SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A (FIRST)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended JUNE 30, 1997
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to ________
Commission file number 0-15194
SOUND ADVICE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-1520531
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 TIGERTAIL BOULEVARD, DANIA, FLORIDA 33004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 922-4434
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Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
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Title of class
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COMMON STOCK PURCHASE RIGHTS
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Title of class
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (17CFR 229.405) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT ON SEPTEMBER 19, 1997 BASED UPON THE CLOSING
MARKET PRICE OF THE REGISTRANT'S VOTING STOCK ON THE NASDAQ NATIONAL MARKET
SYSTEM ON SEPTEMBER 19, 1997, AS REPORTED IN THE WALL STREET JOURNAL, WAS
APPROXIMATELY $6,690,000.
THE REGISTRANT HAD 3,728,894 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF SEPTEMBER 19, 1997
DOCUMENTS INCORPORATED BY REFERENCE
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None
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Items 10, 11, 12 and 13 of Part III of the Annual Report on Form 10-K
for the fiscal year ended June 30, 1997(the "Report") of Sound Advice, Inc. (the
"Registrant") previously filed with the Securities and Exchange Commission are
hereby amended and restated in their entirety as follows:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
REGISTRANT'S DIRECTORS
The following table sets forth certain information as of the date of
this report regarding the current directors of the Registrant:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH THE REGISTRANT SINCE
- ---- --- ------------------------------- --------
<S> <C> <C> <C>
Peter Beshouri 43 Chairman of the Board, President 1982
and Chief Executive Officer
Michael Blumberg 49 Director, Senior Vice President, 1974
and Secretary
Gregory Sturgis(2) 45 Director 1974
G. Kay Griffith(1) 52 Director 1992
Richard W. McEwen(1),(2) 77 Director 1994
Herbert A. Leeds(1),(2) 80 Director 1996
</TABLE>
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1 Member of the Audit Committee of the Registrant's Board of
Directors.
2 Member of the Stock Option Committee of the Registrant's Board
of Directors.
The Registrant's directors hold office until the next annual meeting of
shareholders and until their respective successors have been duly elected and
qualified.
PETER BESHOURI, who has been an employee of the Registrant since 1974,
has served as Chairman of the Board and Chief Executive Officer of the
Registrant since August 1982. Prior thereto he was the general sales manager of
the Registrant, as well as having served as a showroom manager and district
manager. He was elected President of the Registrant in May 1985. Mr. Beshouri
currently serves as a director of Progressive Retailers Organization. In August
1995, Mr. Beshouri, together with the Registrant and a former chief financial
officer of the Registrant, voluntarily agreed with the United States Securities
and Exchange Commission ("SEC"), without admitting or denying any wrongdoing, to
the entry of a cease and desist order by the SEC concerning the Registrant's
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Form 10-K for fiscal year 1991 and Forms 10-Q for the quarters ended September
30 and December 31, 1991, which the SEC found in such order had been materially
misstated. The cease and desist order with respect to Mr. Beshouri related to
his supervisory responsibility in connection with the Registrant violating
certain provisions of the securities laws that require public companies to keep
accurate books and records, to maintain appropriate internal accounting controls
and to file accurate annual and quarterly reports. No censure, fine or penalty
was imposed by the SEC on Mr. Beshouri.
MICHAEL BLUMBERG, a founder and a director of the Registrant, was
elected a Vice President in August 1982, Vice President Purchasing and Finance
in May 1986, Vice President - Purchasing and Marketing in December 1987, and
Senior Vice President in May 1989. From the Registrant's inception until
February 1995, Mr. Blumberg served as Treasurer of the Registrant and, since
October 13, 1989, he has also been serving as Secretary of the Registrant. His
responsibilities include overall supervision of all purchasing and selecting new
product categories and lines for the Registrant, as well as consulting with
certain of the Registrant's manufacturers in connection with product design.
GREGORY STURGIS, a founder of the Registrant, had been an executive
officer of the Registrant from its inception until June 30, 1989, including
holding the position of Vice President-Planning and Development. Effective June
30, 1989, he resigned as an officer and employee of the Registrant, but is
continuing as a director. Since leaving the Registrant, Mr. Sturgis has provided
consulting services to companies in the marine industry, as well as performing
consulting services for the Registrant. Mr. Sturgis is also currently the
President of the Serpentine Group, which is in the yacht sales business.
G. KAY GRIFFITH was elected a director of the Registrant and a member
of the Audit Committee of its Board of Directors in July 1992, joined the
Registrant as an employee in May 1993 and served as Executive Vice President and
Chief Administrative Officer of the Registrant from September 1993 until
February 1996. In February 1996, Ms. Griffith formed Corporate Growth
Consultants, Inc., a management consulting firm that specializes in finance,
strategic planning and training. Since forming such firm, Ms. Griffith has
performed consulting services for the Registrant. Prior to May 1993, Ms.
Griffith was Chairman and President/Chief Executive Officer of Admiralty Bank,
headquartered in Palm Beach Gardens, Florida. From September 1983 to June 1991,
she held a variety of officer positions with NationsBank of Florida, N.A., the
last of which was Senior Vice President/Regional Banking Executive. Among her
career highlights, Ms. Griffith was presented the Women in Business and Industry
Award by the Dade County YWCA in 1986. She was also awarded the American Free
Enterprise Medal by the Palm Beach Atlantic College in 1988. See "ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
RICHARD W. MCEWEN was elected a director of the Registrant at its
annual meeting of shareholders held in January 1994 and was also appointed a
member of the Audit Committee and Stock Option
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Committee of its Board of Directors at such time. From 1977 until his retirement
in 1984, he was Chairman of the Board of Burdines, a chain of Florida department
stores then owned by Federated Stores, Inc. Mr. McEwen is currently a director
of two companies listed on the Nasdaq National Market. He was elected a director
in 1994 of Supreme International Corp., a Miami, Florida based designer and
importer of men's and boys' sportswear, and in July 1997 of Q.E.P. Co., Inc., a
Boca Raton, Florida based manufacturer of specialty tools and related products
for the home improvement market. He also currently serves as a director of two
privately held companies.
HERBERT A. LEEDS was elected a director of the Registrant in April 1996
and was appointed a member of its Audit Committee in May 1996 and its Stock
Option Committee in January 1997. Since 1975, Mr. Leeds has been President and
Chief Executive Officer of Leeds Business Counseling, Inc., a consulting firm
owned by him which has provided consulting services mainly to companies in the
retail industry and developers of retail malls. Prior to launching his company,
Mr. Leeds served as the President and Chief Executive Officer and held other
senior executive positions with major department store chains.
The Board of Directors has an Audit Committee comprised of a majority
of directors who are not officers or employees of the Registrant. The Board of
Directors does not currently have a nominating committee or a compensation
committee or committees performing similar functions.
REGISTRANT'S EXECUTIVE OFFICERS
The information regarding the Registrant's executive officers called
for by Item 401(b) of Regulation S-K has been included in ITEM 4.1 of Part I of
the Report.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Registrant's officers and directors, and persons who own more than ten percent
of a registered class of the Registrant's equity securities, to file reports of
ownership and changes in ownership with the SEC and the National Association of
Securities Dealers, Inc. Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Registrant with
copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Registrant and written representations that no Form 5's were required when
applicable, the Registrant believes that during the fiscal year ended June 30,
1997, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with.
4
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ITEM 11. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION TABLES
The following tables provide information about executive compensation.
SUMMARY COMPENSATION TABLE
The following table sets forth information about the compensation of
the Registrant's Chief Executive Officer ("CEO") and each of the other executive
officers of the Registrant during the fiscal year ended June 30, 1997 for
services in all capacities.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION (1) LONG TERM COMPENSATION
----------------------------------------- ----------------------
NAME AND PRINCIPAL FISCAL SECURITIES ALL OTHER
POSITION YEAR SALARY ($) BONUS ($)(2) UNDERLYING OPTIONS (#)(3) COMPENSATION ($)(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peter Beshouri 1997 324,008 0 105,000(5) 0
Chairman, President 1996 324,008 0 0 0
and CEO 1995 324,008 0 0 0
Michael Blumberg 1997 294,008 0 90,000(5) 0
Senior Vice 1996 294,008 0 0 0
President 1995 294,008 0 0 0
Christopher O'Neil 1997 150,000 0 101,000(5)(6) 8,367(7)
Executive Vice 1996 150,000 0 30,000(8) 8,268(7)
President and Chief 1995 150,000 0 15,000(8) 8,268(7)
Operating Officer
Kenneth L. Danielson 1997 160,000 0 110,000(5)(9) 0
Chief Financial and 1996 160,000 0 30,000(8) 0
Accounting Officer 1995 160,000 0 15,000(8) 0
and Treasurer
</TABLE>
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(1) Does not include any amounts for perquisites and other
personal benefits, securities or property extended to
such executive officers of the Registrant, such as life
insurance and disability insurance, because the
Registrant does not believe that in any individual case
the dollar value of such other annual compensation would
equal or exceed the lesser of either $50,000 or 10% of
such individual's total annual compensation shown above.
(2) In fiscal year 1995, the Registrant's Board of Directors
adopted an annual incentive bonus plan for four
categories of the Registrant's employees (two of which
categories were the CEO and other executive officers)
based upon the annual operating performance of the
Registrant. The percentage of the targeted bonus award
to be earned by the different employee categories is
directly tied to a percentage of the Registrant's
projected operating performance (after taking into
account accruals for the annual incentive bonus plan) to
be approved each year by the Registrant's Board of
Directors. Achievement of 100% of the projected
operating performance would result in the award of a
targeted bonus ranging from approximately 10% to up to
25% of base salary (with the CEO at 25% and other
executive officers at 20%), with the percentage of the
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<PAGE>
targeted bonus award earned increasing or decreasing based upon the
percentage (ranging from 70% to 130%) of projected operating
performance achieved. In fiscal years 1995, 1996 and 1997, no bonuses
were earned under such plan.
(3) These currently represent incentive stock options or non-
qualified stock options issued pursuant to the
Registrant's 1986 Stock Option Plan adopted in May 1986
as subsequently amended and restated (the "Option Plan").
See footnotes (5), (6), (8) and (9) hereinbelow and
footnote (4) to the table in "ITEM 12. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT."
(4) The Registrant has an Employee Stock Ownership Plan
("ESOP") for all of its employees which holds shares of
the Registrant's Common Stock. The Registrant made no
contribution to the ESOP during the fiscal years ended
June 30, 1995, 1996 and 1997. However, as a result of
reallocations to employee accounts of the ESOP caused by
employee terminations and pay outs of vested interests of
former employees, (a) with respect to the fiscal year
ended June 30, 1995, Mr. Beshouri was allocated 1.691
additional shares, Mr. Blumberg was allocated 1.690
additional shares and Mr. O'Neil was allocated 1.077
additional shares, and (b) with respect to the fiscal
year ended June 30, 1996, Mr. Beshouri was allocated
53.335 additional shares, Mr. Blumberg was allocated
53.337 additional shares, Mr. O'Neil was allocated 34.326
additional shares and Mr. Danielson was allocated .983
shares, which represent all of Mr. Danielson's shares
held by the ESOP. There were no further reallocations to
employee accounts for the fiscal year ended June 30,
1997. See footnote (3) to the table in "ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT." for the number of vested shares of the ESOP
owned by each of such individuals based upon the latest
available annual report of the ESOP.
(5) 75,000 of the aggregate stock options issued to such
officer in fiscal year 1997 were non-qualified stock
options which were not immediately exercisable but vest
and become exercisable (the "Vesting Terms") to the
extent that after the date of grant the market price (as
defined) of a share of Common Stock of the Registrant
increases to $4.00 per share (one-third vest), $5.00 per
share (two-thirds vest) and $6.50 per share (all vest),
subject, however, to vesting and becoming exercisable in
full in all events on the earlier to occur of April 29,
2001 or a change in control (as defined). Such 75,000
stock options have an exercise price of $1.89 per share
and a term of five years expiring on April 28, 2002.
(6) 11,000 of the incentive stock options issued to such
officer in fiscal year 1997 were issued in exchange for
the cancellation of 11,000 incentive stock options
previously granted to such officer in fiscal year 1994
which had an exercise price of $6.29 per share and
expired on September 21, 1998. The 11,000 incentive
stock options which replaced the cancelled stock options
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<PAGE>
have an exercise price of $1.69 per share and expire on
March 9, 2002.
(7) This sum represents the aggregate amount of a monthly automobile
allowance paid during fiscal years 1995, 1996 and 1997.
(8) 15,000 of the aggregate 30,000 incentive stock options
issued to such officer in fiscal year 1996 were issued in
exchange for the cancellation of the 15,000 incentive
stock options granted to such officer in fiscal year 1995
which had an exercise price of $5.96 per share and
expired on December 13, 1999. The 15,000 incentive stock
options which replaced the cancelled stock options have
an exercise price of $1.77 per share and expire on
February 21, 2001.
(9) 20,000 of the incentive stock options issues to such
officer in fiscal year 1997 were issued in exchange for
the cancellation of 20,000 incentive stock options
previously granted to such officer in fiscal year 1994
which had an exercise price of $6.29 per share and
expired on September 21, 1998. The 20,000 incentive
stock options which replaced the cancelled stock options
have an exercise price of $1.69 per share and expire on
March 9, 2002.
OPTION GRANTS IN 1997 FISCAL YEAR
The following table shows all grants of options to the named executive
officers of the Registrant during the fiscal year ended June 30, 1997. Pursuant
to SEC rules, the table also shows the value of the options granted at the end
of the option terms (five years) if the price of the Registrant's stock was to
appreciate annually by 5% and 10%, respectively. There is no assurance that such
stock price will appreciate at the rates shown in the table. The table also
indicates that, if the stock price does not appreciate, there will be no
increase in the potential realizable value of the options granted above the
difference (if any) between the market price of the Registrant's Common Stock as
of the date of grant and the exercise price per share. All of the options set
forth in the table were issued pursuant to the Registrant's Option Plan and are
immediately exercisable incentive stock options except
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<PAGE>
as otherwise indicated below. The Registrant does not have a plan whereby tandem
stock appreciation rights ("SARS") are granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- --------------------------------------------------------------------------------------------- --------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS CLOSING MARKET
UNDERLYING GRANTED TO EXERCISE PRICE ON DATE
OPTIONS EMPLOYEES PRICE OF GRANT EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) ($/SHARE)(1) DATE 0% ($)(1) 5%($) 10%($)
- ---- ----------- -------------- ---------- -------------- ---------- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Peter Beshouri 30,000 5.8% 1.69 2.25 3/9/02 16,800 35,449 58,009
75,000(2) 14.6% 1.89 1.75 4/28/02 0 25,762 69,629
Michael Blumberg 15,000 2.9% 1.69 2.25 3/9/02 8,400 17,725 29,005
75,000(2) 14.6% 1.89 1.75 4/28/02 0 25,762 69,629
Christopher O'Neil 11,000(3) 2.1% 1.69 2.25 3/9/02 6,160 12,998 21,270
15,000 2.9% 1.69 2.25 3/9/02 8,400 17,725 29,005
75,000(2) 14.6% 1.89 1.75 4/28/02 0 25,762 69,629
Kenneth L. Danielson 20,000(4) 3.9% 1.69 2.25 3/9/02 11,200 23,633 38,673
15,000 2.9% 1.69 2.25 3/9/02 8,400 17,725 29,005
75,000(2) 14.6% 1.89 1.75 4/28/02 0 25,762 69,629
</TABLE>
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(1) For purposes of the Option Plan, "fair market value" on the
date of grant of any option is the average of the "market
price" of a share of Common Stock for each of the seven (7)
consecutive business days preceding such day. The "market
price" on each such day is the closing sales price on the
NASDAQ National Market on such day. The Stock Option
Committee of the Registrant believes this calculation more
accurately reflects "fair market value" of the Registrant's
Common Stock on any given day as compared to simply using the
closing market price on the date of grant. As a result, the
closing market price on the date of grant at times may be
different than the exercise price per share.
(2) See footnote (5) to Summary Compensation Table hereinabove.
(3) See footnote (6) to Summary Compensation Table hereinabove.
(4) See footnote (9) to Summary Compensation Table hereinabove.
AGGREGATE OPTION EXERCISES IN 1997 FISCAL YEAR
AND 1997 FISCAL YEAR-END OPTION VALUES
The following table provides information as to options exercised by
each of the named executives of the Registrant during the fiscal year ended June
30, 1997, and the value of unexercised options held by such executive officers
at the Registrant's fiscal year-end measured in terms of the closing market
price of the
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Registrant's stock on June 30, 1997 (the last business day of fiscal year 1997).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FY-END(#) AT FY-END ($)(2)
SHARES ACQUIRED EXERCISABLE(E)/ EXERCISABLE(E)/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE(U)(1) UNEXERCISABLE(U)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Peter Beshouri 0 0 30,000(E) 13,050(E)
75,000(U) 17,625(U)
Michael Blumberg 0 0 15,000(E) 6,525(E)
75,000(U) 17,625(U)
Christopher O'Neil 0 0 56,000(E) 23,010(E)
75,000(U) 17,625(U)
Kenneth L. Danielson 0 0 65,000(E) 26,925(E)
75,000(U) 17,625(U)
</TABLE>
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(1) See footnote (5) to Summary Compensation Table hereinabove.
(2) The closing market price of the Registrant's Common Stock on the NASDAQ
National Market on June 30, 1997 (the last business day of the
Registrant's fiscal year-end) was $2.125.
EMPLOYMENT AGREEMENTS
During the 1997 fiscal year Peter Beshouri and Michael Blumberg each
had an employment agreement with the Registrant which provided for an annual
base salary for fiscal year 1997 of $320,650 for Peter Beshouri and $290,400 for
Michael Blumberg. The term of each such employment agreement was originally for
a three year period expiring June 30, 1992, and had been extended each fiscal
year thereafter for an additional one year period. Effective as of July 1, 1997,
such employment agreements were again extended for an additional one year term
(currently until June 30, 1998) on the same terms and conditions as in effect
under their respective employment agreements during the previous fiscal year,
including, without limitation, that the annual base salary payable to each of
them for the Registrant's current fiscal year will be the same as they were
entitled to receive for the fiscal year ended June 30, 1997. Under the latest
one-year extension of the employment agreements, each of Messrs. Beshouri and
Blumberg will be entitled to participate in the Registrant's annual incentive
bonus plan and long term incentive stock option program. The Registrant is also
required to furnish each of Messrs. Beshouri and Blumberg with, among other
things, family health, life and disability insurance coverage.
Such employment agreements with Messrs. Beshouri and Blumberg also
provide that, in the event of a change in control of the Registrant, each of
them can terminate his full-time employment thereunder. A change in control
occurs when Messrs. Beshouri and Blumberg and/or other individuals or designees
voted for or approved by them no longer collectively comprise at least a
majority of the members of the Board of Directors of the Registrant or if
Messrs. Beshouri or Blumberg is forced by a merger, consolidation,
reorganization or otherwise by operation of law or other form of transaction to
sell his shares of voting capital
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stock in the Registrant or if 50% or more of the consolidated assets, properties
and businesses of the Registrant is sold or otherwise transferred to a
third-party or if an individual (other than either Messrs. Beshouri and
Blumberg) or another company or entity or a group acting in concert becomes the
beneficial owner of 25% or more of the outstanding voting capital stock of the
Registrant as a result of acquisitions made from other than Messrs. Beshouri
and/or Blumberg or the Registrant, assuming such acquisitions from the
Registrant were approved by Messrs. Beshouri and Blumberg. In the event such
change in control was resisted by either Messrs. Beshouri or Blumberg as
evidenced by his failure to approve of such change in control either in his
capacity as a director or shareholder of the Registrant, unless (i) he accepts a
new employment agreement with the Registrant or any successor or (ii) such
change in control was supported by the Board of Directors of the Registrant at a
time when Messrs. Beshouri and Blumberg and/or other individuals or designees
voted for or approved by them collectively comprise at least a majority of the
members of the Board of Directors of the Registrant and he was offered a new
contract at least as favorable as his current employment agreement, he would be
entitled to his compensation (both annual salary and any bonus) and the other
benefits provided for in his employment agreement for the greater of three years
or the remaining term of his employment agreement. The Registrant is not aware
of any contemplated change in control.
SEVERANCE AGREEMENTS
In May 1997, the Registrant entered into severance agreements with each
of Christopher O'Neil, the Registrant's Executive Vice President and Chief
Operating Officer, and Kenneth L. Danielson, the Registrant's Chief Financial
and Accounting Officer and Treasurer, as well as twelve other non-executive
officer employees of the Registrant. The severance agreement for each of Messrs.
O'Neil and Danielson provides that, in the event that prior to the expiration of
its one year term (April 30, 1998) a change in control (as defined) occurs and
such executive officer remains an employee of the Registrant until the later to
occur of the closing date or effective date of the change in control (a "Change
in Control Date") unless such executive officer is terminated prior to such date
other than for cause (as defined), such executive officer shall be entitled to
be paid in one lump sum a severance payment (in addition to any other
compensation then owed) equal to two times the gross wages paid to such
executive officer during the twelve months immediately preceding the month in
which the Change in Control Date occurs. Such severance payment is not owed,
however, in the event that such executive officer is offered on or prior to the
Change in Control Date to continue as an employee of the Registrant or its
successor in substantially the same position then held and such executive
officer receives a written agreement from the Registrant or its successor to the
effect that, in the event that such executive officer is terminated without
cause within one year after the Change in Control Date, he shall be paid the
severance payment in one lump sum on the date of termination.
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DIRECTORS COMPENSATION
Directors who are also officers or employees of the Registrant are not
paid additional compensation for acting as a director of the Registrant. The
Registrant has established a standard arrangement for compensating directors who
are not officers or employees of the Registrant for services provided in such
person's capacity as a director. Each such outside director receives a fee of
$1,500 on a quarterly basis for serving as a director of the Registrant plus an
additional fee of $500 for each meeting of the Board of Directors or any
committee thereof such director attends, as well as reimbursement of any
out-of-pocket expenses incurred for travel, lodging and meals in connection with
attendance at any such meeting. Each outside director who is also a member of
the Audit Committee also receives an additional fee of $1,500 on a quarterly
basis for serving on the Audit Committee. In fiscal year 1997, in addition to
the above-described standard arrangement, the Registrant granted or reissued
certain stock options or warrants to its outside directors as a form of
additional incentive compensation for them acting as a director of the
Registrant as follows: (i) G. Kay Griffith was reissued non-qualified stock
options to purchase 35,000 shares of Common Stock at an exercise price of $1.89
per share on the Vesting Terms and expiring on April 28, 2002 in exchange for
the cancellation of stock options covering 35,000 shares previously granted to
her at exercise prices of $5.96 per share (15,000 shares) and $6.29 per share
(20,000 shares); (ii) G. Kay Griffith was also granted an additional stock
option covering 5,000 shares of Common Stock at an exercise price of $1.89 per
share on the Vesting Terms and expiring on April 28, 2002; and (iii) Gregory
Sturgis, Richard W. McEwen and Herbert A. Leeds were each granted a warrant to
purchase 5,000 shares of Common Stock at an exercise price of $1.89 per share on
the Vesting Terms and expiring on April 28, 2002. For a description of the
Vesting Terms, see footnote (5) to Summary Compensation Table hereinabove. See
also "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since during the fiscal year ended June 30, 1997, the Registrant did
not have a compensation committee of its Board of Directors (or Board committee
performing equivalent functions), Peter Beshouri and Michael Blumberg, in their
capacities as members of the Registrant's Board of Directors, participated in
deliberations of the Board concerning the authorization of the one-year renewals
of the employment agreements of Messrs. Beshouri and Blumberg on the terms as
discussed in "Employment Agreements" hereinabove. Furthermore, Messrs. Sturgis,
McEwen and Leeds, in their capacities as members of the Registrant's Board of
Directors, participated in deliberations of the Board concerning the granting by
the Registrant of warrants to purchase 5,000 shares of Common Stock to each of
them on the terms as discussed in "Directors Compensation" hereinabove.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of the Registrant's Common Stock, as of October 21, 1997,
by (i) each person who is known by the Registrant to own beneficially more than
5% of the Registrant's Common Stock; (ii) each of the Registrant's directors and
nominees for director who own shares of the Registrant's Common Stock; (iii) the
Registrant's CEO and its executive officers other than the CEO who were serving
as executive officers at the end of fiscal year 1997; and (iv) all directors and
executive officers of the Registrant as a group. Except as noted in the
footnotes to the table, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES BENEFICIALLY OWNED
OF -------------------------
BENEFICIAL OWNER NUMBER PERCENTAGE
---------------- ------ ----------
<S> <C> <C>
Peter Beshouri (1) ............................ 381,060.8 (2)(3)(4) 10.14% (2)(3)(4)
FMR Corp. (5)(6) .............................. 371,655.0 (6) 9.94% (6)
Michael Blumberg (1)........................... 361,910.8 (2)(3)(4) 9.67% (2)(3)(4)
U.S. Bancorp (5)(7) ........................... 288,000.0 (7) 7.72% (7)
Dimensional Fund Advisors
Inc. (5)(8) .................................. 218,747.0 (8) 5.87% (8)
Joseph Piccirilli (1) ......................... 210,467.5 (2) 5.64% (2)
Gregory Sturgis (1) ........................... 150,467.5 (2)(4) 4.04% (2)(4)
Kenneth L. Danielson (1) ...................... 117,001.0 (3)(4) 3.08% (3)(4)
Christopher O'Neil (1)......................... 62,373.5 (3)(4) 1.65% (3)(4)
Richard W. McEwen (9).......................... 6,000.0 (4) .16% (4)
G. Kay Griffith (10)........................... 1,000.0 (4) .03% (4)
Herbert A. Leeds (11).......................... 0 (4) --- (4)
All directors and executive officers
as a group (eight persons including
certain of those listed above) (2)(3)(4)...... 1,079,813.6 27.72%
- --------------------------
</TABLE>
(1) The address of each such person is care of the Registrant, 1901
Tigertail Boulevard, Dania, Florida 33004. Messrs. Beshouri, Blumberg
and Sturgis together with Mr. Piccirilli, a former officer and director
of the Registrant, are collectively hereinafter referred to as the
"Principal Shareholders."
(2) See "Right of First Refusal and Voting Trust Agreement" hereinbelow.
(3) Includes such person's or members' of the group vested interest (if
any) in shares of Common Stock of the Registrant resulting from such
person's or members' of the group participation in the Registrant's
ESOP based upon the latest available annual report of the ESOP for the
fiscal year ended June 30, 1997. Based on such annual report, Mr.
Beshouri had 593.333 vested shares, Mr. Blumberg had 593.336 vested
shares, Mr. Danielson had .983 vested shares and Mr. O'Neil had 373.462
vested shares, and all current directors and executive officers as a
group had 1,561.114 vested shares.
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(4) Includes (as applicable) immediately exercisable stock options
held by: (i) Mr. Beshouri for 30,000 shares of Common Stock at
an exercise price of $1.69 per share; (ii) Mr. Blumberg for
15,000 shares of Common Stock at an exercise price of $1.69
per share; (iii) Mr. Danielson for 15,000 shares of Common
Stock at an exercise price of $1.77 per share, for 15,000
shares at an exercise price of $1.70 per share and for 35,000
shares at an exercise price of $1.69 per share; and (iv) Mr.
O'Neil for 15,000 shares of Common Stock at an exercise price
of $1.77 per share, for 15,000 shares at an exercise price of
$1.70 per share and for 26,000 shares at an exercise price of
$1.69 per share. Does not include stock options or warrants
held by officers or directors which are not currently
exercisable within 60 days of October 21, 1997. See "ITEM 11
EXECUTIVE COMPENSATION. - Executive Compensation Tables" and
" - Directors Compensation."
(5) The information set forth herein with respect to each such person(s) is
based solely upon a Schedule(s) 13G (and any amendments thereto) filed
with the SEC by such person(s) with respect to the calendar year ended
December 31, 1996 and, accordingly, may not reflect their respective
holdings as of the date of this report.
(6) FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109,
through the ownership of its wholly-owned subsidiary, Fidelity
Management & Research Company, a registered investment advisor
located at the same address as FMR Corp., is deemed to be the
beneficial owner of 371,655 shares of Common Stock, with
respect to which shares it has sole dispositive power, as a
result of acting as an investment advisor to various
registered investment companies. The number of shares of
Common Stock owned by such investment companies includes
11,255 shares resulting from the assumed conversion of certain
of the Registrant's warrants. In addition, Edward C. Johnson
3d, the Chairman of FMR Corp. and who with various Johnson
family members and trusts for the benefit of Johnson family
members form a control group with respect to FMR Corp.,
indirectly would also be deemed the beneficial owner of such
371,655 shares by reasoning of having sole dispositive power
over such shares. Fidelity Low-Priced Stock Fund, one of the
registered investment companies as to which Fidelity
Management & Research Company acts as an investment advisor
and located at the same address as FMR Corp., may also be
deemed a beneficial owner of 371,605 of such 371,655 shares as
a result of its right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of,
such 371,605 shares. The number of shares of Common Stock
owned by Fidelity Low-Priced Stock Fund includes 11,205 shares
resulting from the assumed conversion of certain of the
Registrant's warrants.
(7) U.S. Bancorp, 111 S.W. Fifth Avenue, Portland, Oregon, 97204,
as a result of the Trust Group of the United States National
Bank of Oregon (a national banking association located at the
same address and owned by U.S. Bancorp) holding the sole
voting power over 130,900 shares of Common Stock, is deemed,
together with United States National Bank of Oregon, to be the
beneficial owner of such 130,900 shares. In addition,
Qualivest Capital Management, Inc. (a registered investment
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adviser located at the same address and owned by United States National
Bank of Oregon) holds the sole voting power over 157,100 shares of
Common Stock and is deemed the beneficial owner of such additional
157,100 shares, as a result of acting as an investment adviser to The
Qualivest Funds, a registered investment company.
(8) Dimensional Fund Advisors Inc. ("Dimensional"), 1299 Ocean
Avenue, 11th Floor, Santa Monica, California 90401, which is
a registered investment advisor, is deemed to have beneficial
ownership of 218,747 shares of Common Stock, with respect to
which shares it has sole voting power over 140,300 and sole
dispositive power over 218,747. All of such shares are held
in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end management investment company, or in
series of the DFA Investment Trust Company, a Delaware
business trust, or The DFA Group Trust and DFA Participation
Group Trust, investment vehicles for qualified employee
benefit plans, with respect to all of which Dimensional serves
as investment manager. In addition, persons who are officers
of Dimensional also serve as officers of DFA Investment
Dimensions Group Inc. and The DFA Investment Trust Company
and, in their capacities as officers of DFA Investment
Dimensions Group Inc. and The DFA Investment Trust Company,
such persons have sole voting power over the balance (78,447
shares) of the 218,747 shares not voted by Dimensional.
Dimensional disclaims beneficial ownership of all such shares.
(9) The address of Richard W. McEwen is 3752 Bobbin Brook West,
Tallahassee, Florida 32312.
(10) The address of G. Kay Griffith is 2808 N.E. 23rd Street, Fort
Lauderdale, Florida 33305.
(11) The address of Herbert A. Leeds is 1110 Brickell Avenue, Suite
508, Miami, Florida 33131.
RIGHT OF FIRST REFUSAL AND VOTING TRUST AGREEMENT
On June 30, 1986, the Principal Shareholders entered into a right of
first refusal and voting trust agreement. The voting trust arrangement under
such agreement expired on June 30, 1996, while the right of first refusal
arrangement continues. Pursuant to such agreement, each Principal Shareholder,
for himself and on behalf of his heirs, beneficiaries, legal representatives and
permitted assigns, has agreed not to sell, transfer, assign, pledge, encumber or
otherwise dispose of any of his shares of Common Stock except (a) by will or the
laws of intestate succession, (b) to a trust in which such Principal Shareholder
or his immediate family are the sole beneficiaries, (c) with the written consent
of all of the other Principal Shareholders or (d) pursuant to the right of first
refusal granted to the other Principal Shareholders. Under such right of first
refusal, in the event a Principal Shareholder or his heirs, beneficiaries, legal
representative or permitted assigns desires to sell any shares of Common Stock
pursuant to a bona fide offer or otherwise, such other Principal Shareholders
shall have the right and option to purchase such shares at a price equal to the
bona fide offer price per share (if any) or the average of the closing bid and
ask prices for the Common Stock over the four full weeks preceding the date the
notice of intent to sell is given.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
G. Kay Griffith, a director and until February 1996 the Executive Vice
President and Chief Administrative Officer of the Registrant, had provided
consulting services to the Registrant from February 1996 through November 1996.
For providing such services, Ms. Griffith received compensation of $13,333.33
per month. Accordingly, the compensation received by Ms. Griffith during fiscal
year 1997 in this capacity aggregated approximately $66,667.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment to the Report to be signed on its
behalf by the undersigned, thereunto duly authorized, on the 27th day of
October, 1997.
Sound Advice, Inc.
By:/S/ PETER BESHOURI
----------------------------
Peter Beshouri, Chairman of
the Board, President and
Chief Executive Officer
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