UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
AUDIO KING CORPORATION
(Name of Issuer)
COMMON STOCK, $0.001 PAR VALUE PER SHARE
(Title of Class of Securities)
05071H105
(CUSIP Number)
Alan E. Kessock With copies to:
Vice President, J. Justyn Sirkin, Esq.
Chief Financial Officer and Secretary Davis, Graham & Stubbs LLP
Ultimate Electronics, Inc. 370 17th Street, Suite 4700
321-A West 84th Avenue Denver, Colorado 80202
Thornton, Colorado 80221 (303) 892-9400
(303) 412-5200
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
MAY 12, 1997
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box o.
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 7 pages
<PAGE>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ultimate Electronics, Inc. 84-0585211
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
00, BK
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY 556,657 See Item 5.
OWNED BY
EACH
REPORTING 8 SHARED VOTING POWER
PERSON
WITH 556,657 See Item 5.
9 SOLE DISPOSITIVE POWER
556,657 See Item 5.
10 SHARED DISPOSITIVE POWER
556,657 See Item 5.
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
556,657 See Items 4 and 5.
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
Approximately 19.9%, based upon 2,798,613 shares of Common Stock
outstanding as of the date hereof.
See Item 5.
14 TYPE OF REPORTING PERSON*
CO
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to shares of common stock, $0.001
par value per share of Audio King Corporation ("Audio King Stock"), a Minnesota
corporation ("Audio King") whose principal business and executive office is
located at 3501 South Highway 100, Minneapolis, Minnesota, 55416.
ITEM 2. IDENTITY AND BACKGROUND.
Ultimate Electronics, Inc., a Delaware corporation
("Ultimate"), is a specialty retailer of home entertainment and consumer
electronics whose principal business and executive office is located at 321-A
West 84th Avenue, Thornton, Colorado 80221. Ultimate's common stock, $0.01 par
value per share ("Ultimate Common Stock"), is listed for trading on the NASDAQ
National Market.
The directors and executive officers of Ultimate are set forth
on Schedule I hereto. Schedule I sets forth the following information with
respect to each such person:
(a) Name;
(b) Business address; and
(c) Present principal occupation or employment and
name of employer.
All of the directors and executive officers of Ultimate are citizens of the
United States. During the last five years neither Ultimate nor any person named
in Schedule I hereto has been: (i) convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or (ii) a party to a civil
proceeding of judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Except for Ultimate's agreement to enter into the transactions
set forth in Item 4 below, Ultimate has not paid any consideration to Audio King
or the Principal Shareholders (as defined in Item 4 below).
ITEM 4. PURPOSE OF THE TRANSACTION.
Ultimate may be deemed to have acquired beneficial ownership
of 556,657 shares of Audio King Stock pursuant to a Voting Agreement, dated
May 12, 1997 ("Voting Agreement"). The Voting Agreement was entered into by and
among Ultimate and Messrs. Randel S. Carlock, Gary S. Kohler and Henry G. Thorne
("Principal Shareholders"). The Voting Agreement was
Page 2 of 7 pages
<PAGE>
entered into in connection with an Agreement and Plan of Merger, dated March 4,
1997, by and among Ultimate, Audio King and a wholly-owned subsidiary of
Ultimate (the "Merger Agreement").
Pursuant to the Voting Agreement, the Principal Shareholders
agreed to vote 556,657 shares of their Audio King Stock in favor of the merger
(and the transactions related thereto) by and among Audio King and a
wholly-owned subsidiary of Ultimate (the "Merger"). The Principal Shareholders
have also agreed that until the Merger has been consummated each such Principal
Shareholder will not, without the prior written consent of Ultimate, directly or
indirectly: (i) grant any proxies or enter into any voting trust or other
agreement or arrangement with respect to their Audio King Stock, (ii) acquire or
sell, assign, transfer or otherwise dispose of any Audio King Stock, (iii) enter
into any contract, option or other arrangement or understanding with respect to
the acquisition or sale, assignment, transfer or other disposition of any Audio
King Stock or (iv) subject to the Merger Agreement and their fiduciary
obligations to Audio King, encourage, solicit, initiate or participate in any
way in discussions or negotiations with, or knowingly provide any information
to, any corporation, partnership, person or other entity or group (other than
Ultimate or any affiliate or associate of Ultimate) concerning any transaction
that is the subject of a takeover proposal or any other proposal that has the
effect of competing with the transactions contemplated by the Merger Agreement.
Subject to the approval of the Merger by the Audio King
shareholders, the Merger Agreement provides that Audio King will merge with and
into a wholly owned subsidiary of Ultimate ("Subsidiary"). Subject to certain
adjustments and the rights of dissenting shareholders, each outstanding Audio
King Stock will be converted, at the election of the holder, into one of the
following: (i) the right to receive 0.70 shares of Ultimate Common Stock or (ii)
the right to receive $1.75 cash, without interest. At the Effective Date (as
defined below) of the Merger Agreement, each outstanding option or right to
purchase Audio King Stock that is or will be vested at or prior to July 2, 1997
(without acceleration) (an "Audio King Option") will be canceled, converted or
cashed out as set forth below. Each Audio King Option that has an exercise price
equal to or greater than the product of 0.70 times the average of the closing
sale price of Ultimate Common Stock on NASDAQ over the ten trading days prior to
the date the Merger is filed with the Secretary of State of the state of
Delaware ("Effective Date") will be canceled on the Effective Date. All other
Audio King Options will, at the election of the holder of the Audio King Option,
either be assumed by Ultimate in such a manner that such Audio King Options will
convert into options to purchase shares of Ultimate Common Stock or be exercised
and the holder paid a cash amount equal to the excess of $1.75 over the per
share exercise price of such option.
Upon consummation of the Merger, Audio King will merge with
and into Subsidiary. The surviving entity will be governed by Subsidiaries'
certificate of incorporation and bylaws and by the Subsidiaries' board of
directors. The surviving entities' operations will be similar to that of
Ultimate and will be managed by Ultimate's officers, although certain of Audio
King's officers will remain with the surviving entity for various periods of
time following the Merger. In addition, following the Merger, Audio King Stock
will cease to be quoted on the Nasdaq SmallCap Market and will be eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended.
Page 3 of 7 pages
<PAGE>
Following the consummation of the Merger and by operation of
law: (i) Audio King's present capitalization, charter, bylaws and other
instruments corresponding thereto will change materially, (ii) Audio King Stock
will be canceled and will not be authorized to be quoted in an inter-dealer
quotation system of a registered national securities association and (iii)
Ultimate may make any other material change in Audio King's business or
corporate structure or to take any action similar to those listed above.
Except as described above, Ultimate has no present plans or
proposals which relate to or would result in any transactions specified in
paragraphs (a) through (j) of Item 4. In the future, however, Ultimate reserves
the right to adopt such plans or proposals, subject to applicable regulatory
requirements if any.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) Based upon information received from Audio King, Ultimate
believes that 2,798,613 shares of Audio King Stock are outstanding as of the
date of this Schedule 13D. In such case, the 556,657 shares of Audio King Stock
held by the Principal Shareholders represents 19.9% of the total outstanding
shares of Audio King Stock.
(b) Pursuant to the Merger Agreement and the Voting Agreement,
the Principal Shareholders are required to vote 556,657 of their 722,933 shares
of Audio King Stock in favor of the Merger. Ultimate does not have the power to
direct the voting of the Principal Shareholders in any other matters not
involving the Merger and does not have the power to direct the voting of any
other Audio King shareholders.
(c) As described above, on May 12, 1997, Ultimate and the
Principal Shareholders the Principal Shareholders agreed to vote 556,657 shares
of Audio King Stock in favor of the Merger and on March 4, 1997, Ultimate, Audio
King and Subsidiary entered into the Merger Agreement.
(d) Under the Voting Agreement, the Principal Shareholders
retain the right to receive dividends with respect to, and the proceeds from the
sale of (to the extent such a sale is permitted under the Voting Agreement), the
Principal Shareholders' Audio King Stock.
(e) Not applicable.
Page 4 of 7 pages
<PAGE>
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
In connection with consummation of the Merger, Ultimate
expects to secure financing in an amount of at least $3.5 million under a term
loan agreement through its current credit facility with Norwest Bank Colorado,
N.A. ("Norwest"). Ultimate and Norwest have executed a commitment letter
pursuant to which Norwest has agreed to provide such financing, subject to the
terms and conditions set forth in the Merger Agreement. This financing, as well
as available borrowings under Ultimate's revolving line of credit, will be used
to pay for the Audio King Stock exchanged for cash and all the fees and expenses
relating to the Merger. The indebtedness will be secured by substantially all of
Ultimate's assets.
Except for the Merger Agreement, the Voting Agreement and the
$3.5 million commitment letter from Norwest, none of the persons named in Item 2
have, with respect to the securities of Audio King, any contracts, arrangements,
understandings or relationships (legal or otherwise) with any person with
respect to any securities, finders fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or loss,
or the giving or withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit A Merger Agreement as described
above is incorporated by reference
to Exhibit No. 2 to Ultimate's
Registration Statement on Form S-4
(File No. 333-24957) filed with the
Securities Exchange Commission on
April 11, 1997.
Exhibit B Voting Agreement as described
above is incorporated by reference
to Exhibit No. 9 to Ultimate's
Registration Statement on Form S-4
(File No. 333-24957) filed with the
Securities Exchange Commission on
April 11, 1997.
Exhibit C Form of Commitment Letter relating
to $3.5 million term loan.
Page 5 of 7 pages
<PAGE>
SIGNATURES.
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
May 20, 1997 /s/ William J. Pearse
- ----------------------------------- ------------------------------------
Date William J. Pearse
Chairman and Chief Executive Officer
Page 6 of 7 pages
<PAGE>
SCHEDULE I
NAME: PRINCIPAL OCCUPATION AND BUSINESS ADDRESS:
ADDRESS OF EMPLOYER
William J. Pearse Chairman, Chief Executive 321-A West 84th Ave.
Officer and Director of Thornton, CO 80221
Ultimate
David J. Workman President, Chief Operating 321-A West 84th Ave.
Officer, Secretary and Thornton, CO 80221
Director of Ultimate
Alan E. Kessock Vice President, Chief Financial 321-A West 84th Ave.
Officer, Secretary and Director Thornton, CO 80221
of Ultimate
Neal A. Bobrick Vice President - Sales and Store 321-A West 84th Ave.
Operations of Ultimate Thornton, CO 80221
J. Edward McEntire Vice President - Operations 321-A West 84th Ave.
of Ultimate Thornton, CO 80221
Randall F. Bellows Director of Ultimate 321-A West 84th Ave.
Thornton, CO 80221
Robert W. Beale President of Beale 321-A West 84th Ave.
International Thornton, CO 80221
EXHIBIT C
[NORWEST BUSINESS CREDIT LETTERHEAD]
Norwest Business Credit, Inc.
1740 Broadway
Denver, Colorado 80274-8625
303/863-8593
FAX: 303/863-4904
April 2, 1997
Mr. Alan Kessock
Vice President - Finance
Ultimate Electronics, Inc.
321 A W. 84th Avenue
Thornton, Colorado 80221
RE: COMMITMENT FOR TERM LOAN
Dear Alan:
Norwest Bank of Colorado, National Association ("Norwest") and Norwest
Business Credit, Inc. ("NBCI") are pleased to present Ultimate Electronics, Inc.
this commitment for the term loan described below. This commitment is expressly
conditioned as set forth in the Conditions Precedent paragraph below.
BORROWER: Ultimate Electronics, Inc.
FACILITY: Committed term loan made in a single
advance equal to $5,000,000 ("Term Loan").
The Term Loan will be participated to
existing participants according to their
pro rata shares. This commitment by Norwest
and NBCI is conditioned upon obtaining
final approval from the participants.
BORROWING BASE: The overall Borrowing Base for the
Borrower's credit facilities, including the
Term Loan, is equal to 70% of Acceptable
Inventory. Acceptable Inventory shall be as
defined in Borrower's current Credit
Agreement dated as of November 21, 1996
with Norwest and NBCI.
PURPOSE: The Term Loan shall be used to fund the
acquisition of Audio King Corporation.
<PAGE>
Ultimate Electronics, Inc.
April 2, 1997
Page 2
MATURITY DATE: The maturity date of the Term Loan shall be
two years from the date of closing.
AMORTIZATION: The Term Loan shall amortize in 60 equal
monthly payments of $83,333.33 with a
balloon at maturity of $3,083,333.33.
COLLATERAL: The Term Loan shall be secured by a first
priority interest in all accounts
receivable, inventory and proceeds, general
intangibles, and any unencumbered machinery
and equipment (as defined in the Security
Agreement). The Term Loan shall be
cross-collateralized with Borrower's
existing line of credit as provided for in
the Credit Agreement.
INTEREST RATE: The interest rate on the Term Loan
shall be equal to Norwest's Base Rate plus
0.5%, floating, payable monthly in arrears
and calculated on the basis of actual days
elapsed in a year of 360 days.
The spread over Base Rate shall be adjusted
annually on March 1st of each year based on
the ratio of Funded Debt to EBITDA as of
Borrower's fiscal year-end. The rate
adjustment shall be based initially on
Borrower's internally prepared financial
statements and any change resulting form
any audit adjustments shall be retroactive
to March 1st.
FUNDED DEBT/EBITDA BASE RATE
greater than/
equal to 2.5:1 Base + 0.5%
greater than/
equal to 2.0:1
less than 2.5:1 Base + 0.25%
less than 2.0 Base Rate
The default rate of interest shall
be Norwest's Base Rate plus 5.0%.
Norwest's Base Rate shall mean the
rate of interest publicly announced
by Norwest from time to time as its
Base Rate.
FACILITY FEE: 1/8% of the amount of the Term Loan per
annum.
AGENCY FEE: 1/8% of the amount of the Term Loan per
annum.
<PAGE>
Ultimate Electronics, Inc.
April 2, 1997
Page 3
TERMINATION FEE: If the Term Loan is prepaid
prior to the Maturity Date, there
shall be a prepayment fee of 1.5% of
the Term Loan during the first year
and 1% during the second year. The
Termination Fee shall be waived if
the Term Loan is refinanced by a
subsidiary of Norwest Corporation.
COLLATERAL AUDIT AND OTHER EXPENSES: All costs incurred by Norwest and NBCI
for its initial due diligence collateral
audit of Audio King Corporation and
subsequent collateral audit examinations
will be billed on an hourly basis per
analyst (currently $50.00 per hour) plus
actual out-of-pocket expenses. Upon
completion of the initial due diligence
audit, Norwest shall determine the
frequency (anticipated to be quarterly)
and other requirements for future audits.
Provided that the Borrower is not in
Default under its Credit Agreement, Norwest
and NBCI will agree to limit Borrower's
obligation to reimburse them for the cost
of the audits to a mutually agreed upon
amount.
In addition to collateral audits,
Borrower shall be responsible for
any and all reasonable expenses of
Norwest and NBCI for documentation
and administration of the loan,
including without limitation, legal
fees and expenses, filing fees,
collateral appraisal costs and costs
for any subsequent amendments or
documentation changes.
BORROWING BASE,
COLLATERAL AND
FINANCIAL REPORTING: Borrowing Base, collateral and financial
reporting requirements are expected to
remain the same as those contained in the
Credit Agreement.
OTHER TERMS AND
CONDITIONS: Borrower will be required to execute and
deliver to Norwest and NBCI such documents,
instructions,
<PAGE>
Ultimate Electronics, Inc.
April 2, 1997
Page 4
certifications, opinions and
assurances as may be requested for
the funding of the Term Loan on the
basis outlined above. All
documentation shall be subject to
the approval of Norwest, NBCI, and
its legal counsel as to form and
substance. The Term Loan shall be
documented as an amendment to
Borrower's Credit Agreement and
shall be subject to the conditions
thereof.
CONDITIONS PRECEDENT
TO CLOSING AND FUNDING: 1. Satisfactory due diligence
collateral audit of Audio
King Corporation.
2. Satisfactory completion of an
inventory appraisal of
Audio King Corporation.
3. No material adverse change in
the financial condition of
Borrower since the date of its
most recent financial statement
provided to Norwest.
4. Receipt of current interim
financial statements.
5. Receipt of all Landlord Waivers
acceptable to Norwest and NBCI.
Audio King inventory will not be
included in the Borrowing
Base until all Landlord
Waivers relating to the
Audio King inventory are
received.
6. Execution of Loan Documents as
described above.
7. Approval by Norwest and NBCI of
new financial
covenants which will govern
the credit facilities
following the Audio King
acquisition.
This commitment to extend the Term Loan to the Borrower shall expire if
each condition precedent or the Loan Documents have not been fully executed by
5:00 p.m. (Denver time) on May 30, 1997.
Please indicate your acceptance of this commitment by signing below and
returning it to the attention of Pam Klempel by no later than April 15, 1997.
NBCI shall initiate the documentation process upon receipt of this signed
letter. Please contact Pam
<PAGE>
Ultimate Electronics, Inc.
April 2, 1997
Page 5
Klempel at (303) 863-4842 should you have any questions or require additional
information.
Sincerely,
NORWEST BUSINESS CREDIT, INC.
By: /S/ PAMELA KLEMPEL
----------------------------------
Pamela Klempel
Its: /S/ ASSISTANT VICE PRESIDENT
----------------------------------
Assistant Vice President
NORWEST BANK COLORADO, NATIONAL ASSOCIATION
By: /S/ DAVID S. MAZAR
----------------------------------
Its: /S/ VICE PRESIDENT
----------------------------------
ULTIMATE ELECTRONICS, INC.
By: ----------------------------------
Its: ----------------------------------
