SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A (FIRST)
[ ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended ______________ or
[X] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from JULY 1, 1997 to JANUARY 31, 1998
Commission file number 0-15194
SOUND ADVICE, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-1520531
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 TIGERTAIL BOULEVARD, DANIA, FLORIDA 33004
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 922-4434
------------------------------
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
Title of class
------------------------------
COMMON STOCK PURCHASE RIGHTS
Title of class
------------------------------
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 APRIL 17,1998 BASED UPON THE CLOSING MARKET
PRICE OF THE REGISTRANT'S VOTING STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM ON
APRIL 17, 1998, AS REPORTED IN THE WALL STREET JOURNAL, WAS APPROXIMATELY
$11,885,000.
THE REGISTRANT HAD 3,728,894 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF APRIL 17, 1998
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
Items 10, 11, 12 and 13 of Part III of the Transition Report on Form
10-K for the seven months ended January 31, 1998(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 1 46 Director 1974
G. Kay Griffith 1,2 53 Director 1992
Herbert A. Leeds 2 81 Director 1996
William F. Hagerty IV 1,2 38 Director 1998
</TABLE>
- ----------
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
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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 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. In February 1998, Mr. Sturgis was appointed a member
of the Audit Committee. 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. Since March 1998, Ms. Griffith has served as the President/Chief
Executive Officer of the The G&L Holding Group, Inc. and G&L Banks headquartered
in Pensacola, Florida. 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
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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."
HERBERT A. LEEDS was elected a director of the Registrant in April 1996
and was appointed a member of its Stock Option Committee in January 1997. Mr.
Leeds served as a member of the Audit Committee from May 1996 to February 1998.
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.
WILLIAM F. HAGERTY, IV was elected a director of the Registrant in
February 1998 and appointed a member of its Audit Committee. Mr. Hagerty 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 Registrant'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 Competitiveness. 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 Law School where he was elected to Law Review and served as an
Associate Editor.
The Board of Directors has an Audit Committee comprised of a majority
of directors who are not officers or employees of the
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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 transition period ended
January 31, 1998, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners were complied
with.
5
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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 seven months ended January 31, 1998 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 1998* 189,005 0 0 0
Chairman, President 1997 324,008 0 105,000(5) 0
and CEO 1996 324,008 0 0 0
1995 324,008 0 0 0
Michael Blumberg 1998* 171,504 0 0 0
Senior Vice 1997 294,008 0 90,000(5) 0
President 1996 294,008 0 0 0
1995 294,008 0 0 0
Christopher O'Neil 1998* 87,500 0 0 4,900(7)
Executive Vice 1997 150,000 0 101,000(5)(6) 8,367(7)
President and Chief 1996 150,000 0 30,000(8) 8,268(7)
Operating Officer 1995 150,000 0 15,000(8) 8,268(7)
Kenneth L. Danielson 1998* 93,333 0 0 0
Chief Financial and 1997 160,000 0 110,000(5)(9) 0
Accounting Officer 1996 160,000 0 30,000(8) 0
and Treasurer 1995 160,000 0 15,000(8) 0
</TABLE>
* Seven month transition period ended January 31, 1998
-----------------
(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
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<PAGE>
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 targeted
bonus award earned increasing or decreasing based upon the percentage
(ranging from 70% to 130%) of projected operating performance achieved.
In the seven month transition period ended January 31, 1998 and 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 transition
period ended January 31, 1998 and 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
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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 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 the seven month transition period ended January
31, 1998 and 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 $1.69 per share
and expire on March 9, 2002.
OPTION GRANTS IN THE TRANSITION PERIOD ENDING JANUARY 31, 1998
There were no options granted to any of the named executive officers
during the seven month transition period ended January 31, 1998.
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AGGREGATE OPTION EXERCISES IN 1998 TRANSITION PERIOD
AND 1998 TRANSITION PERIOD-END OPTION VALUES
The following table provides information as to options exercised by
each of the named executives of the Registrant during the transition period
ended January 31, 1998, and the value of unexercised options held by such
executive officers at the Registrant's fiscal year-end measured in terms of the
closing market price of the Registrant's stock on January 30, 1998 (the last
business day of the seven month transition period ended January 31, 1998).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JAN.98(#) AT JAN. 98 ($)(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) 0(E)
75,000(U) 0(U)
Michael Blumberg 0 0 15,000(E) 0(E)
75,000(U) 0(U)
Christopher O'Neil 0 0 56,000(E) 0(E)
75,000(U) 0(U)
Kenneth L. Danielson 0 0 65,000(E) 0(E)
75,000(U) 0(U)
</TABLE>
- ----------
(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 January 30, 1998 (the last
business day of the Registrant's seven month transition
period) was $1.188.
EMPLOYMENT AGREEMENTS
During the seven month transition period ended January 31, 1998 and 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, 1998, such
employment agreements were again extended for an additional one year term
(currently until June 30, 1999) 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
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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 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 other non-executive officer
employees of the Registrant. In March of 1998 these agreements were extended for
a one year period and two additional non-executive officer employees were added.
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, 1999)
a change in control (as
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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.
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. Effective January 1, 1998, each such outside
director receives a fee of $5,000 on a quarterly basis for serving as a director
of the Registrant, as well as reimbursement of any out-of-pocket expenses
incurred for travel, lodging and meals in connection with attendance at any such
meeting. As compensation for their service on the Registrant's Special Projects
Committee, G. Kay Griffith, Herbert A. Leeds and Richard W. McEwen (who is
currently a former director) received $15,000, $10,000 and $10,000,
respectively. In fiscal year 1997, 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."
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Since during the seven month transition period ended January 31, 1998
and 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(currently a former Director) 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 May 22, 1998, 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 transition period ended January 31, 1998;
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) ....................... 362,800.0 (6) 9.73% (6)
Michael Blumberg (1).................... 361,910.8 (2)(3)(4) 9.67% (2)(3)(4)
Dimensional Fund Advisors
Inc. (5)(7) ........................... 218,747.0 (7) 5.87% (7)
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 (8)(9)........... 43,100.0 (4) 1.16% (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).... 1,116,913.6 28.68%
</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 partici pation in the Registrant's
ESOP based upon the latest available annual report of the ESOP for the
transition period ended January 31, 1998. 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
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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 May 22, 1998. 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, 1997 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 374,005
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 11,205 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
374,005 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 374,005 of such 374,005
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
374,005 shares. The number of shares of Common Stock owned by Fidelity
Low-Priced Stock Fund includes 11,205 shares
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resulting from the assumed conversion of certain of the Registrant's
warrants.
(7) 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.
(8) 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 42,600 shares.
(9) The address of William F. Hagerty, IV is 44873 Falcon Place, Suite 174,
Sterling, Virginia 20166.
(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
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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.
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. During the seven
month transition period ended January 31, 1998, consulting services were
provided to the Registrant through a consulting firm owned by Ms. Griffith for
which consulting services the Registrant paid a total of $6,600.
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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 29th day of May,
1998.
Sound Advice, Inc.
By:/S/ PETER BESHOURI
-----------------------------
Peter Beshouri, Chairman of
the Board, President and
Chief Executive Officer
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