SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A (FIRST)
[X] Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended JANUARY 31, 1999 or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ________ to _________
Commission file number 0-15194
SOUND ADVICE, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-1520531
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1901 TIGERTAIL BOULEVARD, DANIA BEACH, 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
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Title of class
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COMMON STOCK PURCHASE RIGHTS
----------------------------
Title of class
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (17CFR 229.405) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K [X]
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES OF THE REGISTRANT ON APRIL 16,1999 BASED UPON THE CLOSING MARKET
PRICE OF THE REGISTRANT'S VOTING STOCK ON THE NASDAQ NATIONAL MARKET SYSTEM ON
APRIL 16, 1999, AS REPORTED IN THE WALL STREET JOURNAL, WAS APPROXIMATELY
$14,985,000.
THE REGISTRANT HAD 3,733,894 SHARES OF COMMON STOCK, $.01 PAR VALUE,
OUTSTANDING AS OF MAY 24, 1999
DOCUMENTS INCORPORATED BY REFERENCE
NONE
<PAGE>
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 44 Chairman of the Board, President 1982
and Chief Executive Officer
Michael Blumberg 50 Director, Senior Vice President, 1974
and Secretary
Gregory Sturgis(1) 47 Director 1974
G. Kay Griffith(1),(2) 54 Director 1992
Herbert A. Leeds(2) 82 Director 1996
William F. Hagerty IV(1),(2) 39 Director 1998
<FN>
- ----------
(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.
</FN>
</TABLE>
The Registrant's directors hold office until the next annual meeting of
shareholders and until their respective successors have been duly elected and
qualified.
PETER BESHOURI, who has been an employee of the Registrant since 1974,
has served as Chairman of the Board and Chief Executive Officer of the
Registrant since August 1982. Prior thereto he was the general sales manager of
the Registrant, as well as having served as a showroom manager and district
manager. He was elected President of the Registrant in May 1985. Mr. Beshouri
currently serves as a director of Progressive Retailers Organization. In August
1995, Mr. Beshouri, together with the Registrant and a former chief financial
officer of the Registrant, voluntarily agreed with the United States Securities
and Exchange Commission
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("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 employ of 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 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 and President/Chief Executive Officer of Admiralty Bank,
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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 was the presentation to Ms. Griffith of 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 Forms 5 were required when
applicable, the Registrant believes that during the fiscal year ended January
31, 1999, all Section 16(a) filing requirements applicable to its officers,
directors and greater than ten percent beneficial owners were complied with.
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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 (the "Named Executive Officers") during the fiscal
year ended January 31, 1999 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 1999 324,008 20,250 0 0
Chairman, President 1998* 189,005 0 0 0
and CEO 1997 324,008 0 105,000(5) 0
1996 324,008 0 0 0
Michael Blumberg 1999 294,008 9,200 0 0
Senior Vice 1998* 171,504 0 0 0
President 1997 294,008 0 90,000(5) 0
1996 294,008 0 0 0
Christopher O'Neil 1999 178,333 9,200 0 3,500(7)
Executive Vice 1998* 87,500 0 0 4,900(7)
President and Chief 1997 150,000 0 101,000(5)(6) 8,367(7)
Operating Officer 1996 150,000 0 30,000(8) 8,268(7)
Kenneth L. Danielson 1999 180,000 9,200 0 0
Chief Financial and 1998* 93,333 0 0 0
Accounting Officer 1997 160,000 0 110,000(5)(9) 0
and Treasurer 1996 160,000 0 30,000(8) 0
<FN>
* 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 directly tied to a percentage of
the Registrant's
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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. During the fiscal year ended January 31, 1999,
$47,850 in bonuses were earned under the plan. 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") which
holds shares of the Registrant's Common Stock for the benefit of all of
its employees. The Registrant made no contribution to the ESOP during
the fiscal year ended January 31, 1999, the transition period ended
January 31, 1998 and the fiscal years ended June 30, 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,
1996, Mr. Beshouri was allocated 53.335 additional shares of common
stock, Mr. Blumberg was allocated 53.337 additional shares of common
stock, Mr. O'Neil was allocated 34.326 additional shares of common
stock and Mr. Danielson was allocated .983 shares of common stock, and
(b) with respect to the fiscal year ended June 30, 1998, Mr. Beshouri
was allocated 27.115 additional shares of common stock, Mr. Blumberg
was allocated 27.116 additional shares of common stock, Mr. O'Neil was
allocated 17.349 additional shares of common stock and Mr. Danielson
was allocated .222 additional shares of common stock. 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.
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(5) 75,000 of the aggregate stock options issued to such officer in fiscal
year 1997 were non-qualified stock options which were not immediately
exercisable but vest and become exercisable (the "Vesting Terms") to
the extent that after the date of grant the market price (as defined)
of a share of Common Stock of the Registrant increases to $4.00 per
share (one-third vest), $5.00 per share (two-thirds vest) and $6.50 per
share (all vest), subject, however, to vesting and becoming exercisable
in full in all events on the earlier to occur of April 29, 2001 or a
change in control (as defined). Such 75,000 stock options have an
exercise price of $1.89 per share and a term of five years expiring on
April 28, 2002.
(6) 11,000 of the incentive stock options issued to such officer in fiscal
year 1997 were issued in exchange for the cancellation of 11,000
incentive stock options previously granted to such officer in fiscal
year 1994 which had an exercise price of $6.29 per share and expired on
September 21, 1998. The 11,000 incentive stock options which replaced
the cancelled stock options 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, 1997 and 1999.
(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 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 cancelled stock options have an exercise price of $1.69 per share
and expire on March 9, 2002.
</FN>
</TABLE>
OPTION GRANTS IN THE FISCAL YEAR ENDING JANUARY 31, 1999
There were no options granted to any of the Named Executive Officers
during the fiscal year ended January 31, 1999.
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AGGREGATE OPTION EXERCISES IN 1999 FISCAL YEAR
AND 1999 FISCAL YEAR-END OPTION VALUES
The following table provides information as to options exercised by
each of the Named Executive Officers during the fiscal year ended January 31,
1999, and the value of unexercised options held by the Named Executive Officers
at the Registrant's fiscal year-end measured in terms of the closing market
price of the Registrant's Common Stock on January 29, 1999 (the last business
day of the fiscal year ended January 31, 1999).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JAN 31, 1999 (#) AT JAN 31, 1999 ($)(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) 80,550(E)
75,000(U) 186,375(U)
Michael Blumberg 0 0 15,000(E) 40,275(E)
75,000(U) 186,375(U)
Christopher O'Neil 0 0 56,000(E) 149,010(E)
75,000(U) 186,375(U)
Kenneth L. Danielson 0 0 65,000(E) 173,175(E)
75,000(U) 186,375(U)
<FN>
- ----------
(1) See footnote (5) to Summary Compensation Table above.
(2) The closing market price of the Registrant's Common Stock on the NASDAQ
National Market on January 29, 1999 (the last business day of the
Registrant's fiscal year) was $4.375.
</FN>
</TABLE>
EMPLOYMENT AGREEMENTS
During the fiscal year ended January 31, 1999, 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
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Messrs. Beshouri and Blumberg will be entitled to participate in the
Registrant's annual incentive bonus plan and long term incentive stock option
program. The Registrant is also required to furnish each of Messrs. Beshouri and
Blumberg with, among other things, family health, life and disability insurance
coverage.
The 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 Registrant is currently preparing documentation to extend the terms of these
agreements for an additional period. The
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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 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. During the transition period ended January 31, 1998, as compensation
for their service on the Registrant's Special Projects Committee, G. Kay
Griffith, Herbert A. Leeds and Richard W. McEwen (who is no longer a 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
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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 above. See also "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Because during the fiscal year ended January 31, 1999, the 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
discussed in "Employment Agreements" above. Furthermore, Messrs. Sturgis,
McEwen(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" above.
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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 24, 1999, 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 the fiscal year ended January 31, 1999; 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) ............................ 406,087.9 (2)(3)(4) 10.72% (2)(3)(4)
Michael Blumberg(1) ........................... 386,938.0 (2)(3)(4) 10.25% (2)(3)(4)
FMR Corp. (5)(6)............................... 238,300.0 (6) 6.38% (6)
Dimensional Fund Advisors
Inc. (5)(7) .................................. 218,747.0 (7) 5.86% (7)
Joseph Piccirilli (1) ......................... 210,467.5 (2) 5.64% (2)
Gregory Sturgis (1) ........................... 152,134.2 (2)(4) 4.07% (2)(4)
Kenneth L. Danielson (1) ...................... 142,001.2 (3)(4) 3.71% (3)(4)
Christopher O'Neil (1)......................... 87,390.8 (3)(4) 2.29% (3)(4)
William F. Hagerty, IV (8)(9).................. 43,100.0 (4) 1.16% (4)
G. Kay Griffith (10)........................... 14,334.4 (4) .38% (4)
Herbert A. Leeds (11).......................... 1,666.7 (4) .04% (4)
All directors and executive officers
as a group (eight persons including
certain of those listed above) (2)(3)(4)...... 1,233,653.2 30.73%
<FN>
- --------------------------
(1) The address of each such person is care of the Registrant, 1901
Tigertail Boulevard, Dania Beach, 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 a group vested interest (if any)
in shares of Common Stock of the Registrant resulting from such
person's or members' participation in the Registrant's ESOP based upon
the latest available annual report of the ESOP for the fiscal year
ended January 31, 1999. Based on such annual report, Mr. Beshouri had
620.448 vested shares, Mr. Blumberg had 620.452 vested shares, Mr.
Danielson had 1.205 vested shares and Mr. O'Neil had 390.811 vested
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<PAGE>
shares, and all current directors and executive officers as a group had
1,632.916 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 and for 25,000 shares at an exercise price of $1.89
per share; (ii) Mr. Blumberg for 15,000 shares of Common Stock at an
exercise price of $1.69 per share and 25,000 shares at an exercise
price of $1.89 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 for 35,000 shares at an
exercise price of $1.69 per share and for 25,000 shares at an exercise
price of $1.89 per share; (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, for 26,000 shares at an exercise
price of $1.69 per share and for 25,000 shares at an exercise price of
$1.89 per share and (v) Ms. Griffith for 13,334.4 shares of Common
Stock at an exercise price of $1.89 per share. Includes warrants held
by (i) Mr. Sturgis for 1666.7 shares of Common Stock at an exercise
price of $1.89 per share and (ii) Mr. Leeds for 1666.7 shares of Common
Stock at an exercise price of $1.89 per share. Does not include stock
options or warrants held by officers or directors which are not
exercisable within 60 days of May 24, 1999. 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, 1998 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 249,505
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 3rd, the Chairman of FMR Corp.
and who together 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
249,505 shares by reasoning of having sole dispositive power over such
shares. Fidelity Low-Priced Stock Fund, one of the
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<PAGE>
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 249,505
of such 249,505 shares as a result of its right to receive or the power
to direct the receipt of dividends on, or proceeds from the sale of,
such 249,505 shares. The number of shares of Common Stock owned by
Fidelity Low-Priced Stock Fund includes 11,205 shares resulting from
the assumed conversion of certain of the Registrant's warrants.
(7) 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 218,247 shares of
Common Stock, with respect to which shares it has sole voting power and
sole dispositive power. Dimensional, an investment advisor registered
under Section 203 of the Investment Advisors Act of 1940, furnishes
investment advice to four investment companies registered under the
Investment Company Act of 1940, and serves as investment manager to
certain other investment vehicles, including commingled group trusts
(these investment companies and investment vehicles are referred to as
the "Portfolios"). In its role as investment advisor and investment
manager, Dimensional possesses both voting and investment power over
the securities of the issuer that are owned by the Portfolios. All
securities reported in this schedule are owned by the Portfolios, and
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 1902 East Lake View Avenue,
Pensacola, Florida 32503.
(11) The address of Herbert A. Leeds is 1110 Brickell Avenue, Suite 508,
Miami, Florida 33131.
</FN>
</TABLE>
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
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<PAGE>
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 on the
NASDAQ National Market 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 28th day of May,
1999.
Sound Advice, Inc.
By:/S/ PETER BESHOURI
------------------------------
Peter Beshouri, Chairman of
the Board, President and
Chief Executive Officer
17
