current and potential contributions and any other
factors the board of directors considers relevant. The recipient of an award has
no choice regarding the form of a stock award. The board of directors is
authorized to establish rules and regulations and make all other determinations
that may be necessary or advisable for the administration of the proposed plan.
PARTICIPATION
Participants in the proposed stock plan will consist of directors and
such executive, managerial and other key employees and consultants as the board
of directors may select from time to time. In view of the discretionary
authority vested in the board of directors, it is not possible to estimate the
number of shares that may be subject to awards with respect to any individual or
group of individuals. Although no determination has been made as to the number
of employees, including officers, who will be eligible for awards under the
proposed plan, we estimate that the majority of our directors, officers,
employees and consultants will be eligible to be considered for awards under the
proposed stock plan.
4
<PAGE> 7
ANTICIPATED AWARDS
No awards have been made under the proposed stock plan. However, if the
proposed stock plan is approved by our stockholders, we intend to make the
following awards in the form of stock options as soon as practical after such
approval.
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK COVERED BY EXERCISE
NAME AND CURRENT POSITION STOCK OPTION AWARD PRICE EXPIRATION DATE
- ------------------------- ------------------ -------- ---------------
<S> <C> <C> <C>
Max Golden, Chairman of the Board of Directors,
President and Chief Executive Officer ........ 1,200,000 $ .10 Oct. 30, 2009
Rita Hunter, Vice President ........................... 300,000 $ .10 Sept. 30, 2009
Martha Scroggins, Secretary ........................... 300,000 $ .10 Sept. 30, 2009
Ernest Kluft, Vice President and Chief Technology
Officer ...................................... 100,000 $ .10 Sept. 30, 2009
Mack Lawrence, Director ............................... 100,000 $ .10 Sept. 30, 2009
John Reynolds, Director ............................... 10,000 $5.00 Sept. 30, 2009
</TABLE>
Each of the stock options set forth above will vest immediately, except
the option issued to Ernest Kluft, which will vest immediately with respect to
33,333 shares and will vest with respect to 33,333 and 33,334 shares on January
1, 2001 and January 1, 2002, respectively.
Each of the persons set forth above, except John Reynolds, currently
hold options to purchase shares of common stock of Plus Solutions, our
wholly-owned subsidiary, that were issued prior to our acquisition of Plus
Solutions under the Plus Solutions stock plan. The currently outstanding options
to purchase Plus Solutions common stock have identical terms to those set forth
above. If the proposed stock plan is approved by our stockholders, we intend to
cancel the Plus Solutions stock plan and all the options currently outstanding
under the Plus Solutions stock plan and issue the options set forth above under
our new stock plan.
TYPES OF AWARDS
STOCK OPTIONS. A stock option entitles the holder to purchase shares of
our common stock at a price and upon the terms established by our board of
directors at the time of the grant. Stock options may be granted for a term of
up to 10 years with an exercise price to be established by our board of
directors of not less than the fair market value of our common stock on the date
of the grant or, if greater, the par value of the common stock. Subject to an
individual limit for each recipient, the proposed plan authorizes the grant of
both non-qualified stock options and incentive stock options, in the discretion
of our board of directors, provided that the aggregate value (determined at the
time of the grant) of the common stock with respect to which incentive stock
options are exercisable for the first time by any employee during any calendar
year may not exceed $100,000. Stock options granted under the proposed plan may
be exercised at any time during the exercise period established by the board of
directors. The proposed plan sets forth restrictions upon the exercise of stock
options upon termination of the holder's relationship with us by reason of
death, disability, retirement or otherwise. The board of directors may permit
the exercise price of options to be paid in cash, in shares of our common stock,
or in any combination of cash and our common stock.
STOCK APPRECIATION RIGHTS. Stock appreciation rights entitle the holder
to receive an amount equal to the difference between the fair market value of a
share of our common stock at the time the stock appreciation right is exercised
and the exercise price specified by our board of directors at the time the stock
appreciation right is granted, which exercise price cannot be less than the fair
market value on the date the stock appreciation right is granted. Stock
appreciation rights may be granted in tandem with or independently of a stock
option. Stock appreciation rights are exercisable at the time and at the price
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<PAGE> 8
established by the board of directors. However, no stock appreciation right may
be exercised more than 10 years after the date of grant. The board of directors
has discretion to determine whether the exercise of an stock appreciation right
will be settled in cash, in common stock, or in a combination of cash and common
stock. The proposed plan sets forth restrictions upon the exercise of stock
appreciation rights upon termination of the holder's relationship with us by
reason of death, disability, retirement or otherwise.
RESTRICTED STOCK. A restricted stock award is a grant of shares of our
common stock to an employee, the earning, vesting or distribution of which is
subject to certain conditions established by our board of directors. Restricted
stock awards are delivered immediately upon the date of grant. Restricted stock
awards that are intended to be "Performance-Based Compensation" as defined under
the United States Internal Revenue Code, may not exceed 250,000 shares to any
one recipient during any one calendar year. The proposed plan sets forth
restrictions upon the award of stock awards upon termination of the holder's
relationship with us by reason of death, disability, retirement or otherwise.
DEFERRED STOCK. A deferred stock award is similar to a restricted stock
awards except the shares are delivered at a deferred delivery date.
OTHER STOCK-BASED AWARDS. Our board of directors may grant any award
denominated or payable in, valued in whole or in part by reference to, or
otherwise based on or related to, shares of our common stock with terms and
conditions stipulated by the board of directors and deemed to be consistent with
the purposes of the proposed stock plan.
ADJUSTMENTS
In the event of a significant corporate transaction such as a stock
dividend, stock split, extraordinary cash dividend, recapitalization,
reorganization, merger, consolidation, split-up, spin-off, combination or
exchange of shares, the aggregate number of shares with respect to which awards
may be made under the proposed plan and the terms and the number of shares of
any outstanding award may be equitably adjusted by our board of directors in its
discretion.
AMENDMENT AND TERMINATION
Our board of directors may amend or terminate the proposed plan at any
time, provided that no amendment of the proposed plan may (1) except as
described above in "Adjustments", increase the number of shares of our common
stock with respect to which awards may be made, (2) be made without stockholder
approval to the extent such approval is required by law, agreement or the rules
of any exchange upon which our common stock is listed, or (3) alter or impair
any award previously granted under the proposed plan without the consent of the
holder thereof.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
Under current United States federal income tax laws, awards granted
under the proposed stock plan will have the consequences set forth below.
The grant of an non-qualified stock option, incentive stock option or
stock appreciation right will not result in taxable income to the holder at the
time of the grant, and we will not be entitled to a deduction at that time.
A holder of a non-qualified stock option generally will realize taxable
ordinary income, at the time of exercise of the option, in an amount equal to
the excess of the fair market value of the shares acquired over the exercise
price for those shares, and we will be entitled to a corresponding deduction.
The exercise of an incentive stock option generally will not result in
taxable income to the holder, nor will we be entitled to a deduction at that
time. Generally, if the holder does not dispose of the
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<PAGE> 9
underlying common stock during the applicable holding period, then, upon
disposition, any amount realized in excess of the exercise price will be taxed
to the holder as capital gain, and we will not be entitled to any deduction for
federal income tax purposes. If the holding period requirements are not met, the
holder will generally realize taxable ordinary income, and a corresponding
deduction will be allowed to us, at the time of disposition, in an amount equal
to the lesser of (1) the excess of the fair market value of the shares on the
date of exercise over the exercise price, or (2) the excess, if any, of the
amount realized upon disposition of the shares over the exercise price. The
exercise of an incentive stock option and the disposition of common stock
acquired pursuant thereto must be taken into account in computing the holder's
alternative minimum taxable income.
Upon exercise of a stock appreciation right, the amount of cash or the
fair market value of our common stock received will be taxable to the holder as
ordinary income, and we will be entitled to a corresponding deduction.
Upon grant of a restricted or deferred stock award, the fair market
value of the common stock received will be taxable to the holder as ordinary
income when the award vests, and we will be entitled to a corresponding
deduction.
All taxable income recognized by a holder of a stock award under the
proposed plan is subject to applicable tax withholding which may be satisfied,
under circumstances set forth in the proposed plan, through the surrender of
shares of common stock that the holder already owns or to which the holder is
otherwise entitled under the proposed plan.
VOTE REQUIRED FOR APPROVAL
In order to approve the proposed stock plan, stockholders representing
a majority of the shares of our common stock eligible to vote at the annual
meeting and represented, either in person or by proxy, at the annual meeting
must vote for the amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL #3.
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<PAGE> 10
PRINCIPAL STOCKHOLDERS
As of the close of business on March 31, 2000, we have issued and
outstanding 39,000,000 shares of our common stock. The following table shows
information concerning the ownership of our common stock as of March 31, 2000
by: (a) each current director, (b) each current officer, (c) each person we know
to own more than 5% of the shares of our common stock; and (d) all of the
current directors and officers and as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES
COMMON STOCK BENEFICIALLY OF COMMON STOCK
NAME (1) OWNED OUTSTANDING (2)
- -------- ------------------------- ----------------
<S> <C> <C>
Max Golden, Chairman of the Board of Directors,
President and Chief Executive Officer (3) ...... 7,776,732 19.4%
Mack Lawrence, Director (4) ............................. 184,317 *
John Reynolds, Director ................................. 0 --
Rita Hunter, Vice President (5) ......................... 1,666,873 4.2%
Martha Scroggins, Secretary (6) ......................... 2,218,313 5.6%
Ernest Kluft, Vice President and Chief Technology
Officer (7) .................................... 33,333 *
David Ballard (8) ....................................... 3,153,459 8.1%
7228 Spring Valley Road
Dallas, Texas 75240 U.S.A.
Mario Pinto ............................................. 2,655,988 6.8%
531 Landsdale, Suite 205
North Vancouver, British Columbia V7L 2G6
Canada
All current directors and officers as a group (9) ....... 11,879,568 29.0%
</TABLE>
* Less than one percent.
(1) Unless otherwise set forth, the address of each named person is 14677
Midway Road, Suite 206, Addison, Texas, U.S.A. 75001.
(2) Based upon 15,600,000 shares of our common stock issued and outstanding as
of February 28, 2000.
(3) Includes 1,200,000 shares that may be acquired upon the exercise of options
issued by Plus Solutions.
(4) Includes 100,000 shares that may be acquired upon the exercise of options
issued by Plus Solutions.
(5) Includes 300,000 shares that may be acquired upon the exercise of options
issued by Plus Solutions.
(6) Includes 300,000 shares that may be acquired upon the exercise of options
issued by Plus Solutions.
(7) Includes 33,333 shares that may be acquired upon the exercise of options
issued by Plus Solutions.
(8) Shares recorded in the name of Ballard Property Company #1, Ltd. which is
controlled by Mr. Ballard.
(9) 6 persons.
Included in the shares owned by some of our directors and officers set
forth above are options to purchase shares of common stock of Plus Solutions.
These options were issued pursuant to the Plus Solutions stock plan prior to the
acquisition of Plus Solutions by Sound Designs. If the proposed stock plan is
approved by our stockholders, we intend to cancel all the options outstanding
under the Plus Solutions stock plan and issue an identical number of options
with similar terms under our new stock plan to the current holders of options
issued by Plus Solutions. If the proposed stock plan is not approved by
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<PAGE> 11
our stockholders, we intend to purchase all the options outstanding under the
Plus Solutions stock plan for fair market value and, after such purchase, cancel
all such options.
MANAGEMENT
The following table sets forth certain information with respect to our
current directors and officers and the new directors set forth in the merger
agreement:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Max Golden 51 Chairman of the Board of Directors,
President and Chief Executive Officer
Mack Lawrence 53 Director
John Reynolds 57 Director
Rita Hunter 41 Vice President
Martha Scroggins 52 Secretary and Treasurer
Ernest Kluft 56 Vice President and Chief Technology
Officer
</TABLE>
Information regarding Max Golden, Mack Lawrence and John Reynolds was
set forth previously with respect to the nominees for director. Certain
background information about each of our other officers and is set forth below:
Rita Hunter currently serves as our Vice President, a position she has
held since March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before joining Plus Solutions, Ms. Hunter
served as Manager of Client and Field Services for AmGas Inc., Marketing
Coordinator and a Trainer for Artesia Data Systems and as a Senior Tax
Consultant with KPMG Peat Marwick LLP..
Martha Scroggins is our Secretary and Treasurer, a position she was
elected to on March 10, 2000. Prior to joining the Company, she served Plus
Solutions in a similar capacity. Before serving Plus Solutions, Ms. Scroggins
served as a Manager of Contract Administration with AmGas Inc.
Ernest Kluft is our Chief Technology Officer, a position he was elected
to on March 10, 2000. Prior to joining the Company, he served Plus Solutions in
a similar capacity. Before joining Plus Solutions, Mr. Kluft directed the
planning and systems efforts of Enserch Exploration for some twenty years and
subsequently directed the information technology department of its parent,
Enserch Corporation. Recently, he also coordinated all financial, planning, and
information technology efforts for Lone Star Gas in its successful bid for the
Mexico City natural gas distribution franchise
EXECUTIVE COMPENSATION
None of our current executive officers provided any services to or
received any compensation from Sound Designs during 1999. We intend to enter
into employment agreements with each of our executive officers in the near
future. Such employment agreements have not yet been negotiated, but we
anticipate that each will have terms of 1-3 years and will contain customary
severance provisions that provide a minimum of 30-180 days notice to terminate
the contract, except for any termination for an appropriate cause. We also
anticipate that each employment agreement will contain special severance
provisions if the employee is terminated within one year after a change of
control of the Company. The salaries of our executive officers, which will be
reflected in the employment agreements, are as follows:
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<PAGE> 12
<TABLE>
<CAPTION>
EXECUTIVE OFFICER SALARY
----------------- ------
<S> <C>
Max Golden ................................. $240,000
Rita Hunter ................................ $ 85,000
Martha Scroggins ........................... $ 85,000
Ernest Kluft ............................... $135,000
</TABLE>
Each of our executive officers currently hold options to purchase
shares of common stock of Plus Solutions. These options were issued pursuant to
the Plus Solutions stock plan prior to the acquisition of Plus Solutions by
Sound Designs. If the proposed stock plan is approved by our stockholders, we
intend to cancel all the options outstanding under the Plus Solutions stock plan
and issue an identical number of options with similar terms under our new stock
plan to each of our executive officers. If the proposed stock plan is not
approved by our stockholders, we intend to purchase all the Plus Solutions
options held by our executive officers for fair market value.
BOARD OF DIRECTORS REPORT REGARDING EXECUTIVE COMPENSATION
The compensation received by our executive officers is determined by
our board of directors. Two members of our board of directors are not employed
by Sound Designs: Mack Lawrence and John Reynolds. All issues pertaining to the
compensation of our executive officers are submitted to the board of directors
for approval prior to implementation.
Our philosophy with respect to executive compensation is that the base
salaries of our executive officers should reflect the responsibilities and
performance of the executive and should be competitive with the salaries paid to
comparable executives in the e-commerce industry. To implement our philosophy,
we evaluate the salaries offered to comparable executives using a variety of
methods, including information available to the public and our personal
knowledge and experience. Using this information, we set the base salaries of
our executive officers accordingly, making adjustments as necessary to reflect
differences in experience, education and geographic location. In addition, we
may consider the past contributions of the executive, our estimation of the
executive's contribution to our future endeavors and our desire to retain the
services of the executive when we set the executive's salary. The salaries of
all our current executive officers, including our President and Chief Executive
Officer, have been set in accordance with the methods outlined in this
paragraph.
With respect to incentive compensation, in which we include cash
bonuses and, if approved by our stockholders, grants under the proposed stock
plan, we evaluate our executive officers, including our President and Chief
Executive Officer using largely traditional, results-oriented methods. We
believe that the incentive compensation given to our executive officers should
be tied directly to the performance of Sound Designs as a whole and the areas of
our business over which the executive has primary responsibility. As a result,
we set goals for each executive and area of our business with respect to which
the executive exercises authority that we believe to be desirable for the
success of our business. At the end of each year, we compare the results
achieved by Sound Designs with the goals we set previously. Based largely on
these comparisons, we award incentive compensation to our executives, if we
conclude their performance warrants additional compensation. In addition to
results-oriented criteria, we may also consider our estimation of the
executive's contribution to our future endeavors and our desire to retain the
services of the executive when we determine the executive's incentive
compensation.
We believe that awards under the proposed stock plan will be a critical
component of our incentive compensation plan. Awards under the plan allow us to
align the long-term interests of our executives with those of our stockholders.
In addition, we believe that, by vesting awards under the proposed plan over a
three to five year period, we may more successfully retain our executive
officers.
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This advantage represents an important reason we have approved the proposed
stock plan and recommended that it be approved by our stockholders.
As a result of the current cash needs of Sound Designs, none of our
executive officers were awarded cash incentive compensation for 1999. However,
if our stockholders approve the proposed stock plan, each of our executive
officers will be issued a significant number of options to purchase our common
stock as compensation for their previous service with Plus Solutions and their
assistance with the acquisition of Plus Solutions by Sound Designs. As part of
this grant of options, our President and Chief Executive Officer will be issued
an option to purchase 1,200,000 shares of our common stock if the proposed plan
is approved.
Max Golden, Chairman
Mack Lawrence
John Reynolds
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Prior to March 10, 2000, Barry Wosk and Marvin Wosk comprised the
entire board of directors of Sound Designs. During such period, Barry Wosk
served as the President of Sound Designs and Marvin Wosk served as Secretary.
Barry Wosk is the son of Marvin Wosk. In September 1998, Barry Wosk and Marvin
Wosk each purchased 500,000 shares of Sound Designs common stock for
consideration of $.0025 per share. In January 2000, all of the shares issued to
Barry Wosk and Marvin Wosk were canceled. In September 1999, Sound Designs and
Barry Wosk entered into a Sales Commission Agreement which was subsequently
canceled in February 2000. Barry Wosk was paid $3,678 in sales commissions under
the Sales Commission Agreement prior to its cancellation.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Based on our review of reports filed pursuant to Section 16 of the
Securities Exchange Act, we are aware of the following persons who failed to
properly file a required report:
(1) Barry Wosk failed to file a Form 3 upon Sound Designs becoming
a reporting company under the Securities Exchange Act. He also
failed to file a Form 4 regarding the cancellation of all his
shares of our common stock in January 2000.
(2) Marvin Wosk failed to file a Form 3 upon Sound Designs
becoming a reporting company under the Securities Exchange
Act. He also failed to file a Form 4 regarding the
cancellation of all his shares of our common stock in January
2000
INDEPENDENT PUBLIC ACCOUNTANTS
Our board of directors has engaged Deloitte & Touche LLP as our
independent public accountants and auditors. Representatives of Deloitte &
Touche are expected to be present at the annual meeting and will be available to
respond to appropriate questions from our stockholders after the meeting.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
In order for a proposal from a stockholder to be included in our proxy
materials for the 2001 annual meeting under the rules of the United States
Securities and Exchange Commission, we must receive the proposal at our
executive offices at 14677 Midway Road, Suite 206, Addison, Texas 75001, no
later than January 1, 2001.
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A stockholder that desires to make a proposal at the 2001 annual
meeting must also comply with the requirements set forth in our bylaws. The
stockholder must give us written notice of the proposal at least 180 days prior
to the anniversary date of the 2000 annual meeting of stockholders. Because the
2000 annual meeting is scheduled for May 17, 2000, we must receive written
notice of a stockholder proposal no later than November 16, 2000.
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EXHIBIT A
TEXT OF PROPOSED STOCK PLAN
This exhibit will be filed with the definitive proxy statement. The
text of this exhibit is available and will be delivered to the Commission upon
request.
A-1
