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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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):
|X| No Fee Required
|_| 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:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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<PAGE>
SOUND ADVICE, INC.
1901 TIGERTAIL BOULEVARD
DANIA BEACH, FLORIDA 33004
--------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 27, 1999
--------------------
To Our Shareholders:
The 1999 Annual Meeting of Shareholders of Sound Advice, Inc. (the
"Company") will be held on Wednesday, October 27, 1999, at 9:00 a.m., local
time, at the Hollywood Sound Advice Store, 4150 North 28th Terrace, Hollywood,
Florida 33021, for the following purposes:
1. To elect a board of five directors;
2. The approval of the adoption of the Company's Articles of
Incorporation to create three classes of directors to serve for three-year
staggered terms;
3. The approval of the adoption of the Company's 1999 Stock Option
Plan; and
4. 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, August 27, 1999, as the record
date for the determination of shareholders entitled to vote at the 1999 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 January 31, 1999 accompany this notice.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
By Order of the Board of Directors
/s/ MICHAEL BLUMBERG
---------------------------------
Michael Blumberg
SECRETARY
Dania Beach, Florida
October 5, 1999
<PAGE>
SOUND ADVICE, INC.
1901 TIGERTAIL BOULEVARD
DANIA BEACH, 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 October 6, 1999, 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 1999
Annual Meeting of Shareholders, including any adjournments or postponements
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 five
directors to serve until the 2000 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 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.
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.
The approximate date that this Proxy Statement and the enclosed form of
proxy are first being sent to shareholders is October 6, 1999. A copy of the
Company's annual report for the fiscal year ended January 31, 1999 (which has
included therein audited consolidated financial statements for the Company for
the fiscal year ended January 31, 1999, the seven month period ended January 31,
1998 and the fiscal years ended June 30, 1997 and 1996) 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.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
1. To elect a board of five directors;
<PAGE>
2. The approval of an amendment to the Company's Articles of
Incorporation to create three classes of directors to serve for three-year
staggered terms;
3. The approval of the adoption of the Company's 1999 Stock Option
Plan; and
4. To transact such other business as may properly come before the
meeting or any postponement or adjournment thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted (a) FOR the election of the five nominees for director named
below; (b) FOR approval of the amendment to the Company's Articles of
Incorporation to create three classes of directors to serve for three-year
staggered terms; and (c) FOR approval of the adoption of the Company's 1999
Stock Option Plan. In the event a shareholder specifies a different choice by
means of the enclosed proxy, his, her or its shares will be voted in accordance
with the specification so made.
The Board of Directors does not know of any other matters that may be
brought before the Annual Meeting nor does it foresee or have reason to believe
that proxy holders will have to vote for substitute or alternate nominees. In
the event that any other matter should come before the Annual Meeting or any
nominee is not available for election, the persons named in the enclosed proxy
will have discretionary authority to vote all proxies not marked to the contrary
with respect to such matters in accordance with their best judgment.
VOTING SECURITIES
At the close of business on Friday, August 27, 1999, 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
3,748,894 shares of Common Stock, par value $0.01 per share. Holders of Common
Stock are entitled to one vote per share.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum. Directors will be elected by a plurality of
the votes cast by the shares of Common Stock represented in person or by proxy
at the Annual Meeting. The affirmative vote of a majority of the shares of
Common Stock present and voting at the Annual Meeting is required to approve and
adopt the amendment to the Company's Articles of Incorporation to create three
classes of directors to serve for three-year staggered terms and to approve and
adopt the Company's 1999 Stock Option Plan. Any other matter that may be
submitted to a vote of the shareholders will be approved if the number of shares
of Common Stock voted in favor of the matter exceeds the number of shares voted
in opposition to the matter, unless such matter is one for which a greater vote
is required by law or by the Company's Articles of Incorporation or Bylaws. If
less than a majority of outstanding shares entitled to vote are represented at
the Annual Meeting, a majority of the shares so represented may adjourn the
Annual Meeting to another date, time or place, and notice need not be given of
the new date, time or place if the new date, time or place is announced at the
meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof.
A list of shareholders entitled to vote at the Annual Meeting will be
available at the Company's offices, 1901 Tigertail Boulevard, Dania Beach,
Florida 33004, for a period of ten days prior to the Annual Meeting and at the
Annual Meeting itself for examination by any shareholder.
2
<PAGE>
The Company's Common Stock is quoted on the Nasdaq Stock Market's
National Market under the symbol "SUND".
The following table sets forth, for the fiscal quarters indicated, the
high and low sales prices for the Company's Common Stock on the NASDAQ Stock
Market. NASDAQ Stock Market quotations are based on actual transactions and not
bid prices.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30, 1997 PRICES
------------------------------- -------------------------
QUARTER PERIOD HIGH LOW
- -------------------------------------- ------------------------------- ---------- -------
<S> <C> <C> <C>
Third 01/01/97 To 03/31/97 2-5/8 1-3/8
Fourth 04/01/97 To 06/30/97 2-3/8 1-1/4
<CAPTION>
TRANSITION PERIOD ENDED JANUARY 31, 1998 PRICES
QUARTER PERIOD HIGH LOW
- -------------------------------------- ------------------------------- ---------- -------
<S> <C> <C> <C>
Second 07/01/97 To 07/31/97 2-5/8 1-7/8
Third 08/01/97 To 10/31/97 2-5/8 1-3/8
Fourth 11/01/97 To 01/31/98 2 1-1/8
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, 1999 PRICES
QUARTER PERIOD HIGH LOW
- -------------------------------------- ------------------------------- ---------- -------
<S> <C> <C> <C>
First 02/01/98 To 04/30/98 3-9/16 1-1/8
Second 05/01/98 To 07/31/98 4-3/8 2-1/4
Third 08/01/98 To 10/31/98 3-11/16 1-15/16
Fourth 11/01/98 To 01/31/99 4-27/32 2
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, 2000 PRICES
QUARTER PERIOD HIGH LOW
- -------------------------------------- ------------------------------- ---------- -------
<S> <C> <C> <C>
First 02/01/99 To 04/30/99 4-5/8 2-1/4
Second 05/01/99 To 07/31/99 8-3/8 3-1/16
Third 08/01/99 To 09/30/99 10 6-3/8
</TABLE>
As of September 30, 1999, there were 156 holders of record of the
Common Stock, and, based upon information previously provided to the Company by
depositories and brokers, the Company believes it has in excess of 1,000
beneficial owners.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and does
not plan to pay cash dividends in the foreseeable future. The Company has been
and continues to be prohibited under its revolving credit facility from paying
cash dividends.
3
<PAGE>
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 August 27, 1999, 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;
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>
SHARES BENEFICIALLY OWNED
------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENTAGE
- ------------------------------------------------- ----------------------------- ----------------------------
<S> <C> <C>
Peter Beshouri (1)............................... 456,087.9(2)(3)(4) 11.9%(2)(3)(4)
Michael Blumberg(1).............................. 436,938.0(2)(3)(4) 11.4%(2)(3)(4)
FMR Corp.(5)(6).................................. 238,300.0(6) 6.4%(6)
Dimensional Fund Advisors Inc.(5)(7)............. 218,747.0(7) 5.9%(7)
Joseph Piccirilli(1)............................. 210,467.5(2) 5.6%(2)
Gregory Sturgis(1)............................... 155,467.5(2) 4.2%(2)
Kenneth L. Danielson(1).......................... 197,001.2(3)(4) 5.1%(3)(4)
Christopher O'Neil(1)............................ 137,390.8(3)(4) 3.6%(3)(4)
William F. Hagerty, IV(8)........................ 43,100.0(9) 1.6%
G. Kay Griffith(10).............................. 40,000.0(4) 1.1%(4)
Herbert A. Leeds(11)............................. 5,000.0(4) *
All directors and executive officers as a group
(eight persons including certain of those listed
above) (2)(3)(4)................................. 1,470,985.4 34.6%
</TABLE>
- ----------------
* Less than 1%.
(1) The address of each such person is care of the Company, 1901 Tigertail
Boulevard, Dania Beach, 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 a group vested interest (if any)
in shares of Common Stock of the Company resulting from such person's
or members' participation in the Company'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 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 75,000 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 75,000 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 75,000 shares at an exercise
price of $1.89 per share; (iv) Mr. O'Neil for
4
<PAGE>
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 75,000 shares at
an exercise price of $1.89 per share and (v) Ms. Griffith for 40,000
shares of Common Stock at an exercise price of $1.89 per share.
Includes warrants held by Mr. Leeds for 5,000 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 August 27, 1999. See "EXECUTIVE COMPENSATION -- Executive
Compensation Tables" and " -- Director 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 Company'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 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 Company'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) The address of William F. Hagerty, IV is 44873 Falcon Place, Suite 174,
Sterling, Virginia 20166.
(9) 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.
(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.
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.
5
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide that the Board of
Directors shall consist of not less than one individual, with the exact number
to be fixed from time to time by the majority vote of the Board of Directors.
The Board of Directors has fixed the number of Directors at five individuals.
The Board of Directors intends to present for action at the Annual
Meeting the election of Peter Beshouri, Michael Blumberg, G. Kay Griffith,
William F. Hagerty IV and Herbert A. Leeds to serve for the staggered terms set
forth in the table below and until their respective successors are duly elected
and qualified. Unless otherwise instructed, the enclosed Proxy will be voted FOR
the election of the nominees listed below, except that the persons designated as
proxies reserve full discretion to cast their votes for another person
recommended by the Board of Directors in the unanticipated event that any
nominee is unable or declines to serve.
Directors will be elected by the plurality vote of the holders of
Common Stock entitled to vote at the Annual Meeting and present in person or by
proxy.
The following table sets forth the name, age and the position with the
Company of the nominees for Directors:
<TABLE>
<CAPTION>
NAME OF NOMINEE AGE DIRECTOR SINCE CLASS* POSITION WITH THE COMPANY
- ------------------------------------ ------ ----------------- --------- ------------------------------
<S> <C> <C> <C> <C>
Peter Beshouri................. 44 1982 III Chairman of the Board, President
and Chief Executive Officer
Michael Blumberg............... 50 1982 III Director, Senior Vice President,
and Secretary
G. Kay Griffith................ 54 1992 II Director
Herbert A. Leeds............... 82 1996 I Director
William F. Hagerty, IV......... 39 1998 I Director
</TABLE>
- ------------------
* Class designations are contingent upon approval of Proposal 3
establishing a classified Board of Directors.
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
6
<PAGE>
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.
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.
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 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 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
"CERTAIN RELATIONSHIPS AND RELATED 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 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 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 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 three meetings during the fiscal year ended
January 31, 1999. 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 fiscal year ended January 31, 1999.
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 the 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,
7
<PAGE>
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. The Audit
Committee held three formal meetings during the fiscal year ended January 31,
1999, although members of the Audit Committee on an informal basis and in their
capacity as members of the Board of Directors kept informed throughout the
fiscal year ended January 31, 1999 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
"1986 Stock Option Plan"). The Stock Option Committee had three meetings during
the fiscal year ended January 31, 1999.
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 January 31,
1999 all Section 16(a) filing requirements applicable to its officers, directors
and greater than ten percent beneficial owners were complied with.
EXECUTIVE COMPENSATION
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
GENERAL COMPENSATION PHILOSOPHY
The Board of Directors of the Company determines the chief executive
officer's salary and bonus. The chief executive officer, in consultation with
the Board of Directors, determines the salary of the Company's other executive
officers. The Stock Option Committee of the Board of Directors administers the
Company's 1986 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 objective of
this strategy is 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 the 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 LLP ("KPMG"), 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.
8
<PAGE>
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 KPMG, 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 base
salaries of the executive officers (including the CEO) have remained constant.
Consistent with the foregoing, at the time of their expiration on June 30, 1999
the Board of Directors authorized the renewal on substantially the same terms
and conditions as the 1998 fiscal year of the CEO's and Senior Vice President's
employment agreements for three additional years (until January 31, 2002). See
"Employment Agreements" below.
ANNUAL BONUS COMPENSATION
During fiscal year 1995 the Company's Board of Directors, based upon
the recommendations of KPMG, 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 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 KPMG indicated that such range around the projected operating
performance was consistent with the approach typically taken by smaller
companies in industries like that in which the Company operates.
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
Company's executive officers and 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 1986 Stock Option Plan
to all executive officers of the Company during the fiscal year ended January
31, 1999. Included were 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 if certain specified levels of increase are achieved in
the market price (as defined) of the Common Stock after the date of grant. See
"SUMMARY COMPENSATION TABLE" and "OPTION GRANTS IN 1998 FISCAL YEAR" below. In
addition the Stock Option Committee repriced certain executive officers' stock
options as described in "TEN-YEAR OPTION/SAR REPRICINGS" hereinbelow.
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 Chief Executive Officer ("CEO") and each of the other executive
officers of the Company (the "Named Executive Officers") during the fiscal year
ended January 31, 1999 for services in all capacities.
9
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) LONG TERM COMPENSATION
----------------------------------------- ----------------------
SECURITIES UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($)(2) OPTIONS (#)(3) COMPENSATION ($)(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
</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 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. 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 Company's 1986 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 Employee Stock Ownership Plan ("ESOP") which holds
shares of the Company's Common Stock for the benefit of all of its
employees. The Company 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 "SECURITY OWNERSHIP
10
<PAGE>
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT" table herein 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 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 $1.69 per share
and expire on March 9, 2002.
OPTION GRANTS IN THE FISCAL YEAR ENDING JANUARY 31, 1999
There were no options granted to any of the Named Executive Officers
during the fiscal year ended January 31, 1999.
11
<PAGE>
AGGREGATE OPTION EXERCISES IN 1998 FISCAL YEAR
AND 1998 FISCAL YEAR-END OPTION VALUES
The following table provides information as to options exercised by
each of the Named Executive Officers during the fiscal year ended January 31,
1999, and the value of unexercised options held by the Named Executive Officers
at the Company's fiscal year-end measured in terms of the closing market price
of the Company's Common Stock on January 29, 1999 (the last business day of the
fiscal year ended January 31, 1999).
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT JANUARY 31, AT JANUARY 31, 1999
SHARES ACQUIRED ON 1999(#) EXERCISABLE (E)/ ($)(2) EXERCISABLE (E)/
NAME 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)
- --------------------
</TABLE>
(1) See footnote (5) to Summary Compensation Table above.
(2) The closing market price of the Company's Common Stock on the NASDAQ
National Market on January 29, 1999 (the last business day of the
Company's fiscal year-ended January 31, 1999 was $4.375.
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 Company
which provided for an annual base salary for fiscal year 1998 of $400,000 for
Peter Beshouri and $320,000 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, 1999, these employment agreements were
again extended for additional three year terms (currently until January 31 ,
2002) on the same material terms and conditions as in effect under their
respective employment agreements during the previous fiscal year except that the
annual base salary payable to Mr. Beshouri and Mr. Blumberg pursuant to the
amended agreements were increased to $400,000 and $320,000, respectively
effective February 1, 1999. Under the latest extensions of the employment
agreements, each of Messrs. Beshouri and Blumberg will be entitled to
participate in the Company's annual incentive bonus plan and long term incentive
stock option program. The Company 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 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 persons 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
12
<PAGE>
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 comprised 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.
In July 1999, the Company entered into employment 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. The employment agreements cover the period
ending January 31, 2002. The agreements may be terminated at the sole discretion
of the employee after a Change in Control, as defined in the agreements, due to
death, disability or for "cause." The agreements each provide for an annual
salary of $184,000 and certain fringe benefits.
SEVERANCE AGREEMENTS
In May 1997 the Company entered into severance agreements with certain
non-executive employees of the Company. In March of 1998 these agreements were
extended for a one year period and two additional non-executive officer
employees were added. The Company is currently preparing documentation to extend
the terms of these agreements for an additional one year period.
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 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 Company, 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 Company'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 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 defined in footnote (5) to the Summary Compensation
Table below) 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. See "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
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
three-year renewals of the employment agreements of Messrs. Beshouri and
Blumberg
13
<PAGE>
discussed in "Employment Agreements" above. Furthermore, Messrs.
Sturgis, McEwen (a former Director) 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 "Directors
Compensation" above.
14
<PAGE>
PROPOSAL 2
APPROVAL OF A CLASSIFIED BOARD OF DIRECTORS
The Company's Board of Directors has unanimously approved and
recommended that the shareholders of the Company approve an amendment to Article
7 to the Company's Articles of Incorporation to provide for the classification
of the Board of Directors into three classes of directors with staggered terms
of office.
The Company's By-Laws now provide that all directors are to be elected
annually for a term of one year. Florida law permits provisions in a company's
articles of incorporation or by-laws approved by shareholders that provide for a
classified board of directors. The proposed classified board amendment to the
Articles of Incorporation and conforming amendments to the By-Laws, set forth in
Appendix A to this Proxy Statement, would provide that directors will be
classified into three classes, as nearly equal in number as possible. One class
(Class I) would hold office initially for a term expiring at the 2000 Annual
Meeting; another class (Class II) would hold office initially for a term
expiring at the 2001 Annual Meeting; and another class (Class III) would hold
office initially for a term expiring at the 2002 Annual Meeting. At each Annual
Meeting following this initial classification and election, the successors to
the class of directors whose terms expire at that meeting would be elected for a
term of office to expire at the third succeeding Annual Meeting after their
election and until their successors have been duly elected and qualified. See
"Election of Directors" as to the composition of each class of directors if this
proposal is adopted.
The proposed classified board amendment will significantly extend the
time required to effect a change in control of the Board of Directors and may
discourage hostile takeover bids for the Company. Currently, a change in control
of the Board of Directors can be made by shareholders holding a plurality of the
votes cast at a single Annual Meeting. If the Company implements a classified
board of directors, it will take at least two Annual Meetings for even a
majority of shareholders to make a change in control of the Board of Directors,
because only a minority of the directors will be elected at each meeting.
Under Florida law, directors chosen to fill vacancies on a classified
board shall hold office until the next election of the class for which such
directors shall have been chosen, and until their successors are elected and
qualified. Florida law also provides that, unless the articles of incorporation
provide otherwise, directors serving on a classified board of directors may be
removed only for cause. The Company's Articles of Incorporation do not provide
otherwise. Accordingly, if the classified board proposal is approved by the
shareholders, conforming By-Law provisions, substantially in the form attached
as Appendix A to this Proxy Statement, will be implemented. Presently, all
directors of the Company are elected annually and all of the directors may be
removed, with or without cause, by a majority vote of the outstanding shares of
the Common Stock. Cumulative voting is not authorized by the Articles of
Incorporation.
The classified board proposal is designed to assure continuity and
stability in the board of directors' leadership and policies. While management
has not experienced any problems with such continuity in the past, it wishes to
ensure that this experience will continue. The Board of Directors also believes
that the classified board proposal will assist the Board of Directors in
protecting the interests of the Company's shareholders in the event of an
unsolicited offer for the Company.
Because of the additional time required to change control of the Board
of Directors, the classified board proposal will tend to perpetuate present
management. Without the ability to obtain immediate control of the Board of
Directors, a takeover bidder will not be able to take action to remove other
impediments to its acquisition of the Company. Because the classified board
proposal will increase the amount of time required for a takeover bidder to
obtain control of the Company without the cooperation of the Board of Directors,
even if the takeover bidder were to acquire a majority of the Company's
outstanding stock, it will tend to discourage certain tender offers, perhaps
including some tender offers that shareholders may feel would be in their best
interests. The classified board proposal will also make it more difficult for
the shareholders to change the composition of the Board of Directors even if the
shareholders believe such a change would be desirable.
15
<PAGE>
ADVANTAGES AND DISADVANTAGES OF PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
The proposed amendment to the Company's Articles of Incorporation set
forth in Proposal 2 (the "Proposed Amendment") has both advantages and
disadvantages to shareholders. The Proposed Amendment does not prevent a
purchase of all or a majority of the equity securities of the Company, whether
pursuant to open-market purchases, negotiated purchases from large shareholders
or an unsolicited bid for all or part of the securities of the Company. Rather,
the Board believes that the Proposed Amendment would discourage disruptive
tactics and encourage persons who may seek to acquire control of the Company to
initiate such an acquisition through negotiations with the Board. The Board
believes that it will therefore be in a better position to protect the interests
of all the shareholders. Furthermore, the shareholders will have a more
meaningful opportunity to evaluate any such action. Although the Proposed
Amendment is intended to encourage persons seeking to acquire control of the
Company to initiate such an acquisition through arm's length negotiations with
the Board, the overall effect of the Proposed Amendment may be to discourage a
third party from making a tender offer for a portion or all of the Company's
Common Stock, or otherwise attempting to obtain a substantial position in the
equity securities of the Company, by preventing such third party from
immediately removing and replacing the incumbent directors.
To the extent any potential acquirors are deterred by the Proposed
Amendment, the Proposed Amendment may have the effect of preserving the
incumbent management in office. The Proposed Amendment may also serve to benefit
incumbent management by making it more difficult to remove management even when
the only reason of the shareholder action for the proposed change of control may
be the unsatisfactory performance of the present directors. In addition, since
the Proposed Amendment is in part designed to discourage accumulations of large
blocks of the Company's voting shares by purchasers whose objective is to have
such voting shares repurchased by the Company at a premium, its adoption could
tend to reduce the temporary fluctuations in the market price of such voting
shares that are caused by such accumulations. Accordingly, shareholders could be
deprived of certain opportunities to sell their shares at a temporarily higher
market price.
Takeover or changes in the Board of Directors that are effected without
prior consultation and negotiation with the Company would not necessarily be
detrimental to the Company and its shareholders. However, the Board feels that
the benefits of seeking to protect the ability of the Company to negotiate
effectively, through directors who have previously been elected by the
shareholders as a whole and are familiar with the Company, outweigh any
disadvantage of discouraging such unsolicited proposals.
The Proposed Amendment is not in response to any specific efforts of
which the Company is aware to accumulate shares of Common Stock or obtain
control of the Company. The Board is recommending the adoption of the Proposed
Amendment in order to further continuity and stability in the leadership and
policies of the Company and to discourage certain types of tactics that could
involve actual or threatened changes of control that are not in the best
interests of the shareholders. Because of the time associated with obtaining
shareholder approval, the Company believes it is inadvisable to defer
consideration of the Proposed Amendment until a takeover threat is pending. Once
a specific threat exists, the time required to adopt the Proposed Amendment may
render its adoption impractical prior to the completion of the takeover.
Further, the absence of a specific threat permits shareholders to consider the
merits of the Proposed Amendment outside the pressured atmosphere of a takeover
threat. For these reasons, the Company believes it is prudent to consider the
Proposed Amendment at this time.
Other than as disclosed herein, the Board does not currently
contemplate recommending the adoption of any further amendments to its Articles
of Incorporation or any other action designed to affect the ability of third
parties to take over or change control of the Company.
The Board of Directors recommends a vote FOR Proposal 2. An affirmative
vote by holders of a majority of the outstanding shares of common stock entitled
to vote at the annual meeting is required to approve the amendment to the
Articles of Incorporation.
16
<PAGE>
PROPOSAL 3
APPROVAL AND ADOPTION OF THE COMPANY'S
1999 STOCK OPTION PLAN
BACKGROUND AND PURPOSE
In September 1999 the Board of Directors adopted the Company's 1999
Stock Option Plan in the form attached hereto as Appendix B (the "Option Plan")
and recommended that it be submitted to the Company's shareholders for their
approval at the Annual Meeting. Pursuant to the Option Plan, the employees of
the Company are given an opportunity to acquire common stock of the Company
("Common Stock"). The Option Plan is intended to supersede the 1986 Option Plan.
The effective date of the Option Plan is September 30, 1999. No awards have been
made under the Option Plan as of the date of this Proxy Statement. The
affirmative vote of a majority of the shares of Common Stock present, or
represented, and entitled to vote at the Annual Meeting is required for approval
of the adoption of the Option Plan.
The ability to offer the Company's employees an opportunity to acquire
shares of the Common Stock of the Company provides another means by which the
Company may compensate its employees and provide competitive compensation levels
without increasing its cash requirements. By providing competitive compensation
levels the Company can attract and retain competent personnel. Further, the
Board of Directors believes that an employee stock ownership plan, such as the
Option Plan, provides an incentive to employees to promote the best interests of
the Company because they have an opportunity to acquire a proprietary interest
in the Company and ultimately to benefit from appreciation in the value of the
Stock.
Shareholder approval of the Option Plan is required (i) for purposes of
compliance with certain exclusions from the limitations of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), which are further
described below, (ii) in order for the Option Plan to be eligible under the
"plan lender" exemption from the margin requirements of Regulation G promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(iii) by the rules of the Nasdaq National Market.
The Board of Directors recommends a vote FOR Proposal 3. An affirmative
vote by the holders of a majority of the outstanding shares of common stock
entitled to vote at the annual meeting is required to approve the adoption of
the Option Plan.
DESCRIPTION OF PLAN
A total of 500,000 shares of Common Stock are reserved for issuance
under the Option Plan, with such number to be appropriately adjusted in the
event of stock splits, stock dividends, combinations or reclassification of
shares of Common Stock of the Company, or like capital adjustments. The Option
Plan provides for the granting to key employees of both "incentive stock
options," within the meaning of section 422A of the Code and "non-qualified
stock options." An incentive stock option has certain tax advantages for the
participant as compared to a non-qualified stock option.
Although the stock options authorized under the Option Plan are similar
to those under the 1986 Option Plan, the Board determined to adopt an entirely
new plan in order to respond to a number of changes and proposed changes
relating to Rule 16b-3 under the Exchange Act and regulations under Section
162(m) of the Code and otherwise to add flexibility to annual incentive awards
and other performance-based awards intended to qualify for corporate tax
deductions under Section 162(m), to increase the number of shares of Common
Stock that may be subject to stock options, and to otherwise adopt provisions
intended to enable the Committee to better promote the goals of the Company's
compensation policies and programs, as discussed above.
The following is a summary of certain principal features of the Option
Plan. This summary is qualified in its entirety by reference to the complete
text of the Option Plan, which is attached to this Proxy Statement as Appendix
B. Shareholders are urged to read the actual text of the Option Plan in its
entirety.
17
<PAGE>
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
Option Plan, the total number of shares of Common Stock that may be subject to
the granting of Options under the Option Plan at any time during the term of the
Option Plan shall be equal to 500,000 shares.
The Option Plan provides for administration by the Stock Option
Committee appointed by the Board of Directors who may change the members at any
time, which will determine, by majority vote, the key employees to be granted
options under the Option Plan, the number of shares subject to each option and
the option price, and which will specify whether options granted are incentive
stock options or non-qualified stock options. Members of the Committee will not
be eligible to receive options under the Option Plan unless approved by the
members of the Board of Directors who are not members of the Stock Option
Committee. No options granted under the Option Plan will be transferable by the
optionee other than by will or by the laws of descent and distribution, and each
option will be exercisable, during the lifetime of the optionee, only by the
optionee. Any options granted to an employee will terminate three months after
the optionee's termination of employment except in cases of (i) disability
occurring while employed or (ii) death while employed or within three months
thereafter. No options may be granted under the Option Plan commencing 10 years
after adoption of the Option Plan.
The exercise price of any incentive stock option granted under the
Option Plan shall be not less than the fair market value of the shares subject
to the option on the date of grant. The exercise price of any non-qualified
stock option granted under the Option Plan shall be not less than 85% of the
fair market value of the shares subject to the option on the date of grant. The
term of each option and the manner in which it may be exercised will be
determined by the Committee, subject to the requirements that no option may be
exercisable more than 10 years after the date of grant. With respect to any
incentive stock option granted to an employee who owns stock possessing more
than 10% of the voting rights of the Company's outstanding capital stock on the
date of grant, the exercise price of the option must be at least equal to 110%
of the fair market value of the shares subject to the option on the date of
grant and the option may not be exercisable more than five years after the date
of grant. The aggregate fair market value of the Common Stock (determined at the
date of the option grant) for which any employee may be granted incentive stock
options under the Option Plan in any calendar year may not exceed $100,000, plus
certain permissible carry over allowances. The Option Plan permits the exercise
of options either by a cash payment or, with the consent of the Committee, by
surrender of shares of Common Stock, valued at fair market value at the date of
surrender, or a combination thereof.
The Option Plan may be amended, suspended or terminated by the Board of
Directors at any time, but no such action may impair rights under a previously
granted option.
18
<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.
[OBJECT OMITTED]
The following table presents in tabular form the data set forth in the
performance graph to be included in this Proxy Statement:
LEGEND
<TABLE>
<CAPTION>
SYMBOL CRSP TOTAL RETURNS INDEX FOR: 06/1993 06/1994 06/1995 06/1996 06/1997 06/1998
------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
[ ] Sound Advice, Inc. 100.0 102.2 56.5 37.0 37.0 54.3
0 Nasdaq Stock Market (US Companies) 100.0 101.0 134.8 173.1 210.6 277.1
/triangle/ NASDAQ Stocks (SIC 5730-5739 100.0 71.8 76.2 57.3 33.7 49.7
US Companies) 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 06/30/93.
19
<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
KPMG acted as the Company's independent public accountants for the
Company's fiscal year ended January 31, 1999. 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 KPMG to serve as
the Company's independent public accountants for the fiscal year ending January
31, 2000, after the Audit Committee has undertaken the appropriate review,
including reviewing the terms of engagement of KPMG for fiscal year 1999. 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 KPMG is expected to
be present at the Annual Meeting 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 KPMG of the
Company's 1999 consolidated financial statements.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Shareholder proposals intended to be presented at the 1999 annual
shareholders' meeting must be submitted to the Secretary of the Company, at the
principal executive offices of the Company, 1901 Tigertail Boulevard, Dania
Beach, Florida 33004, no later than August 6, 2000, in order to receive
consideration for inclusion in the Company's 2000 proxy materials. Any such
shareholder proposal must comply with the requirements of Rule 14a-8 promulgated
under the Securities Exchange Act of 1934.
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 JANUARY 31, 1999, 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 BEACH, FLORIDA 33004.
By Order of the Board of Directors
/s/ MICHAEL BLUMBERG
------------------------------
Michael Blumberg
SECRETARY
October 5, 1999
20
<PAGE>
APPENDIX A
PROPOSED AMENDED AND
RESTATED ARTICLES OF INCORPORATION
OF SOUND ADVICE, INC.
(PROPOSED AMENDMENTS IN BOLD ITALICS)
We, the undersigned, hereby associate ourselves together for the
purpose of becoming a corporation for profit under the laws of the State of
Florida:
1. The name of the corporation is SOUND ADVICE, INC.
2. The general nature of the business or businesses to be
transacted is:
(a) To carry on the business of purchasing and selling at
wholesale and retail electronic equipment and component parts and all businesses
necessarily or impliedly incidental thereto.
(b) To buy, sell, exchange, lease, lend, import, export,
manufacture, repair, service, improve, manage, deal and trade in any and all
kinds of property, real, personal or mixed, of whatsoever nature and wheresoever
situated, as principal, agent, factor, correspondent, or broker, for the
corporation account or for the account of others.
(c) To negotiate, invest in, acquire, buy, sell, transfer,
convey, encumber, hypothecate, exchange, trade, service, deal in any and all
types of investments and securities, as principal, agent, factor, correspondent,
representative or broker.
(d) To engage in any and all lawful businesses, trades,
occupations and professions.
(e) To generally engage in, do and perform any enterprise, act
or vocation that a natural person might or could do or perform.
(f) To engage in any commercial, industrial and agricultural
enterprises calculated or designed to be profitable to this corporation and in
conformity with the laws of the State of Florida.
3. The aggregate number of shares which the corporation shall
have the authority to issue is ten million (10,000,000) shares
of common stock, all of which are to have a par value of one
cent ($0.01).
4. The amount of capital with which the corporation shall begin
business shall be Five Hundred ($500.00) Dollars.
5. The corporation is to have perpetual existence.
6. The post office address of the principal office of the
corporation is 1901 Tigertail Boulevard, Dania Beach, Florida
33004.
7. DIRECTORS
(A) NUMBER. THE NUMBER OF DIRECTORS OF THE CORPORATION MAY BE
EITHER INCREASED OR DECREASED FROM TIME TO TIME AS PROVIDED FOR IN THE BY-LAWS
OF THE CORPORATION, BUT SHALL NEVER BE LESS THAN ONE.
<PAGE>
(B) STAGGERED TERMS. THE BOARD OF DIRECTORS SHALL BE DIVIDED
INTO THREE CLASSES, AS NEARLY EQUAL IN NUMBER AS POSSIBLE. THE FIRST DIRECTOR IN
EXCESS OF THE NUMBER DIVISIBLE BY THREE SHALL BE ASSIGNED TO CLASS I, AND ANY
ADDITIONAL DIRECTOR SHALL BE ASSIGNED TO CLASS II, AS THE CASE MAY BE. AT THE
FIRST ELECTION OF DIRECTORS TO SUCH CLASSIFIED BOARD OF DIRECTORS, EACH CLASS I
DIRECTOR SHALL BE ELECTED TO SERVE UNTIL THE NEXT ENSUING ANNUAL MEETING OF
SHAREHOLDERS, EACH CLASS II DIRECTOR SHALL BE ELECTED TO SERVE UNTIL THE SECOND
ANNUAL MEETING OF SHAREHOLDERS AND EACH CLASS III DIRECTOR SHALL BE ELECTED TO
SERVE UNTIL THE THIRD ANNUAL MEETING OF SHAREHOLDERS. AT EACH ANNUAL MEETING OF
SHAREHOLDERS FOLLOWING THE MEETING AT WHICH THE BOARD OF DIRECTORS IS INITIALLY
CLASSIFIED, THE NUMBER OF DIRECTORS EQUAL TO THE NUMBER OF DIRECTORS OF A CLASS
WHOSE TERM EXPIRES AT THE TIME OF SUCH MEETING SHALL BE ELECTED TO SERVE UNTIL
THE THIRD ENSUING ANNUAL MEETING OF SHAREHOLDERS. NOTWITHSTANDING ANY OF THE
FOREGOING PROVISIONS OF THIS ARTICLE 7, DIRECTORS SHALL SERVE UNTIL THEIR
SUCCESSORS ARE ELECTED AND QUALIFIED OR UNTIL THEIR EARLIER DEATH, RESIGNATION
OR REMOVAL FROM OFFICE, OR UNTIL THERE IS A DECREASE IN THE NUMBER OF DIRECTORS;
PROVIDED, HOWEVER, THAT NO DECREASE IN THE NUMBER OF DIRECTORS SHALL HAVE THE
EFFECT OF SHORTENING THE TERM OF ANY INCUMBENT DIRECTOR.
8. The names and post office address of the President and
Secretary-Treasurer are:
President PETER BESHOURI 1901 Tigertail Boulevard
Dania Beach, Florida 33304
Secretary MICHAEL BLUMBERG 1901 Tigertail Boulevard
Dania Beach, Florida 33304
9. The Board of Directors is authorized to adopt By-laws,
including provisions, governing the issuance of stock
certificates to replace lost or destroyed stock certificates
and provisions prohibiting the transfer of the stock of the
corporation and of the preemptive rights to such stock,
provided such By-laws are not contrary to the laws of the
State of Florida.
10. The corporation shall indemnify any officer or director, or
any former officer or director, of the corporation to the
fullest extent permitted by law.
11. Any shareholder of record of the corporation holding 15% or
more of the outstanding shares of common stock of the
corporation shall be entitled to require cumulative voting for
the election of the directors of the corporation at the next
shareholders' meeting to be held by he corporation for the
purpose of the election of directors provided such
shareholder, at the time such shareholder holds 15% or more of
the outstanding common stock of the corporation, shall elect
to require cumulative voting by giving written notice to the
President or Vice President of the corporation no later than
six months after the holding of the previous shareholders'
meeting at which directors of the corporation were elected. In
such event, each shareholder of the corporation at the next
shareholders' meeting for the election of directors shall be
allowed to cumulatively vote his shares and give one candidate
as many votes as the number of directors to be elected
multiplied by the number of said shareholders' shares or to
distribute such votes on the same principle among as many
candidates as such shareholder may wish. The right to vote
cumulatively as herein provided shall not be further
restricted or qualified by any provision in the By-laws of the
company.
2
<PAGE>
BY-LAWS
OF
SOUND ADVICE, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I MEETINGS OF SHAREHOLDERS................................................................................1
Section 1. Annual Meeting................................................................................1
Section 2. Special Meetings..............................................................................1
Section 3. Place.........................................................................................1
Section 4. Notice........................................................................................1
Section 5. Notice of Adjourned Meetings..................................................................1
Section 6. Closing of Transfer Books and Fixing of Record Date...........................................2
Section 7. Voting Record.................................................................................2
Section 8. Shareholder Quorum and Voting.................................................................2
Section 9. Voting of Shares..............................................................................3
Section 10. Proxies......................................................................................3
Section 11. Voting Trusts................................................................................4
Section 12. Shareholders'Agreements......................................................................4
Section 13. Action by Shareholders Without a Meeting.....................................................4
ARTICLE II DIRECTORS..............................................................................................4
Section 1. Function......................................................................................4
Section 2. Qualification.................................................................................4
Section 3. Compensation..................................................................................5
Section 4. Duties of Directors...........................................................................5
Section 5. Presumption of Assent.........................................................................5
Section 6. Directors.....................................................................................5
Section 7. Vacancies.....................................................................................6
Section 8. Removal of Directors..........................................................................6
Section 9. Quorum and Voting.............................................................................6
Section 10. Conflicts of Interest........................................................................6
Section 11. Executive and Other Committees...............................................................6
Section 12. Place of Meetings............................................................................7
Section 13. Time, Notice and Call of Meetings............................................................7
Section 14. Action Without a Meeting.....................................................................8
ARTICLE III OFFICERS..............................................................................................8
Section 1. Officers......................................................................................8
Section 2. Powers and Duties.............................................................................8
Section 3. Delegation....................................................................................9
Section 4. Removal of Officers...........................................................................9
ARTICLE IV STOCK CERTIFICATES.....................................................................................9
Section 1. Issuance......................................................................................9
Section 2. Form..........................................................................................9
Section 3. Transfer of Stock............................................................................10
Section 4. Lost, Stolen or Destroyed Certificates.......................................................10
ARTICLE V BOOKS AND RECORDS......................................................................................10
Section 1. Books and Records............................................................................10
Section 2. Shareholders'Inspection Rights...............................................................10
Section 3. Financial Information........................................................................10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI DIVIDENDS.............................................................................................11
ARTICLE VII CORPORATE SEAL.......................................................................................12
ARTICLE VIII EXECUTION OF DOCUMENTS..............................................................................12
ARTICLE IX INDEMNIFICATION.......................................................................................12
ARTICLE X AMENDMENT..............................................................................................12
</TABLE>
ii
<PAGE>
BY-LAWS
OF
SOUND ADVICE, INC.
ARTICLE I
MEETINGS OF SHAREHOLDERS
SECTION 1. ANNUAL MEETING.
The annual meeting of the shareholders of this corporation shall be
held at the time and place designated by the Board of Directors of the
corporation. Unless otherwise determined by the Board of Directors subject to
any rights of shareholders provided by-law, the annual meeting of shareholders
for any calendar year shall be held no later than thirteen months after the last
preceding annual meeting of shareholders. Business transacted at the annual
meeting shall include the election of directors of the corporation and such
other business as may come before the meeting.
SECTION 2. SPECIAL MEETINGS.
Special meetings of the shareholders shall be held when directed by the
President or the Board of Directors, or when requested in writing by the holders
of not less than ten percent of all the shares entitled to vote at the meeting.
At any special meeting only such business may be transacted which is related to
the purpose or purposes set forth in the notice of such special meeting.
SECTION 3. PLACE.
Meetings of shareholders may be held within or without the State of
Florida.
SECTION 4. NOTICE.
Written notice stating the place, day and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered not less than ten nor more than sixty days before the
meeting, either personally or by first class mail, by or at the direction of the
President, the Secretary, or the officer or persons calling the meeting to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail
addressed to the shareholder at his address as it appears on the stock transfer
books of the corporation, with postage thereon prepaid. If the notice is mailed
at least thirty days before the date of the meeting, it may be done by a class
of United States mail other than first class.
SECTION 5. NOTICE OF ADJOURNED MEETINGS.
When a meeting is adjourned to any other time and place, it shall not
be necessary to give any notice of the adjourned meeting if the time and place
to which the meeting is adjourned are announced at the meeting at which the
adjournment is taken, and at the adjourned meeting any business may be
transacted that might have been transacted on the original date of the meeting.
If, however, after the adjournment the Board of Directors fixes a new record
date for the adjourned meeting, notice shall be given as provided in this
section to each shareholder of record entitled to vote at such meeting as of the
new record date.
SECTION 6. CLOSING OF TRANSFER BOOKS AND FIXING OF RECORD DATE.
For the purpose of determining shareholders entitled to notice of or to
vote at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend, or in order to make a determination of
<PAGE>
shareholders for any other purpose, the Board of Directors may provide that the
stock transfer books shall be closed for a stated period not to exceed, in any
case, sixty days. If the stock transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least ten days immediately
preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any determination of shareholders,
such date in any case to be not more than sixty days and, in case of a meeting
of shareholders, not less than ten days prior to the date on which the
particular action requiring such determination of shareholders is to be taken.
If the stock transfer books are not closed and no record date is fixed
for the determination of shareholders entitled to notice of, or to vote at a
meeting of shareholders, or shareholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is adopted, as
the case may be, shall be the record date for such determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, unless the Board of
Directors fixes a new record date for the adjourned meeting.
SECTION 7. VOTING RECORD.
The officers or agent having charge of the stock transfer books for
shares of the corporation shall make, at least ten days before each meeting of
shareholders, a complete list of the shareholders entitled to vote at such
meeting or any adjournment thereof, with the address of and the number and class
and series of shares, if any, held by each. The list shall be kept on file at
the registered office of the corporation, at the principal place of business of
the corporation or at the office of the transfer agent or registrar of the
corporation for a period of ten days prior to such meeting, and any shareholder
shall be entitled to inspect the list at any time during usual business hours.
The list shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder at any time
during the meeting.
If the requirements of this section have not been substantially
complied with, on demand of any shareholders in person or by proxy, the meeting
shall be adjourned until the requirements are complied with. If no such demand
is made, failure to comply with the requirements of this section shall not
affect the validity of any action taken at such meeting.
SECTION 8. SHAREHOLDER QUORUM AND VOTING.
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders. When a specified
item of business is required to be voted on by a class or series of stock, a
majority of the shares of such class or series shall constitute a quorum for the
transaction of such item of business by that class or series.
If a quorum is present, the affirmative vote of the majority of the
shares represented at the meeting and entitled to vote on the subject matter
shall be the act of the shareholders unless otherwise provided by law.
After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
SECTION 9. VOTING OF SHARES.
Each outstanding share, regardless of class, shall be entitled to one
vote on each matter submitted to a vote at a meeting of shareholders.
2
<PAGE>
Treasury shares, shares of stock of this corporation owned by another
corporation the majority of the voting stock of which is owned or controlled by
this corporation, and any shares of stock of this corporation held in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
A shareholder may vote in person or by proxy executed in writing by the
shareholder or his duly authorized attorney-in-fact.
Subject to any rights granted to shareholders in the Articles of
Incorporation of this corporation to cumulate their votes for the election of
directors, at each election for directors, every shareholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected at
that time and for whose election he has a right to vote.
Shares standing in the name of another corporation, domestic or
foreign, may be voted by the officer, agent, or proxy designated by the By-Laws
of the corporate shareholder or, in the absence of any applicable By-Law, by
such person as the Board of Directors of the corporate shareholder may
designate. Proof of such designation may be made by presentation of a certified
copy of the By-Laws or other instrument of the corporate shareholder. In the
absence of any such designation, or in case of a conflicting designation by the
corporate shareholder, the Chairman of the Board, President, Vice President,
Secretary and Treasurer of the corporate shareholder shall be presumed to
possess, in that order, authority to vote such shares.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his name if authority to do so
be contained in an appropriate order of the court by which such receiver was
appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee or his nominee shall be entitled to vote the shares so
transferred.
On and after the date on which written notice of redemption of
redeemable shares has been mailed to the holders thereof and a sum sufficient to
redeem such shares has been deposited with a bank or trust company with
irrevocable instruction and authority to pay the redemption price to the holders
thereof upon surrender of certificates therefor, such shares shall not be
entitled to vote on any matter and shall not be deemed to be outstanding shares.
SECTION 10. PROXIES.
Every shareholder entitled to vote at a meeting of shareholders or to
express consent or dissent without a meeting or his duly authorized
attorney-in-fact may authorize another person or persons to act for him by
proxy.
Every proxy must be signed by the shareholder or his attorney-in-fact.
No proxy shall be valid after the expiration of eleven months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the shareholder executing it, except as otherwise provided by
law.
The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the shareholder who executed the proxy unless,
before the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the corporate officer responsible
for maintaining the list of shareholders.
3
<PAGE>
If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of such persons present at
the meeting, or if only one is present, then that one, may exercise all the
powers conferred by the proxy; but if the proxy holders present at the meeting
are equally divided as to the right and manner of voting in any particular case,
the voting of such shares shall be prorated.
SECTION 11. VOTING TRUSTS.
Any number of shareholders of this corporation may create a voting
trust for the purpose of conferring upon a trustee or trustees the right to vote
or otherwise represent their shares as provided by law. Where the counterparts
of a voting trust agreement and the copy of the record of the holders of voting
trust certificates has been deposited with the corporation as provided by law,
such documents shall be subject to the same right of examination by a
shareholder of a corporation, in person or by his agent or attorney, as are the
books and records of the corporation, and such record shall be subject to the
examination by any holder of record of voting trust certificates, either in
person or by his agent or attorney, at any reasonable time for any proper
purpose.
SECTION 12. SHAREHOLDERS' AGREEMENTS.
Two or more shareholders of this corporation may enter into an
agreement providing for the exercise of voting rights in the manner provided in
the agreement or relating to any phase of the affairs of the corporation as
provided by law. Nothing therein shall impair the right of this corporation to
treat the shareholders of records as entitled to vote the shares standing in
their names.
SECTION 13. ACTION BY SHAREHOLDERS WITHOUT A MEETING.
Any action required by law, these By-Laws, or the Articles of
Incorporation of this corporation to be taken at any annual or special meeting
of the shareholders of the corporation, or any action which may be taken at any
annual or special meeting of the shareholders of this corporation, may be taken
without a meeting, without prior notice and without vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. If any class of shares is
entitled to vote thereon as a class, such written consent shall be required of
the holders of a majority of the shares of each class of shares entitled to vote
as a class thereon and of the total shares entitled to vote thereon.
Within ten days after obtaining such authorization by written consent,
notice shall be given to those shareholders who have not consented in writing.
The notice shall fairly summarize the material features of the authorized action
and, if the action be a merger, consolidation or sale or exchange of assets for
which dissenters' rights are provided under the Florida General Corporation Act
(the "Act"), the notice shall contain a clear statement of the right of
shareholders dissenting therefrom to be paid the fair value of their shares upon
compliance with further provisions of the Act regarding the rights of dissenting
shareholders.
ARTICLE II
DIRECTORS
SECTION 1. FUNCTION.
All corporate powers shall be exercised by or under the authority of,
and the business and affairs of the corporation shall be managed under the
direction of, the Board of Directors.
SECTION 2. QUALIFICATION.
Directors need not be residents of the State of Florida or shareholders
of this corporation.
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SECTION 3. COMPENSATION.
The Board of Directors shall have the authority to fix the compensation
of directors.
SECTION 4. DUTIES OF DIRECTORS.
A director shall perform his duties as a director, including his duties
as a member of any committee of the board upon which he may serve, in good
faith, in a manner he reasonably believes to be in the best interests of the
corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
In performing his duties, a director shall be entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, in each case prepared or presented by:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in
the matters presented;
(b) Counsel, public accountants, or other persons as to matters
which the director reasonably believes to be within such
person's professional or expert competence; or
(c) A committee of the Board of Directors upon which he does not
serve, duly designated in accordance with a provision of the
Articles of Incorporation or the By-Laws as to matters within
its designated authority, which committee the director
reasonably believes to merit confidence.
A director shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance
described above to be unwarranted. A person who performs his duties in
compliance with this section shall have no liability by reason of being or
having been a director of the corporation.
SECTION 5. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting of its Board
of Directors at which action on any corporate matter is taken shall be presumed
to vote in favor of any such action unless he votes against such action or
abstains from voting in respect thereto because of an asserted conflict of
interest.
SECTION 6. DIRECTORS.
(a) NUMBER. The number of directors of the corporation may be
either increased or decreased from time to time as provided
for in the By-laws of the corporation, but shall never be less
than one.
(b) STAGGERED TERMS. The Board of Directors shall be divided into
three classes, as nearly equal in number as possible. The
first director in excess of the number divisible by three
shall be assigned to Class I, and any additional director
shall be assigned to Class II, as the case may be. At the
first election of directors to such classified Board of
Directors, each Class I Director shall be elected to serve
until the next ensuing annual meeting of shareholders, each
Class II Director shall be elected to serve until the second
annual meeting of shareholders and each Class III Director
shall be elected to serve until the third annual meeting of
shareholders. At each annual meeting of shareholders following
the meeting at which the Board of Directors is initially
classified, the number of directors equal to the number of
directors of a class whose term expires at the time of such
meeting shall be elected to serve until the third ensuing
annual meeting of shareholders. Notwithstanding any of the
foregoing provisions of this Article 7, directors shall serve
until their successors are elected and qualified or until
their earlier death, resignation or removal from office, or
until there is a decrease in the number of directors;
provided, however, that no decrease in the number of directors
shall have the effect of shortening the term of any incumbent
director.
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SECTION 7. VACANCIES.
Any vacancy occurring in the Board of Directors, including any vacancy
created by reason of an increase in the number of directors, may be filled by
the affirmative vote of a majority of the remaining directors even though the
directors present at the meeting constitute less than a quorum of the Board of
Directors at such time. A director elected to fill a vacancy shall hold office
until the next election of directors by the shareholders.
SECTION 8. REMOVAL OF DIRECTORS.
At a meeting of shareholders called expressly for that purpose, any
director or the entire Board of Directors may be removed, with or without cause,
by a vote of the holders of a majority of the shares then entitled to vote at
any election of directors.
SECTION 9. QUORUM AND VOTING.
A majority of the number of directors fixed by or in the manner
provided in these By-Laws shall constitute a quorum for the transaction of
business. The act of the majority of directors Present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
SECTION 10. CONFLICTS OF INTEREST.
No contract or other transaction between this corporation and one or
more of its directors or any other corporation, firm, association or entity in
which one or more of the directors or officers or are financially interested
shall be either void or voidable because of such relationship or interest or
because such director or directors are present at the meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction or because his or their votes are counted for such
purpose, if:
(a) the fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes,
approves or ratifies the contract or transaction by a vote of
consent sufficient for the purpose without counting the votes
or consents of such interested directors; or
(b) the fact of such relationship or interest is disclosed or
known to shareholders entitled to vote and they authorize,
approve or ratify such contract or transaction by vote or
written consent; or
(c) the contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the Board,
committee or the shareholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
SECTION 11. EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors, by resolution adopted by a majority of the full
Board of Directors, may designate from among its members an executive committee
and one or more other committees each of which, to the extent provided in such
resolution, shall have and may exercise all the authority of the Board of
Directors, except that no committee shall have the authority to:
(a) Approve or recommend to shareholders actions or proposals
required by law to be approved by shareholders;
(b) Designate candidates for the office of director for purposes
of proxy solicitation or otherwise;
(c) Fill vacancies on the Board of Directors or any committee
thereof;
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(d) Amend the By-Laws;
(e) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the Board
of Directors; or
(f) Authorize or approve the issuance or sale of, or any contract
to issue or sell shares, or designate the terms of a series of
a class of shares, except that the Board of Directors, having
acted regarding general authorization for the issuance or sale
of shares, or any contract therefor, and, in the case of a
series, the designation thereof, may, pursuant to a general
formula or method specified by the Board of Directors, by
resolution or by adoption of a stock option or other plan,
authorize a committee to fix the terms of any contract for the
sale of he shares and to fix the terms upon which such shares
may be issued or sold, including without limitation, the
price, the rate or manner of payment of dividends, provisions
for redemption, sinking fund, conversion, voting or
preferential rights, and provisions for other features of the
class of shares, or a series of a class of shares, with full
power in such committee to adopt any final resolution setting
forth all terms thereof and to authorize the statement of the
terms or a series for filing with the Department of State. The
Board of Directors, by resolution adopted in accordance with
this section, may designate one or more directors as alternate
members of any such committee, who may act in the place and
stead of any absent member or members at any meeting of such
committee.
SECTION 12. PLACE OF MEETINGS.
Regular and special meetings by the Board of Directors may be held
within or without the State of Florida.
SECTION 13. TIME, NOTICE AND CALL OF MEETINGS.
Regular meetings of the Board of Directors shall be held without notice
at such times as the Board of Directors may fix. Written notice of the time and
place of special meetings of the Board of Directors shall be given to each
director by either personal delivery, telegram or cablegram at least two days
before the meeting or by notice mailed to the director at least five days before
the meeting.
Notice of a meeting of the Board of Directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting, any objection to
the transaction of business because the meeting is not lawfully called or
convened.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting.
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place.
Notice of any such adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors.
Meetings of the Board of Directors may be called by the Chairman of the
Board, by the President of the corporation, or by any two directors.
Members of the Board of Directors may participate in a meeting of the
Board by means of a conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation by such means shall constitute presence in person
at a meeting.
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SECTION 14. ACTION WITHOUT A MEETING.
Any action required to be taken at a meeting of the directors of the
corporation, or any action which may be taken at a meeting of the directors or a
committee thereof, may be taken without a meeting if a consent in writing,
setting forth the action so to be taken signed by all of the directors or all
the members of the committee, as the case may be, is filed in the minutes of the
proceedings of the Board or of the committee. Such consent shall have the same
effect as a unanimous vote.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS.
The Board of Directors may elect from its own number a Chairman of the
Board and shall elect a President and such Vice Presidents as in the opinion of
the Board the business of the corporation requires, a Treasurer and a Secretary;
and it shall elect or appoint from time to time such other additional officers
as in its opinion are desirable for the conduct of the business of the
corporation. Any two or more offices may be held by the same person. None of the
officers of the corporation need be directors or shareholders of the
corporation. The failure to elect a President, Secretary or Treasurer shall not
affect the existence of this corporation.
SECTION 2. POWERS AND DUTIES.
The officers of the corporation shall have the following duties:
(a) The chairman of the Board of Directors, if elected, or failing
his election, the President, shall preside at all meetings of
the shareholders and Board of Directors and shall have such
other powers and perform such other duties as may be
prescribed from time to time by the Board of Directors.
(b) The President shall be the chief executive, operating and
administrative officer of the corporation, shall have general
charge and supervision of its business, affairs,
administration and operations subject to the direction of the
Board of Directors, and shall, in the absence or failing the
election of a Chairman of the Board, preside at all meetings
of the shareholders and the Board of Directors. The President
shall have such other powers and perform such other duties as
may from time to time be assigned to him by the Board of
Directors.
(c) Each of the Vice Presidents, if elected, shall have such
powers and shall perform such duties as may from time to time
be assigned to him by the Board of Directors.
(d) The Secretary shall be the custodian of, and shall maintain,
all of the corporate records except the financial records,
shall record the minutes of all meetings of the shareholders
and Board of Directors, send out all notices of meetings, and
shall have such other powers and shall perform such other
duties as may be prescribed by the Board of Directors or the
President.
(e) The Treasurer shall be the custodian of all corporate funds,
securities and financial records, shall keep full and accurate
accounts of receipts and disbursements and render accounts
thereof at the annual meetings of shareholders and whenever
else required by the Board of Directors or the President, and
shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or the President.
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SECTION 3. DELEGATION.
In the event of the absence of any officer of this corporation or for
any other reason that the Board of Directors may deem sufficient, the Board of
Directors may at any time and from time to time delegate all or any part of the
powers or duties of any officer to any other officer or officers or to any
director or directors.
SECTION 4. REMOVAL OF OFFICERS.
Any officer or agent elected or appointed by the Board of Directors may
be removed by the Board whenever in its judgment the best interests of the
corporation will be served thereby.
An officer or agent elected by the shareholders may be removed only by
vote of the shareholders, unless the shareholders shall have authorized the
directors to remove such officer or agent. Any vacancy in any office, however
occurring, may be filled by the Board of Directors.
Removal of any officer shall be without prejudice to the contract
rights, if any, of the person so removed; however, election or appointment of an
officer or agent shall not of itself create contract rights.
ARTICLE IV
STOCK CERTIFICATES
SECTION 1. ISSUANCE.
Every holder of shares in this corporation shall be entitled to have a
certificate representing all shares to which he is entitled. No certificate
shall be issued for any share until such share is fully paid.
SECTION 2. FORM.
Certificates representing shares in this corporation shall be signed by
the President or Vice President and the Secretary or Assistant Secretary and may
be sealed with the seal of this corporation or a facsimile thereof. The
signatures of the President or Vice President and the Secretary may be
facsimiles if the certificate is manually signed on behalf of the transfer agent
or a registrar other than the corporation itself or an employee of the
corporation. In case any officer who signed or whose facsimile signature has
been placed upon such certificate shall have ceased to be such officer before
such certificate is issued, it may be issued by the corporation with the same
effect as if he were such officer at the date of its issuance.
In the event the corporation is authorized to issue more than one class
or series, every certificate representing shares issued by this corporation
shall set forth or fairly summarize upon the face or back of the certificate or
shall state that the corporation will furnish to any shareholder upon request
and without charge a full statement of the designations, preferences,
limitations and relative rights of the shares of each class or series authorized
to be issued, and the variations in the relative rights and preferences between
the shares of each series so far as the same have been fixed and determined and
the relative rights and preferences of subsequent series.
Every certificate representing shares which are restricted as to the
sale, disposition or other transfer of such shares shall state that such shares
are restricted as to transfer and shall set forth or fairly summarize upon the
certificates or shall state that the corporation will furnish to any shareholder
upon request and without charge a full statement of such restrictions.
Each certificate representing shares shall state upon the face thereof:
the name of the corporation; that the corporation is organized under the laws of
the State of Florida; the name of the person or persons to whom issued; the
number and class of shares, and the designation of the series, if any, which
such certificate represents; and the par value of each share represented by such
certificate, or a statement that the shares are without par value.
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SECTION 3. TRANSFER OF STOCK.
The corporation shall register a stock certificate presented to it for
transfer if the certificate is properly endorsed by the holder of records or by
his duly authorized attorney and is accompanied with any additional documents,
instruments, certificates, signature guaranties or other items required from
time to time by the Board of Directors in its sole discretion.
SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
The corporation shall issue a new stock certificate in the place of any
certificate previously issued if the holder of record of the certificate (a)
makes proof in affidavit form that it has been lost, destroyed or wrongfully
taken; (b) requests the issue of a new certificate before the corporation has
notice that the certificate has been acquired by a purchaser for value in good
faith and without notice of any adverse claim; (c) gives bond in such form as
the corporation may direct to indemnify the corporation, the transfer agent, and
registrar against any claim that may be made on account of the alleged loss,
destruction, or theft of a certificate; and (d) satisfies any other reasonable
requirements imposed by the corporation.
ARTICLE V
BOOKS AND RECORDS
SECTION 1. BOOKS AND RECORDS.
This corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its shareholders, Board of
Directors and committees of directors.
This corporation shall keep at its registered office or principal place
of business, or at the office of its transfer agent or registrar, a record of
its shareholders, giving the names and addresses of all shareholders, and the
number, class and series, if any, of the shares held by each.
Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable time.
SECTION 2. SHAREHOLDERS' INSPECTION RIGHTS.
Any person who shall have been a holder of record of shares or of
voting trust certificates therefor at least six months immediately preceding his
demand or shall be the holder of record of, or the holder of record of voting
trust certificates for, at least five percent of the outstanding shares of any
class or series of the corporation, upon written demand stating the purpose
thereof, shall have the right to examine, in person or by agent or attorney, at
any reasonable time or times, for any proper purpose, its relevant books and
records of accounts, minutes and records of shareholders and to make extracts
therefrom.
SECTION 3. FINANCIAL INFORMATION.
Not later than four months after the close of each fiscal year, this
corporation shall prepare a balance sheet showing in reasonable detail the
financial condition of the corporation as if the close of its fiscal year, and a
profit and loss statement showing the results of the operations of the
corporation during its fiscal year.
Upon the written request of any shareholder or holder of voting trust
certificates for shares of the corporation, the corporation shall mail to such
shareholder or holder of voting trust certificates a copy of the most recent
balance sheet and profit and loss statement.
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The balance sheets and profit and loss statements shall be filed in the
registered office of the corporation in the State of Florida, shall be kept for
at least five years, and shall be subject to inspection during business hours by
any shareholder or bolder of voting trust certificates in person or by agent.
ARTICLE VI
DIVIDENDS
The Board of Directors of this corporation may, from time to time
declare, and the corporation may pay dividends on its shares in cash, property
or its own shares, except when the corporation is insolvent or when the payment
thereof would render the corporation insolvent or when the declaration or
payment thereof would be contrary to any restrictions contained in the Articles
of Incorporation, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid, except
as otherwise provided in this section, only out of the
unreserved and unrestricted earned surplus of the corporation
or out of the capital surplus. If paid out of capital surplus,
the dividend shall be identified as a distribution of capital
surplus, and the amount per share paid from such surplus shall
be disclosed to the shareholders receiving the same
concurrently with the distribution.
(b) Dividends may be declared and paid in the corporation's own
treasury shares.
(c) Dividends may be declared and paid in the corporation's own
authorized but unissued shares out of unreserved and
unrestricted surplus of the corporation upon the following
conditions:
(1) If a dividend is payable in shares having a par
value, such shares shall be issued at not less than
the par value thereof and there shall be transferred
to stated capital at the time such dividend is paid
an amount of surplus equal to the aggregate par value
of the shares to be issued as a dividend.
(2) If a dividend is payable in any shares of the
Corporation without par value, such shares shall be
issued at such stated value as shall be fixed by the
Board of Directors by resolution adopted at the time
such dividend is declared, and there shall be
transferred to stated capital at the time such
dividend is paid an amount of surplus equal to the
aggregate stated value so fixed in respect of such
shares; and the amount per share so transferred to
stated capital shall be disclosed to the shareholders
receiving such dividend concurrently with the payment
thereof.
(d) No dividend payable in shares of any class shall be paid to
the holders of shares of any other class unless the Articles
of Incorporation so provide or such payment is authorized by
the affirmative vote or the written consent of the holders of
at least a majority of the outstanding shares of the class in
which the payment is to be made.
(e) A split-up or division of the issued shares of any class into
a greater number of shares of the same class without
increasing the stated capital of the corporation shall not be
construed to be a share dividend within the meaning of this
section.
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ARTICLE VII
CORPORATE SEAL
The Board of Directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the corporation,
the year of incorporation, the word "Florida" and the word "seal"; it may be a
facsimile, engraved, printed or an impression seal.
ARTICLE VIII
EXECUTION OF DOCUMENTS
All contracts, instruments, agreements, bills payable, notes, checks,
drafts, warrants or other obligations of this corporation shall be made in the
name of the corporation and shall be signed by such officer or officers as the
Board of Directors may from time to time designate.
ARTICLE IX
INDEMNIFICATION
The corporation shall indemnify any officer or director, or any former
officer or director of the corporation, to the fullest extent permitted by law.
ARTICLE X
AMENDMENT
These By-Laws may be repealed or amended, and new By-Laws may be
adopted, by either the Board of Directors or the shareholders, but the Board of
Directors may not amend or repeal any By-Law adopted by the shareholders if the
shareholders specifically provide such By-Law is not subject to amendment or
repeal by the Board of Directors.
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APPENDIX B
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SOUND ADVICE, INC.
1999 STOCK OPTION PLAN
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1. PURPOSE. The purpose of this Plan is to advance the interests of
SOUND ADVICE, INC., a Florida corporation (the "Company"), and its Subsidiaries
by providing an additional incentive to attract and retain qualified and
competent persons who provide services to the Company and its Subsidiaries, and
upon whose efforts and judgment the success of the Company and its Subsidiaries
is largely dependent, through the encouragement of stock ownership in the
Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Committee" shall mean the committee appointed by the
Board pursuant to Section 13(a) hereof.
(c) "Common Stock" shall mean the Company's Common Stock, par
value $.01 per share.
(d) "Company" shall mean SOUND ADVICE, INC., a Florida
corporation.
(e) "Director" shall mean a member of the Board.
(f) "Disability" shall have the same meaning as described in
Section 22(e) of the Internal Revenue Code.
(g) "Fair Market Value" of a Share on any date of reference
shall mean the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee or the Board
in its sole discretion shall determine otherwise in a fair and uniform manner.
For the purpose of determining Fair Market Value, the "Closing Price" of the
Common Stock on any business day shall be (i) if the Common Stock is listed or
admitted for trading on any United States national securities exchange, or if
actual transactions are otherwise reported on a consolidated transaction
reporting system, the last reported sale price of Common Stock on such exchange
or reporting system, as reported in any newspaper of general circulation, (ii)
if the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System ("NASDAQ"), or any similar system of automated
dissemination of quotations of securities prices in common use, the last
reported sale price of Common Stock on such system or, if sales prices are not
reported, the mean between the closing high bid and low asked quotations for
such day of Common Stock on such system, as reported in any newspaper of general
circulation or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low asked quotations for the Common Stock as reported
by the National Quotation Bureau, Incorporated if at least two securities
dealers have inserted both bid and asked quotations for Common Stock on at least
five of the ten preceding days. If neither (i), (ii), or (iii) above is
applicable, then Fair Market Value shall be determined in good faith by the
Committee or the Board in a fair and uniform manner.
(h) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Internal Revenue Code.
(i) "Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
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(j) "Non-Qualified Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(k) "Officer" shall mean the Company's Chairman of the Board,
President, Chief Executive Officer, principal financial officer, principal
accounting officer, any vice-president of the Company in charge of a principal
business unit, division or function (such as sales, administration or finance),
any other officer who performs a policy-making function, or any other person who
performs similar policy-making functions for the Company. Officers of
Subsidiaries shall be deemed Officers of the Company if they perform such
policy-making functions for the Company. As used in this paragraph, the phrase
"policy-making function" does not include policy-making functions that are not
significant. If pursuant to Item 401(b) of Regulation S-K (17 C.F.R. ss.
229.401(b)) the Company identifies a person as an "executive officer," the
person so identified shall be deemed an "Officer" even though such person may
not otherwise be an "Officer" pursuant to the foregoing provisions of this
paragraph.
(l) "Option" (when capitalized) shall mean any option granted
under this Plan.
(m) "Option Agreement" means the agreement between the Company
and the Optionee for the grant of an option.
(n) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(o) "Outside Director" shall mean a member of the Board who
qualifies as an "outside director" under Section 162(m) of the Internal Revenue
Code and the regulations thereunder and as a "Non-Employee Director" under Rule
16b-3 promulgated under the Securities Exchange Act.
(p) "Plan" shall mean this 1999 Stock Option Plan for the
Company.
(q) "Retirement" shall mean the voluntary resignation by an
Optionee as an employee or a director of the Company or its Subsidiaries after
the Optionee has attained age 65.
(r) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(s) "Share" shall mean a share of Common Stock.
(t) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AVAILABLE FOR OPTION GRANTS. The Committee or the Board may
grant to Optionees from time to time Options to purchase an aggregate of up to
Five Hundred Thousand (500,000) Shares from the Company's authorized and
unissued Shares. If any Option granted under the Plan shall terminate, expire,
or be cancelled or surrendered as to any Shares, new Options may thereafter be
granted covering such Shares.
4. INCENTIVE AND NON-QUALIFIED OPTIONS.
(a) An Option granted hereunder shall be either an Incentive
Stock Option or a Non-Qualified Stock Option as determined by the Committee or
the Board at the time of grant of such Option and shall clearly state whether it
is an Incentive Stock Option or a Non-Qualified Stock Option. All Incentive
Stock Options shall be granted within 10 years from the effective date of this
Plan. Incentive Stock Options may not be granted to any person who is not an
employee of the Company or any Subsidiary.
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(b) Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate fair market value (determined at the time the Option is granted) of
the Shares, with respect to which Options meeting the requirements of Section
422(b) of the Internal Revenue Code are exercisable for the first time by any
individual during any calendar year (under all plans of the Company and its
parent and subsidiary corporations as defined in Section 424 of the Internal
Revenue Code), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee or the
Board, provided such terms are not inconsistent with this Plan or any applicable
law. Optionees shall be (i) those persons selected by the Committee or the Board
from the class of all employees of, or persons who provide consulting or other
services as independent contractors to, the Company or its Subsidiaries,
including, without limitation, Directors and Officers who are employees, and
(ii) Directors who are not employees of the Company or of any Subsidiaries. Any
person who files with the Committee or the Board, in a form satisfactory to the
Committee or the Board, a written waiver of eligibility to receive any Option
under this Plan shall not be eligible to receive any Option under this Plan for
the duration of such waiver.
(b) In granting Options, the Committee or the Board shall take
into consideration the contribution the person has made to the success of the
Company or its Subsidiaries and such other factors as the Committee or the Board
shall determine. The Committee or the Board shall also have the authority to
consult with and receive recommendations from officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee or
the Board may from time to time in granting Options under the Plan prescribe
such other terms and conditions concerning such Options as it deems appropriate,
including, without limitation, (i) prescribing the date or dates on which the
Option becomes exercisable, (ii) providing that the Option rights accrue or
become exercisable in installments over a period of years, or upon the
attainment of stated goals or both, or (iii) relating an Option to the continued
employment of the Optionee for a specified period of time, provided that such
terms and conditions are not more favorable to an Optionee than those expressly
permitted herein.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither the
Plan nor any Option granted under the Plan shall confer upon any person any
right to employment or continuance of employment by the Company or its
Subsidiaries.
(d) Notwithstanding any other provision of this Plan, an
Incentive Stock Option shall not be granted to any person owning directly or
indirectly (through attribution under Section 424(d) of the Internal Revenue
Code) at the date of grant, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company (or of its parent or
subsidiary corporation (as defined in Section 424 of the Internal Revenue Code)
at the date of grant) unless the option price of such Option is at least 110% of
the Fair Market Value of the Shares subject to such Option on the date the
Option is granted, and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
(e) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, the aggregate number of Options
granted to any one Optionee may not exceed 200,000, subject to adjustment as
provided in Section 10 hereof.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee or the Board but shall not be less than the
par value per Share; provided, however, that in no event shall the option price
per Share of any Incentive Stock Option be less than the Fair Market Value of
the Shares underlying such Option on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate option price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to
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the Committee or the Board in its sole discretion have been made for the
Optionee's payment to the Company of the amount that is necessary for the
Company or Subsidiary employing the Optionee to withhold in accordance with
applicable Federal or state tax withholding requirements. The consideration to
be paid for the Shares to be issued upon exercise of an Option as well as the
method of payment of the exercise price and of any withholding and employment
taxes applicable thereto, shall be determined by the Committee or the Board and
may in the discretion of the Committee or the Board consist of: (1) cash, (2)
certified or official bank check, (3) money order, (4) Shares that have been
held by the Optionee for at least six (6) months (or such other Shares as the
Company determines will not cause the Company to recognize for financial
accounting purposes a charge for compensation expense), (5) the withholding of
Shares issuable upon exercise of the Option, (6) pursuant to a "cashless
exercise" procedure, by delivery of a properly executed exercise notice together
with such other documentation, and subject to such guidelines, as the Board or
the Committee shall require to effect an exercise of the Option and delivery to
the Company by a licensed broker acceptable to the Company of proceeds from the
sale of Shares or a margin loan sufficient to pay the exercise price and any
applicable income or employment taxes, or (7) in such other consideration as the
Committee or the Board deems appropriate, or by a combination of the above. In
the case of an Incentive Stock Option, the permissible methods of payment shall
be specified at the time the Option is granted. The Committee or the Board in
its sole discretion may accept a personal check in full or partial payment of
any Shares. If the exercise price is paid in whole or in part with Shares, or
through the withholding of Shares issuable upon exercise of the Option, the
value of the Shares surrendered or withheld shall be their Fair Market Value on
the date the Option is exercised. The Company in its sole discretion may, on an
individual basis or pursuant to a general program established in connection with
this Plan, lend money to an Optionee, guarantee a loan to an Optionee, or
otherwise assist an Optionee to obtain the cash necessary to exercise all or a
portion of an Option granted hereunder or to pay any tax liability of the
Optionee attributable to such exercise. If the exercise price is paid in whole
or part with Optionee's promissory note, such note shall (i) provide for full
recourse to the maker, (ii) be collateralized by the pledge of the Shares that
the Optionee purchases upon exercise of such Option, (iii) bear interest at the
prime rate of the Company's principal lender, and (iv) contain such other terms
as the Committee or the Board in its sole discretion shall reasonably require.
No Optionee shall be deemed to be a holder of any Shares subject to an Option
unless and until a stock certificate or certificates for such Shares are issued
to such person(s) under the terms of this Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals and upon such terms as the Committee or the
Board shall provide in such Option, except as otherwise provided in this Section
8.
(a) The expiration date of an Option shall be determined by
the Committee or the Board at the time of grant, but in no event shall an Option
be exercisable after the expiration of 10 years from the date on which the
Option is granted.
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable in the event of a "Change in
Control" or in the event that the Committee or the Board exercises its
discretion to provide a cancellation notice with respect to the Option pursuant
to Section 9(b) hereof. For this purpose, the term "Change in Control" shall
mean:
(i) Approval by the shareholders of the Company of a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
50% of the combined voting power entitled to vote generally in the election of
directors of the reorganized, merged or consolidated company's then outstanding
voting securities, in substantially the same proportions as their ownership
immediately prior to such reorganization, merger, consolidation or other
transaction, or a liquidation or dissolution of the Company or the sale of all
or substantially all of the assets of the Company (unless such reorganization,
merger, consolidation or other corporate transaction, liquidation, dissolution
or sale is subsequently abandoned); or
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(ii) Individuals who, as of the date on which the
Option is granted, constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date on which the Option was granted whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an election or nomination of an individual whose initial
assumption of office is in connection with an actual or threatened election
contest relating to the election of the Directors of the Company, as such terms
are used in Rule 14a-11 of Regulation 14A of Regulation 14A promulgated under
the Securities Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board.; or
(iii) the acquisition (other than from the Company)
by any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of 15% of [either the then outstanding
shares of the Company's Common Stock or] the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in the
election of directors (hereinafter referred to as the ownership of a
"Controlling Interest") excluding, for this purpose, any acquisitions by (1) the
Company or its Subsidiaries, (2) any person, entity or "group" that as of the
date on which the Option is granted owns beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Securities Exchange Act) of a
Controlling Interest, (3) a trustee or other fiduciary holding securities under
one or more employee benefit plan maintained by the Company or its Subsidiaries,
(4) any corporation which, immediately prior to such acquisition is owned
directly or indirectly by the shareholders of the Company in the same proportion
as their ownership of stock in the Company immediately prior to such
acquisition, or (5) Peter Beshouri, Michael Blumberg, Joseph Piccirilli, Gregory
Sturgis or any other person, who, as of the Effective Date of this Plan,
directly or indirectly beneficially owns 5% or more of the voting securities of
the Company; PROVIDED, HOWEVER, that a Change in Control shall not be deemed to
occur solely because any person (the "Subject Person") acquired beneficial
ownership of a Controlling Interest as a result of the acquisition by the
Company of some of its voting securities which, by reducing the number of
outstanding voting securities, increases the proportionate number of voting
securities owned by the Subject Person; PROVIDED FURTHER that if the Subject
Person thereafter becomes the beneficial owner of any additional voting
securities of the Company which increases the percentage of the then outstanding
voting securities beneficially owned by the Subject Person, then a Change in
Control shall occur.
(c) The Committee or the Board may in its sole discretion,
accelerate the date on which any Option may be exercised and may accelerate the
vesting of any Shares subject to any Option or previously acquired by the
exercise of any Option.
(d) The Committee or the Board may, in its discretion, in
connection with and at the time of granting a Non-Qualified Stock Option,
provide that such Non-Qualified Stock Option shall accelerate and become fully
exercisable upon the termination of the Optionee's employment or service with
the Company or its Subsidiaries by reason of either the death or as a result of
a Disability.
9. TERMINATION OF OPTION PERIOD. (a) Unless otherwise provided in any
Option agreement, the unexercised portion of any Option shall automatically and
without notice terminate and become null and void at the time of the earliest to
occur of the following:
(b) if the Option is an Incentive Stock Option:
(i) the expiration of ten years from the date on
which the Option was granted, expect as otherwise provided in subsection 5(d)
hereof;
(ii) immediately upon the termination of the
Optionee's employment with the Company or its Subsidiaries for cause; provided
that the Committee or the Board shall have the right to determine whether the
Optionee has been terminated for cause and the date of such termination, and
such determination of the Committee or the Board shall be final and conclusive;
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(iii) immediately upon the termination of the
Optionee's employment with the Company or its Subsidiaries if such termination
constitutes or is attributable to a breach by the Optionee of an employment
agreement with the Company, its parent company, or its Subsidiaries (a
"Breach");
(iv) the expiration of such period of time or the
occurrence of such event as the Committee or the Board in its discretion may
provide for in any Option;
(v) three months after the date on which the
Optionee's employment with the Company or its Subsidiaries is terminated other
than by reason of (A) Cause, (B) a Breach, (C) a Disability as determined by a
medical doctor satisfactory to the Committee, or (D) death of the Optionee;
PROVIDED, HOWEVER, that if the Optionee shall die during such three-month
period, the time of termination of the unexpired portion of any such Option
shall be determined under the provision of paragraph (7) of this subsection
9(a)(i);
(vi) twelve months after the date on which the
Optionee's employment with the Company or its Subsidiaries is terminated by
reason of a Disability, as determined by a medical doctor satisfactory to the
Committee or the Board; or
(vii) the expiration of six months following the
issuance of letters testamentary or letters of administration to the personal
representative, executor or administrator of the estate of a deceased Optionee,
if the Optionee's death occurs either (A) during his employment with the Company
or its Subsidiaries or (B) during the three-month period following the date of
termination of such employment (other than a termination described in paragraphs
(2) and (3) of this subsection 9(a)(i)), but in no event later than twelve
months after the date of Optionee's death.
(c) if the Option is a Non-Qualified Stock Option:
(i) the expiration of ten years from the date on
which the Option was granted, expect as otherwise provided in subsection 5(d)
hereof;
(ii) immediately upon the termination of the
Optionee's employment with the Company or its Subsidiaries for cause; provided
that the Committee or the Board shall have the right to determine whether the
Optionee has been terminated for cause and the date of such termination, and
such determination of the Committee or the Board shall be final and conclusive;
(iii) immediately upon the termination of the
Optionee's employment with the Company or its Subsidiaries due to a Breach by
Optionee;
(iv) the expiration of such period of time or the
occurrence of such event as the Committee or the Board in its discretion may
provide for in any Option;
(v) two years after the date on which the Optionee's
employment with the Company or its Subsidiaries is terminated for any reason
(including, without limitation, as a result of a Disability, voluntary
resignation within sixty days after a Change in Control, or Retirement) other
than by reason of (A) Cause, (B) a Breach, or (C) a termination provided for in
paragraph (6) of this subsection 9(a)(ii); or
(vi) three months after the date on which Optionee's
employment with the Company or its Subsidiaries is terminated as a result of the
Optionee's voluntary resignation other than (A) within sixty days after a Change
in Control or (B) as a result of Retirement; PROVIDED, HOWEVER, that if Optionee
shall die during the three-month period, the time of termination of the
unexpired portion of such nonqualified Option shall be six months following the
issuance of letters testamentary or letters of administration to the personal
representative, executor or administrator of the estate of a deceased Optionee,
but in no event later than one year after the Optionee's death; or
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(vii) two years after the date on which the
Optionee's employment with the Company or its Subsidiaries is terminated by
reason of Optionee's death.
All references herein to the termination of the Optionee's employment shall, in
the case of a Optionee who is not an employee of the Company or a Subsidiary,
refer to the termination of the Optionee's service with the Company.
(d) To the extent not previously exercised, (i) each Option
shall terminate immediately in the event of (1) the liquidation or dissolution
of the Company, or (2) any reorganization, merger, consolidation or other form
of corporate transaction in which the Company does not survive, unless the
successor corporation, or a parent or subsidiary of such successor corporation,
assumes the Option or substitutes an equivalent option or right pursuant to
Section 10(c) hereof, and (ii) the Committee or the Board in its sole discretion
may by written notice ("cancellation notice") cancel, effective upon the
consummation of any corporate transaction described in Subsection 8(b)(i) hereof
in which the Company does survive, any Option that remains unexercised on such
date. The Committee or the Board shall give written notice of any proposed
transaction referred to in this Section 9(b) a reasonable period of time prior
to the closing date for such transaction (which notice may be given either
before or after approval of such transaction), in order that Optionees may have
a reasonable period of time prior to the closing date of such transaction within
which to exercise any Options that then are exercisable (including any Options
that may become exercisable upon the closing date of such transaction). An
Optionee may condition his exercise of any Option upon the consummation of a
transaction referred to in this Section 9(b).
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, or available for
grant to any person under the Plan, so that the same percentage of the Company's
issued and outstanding Shares shall continue to be subject to being so optioned;
and
(ii) the Board or the Committee may, in its
discretion, make any adjustments it deems appropriate in the number of Shares
and the exercise price per Share thereof then subject to any outstanding Option,
so that the same percentage of the Company's issued and outstanding Shares shall
remain subject to purchase at the same aggregate exercise price.
(b) Unless otherwise provided in any Option, the Committee or
the Board may change the terms of Options outstanding under this Plan, with
respect to the option price or the number of Shares subject to the Options, or
both, when, in the Committee's or Board's sole discretion, such adjustments
become appropriate so as to preserve but not increase benefits under the Plan.
(c) In the event of a proposed sale of all or substantially
all of the Company's assets or any reorganization, merger, consolidation or
other form of corporate transaction in which the Company does not survive, where
the securities of the successor corporation, or its parent company, are issued
to the Company's shareholders, then the successor corporation or a parent of the
successor corporation may, with the consent of the Committee or the Board,
assume each outstanding Option or substitute an equivalent option or right. If
the successor corporation, or its parent, does not cause such an assumption or
substitution to occur, or the Committee or the Board does not consent to such an
assumption or substitution, then each Option shall terminate pursuant to Section
9(b) hereof upon the consummation of sale, merger, consolidation or other
corporate transaction.
(d) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations
7
<PAGE>
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made to, the number of or
exercise price for Shares then subject to outstanding Options granted under the
Plan.
(e) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the prior written
consent of the Committee or the Board is obtained (which consent may be withheld
for any reason) and the transaction does not violate the requirements of Rule
16b-3 promulgated under the Securities Exchange Act no Non-Qualified Stock
Option, shall be subject to alienation, assignment, pledge, charge or other
transfer other than by the Optionee by will or the laws of descent and
distribution, and any attempt to make any such prohibited transfer shall be
void. Each Option shall be exercisable during the Optionee's lifetime only by
the Optionee, or in the case of a Non-Qualified Stock Option that has been
assigned or transferred with the prior written consent of the Committee or the
Board, only by the permitted assignee.
(b) No Shares acquired by an Officer or Director pursuant to
the exercise of an Option may be sold, assigned, pledged or otherwise
transferred prior to the expiration of the six-month period following the date
on which the Option was granted, unless the transaction does not violate the
requirements of Rule 16b-3 promulgated under the Securities Exchange Act.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition to any sale or issuance of Shares upon
exercise of any Option, the Committee or the Board may require such agreements
or undertakings as the Committee or the Board may deem necessary or advisable to
facilitate compliance with any applicable law or regulation including, but not
limited to, the following:
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is acquiring the
Shares to be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to
be bound by any legends endorsed upon the certificate(s) for such Shares that
are, in the opinion of the Committee or the Board, necessary or appropriate to
facilitate compliance with the provisions of any securities laws deemed by the
Committee or the Board to be applicable to the issuance and transfer of such
Shares.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Board or by a
committee appointed by the Board (the "Committee") which shall be composed of
two or more Directors all of whom shall be Outside Directors. The membership of
the Committee shall be constituted so as to comply at all times with the
applicable requirements of Rule
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16b-3 promulgated under the Securities Exchange Act and Section 162(m) of the
Internal Revenue Code. The Committee shall serve at the pleasure of the Board
and shall have the powers designated herein and such other powers as the Board
may from time to time confer upon it.
(b) The Board may grant Options pursuant to this Plan to
Directors who are not employees of the Company or any Subsidiary and/or other
persons to whom Options may be granted under Section 5(a) hereof.
(c) The Committee or the Board, from time to time, may adopt
rules and regulations for carrying out the purposes of the Plan. The
determinations by the Committee or the Board, and the interpretation and
construction of any provision of the Plan or any Option by the Committee or the
Board, shall be final and conclusive.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
(e) No member of the Board or the Committee shall be liable
for any action or determination made in good faith with respect to this Plan or
any option granted hereunder.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified
herein for the making of any issuance or delivery of any Option or Common Stock
to any Optionee or beneficiary, any law or regulation of any governmental
authority having jurisdiction in the premises shall require the Company to
withhold, or to make any deduction for, any taxes or take any other action in
connection with the issuance or delivery then to be made, such issuance or
delivery shall be deferred until such withholding or deduction shall have been
provided for by the Optionee or beneficiary, or other appropriate action shall
have been taken.
15. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in
all respects with Rule 16b-3 promulgated under the Securities Exchange Act
("Rule 16b-3"), any ambiguities or inconsistencies in construction of the Plan
shall be interpreted to give effect to such intention, and if any provision of
the Plan is found not to be in compliance with Rule 16b-3, such provision shall
be deemed null and void to the extent required to permit the Plan to comply with
Rule 16b-3. The Committee or the Board may from time to time adopt rules and
regulations under, and amend, the Plan in furtherance of the intent of the
foregoing.
(b) The Plan and any Option agreements entered into pursuant
to the Plan shall be administered and interpreted so that all Incentive Stock
Options granted under the Plan will qualify as Incentive Stock Options under
section 422 of the Internal Revenue Code. If any provision of the Plan or any
such Option agreement should be held invalid for the granting of Incentive Stock
Options or illegal for any reason, such determination shall not affect the
remaining provisions hereof, but instead the Plan and the Option agreement shall
be construed and enforced as if such provision had never been included in the
Plan or the Option agreement.
(c) This Plan shall be governed by the laws of the State of
Florida.
(d) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Committee or
the Board may from time to time amend, suspend or terminate the Plan or any
Option; provided, however, that, any amendment to the Plan shall be subject to
the approval of the Company's shareholders if such shareholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or to comply with Section 162(m) of the Internal
9
<PAGE>
Revenue Code) or the rules of any Stock exchange or automated quotation system
on which the Common Stock may then be listed or granted. Except to the extent
provided in Sections 9 and 10 hereof, no amendment, suspension or termination of
the Plan or any Option issued hereunder shall substantially impair the rights or
benefits of any Optionee pursuant to any Option previously granted without the
consent of the Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The effective date of the Plan
is the date on which the Board adopts this Plan, and the Plan shall terminate on
the tenth anniversary of such date. The Plan shall be submitted to the
shareholders of the Company for their approval and adoption and Options
hereunder may be granted prior to such approval and adoption but contingent upon
such approval and adoption.
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SOUND ADVICE, INC.
1999 ANNUAL MEETING OF SHAREHOLDERS--OCTOBER 27, 1999
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 27th day of October, 1999, 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. To elect a board of five directors for the ensuing year.
|_| FOR the election of all nominees: Peter Beshouri,
Michael Blumberg, G. Kay Griffith, William F. Hagerty, IV
and Herbert A. Leeds as directors.
|_| 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. To approve an amendment to the Company's Articles of Incorporation to
create three classes of directors to serve for three-year staggered
terms.
|_| FOR APPROVAL
|_| AGAINST APPROVAL
|_| ABSTAIN
3. To approve and adopt the Company's 1999 Stock Option Plan.
|_| FOR APPROVAL
|_| AGAINST APPROVAL
|_| ABSTAIN
4. 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, FOR APPROVAL OF THE PROPOSED AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION AND FOR APPROVAL OF THE ADOPTION OF THE
COMPANY'S 1999 STOCK OPTION PLAN.
<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 1999 Annual Report to Shareholders and the
Notice of Annual Meeting of Shareholders to be held October 27, 1999, 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 ________________________ 1999
(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.
2
