SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
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 Rule 14a-11(c) or Rule 14a-12
SOUND ADVICE, INC.
...............................................................................
(Name of Registrant as Specified In Its Charter)
...............................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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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[ ] 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.
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SOUND ADVICE, INC.
1901 TIGERTAIL BOULEVARD
DANIA, FLORIDA 33004
-----------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 13, 1998
-----------------------------------------
To Our Shareholders:
The 1997 Annual Meeting of Shareholders of Sound Advice, Inc. (the
"Company") will be held on Friday, February 13, 1998, at 10:00 a.m., local time,
at The Wyndham Hotel, 1825 Griffin Road, Dania, Florida 33004, for the following
purposes:
1. To elect directors; and
2. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed Friday, December 19, 1997, as the
record date for the determination of shareholders entitled to vote at the 1997
Annual Meeting of Shareholders. Only shareholders of record at the close of
business on that date will be entitled to notice of, and to vote at, the meeting
or any postponement or adjournment thereof.
Copies of the Company's Proxy Statement and annual report for the year
ended June 30, 1997 accompany this notice.
You are cordially invited to attend the meeting in person. Whether or
not you expect to attend the meeting in person, you are urged to sign and date
the enclosed proxy and return it promptly in the envelope provided for that
purpose.
By Order of the Board of Directors
/s/ Michael Blumberg
------------------------------
Michael Blumberg
Secretary
Dania, Florida
January 15, 1998
<PAGE>
SOUND ADVICE, INC.
1901 TIGERTAIL BOULEVARD
DANIA, FLORIDA 33004
PROXY STATEMENT
-------------------------------
INTRODUCTION
GENERAL
This Proxy Statement, which together with the accompanying proxy card
is first being mailed to shareholders on or about January 20, 1998, is furnished
to the shareholders of the Company in connection with the solicitation of
proxies by the Board of Directors of the Company for use in voting at the 1997
Annual Meeting of Shareholders, including any adjournment or postponement
thereof.
Proxies in the form enclosed, if properly executed and received in time
for voting, and not revoked, will be voted as directed in accordance with the
instructions thereon. In voting by proxy in regard to the election of six
directors to serve until the 1998 annual meeting of shareholders, shareholders
may vote in favor of all nominees or withhold their votes as to all or as to any
specific nominees. Any properly executed and timely received proxy not so
directing or instructing to the contrary will be voted FOR each of the Company's
nominees as directors. See "ELECTION OF DIRECTORS." Sending in a signed proxy
will not affect a shareholder's right to attend the meeting and vote in person
since the proxy is revocable. Any shareholder giving a proxy may revoke it at
any time before it is voted at the meeting by, among other methods, giving
notice of such revocation to the Secretary of the Company, attending the meeting
and voting in person or by duly executing and returning a proxy bearing a later
date.
The cost of this solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or other means by officers and/or regular employees of the Company
without additional compensation or remuneration therefor. Arrangements have also
been made with brokers, dealers, banks, voting trustees and other custodians,
nominees and fiduciaries to forward proxy materials and annual reports to the
beneficial owners of the shares held of record by such persons, and the Company
will, upon request, reimburse them for their reasonable expenses in so doing.
The management knows of no other matters to be presented for action at
the meeting other than as mentioned herein. However, if any other matters come
before the meeting, it is intended that the holders of the proxies will vote
thereon in their sole discretion.
A copy of the Company's annual report for the fiscal year ended June
30, 1997 (which has included therein audited consolidated financial statements
for the Company for the three fiscal years ended June 30, 1997) is being mailed
to the Company's shareholders together with this Proxy Statement. Such annual
report is not, however, incorporated into this Proxy Statement nor is it to be
deemed a part of the proxy soliciting material.
<PAGE>
VOTING SECURITIES
At the close of business on Friday, December 19, 1997, the record date
for the determination of shareholders entitled to receive notice of and to vote
at the meeting, the Company's outstanding voting securities consisted of
3,728,894 shares of Common Stock, par value $0.01 per share. Holders of Common
Stock are entitled to one vote per share.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, as of December 19, 1997, by
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's Common Stock; (ii) each of the Company's directors and nominees
for director who own shares of the Company's Common Stock; (iii) the Company's
Chief Executive Officer ("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 Company 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)
William F. Hagerty, IV (9)..................... 43,100.0 (10) 1.16% (10)
Richard W. McEwen (11)......................... 6,000.0 (4) .16% (4)
G. Kay Griffith (12)........................... 1,000.0 (4) .03% (4)
Herbert A. Leeds (13).......................... 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 Company, 1901 Tigertail
Boulevard, Dania, Florida 33004. Messrs. Beshouri, Blumberg and
Sturgis together with Mr. Piccirilli, a former officer and director of
the Company, 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 Company resulting from such
person's or members' of the group participation
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in the Company's Employee Stock Ownership Plan ("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.
(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 December 19, 1997. See
"EXECUTIVE COMPENSATION - Executive Compensation Tables" and "ELECTION
OF DIRECTORS - 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 Securities and Exchange Commission ("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 Company'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 Company'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 adviser
located at the same address and owned by United States National Bank of
Oregon) holds the sole voting power over 157,100 shares
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<PAGE>
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) William F. Hagerty, IV is a nominee for director of the Company and his
address is Suite 174, 44873 Falcon Place, Sterling, Virginia 20166. See
"ELECTION OF DIRECTORS."
(10) Mr. Hagerty is deemed the beneficial owner of 42,600 of such 43,100
shares of Common Stock as a result of having shared voting and
investment power over such 42,600 shares.
(11) The address of Richard W. McEwen is 3752 Bobbin Brook West,
Tallahassee, Florida 32312.
(12) The address of G. Kay Griffith is 2808 N.E. 23rd Street, Fort
Lauderdale, Florida 33305.
(13) 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.
4
<PAGE>
ELECTION OF DIRECTORS
Six directors are to be elected at the 1997 Annual Meeting of
Shareholders to hold office until the annual meeting of shareholders next
succeeding their election and until their respective successors are elected and
qualified or as otherwise provided in the by-laws of the Company. The nominees
for directors who receive a plurality of the votes cast by the holders of
outstanding shares of Common Stock entitled to vote at the 1997 Annual Meeting
of Shareholders will be elected. Abstentions (withheld authority) and broker
non-votes are not counted in determining the number of shares voted for or
against any nominee for director.
The Board of Directors has designated the persons listed below to be
nominees for election as directors. Each is currently serving as a director of
the Company except for William F. Hagerty, IV, and each has consented to being
named in the Proxy Statement and to serve if elected. The Company has no reason
to believe that any of the nominees will be unavailable for election; however,
should any nominee become unavailable for any reason, the Board of Directors may
designate a substitute nominee or the number of authorized directors may be
reduced. Each proxy will be voted for the election to the Board of Directors of
all of the Board of Director's nominees unless authority is withheld to vote for
all or any of said nominees.
The following information regarding the Company's nominees for election
as directors is based, in part, on information furnished by these individuals
and is as of the date of this Proxy Statement:
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH THE COMPANY 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 Sturgis2 46 Director 1974
G. Kay Griffith1 53 Director 1992
Herbert A. Leeds1,2 80 Director 1996
William F. Hagerty, IV 38 * *
</TABLE>
- -----------------------------
1 Member of the Audit Committee of the Company's Board of Directors.
2 Member of the Stock Option Committee of the Company's Board of Directors.
* Mr. Hagerty is not currently serving as a director of the Company.
Richard W. McEwen, who is currently a director of the Company and
serves as a member of the Audit Committee and Stock Option Committee of the
Company's Board of Directors, will be retiring as a director of the Company
effective as of the day immediately preceding the date of the 1997 Annual
Meeting of Shareholders, and, accordingly, will not be standing for reelection.
5
<PAGE>
PETER BESHOURI, who has been an employee of the Company since 1974, has
served as Chairman of the Board and Chief Executive Officer of the Company since
August 1982. Prior thereto he was the general sales manager of the Company, as
well as having served as a showroom manager and district manager. He was elected
President of the Company in May 1985. Mr. Beshouri currently serves as a
director of Progressive Retailers Organization, Inc., a buying group comprised
of approximately 14 retailers (including the Company) of home entertainment and
consumer electronic products located throughout the country. In August 1995, Mr.
Beshouri, together with the Company and a former chief financial officer of the
Company, voluntarily agreed with the SEC, without admitting or denying any
wrongdoing, to the entry of a cease and desist order by the SEC concerning the
Company's 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 Company
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 of the Company, 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 Company's inception until February 1995, Mr.
Blumberg served as Treasurer of the Company and, since October 13, 1989, he has
also been serving as Secretary of the Company. His responsibilities include
overall supervision of all purchasing and selecting new product categories and
lines for the Company, as well as consulting with certain of the Company's
manufacturers in connection with product design.
GREGORY STURGIS, a founder of the Company, had been an executive
officer of the Company 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 Company, but is continuing
as a director. Since leaving the Company, Mr. Sturgis has provided consulting
services to companies in the marine industry, as well as performing consulting
services for the Company. 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 Company and a member of
the Audit Committee of its Board of Directors in July 1992, joined the Company
as an employee in May 1993 and served as Executive Vice President and Chief
Administrative Officer of the Company 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 Company. 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 "CERTAIN TRANSACTIONS."
HERBERT A. LEEDS was elected a director of the Company 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
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<PAGE>
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.
WILLIAM F. HAGERTY, IV, who is not currently a director of the Company,
has been a principal of Hagerty, Peterson & Company, LLC, a private equity
investment firm based in Washington, D.C., since 1996. In addition, since August
1996 Mr. Hagerty has been the Vice Chairman of National Electronics Warranty
Corporation, an administrator of warranty programs based in Sterling, Virginia
primarily engaged in the sale of product warranty contracts and through which
administrator the Company offers its customers extended warranty contracts for
most of the Company's products. From 1994 to present, Mr. Hagerty has been a
principal of the Management Advisory Group, a Washington, D.C. based consulting
firm which is a wholly-owned subsidiary of Hagerty, Peterson & Company, LLC.
During 1993 and 1994, Mr. Hagerty was affiliated with Trident Capital, L.P., a
private equity investment firm based in Chicago, Illinois. During the Bush
Administration (1991-1993), Mr. Hagerty served in the White House as the Chief
Economist of the President's Council on Competiveness. From 1984 to 1991, he was
a management consultant with the Boston Consulting Group serving as the senior
expatriate in its Tokyo office with responsibility for all of such firm's
international activities in Japan. Mr. Hagerty has an economics degree from
Vanderbilt University where he was a member of Phi Beta Kappa and a law degree
from Vanderbilt Law School where he was elected to Law Review and served as
Associate Editor.
BOARD MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held six meetings (excluding actions by the
Board of Directors taken by unanimous written consent in lieu of a meeting, of
which there were four such unanimous written consents) during the fiscal year
ended June 30, 1997. Each director attended 75% or more of the aggregate number
of meetings of the Board of Directors and committees of the Board of Directors
on which he or she served during the 1997 fiscal year.
The Board of Directors has an Audit Committee comprised of a majority
of directors who are not officers or employees of the Company. The duties and
responsibilities of such Audit Committee include meeting independently with
representatives of the Company's independent public accountants and
representatives of the Company's senior management, reviewing the general scope
of the Company's annual audit, the fee charged by the independent public
accountants and other matters relating to internal accounting controls and
financial procedures and reporting, reviewing and monitoring the performance of
non-audit services by the Company's auditors, recommending the engagement or
discharge of the Company's independent public accountants and conducting an
appropriate review of all related party transactions and conflict of interest
situations where appropriate. Such Audit Committee held three formal meetings
during the fiscal year ended June 30, 1997, although members of such Audit
Committee on an informal basis and in their capacity as members of the Board of
Directors kept informed throughout fiscal year 1997 of the financial condition
of the Company and its internal accounting controls and financial reporting.
The Board of Directors does not currently have a nominating committee
or a compensation committee or committees performing similar functions. However,
a Stock Option Committee of the Board of Directors administers the Company's
Stock Option Plan adopted in May 1986 as subsequently amended and restated (the
"Stock Option Plan"). The Stock Option Committee had one formal meeting and took
action on two occasions by unanimous written consent in lieu of a meeting during
fiscal year 1997.
7
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DIRECTORS COMPENSATION
Directors who are also officers or employees of the Company are not
paid additional compensation for acting as a director of the Company. The
Company has established a standard arrangement for compensating directors who
are not officers or employees of the Company for any 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 Company 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 Company 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 Company
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 (as hereinafter defined) 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 in "EXECUTIVE
COMPENSATION - Executive Compensation Tables." See also "CERTAIN TRANSACTIONS."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company'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 Company with copies
of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the
Company and written representations that no Form 5's were required when
applicable, the Company 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.
8
<PAGE>
EXECUTIVE COMPENSATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
GENERAL COMPENSATION PHILOSOPHY
The Board of Directors of the Company determines executive officers'
salaries and bonuses and the Stock Option Committee of the Board of Directors
administers the Company's Stock Option Plan. The Board of Directors' and Stock
Option Committee's strategy is to develop and implement an executive
compensation program that allows the Company to attract and retain highly
qualified persons to manage the Company in order to enhance shareholders' value.
The objectives of this strategy are to provide a compensation policy that
permits the recognition of individual contributions and achievements as well as
the Company's operating results. Within this strategy, the Board of Directors
and Stock Option Committee consider it essential to the vitality of the Company
to maintain levels of compensation opportunity that are competitive with similar
companies in the Company's industry including the Company's public company peer
group. The Company's compensation policy and strategy are based in part upon the
information and recommendations provided in the Executive Compensation Review
prepared during fiscal year 1994 by the Employer Benefit Services Division of
KPMG Peat Marwick LLP ("Peat Marwick"), the Company's independent public
accountants who were retained by the then Board of Directors to undertake an
executive compensation review on behalf of the Company.
EXECUTIVE COMPENSATION
Executive compensation is comprised of base salary, annual bonus
compensation and long-term incentive compensation in the form of stock options.
BASE SALARIES
Base salary levels for executive officers are designed to be consistent
with competitive practice and level of responsibility. Based on the Executive
Compensation Review of Peat Marwick, the Board of Directors adopted in fiscal
year 1995 a compensation program that would over time shift a higher percentage
of total compensation to annual bonus and long term incentive programs in order
to strengthen the link between the Company's operating performance and
compensation and to more effectively reward individuals for corporate
performance and individual achievement. As a result, over the last several years
the based salaries of the executive officers (including the CEO) have remained
constant. Consistent with the foregoing, the Board of Directors authorized the
renewal on substantially the same terms and condition as the 1994 fiscal year of
the CEO's and Senior Vice President's employment agreements for one additional
year at the time of their expiration on June 30, 1997. See "Employment
Agreements" hereinbelow.
ANNUAL BONUS COMPENSATION
During fiscal year 1995 the Company's Board of Directors, based upon
the recommendations of Peat Marwick, adopted an annual incentive bonus plan for
four categories of the Company's employees (two of which categories were the CEO
and other executive officers) based upon the annual operating performance of the
Company. The percentage of the targeted bonus award to be earned by the
different employee categories is directly tied to a percentage of the Company's
projected operating performance (after taking into account accruals for the
annual incentive bonus plan) to be approved each year by the Company's Board of
Directors. Achievement of 100% of the
9
<PAGE>
projected operating performance will result in the award of a targeted bonus
ranging from approximately 10% to up to 25% of base salary (with the CEO at
approximately 25% and other executive officers at approximately 20%), with the
percentage of the targeted bonus award earned increasing or decreasing based
upon the percentage (ranging from 70% to 130%) of projected operating
performance achieved. The Executive Compensation Review of Peat Marwick
indicated that such range around the projected operating performance was
consistent with the approach typically taken by smaller companies in industries
like the Company.
LONG-TERM INCENTIVE COMPENSATION
The Stock Option Committee believes that the use of equity-based
long-term compensation plans directly links executive officers' interests to
enhancing shareholders' value. Stock options are an integral part of the
Company's executive compensation program in order to align the interests of the
executive officers with the interests of the Company's shareholders. Stock
option compensation bears a direct relationship to corporate performance in
that, over the long term, share price appreciation depends upon corporate
performance, and without share price appreciation the stock options are of no
value. In that regard, the Stock Option Committee awarded stock options pursuant
to the Company's Stock Option Plan to all executive officers of the Company
during fiscal year 1997 (including stock options covering an aggregate of
300,000 shares of Common Stock which vest and become exercisable prior to April
29, 2001 or a change in control only to the extent of certain specified levels
of increase in the market price (as defined) of the Common Stock after the date
of grant) as described in "SUMMARY COMPENSATION TABLE" and "OPTION GRANTS IN
1997 FISCAL YEAR" hereinbelow and repriced certain executive officers' stock
options as described in "TEN-YEAR OPTION/SAR REPRICINGS" hereinbelow.
The Board of Directors
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 Company's CEO and each of the other executive officers of the Company during
the fiscal year ended June 30, 1997 for services in all capacities.
10
<PAGE>
<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>
- ---------------------
(1) Does not include any amounts for perquisites and other personal
benefits, securities or property extended to such executive officers of
the Company, such as life insurance and disability insurance, because
the Company 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 Company's Board of Directors adopted an annual
incentive bonus plan for four categories of the Company's employees
(two of which categories were the CEO and other executive officers)
based upon the annual operating performance of the Company. The
percentage of the targeted bonus award to be earned by the different
employee categories is directly tied to a percentage of the Company's
projected operating performance (after taking into account accruals for
the annual incentive bonus plan) to be approved each year by the
Company'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 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. See "Board of Directors Report on
Executive Compensation" hereinabove.
(3) These currently represent incentive stock options or non-qualified
stock options issued pursuant to the Company's Stock Option Plan. See
footnotes (5), (6), (8) and (9) hereinbelow and footnote (4) to the
table in "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
(4) The Company has an ESOP for all of its employees which holds shares of
the Company's Common Stock. The Company 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
11
<PAGE>
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. "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 Company 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 canceled stock options 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 canceled 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 issued 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 canceled stock options have an exercise price of $1.69 per share
and expire on March 9, 2002.
OPTION GRANTS IN 1997 FISCAL YEAR
The following table shows all grants of options to the named executive
officers of the Company during the fiscal year ended June 30, 1997. Pursuant to
SEC rules, the table also shows
12
<PAGE>
the value of the options granted at the end of the option terms (five years) if
the price of the Company's stock was to appreciate annually by 5% and 10%,
respectively. There is no assurance that such stock price will appreciate at the
rates shown in the table. The table also indicates that, if the stock price does
not appreciate, there will be no increase in the potential realizable value of
the options granted above the difference (if any) between the market price of
the Company's Common Stock as of the date of grant and the exercise price per
share. All of the options set forth in the table were issued pursuant to the
Company's Stock Option Plan and are immediately exercisable incentive stock
options except as otherwise indicated below. The Company does not have a plan
whereby tandem stock appreciation rights ("SARS") are granted.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM
- ---------------------------------------------------------------------------------------- --------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS CLOSING MARKET
UNDERLYING GRANTED TO EXERCISE PRICE ON DATE
OPTIONS EMPLOYEES PRICE OF GRANT EXPIRATION
NAME GRANTED(#) IN FISCAL YEAR ($/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>
- --------------------
(1) For purposes of the Stock 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 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 Company believes this calculation more accurately
reflects "fair market value" of the Company'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 executive officers of the Company during the fiscal year ended
June 30, 1997, and the value of unexercised options held by such executive
officers at the Company's fiscal year-end measured in
13
<PAGE>
terms of the closing market price of the Company's Common 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>
- ----------------------
(1) See footnote (5) to Summary Compensation Table hereinabove.
(2) The closing market price of the Company's Common Stock on the NASDAQ
National Market on June 30, 1997 (the last business day of the
Company's fiscal year-end) was $2.125.
TEN-YEAR OPTION/SAR REPRICINGS
The following table provides information as to all adjustments or
amendments during the 1997 fiscal year by the Company of the exercise price of
stock options previously awarded to any of the named executive officers for
fiscal year 1997, whether through amendment, cancellation or replacement grants,
or any other means ("repricing"). The repricing as described in the following
table was authorized by the Company's Stock Option Committee as a result of the
trading price of the Company's Common Stock and in order to provide a meaningful
incentive for future performance. The repricing was done at "fair market value"
as determined under the Stock Option Plan. See "Board of Directors Report on
Executive Compensation" and "OPTION GRANTS IN 1997 FISCAL YEAR" hereinabove.
<TABLE>
<CAPTION>
LENGTH OF
NUMBER OF MARKET PRICE EXERCISE ORIGINAL
SECURITIES OF STOCK AT PRICE AT OPTION TERM
UNDERLYING TIME OF TIME OF REMAINING AT
OPTIONS REPRICING OR REPRICING OR NEW DATE OF
REPRICED OR AMENDMENT AMENDMENT EXERCISE REPRICING OR
NAME DATE AMENDED(#) ($) ($) PRICE ($) AMENDMENT
- ---- ---- ----------- ------------------------------------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Christopher O'Neil 3/10/97 11,000 2.25 6.29 1.69(1) 18 months
Executive Vice President and
Chief Operating Officer
Kenneth L. Danielson 3/10/97 20,000 2.25 6.29 1.69(1) 18 months
Chief Financial and
Accounting Officer and
Treasurer
</TABLE>
- ---------------------
(1) See footnote (1) to "OPTION GRANTS IN 1997 FISCAL YEAR" hereinabove.
14
<PAGE>
EMPLOYMENT AGREEMENTS
During the 1997 fiscal year Peter Beshouri and Michael Blumberg each
had an employment agreement with the Company 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 Company'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 Company's annual incentive bonus
plan and Stock Option Plan. The Company 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 Company, 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 Company 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 stock in the Company or if 50% or more of the consolidated assets,
properties and businesses of the Company 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
Company as a result of acquisitions made from other than Messrs. Beshouri and/or
Blumberg or the Company, assuming such acquisitions from the Company 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 Company, unless (i) he accepts a new employment agreement
with the Company or any successor or (ii) such change in control was supported
by the Board of Directors of the Company 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 Company 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 Company is not aware of any contemplated change in
control.
SEVERANCE AGREEMENTS
In May 1997, the Company entered into severance agreements with each of
Christopher O'Neil, the Company's Executive Vice President and Chief Operating
Officer, and Kenneth L. Danielson, the Company's Chief Financial and Accounting
Officer and Treasurer, as well as twelve other non-executive officer employees
of the Company. 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 Company until the later to occur of the
closing date or effective date of the change
15
<PAGE>
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 Company or
its successor in substantially the same position then held and such executive
officer receives a written agreement from the Company 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since during the fiscal year ended June 30, 1997, the Company 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 Company'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 Company's Board of
Directors, participated in deliberations of the Board concerning the granting by
the Company of warrants to purchase 5,000 shares of Common Stock to each of them
on the terms as discussed in "ELECTION OF DIRECTORS - Directors Compensation."
16
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of five year-cumulative total
returns to shareholders for the Company, Center for Research in Security Prices
("CRSP") Index for NASDAQ Stock Market (U.S. Companies) and CRSP Index for
NASDAQ Stocks (SIC 5730-5739 U.S. Companies) of U.S. Companies operating radio,
television, consumer electronics and/or music stores.
[PERFORMANCE GRAPH]
The following table presents in tabular form the data set forth in the
performance graph to be included in this Proxy Statement:
<TABLE>
<CAPTION>
CRSP TOTAL RETURNS INDEX FOR: 06/30/92 06/30/93 06/30/94 06/30/95 06/28/96 06/30/97
- ----------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sound Advice, Inc. 100.0 153.3 156.7 86.7 56.7 56.7
Nasdaq Stock Market (US Companies) 100.0 125.8 127.0 169.5 217.6 264.6
NASDAQ Stocks (SIC 5730-5739 US Companies) 100.0 106.2 76.3 80.9 60.9 35.8
Radio, Television, Consumer Electronics, and Music Stores
</TABLE>
NOTES:
A. The lines represent monthly index levels derived from compounded
daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization
on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a
trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 06/30/92.
17
<PAGE>
CERTAIN TRANSACTIONS
G. Kay Griffith, a director and until February 1996 the Executive Vice
President and Chief Administrative Officer of the Company, had provided
consulting services to the Company 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.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of KPMG Peat Marwick LLP ("Peat Marwick") acted as
the Company's independent public accountants for the Company's fiscal year ended
June 30, 1997. This firm has acted as the independent public accountants for the
Company since fiscal year 1993. It is anticipated that the Audit Committee of
the Board of Directors of the Company will recommend to the Board for its
approval the selection of Peat Marwick to serve as the Company's independent
public accountants for the fiscal year ending June 30, 1998, after the Audit
Committee has undertaken the appropriate review, including reviewing the terms
of engagement of Peat Marwick for fiscal year 1998. Such independent public
accountants, if selected by the Board of Directors, will continue to serve at
the pleasure of the Board. The selection of independent public accountant is not
being submitted to shareholders for approval because there is no legal
requirement to do so. A representative of Peat Marwick is expected to be present
at the 1997 Annual Meeting of Shareholders in order to have the opportunity to
make a statement, if such representative desires to do so, and to be available
to respond to appropriate questions relating to the examination by Peat Marwick
of the Company's 1997 consolidated financial statements.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1998 annual
shareholders' meeting must be submitted to the Secretary of the Company, at the
principal executive offices of the Company, 1901 Tigertail Boulevard, Dania,
Florida 33004, no later than September 17, 1998, in order to receive
consideration for inclusion in the Company's 1998 proxy materials. Any such
shareholder proposal must comply with the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934.
18
<PAGE>
OTHER MATTERS
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN, WITHOUT CHARGE, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITH EXHIBITS) FOR THE COMPANY'S
FISCAL YEAR ENDED JUNE 30, 1997, AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION, BY SENDING A WRITTEN REQUEST TO KENNETH L. DANIELSON, THE CHIEF
FINANCIAL AND ACCOUNTING OFFICER OF THE COMPANY, AT THE COMPANY'S EXECUTIVE
OFFICES LOCATED AT 1901 TIGERTAIL BOULEVARD, DANIA, FLORIDA 33004.
By Order of the Board of Directors
/s/ Michael Blumberg
------------------------------
Michael Blumberg
Secretary
January 15, 1998
19
<PAGE>
SOUND ADVICE, INC.
1997 ANNUAL MEETING OF SHAREHOLDERS--FEBRUARY 13, 1998
PROXY SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Peter Beshouri and Michael
Blumberg, and each of them, as attorneys and proxies of the undersigned, with
full power of substitution for and in the name, place and stead of the
undersigned, to appear at the annual meeting of shareholders of Sound Advice,
Inc. to be held on the 13th day of February, 1998, and at any postponement or
adjournment thereof, and to vote all of the shares of Sound Advice, Inc. which
the undersigned is entitled to vote, with all the powers and authority the
undersigned would possess if personally present. The undersigned hereby directs
that this proxy be voted as follows:
1. Election of Directors for the ensuing year.
[ ] FOR the election of all nominees: Peter Beshouri, Michael Blumberg,
Gregory Sturgis, G. Kay Griffith, Herbert A. Leeds and William F. Hagerty,
IV as directors.
[ ] To WITHHOLD AUTHORITY to vote for all nominees.
To WITHHOLD AUTHORITY to vote for any individual, write that nominee's
name on the space provided below.
______________________________________________________________________
2. Upon such other business as may properly come before the annual meeting.
This proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. IF NO DIRECTIONS TO THE CONTRARY ARE INDICATED,
THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL OF THE AFOREMENTIONED NOMINEES
LISTED IN PROPOSAL NO. 1 AS DIRECTORS.
(CONTINUED, AND TO BE SIGNED, ON OTHER SIDE)
<PAGE>
A majority of said proxies present and acting in person or by their
substitutes (or if only one is present and acting, then that one) may exercise
all the powers conferred hereby. DISCRETIONARY AUTHORITY IS CONFERRED HEREBY AS
TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
Receipt of the Company's 1997 Annual Report to Shareholders and the Notice
of Annual Meeting of Shareholders to be held February 13, 1998, and the Proxy
Statement relating thereto is hereby acknowledged.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED,
POSTAGE PAID ENVELOPE.
Dated__________________ 1998
(Please date this Proxy)
____________________________
Signature(s)
____________________________
If Held Jointly
Note: It would be helpful if
you signed your name
exactly as it appears
hereon, indicating any
official position or
representative capacity.
If shares are registered
in more than one name,
all owners must sign.
