<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] 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 sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
SUN TELEVISION AND APPLIANCES, 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: ...........................................................
================================================================================
<PAGE> 2
SUN TELEVISION AND APPLIANCES, INC.
6600 PORT ROAD
GROVEPORT, OHIO 43125
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 29, 1998
To Our Shareholders:
The Annual Meeting of Shareholders of Sun Television and Appliances,
Inc. will be held at the Hyatt on Capitol Square, 75 East State Street,
Columbus, Ohio, on Tuesday, June 30, 1998, at 10:00 a.m., Columbus time, for the
following purposes:
(1) To elect seven directors to serve until the 1999 Annual
Meeting of Shareholders or until their successors are
elected.
(2) To ratify the appointment of KPMG Peat Marwick LLP to
serve as independent public accountants for the
Corporation for fiscal 1999.
(3) To transact any other business which may properly come
before the meeting.
You will be most welcome at the meeting, and we hope you can attend.
Directors and officers of the Corporation and representatives of its independent
public accountants will be present to answer your questions and to discuss its
business.
We urge you to execute and return the enclosed proxy as soon as
possible so that your shares may be voted in accordance with your wishes. If you
attend the meeting, you may vote in person, and your proxy will not be used.
By Order of the Board of Directors,
Nicholas A. Mytro
Secretary
-------------------------------------------------------------
PLEASE SIGN AND MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING ENVELOPE
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES
-------------------------------------------------------------
<PAGE> 3
SUN TELEVISION AND APPLIANCES, INC.
6600 Port Road
Groveport, Ohio 43125
----------
PROXY STATEMENT
----------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 30, 1998
----------
This Proxy Statement is furnished to the shareholders of Sun Television
and Appliances, Inc. (the "Corporation") in connection with the solicitation of
proxies to be used in voting at the Annual Meeting of Shareholders to be held on
June 30, 1998, and at any adjournment thereof. The enclosed proxy is solicited
by the Board of Directors of the Corporation. This Proxy Statement and the
enclosed proxy will be first sent or given to the Corporation's shareholders on
approximately May 29, 1998.
The shares represented by the accompanying proxy will be voted as directed
if the proxy is properly signed and received by the Corporation prior to the
meeting. The proxy will be voted FOR the nominees for director named herein and
FOR the ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants if no direction is given to the contrary. Any shareholder
giving a proxy has the power to revoke it at any time before it is exercised by
filing a written notice with the Secretary of the Corporation prior to the
Annual Meeting. Shareholders who attend the meeting may vote in person and their
proxies will not be used.
The Corporation will bear the cost of the solicitation of proxies,
including the charges and expenses of brokerage firms and others for forwarding
solicitation material to beneficial owners of stock. Representatives of the
Corporation may solicit proxies by mail, telegram, telephone or personal
interview.
Holders of record of Common Stock at the close of business on May 22, 1998
will be entitled to vote. At that date, the Corporation had 17,439,202 shares of
Common Stock outstanding and entitled to vote at the Annual Meeting. Each share
of Common Stock outstanding on the record date entitles the holder to one vote
on each matter submitted at the Annual Meeting.
A majority of the outstanding shares of the Corporation will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business. The election of each director nominee requires the favorable vote of a
plurality of all votes cast by the holders of Common Stock at a meeting at which
a quorum is present. Only shares that are voted in favor of a particular nominee
will be counted towards such nominee's achievement of a plurality. Proxies that
are marked "Withhold Authority" and broker non-votes are not counted toward such
nominee's achievement of a plurality and, thus, will have no effect. Each other
matter to be submitted to the shareholders at this meeting requires the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote. Thus, abstentions will be counted and
will have the same effect as votes cast against the proposal; broker non-votes
will not be counted and will have no effect.
<PAGE> 4
ELECTION OF DIRECTORS
Seven directors are to be elected to hold office until the next annual
meeting of shareholders or until their successors are elected. In the absence of
instructions to the contrary, it is intended that the shares represented by the
enclosed proxy will be voted for the election of the seven nominees named below.
With the exception of Mr. May, all nominees are currently directors of the
Corporation and were elected at the last annual meeting of shareholders.
Mr. Frank Doczi, who has been a Director of the Corporation since July
1997, will be resigning from the Board of Directors effective June 30, 1998 and
is not standing for re-election.
The Board of Directors expects each of the nominees named below to be
available for election; however, in the event that any of the nominees for
director should become unavailable, the number of directors of the Corporation
may be decreased pursuant to the Corporation's Code of Regulations, or the Board
of Directors may designate substitute nominees, in which event such shares will
be voted for such substitute nominees. The seven persons receiving the highest
number of votes will be elected directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR NAMED BELOW.
The following sets forth certain biographical information with respect to
each current director and each of the nominees for director.
R. CARTER PATE, age 44, has been Chairman of the Board of the Corporation
since February 1997 and interim President and Chief Executive Officer since May
1997. Mr. Pate is a Managing Partner of Price Waterhouse LLP ("Price
Waterhouse") and a principal of Business Regeneration Services, LLC, a
subsidiary of Price Waterhouse ("BRS"), since March 1996. Immediately prior to
joining Price Waterhouse, Mr. Pate served as President and Chief Executive
Officer of Sun Coast Industries, Inc., a manufacturer of plastic closures used
to seal and package food, beverage, household, pharmaceutical, automotive and
industrial products. In 1990, Mr. Pate founded Pate, Winters & Stone, Inc., a
management consulting firm specializing in restructuring and reorganizations,
where he served as a partner until joining Sun Coast Industries, Inc.
MACY T. BLOCK, age 72, has been a Director of the Corporation since 1987.
Mr. Block served as Chairman of the Board and Chief Executive Officer of the
Corporation from April 1991 to July 1995 and served Sun T.V., Inc., the
Corporation's wholly-owned operating subsidiary (the "Subsidiary"), as Chief
Executive Officer from August 1986, Chairman of the Board from March 1987 and
Secretary from March 1990 until the merger of the Subsidiary into the
Corporation in July 1994. Mr. Block founded the predecessor to the Corporation
in 1949 and was the Chief Executive Officer of the predecessor from 1959 to the
time of its acquisition by the Corporation in August 1986. Mr. Block is a
Director of Drug Emporium, Inc., a discount drug store chain.(1)
NED L. SHERWOOD, age 48, has been a Director of the Corporation since
1986. Mr. Sherwood has served as President of Zaleski, Sherwood & Co., Inc.
since September 1985. From December 1981 through August 1985, he served as Vice
President of AEA Investors, Inc. From 1976 through December 1981, Mr. Sherwood
served as a Vice President of the General Development Group of W.R. Grace & Co.,
Inc. Mr. Sherwood is a director of Kaye Group, Inc., an insurance holding
company, Market Facts, Inc., a custom market research firm, and Mazel Stores,
Inc., a retailer and wholesaler of closeout merchandise.(1)
THOMAS EPSTEIN, age 41, has been a Director of the Corporation since 1986.
Mr. Epstein is a private investor and financial consultant. Mr. Epstein was
affiliated with Zaleski, Sherwood & Co., Inc., from April 1986 to September
1990. From 1980 to 1986, Mr. Epstein was employed by Bankers Trust Company in
various capacities, his last position prior to leaving Bankers Trust Company in
1986 being Vice President. Mr. Epstein is a director of Jan Bell Marketing,
Inc., a retailer of fine jewelry.(1)
-2-
<PAGE> 5
PAUL D. BAUER, age 54, has been a Director of the Corporation since 1995.
Mr. Bauer was, from 1989 until his retirement in 1993, Executive Vice President
and Chief Financial Officer of Tops Markets, Inc., a grocery chain headquartered
in Buffalo, New York, operating stores in Western and Central New York and
Northern Pennsylvania. He joined Tops Markets, Inc. in 1970 following employment
from 1965 as an accountant with Peat, Marwick, Mitchell & Co.
BRADY J. CHURCHES, age 40, has been a Director of the Corporation since
1995. Since 1995, Mr. Churches has served as President of Mazel Stores, Inc., an
off-price retail and wholesale company. Before joining Mazel Stores, Inc., Mr.
Churches worked for Consolidated Stores Corporation ("Consolidated") in various
capacities for 19 years, most recently as Consolidated's President from 1993 to
1995. Prior to serving as Consolidated's President, Mr. Churches held the
following positions with Consolidated: Executive Vice President of
Merchandising, Senior Vice President of Merchandising and Vice President of
Merchandising. Mr. Churches also serves as a director of Mazel Stores, Inc.(1)
DENNIS L. MAY, age 30, was elected Executive Vice President and Chief
Operating Officer of the Corporation in May 1997. From May 1996 until May 1997,
Mr. May served as Vice President of Sales and Marketing. From early 1990 until
May 1996, Mr. May served the Corporation in various marketing and management
positions, including Home Office Products Buyer.
FRANK DOCZI, age 60, has been a Director of the Corporation since 1997.
Mr. Doczi currently serves as Special Advisor to the Chairman of Hechinger
Company. Prior to that appointment, he served as the President and Chief
Executive Officer of Home Quarters Warehouse, Inc. ("HQ"), a subsidiary of
Hechinger Company, from 1988 until 1995. Mr. Doczi had been with HQ since its
inception in 1984. He also served as a member of the Management Committee for
the Hechinger Company. Prior to Mr. Doczi's association with HQ, he spent seven
years with Moore's, a chain of home centers operated by Evans Products Company,
where he was the Senior Vice President, General Merchandise Manager.
- - ----------
(1) The common stock of each of the companies named is publicly traded and is
registered pursuant to Section 12 of the Securities Exchange Act of 1934,
as amended.
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed KPMG Peat Marwick LLP, independent
public accountants, as auditors for the Corporation for fiscal 1999. Although
not required, the Board of Directors is submitting its selection to the
shareholders of the Corporation for ratification. If the shareholders do not
ratify the appointment of KPMG Peat Marwick LLP, the Board of Directors will
reconsider this appointment. KPMG Peat Marwick LLP has served as the independent
public accountants for the Corporation since 1997. The Board of Directors
believes that the appointment of KPMG Peat Marwick LLP for fiscal 1999 is
appropriate because of the firm's reputation, qualifications, and experience.
Representatives of KPMG Peat Marwick LLP will be present at the meeting
and will have an opportunity to make a statement if they desire to do so. Such
representatives will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
RATIFICATION OF ITS APPOINTMENT OF KPMG PEAT MARWICK LLP.
INFORMATION CONCERNING THE BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
SHAREHOLDERS
MEETINGS, COMMITTEES AND COMPENSATION OF THE BOARD
The Board of Directors of the Corporation had a total of ten meetings (of
which five were telephonic) during fiscal 1998. With the exceptions of Messrs.
Bauer and Churches, each of the directors attended 75% or more of the total
number of meetings of the Board and of committees of the Board on which he
served during fiscal 1998. Independent directors receive $10,000 annually and
$2,000 per meeting, including meetings of committees, but not including meetings
held by telephone. Directors serve for a one-year term or until their successors
are elected.
-3-
<PAGE> 6
The Board of Directors has standing Audit, Nominating, Executive, and
Compensation and Stock Option Committees. The members of the Audit Committee
during fiscal 1998 were Messrs. Bauer, Epstein, Sherwood and Doczi. The Audit
Committee met twice during fiscal 1998. The Audit Committee recommends the
annual appointment of the Corporation's auditors and reviews the scope of the
audit and non-audit assignments and related fees, the accounting principles used
by the Corporation in financial reporting, the internal financial auditing
procedures and the adequacy of the Corporation's internal control procedures.
The members of the Compensation and Stock Option Committee during fiscal
1998 were Messrs. Block, Bauer, Doczi and Churches. This committee met three
times during fiscal 1998. The Compensation and Stock Option Committee has
authority to fix officer compensation and to determine and administer the
compensation policies with respect to officers of the Corporation and to
administer the Corporation's 1991 Stock Option Plan (the "Plan"), including the
selection of optionees, the determination of the amount of the grants and the
timing of the grants.
In February 1997, the Board of Directors authorized the creation of an
Executive Committee to exercise the powers of the Board of Directors in the
direction of the business and affairs of the Corporation during the intervals
between the meetings of the Board. The members of the Executive Committee are
Messrs. Bauer, Churches and Epstein. The Executive Committee met once during
fiscal 1998.
The Nominating Committee recommends to the Board of Directors the persons
to be nominated for election to the Board of Directors of the Corporation at the
Annual Meeting of Shareholders. The members of the Nominating Committee were
Messrs. Bauer, Block and Epstein. The Nominating Committee did not meet during
fiscal 1998.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership
of the Corporation's Common Stock by each director/nominee, the Corporation's
Chief Executive Officer and each of the Corporation's other executive officers
whose annual salary and bonus exceeded $100,000 and the directors/nominees and
executive officers of the Corporation as a group as of May 1, 1998:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
BENEFICIALLY OUTSTANDING
NAME OWNED(1) SHARES
- - ----------------------------- ---------------------- -----------
<S> <C> <C>
Macy T. Block 1,368,916(2) 7.85%
R. Carter Pate 0 *
Ned L. Sherwood 144,586(3) *
Thomas Epstein 32,066 *
Paul D. Bauer 5,400(4) *
Brady J. Churches 6,000 *
Dennis L. May 83,622(5) *
Beth A. Savage 0 *
James Romero 19,999(6) *
Frank Doczi 0 *
All Directors and Executive
Officers as a Group (10 persons) 1,660,589(7) 9.52%
* Less than 1%
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and/or investment power with respect to those securities. Except as
otherwise noted, none of the named individuals shares with another person
either voting or investment power as to the shares reported.
</TABLE>
-4-
<PAGE> 7
(2) All of these shares are held of record by Block Investors Partnership. Mr.
Block is the trustee and sole beneficiary of a trust which is a general
partner of Block Investors Partnership and, as such, is deemed to be the
beneficial owner of the shares held of record by Block Investors
Partnership.
(3) Includes 288 shares held by ZS Fund L.P.; Mr. Sherwood is a shareholder of
a corporation which is a general partner of ZS Fund L.P.
(4) These shares are held of record jointly by Mr. Bauer and his wife.
(5) Includes 83,622 shares for Mr. May which could have been acquired under
stock options exercisable within 60 days of May 1, 1998.
(6) Includes 19,999 shares for Mr. Romero which could have been acquired under
stock options exercisable within 60 days of May 1, 1998.
(7) Includes shares 83,622 for Mr. May, 19,999 shares for Mr. Romero, and
103,621 for all directors and executive officers as a group) which could
have been acquired under stock options exercisable within 60 days of May
1, 1998.
OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS
As of May 1, 1998, no person was known by the Corporation to be the
beneficial owner of more than 5% of the outstanding shares of Common Stock,
except as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS BENEFICIALLY OUTSTANDING
OF BENEFICIAL OWNERS OWNED(1) SHARES
- - -------------------------------------------- ------------------------- ---------------
<S> <C> <C>
Block Investors Partnership 1,368,916(2) 7.85%
and Macy T. Block
3755 West Dublin-Granville Rd.
Dublin, Ohio 43017
Grandview Partners, L.P. 1,211,500(3) 6.95%
and Sven B. Karlen, Jr.
Two International Place
Boston, Massachusetts 02111
Dimensional Fund Advisors Inc. 1,104,400(4) 6.33%
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401
Peter R. Kellogg 1,550,000(5) 8.89%
c/o Spear, Leeds & Kellogg
120 Broadway
New York, New York 10271
- - ------------------------------------
<FN>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which generally attribute
beneficial ownership of securities to persons who possess sole or
shared voting power and/or investment power with respect to those
securities.
</TABLE>
-5-
<PAGE> 8
(2) Block Investors Partnership is a general partnership consisting of ZS
Partners and a trust created by Macy T. Block, of which Mr. Block is
trustee and sole beneficiary. Under the terms of the partnership
agreement, Mr. Block has the exclusive right to manage and conduct the
business of the partnership, including the right to vote all shares of
Common Stock of the Corporation held by the partnership. Mr. Block is,
therefore, deemed to be the beneficial owner of the shares held of
record by Block Investors Partnership. Block Investors Partnership and
Mr. Block are deemed to share voting and dispositive power with respect
to such shares. Messrs. Sherwood and Epstein are general partners of ZS
Partners. Although ZS Partners is one of the two general partners of
Block Investors Partnership, it has no voting control over the
partnership except under limited circumstances. ZS Partners and Messrs.
Sherwood and Epstein disclaim beneficial ownership of the shares held
of record by Block Investors Partnership.
(3) By copy of Schedule 13D, dated October 15, 1996, Grandview Partners,
L.P. and Sven B. Karlen, Jr. informed the Company that they are the
beneficial owners of these shares.
(4) By copy of Schedule 13G, dated February 10, 1998, Dimensional Fund
Advisors Inc. informed the Company that these securities are owned by
advisory clients of Dimensional Fund Advisors.
(5) Based on information supplied to the Company on Schedule 13D, dated
September 4, 1997.
TRANSACTIONS WITH PRINCIPAL SHAREHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS
Information concerning an agreement between an affiliate of Mr. Sherwood
and the Corporation is provided in "Compensation Committee Interlocks and
Insider Participation."
The Company has entered into a letter agreement with Business Regeneration
Services, LLC, ("BRS," formerly known as Business Turnaround Services, LLC), a
subsidiary of Price Waterhouse LLP, dated February 11, 1997, as amended on June
17, 1997. Mr. Pate is a Managing Partner of Price Waterhouse LLP and a principal
of BRS. Under the letter agreement, BRS was to provide the Corporation with a
business turnaround plan and recommendation regarding the Corporation's
business. The Corporation agreed to pay BRS for time expended by BRS employees,
other than Mr. Pate, and outside consultants engaged by BRS at standard hourly
rates, in an aggregate amount not to exceed $100,000 plus expenses for initial
consultation and development of a business turnaround plan. Additionally, the
Company granted BRS an option to purchase 500,000 shares of the Corporation's
Common Stock at a purchase price of $2.1875 per share, the fair market value as
of the date of grant. As amended on June 17, 1997, the Corporation agreed to pay
BRS (excluding Mr. Pate) an amount not to exceed $12,000 per week to assist with
the implementation of the business turnaround plan. The Corporation also has
agreed to pay $350 per hour to BRS for Mr. Pate's services as President and
Chairman of the Board of the Corporation. In fiscal 1998, the Corporation paid
BRS $1,489,571 (in fees and expenses) for services rendered pursuant to this
Agreement. Additionally, on January 14, 1998, BRS was granted an additional
option to purchase 150,000 shares of the Corporation's Common Stock at a
purchase price of $1.84 per share, the fair market value on the date of grant.
EXECUTIVE OFFICERS
In addition to Mr. Pate and Mr. May, the following persons are executive
officers of the Corporation.
JAMES ROMERO, age 47, was elected Vice President of Operations in October
1996. From November 1995 until September 1996, Mr. Romero served as Vice
President of Operations of Eye Master. From June 1994 until November 1995, Mr.
Romero served as Director of Sales of Service Merchandise. From April 1990 until
June 1994, Mr. Romero served as a Regional Director of Blockbuster Video. From
April 1980 until April 1990, Mr. Romero served as a Regional Manager for Tandy -
Radio Shack.
BETH A. SAVAGE, age 29, was elected Chief Financial Officer of the
Corporation in February 1998 and Treasurer in April 1998. Prior to joining the
Corporation, Ms. Savage served as a Manager with Price Waterhouse LLP working
closely with Business Regeneration Services, LLC (BRS) from July 1996 to
February 1998. Ms. Savage was a founding
-6-
<PAGE> 9
Partner of GBQ Consulting, financial and business consultants in March 1996
through June 1996. From June 1990 to February 1996, Ms. Savage was a Senior
Consultant with the Dispute Analysis and Corporate Recovery division of Price
Waterhouse LLP. From July 1988 to May 1990, Ms. Savage was employed with Tucker
& Tucker Accountants.
Officers are elected annually by the Board of Directors and serve at its
discretion. There are no family relationships among directors and executive
officers of the Corporation.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid during each of the Corporation's last three fiscal years to the
Corporation's Chief Executive Officer and each of the Corporation's other
executive officers whose annual salary and bonus exceeded $100,000 (the "Named
Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM
COMPENSATION COMPENSATION
-------------------------------- ----------------------------------------
NAME AND FISCAL OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS # COMPENSATION
- - ------------------------------------ -------- -------------- -------------- -------------- ---------------------
<S> <C> <C> <C> <C> <C>
R. Carter Pate(1) 1998 -- -- -- --
President, Chief Executive
Officer and Chairman of the
Board
Dennis L. May 1998 $174,462 $ 32,250 175,000 $ 1,308(2)
Executive Vice President and 1997 $125,134 $ 39,359 30,000 $ 487(2)
Chief Operating Officer 1996 $ 78,000 $ 68,500 25,000 $ 741(2)
Beth A. Savage(3) 1998 -- -- 100,000 --
Chief Financial Officer and
Treasurer
James Romero(4) 1998 $140,385 $ 13,423 40,000 --
Vice President of Field 1997 $ 40,782 $ 390 20,000 $ 2,040(5)
Operations
<FN>
- - ------------------------------------
(1) Mr. Pate is a principal of BRS and is not paid directly by the Corporation.
The Corporation pays BRS at an hourly rate of $350 for services rendered by
Mr. Pate. For a description of the remuneration paid by the Company to BRS,
see Transactions with Principal Shareholders, Directors and Executive
Officers.
(2) Represents amounts contributed by the Corporation to the Sun T.V., Inc.
401(k) Plan.
(3) Ms. Savage was employed by the Corporation in February 1998.
(4) Mr. Romero was employed by the Corporation in October 1996.
(5) Represents executive's moving expenses paid by the Corporation.
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides certain information regarding stock options
granted during fiscal 1998 to each of the Named Executive Officers:
-7-
<PAGE> 10
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER % OF TOTAL STOCK PRICE
OF SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED EXERCISE OPTION TERMS(2)(3)
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------
NAME GRANTED(1) YEAR ($/SHARE)(1) DATE 5% ($) 10% ($)
- - ------------------------- ------------- ------------- ------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Carter Pate(4) -- -- -- -- -- --
Dennis L. May 100,000 12.3% $1.6875 05/02/07 $106,126 $286,944
75,000 9.2% $1.84 01/14/08 $86,787 $219,936
Beth A. Savage 100,000 12.3% $1.89 02/23/08 $118,861 $301,217
James Romero 40,000 4.9% $1.6875 05/02/07 $42,450 $107,578
<FN>
- - ------------------------------------
(1) The option price is the fair market value of the Corporation's Common
Stock on the date of grant, determined in accordance with the 1991 Stock
Option Plan (i.e., the average of the highest and lowest sale prices per
share in the Nasdaq Stock Market on that date). The expiration dates
indicated above are the dates fixed when the options were granted.
(2) The dollar amounts in these columns are the product of (a) the difference
between (1) the product of the per-share market price at the date of grant
and the sum of 1 plus the assumed rate of appreciation (5% and 10%)
compounded over the term of the option (ten years) and (2) the per-share
exercise price and (b) the number of shares underlying the grant at the
end of fiscal 1998.
(3) The appreciation rates stated are arbitrarily assumed, and may or may not
reflect actual appreciation in the stock price over the life of the
option. Regardless of any theoretical value which may be placed on a stock
option, no increase in its value will occur without an increase in the
value of the underlying shares. Whether such an increase will be realized
will depend not only on the efforts of the recipient of the option, but
also upon conditions in the Corporation's industry and market area,
competition, and general and local economic conditions, over which the
optionee may have little or no control.
(4) Mr. Pate is a principal of BRS and is not paid directly by the Corporation.
In fiscal 1998, BRS received an option to purchase 150,000 shares of the
Corporation's Common Stock. For a description of the remuneration paid by
the Company to BRS, see "Transactions with Principal Shareholders,
Directors and Executive Officers."
</TABLE>
-8-
<PAGE> 11
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUE TABLE
The following table provides certain information on option exercises
during fiscal 1998 by the Named Executive Officers and the number and value of
stock options held by them at March 1, 1998.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF IN-THE-MONEY
ACQUIRED UNEXERCISED OPTIONS OPTIONS AT FISCAL
ON VALUE AT FISCAL YEAR END (#) YEAR END ($)(2)
EXERCISE REALIZED --------------------------- ----------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------ ------------- ----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. Carter Pate -- -- -- -- -- --
Dennis L. May 0 -- 50,289 203,335 $2,809 $108,625
Beth A. Savage 0 -- 0 100,000 -- $48,500
James Romero 0 -- 6,666 53,334 -- $27,400
<FN>
- - ------------------------------------
(1) Represents the difference between the per share fair market value on the
date of exercise and the per share option exercise price, multiplied by
the number of shares to which the exercise relates.
(2) Represents the total gain which would be realized if all in-the-money
options held at year end were exercised, determined by multiplying the
number of shares underlying the options by the difference between the per
share option exercise price and per share fair market value at year end.
An option is in-the-money if the fair market value of the underlying
shares exceeds the exercise price of the option.
</TABLE>
The following Board of Directors' Compensation Report and Performance
Graph shall not be deemed incorporated by reference by any general statement
incorporating by reference this Proxy Statement into any of the Corporation's
filings under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent that the Corporation specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under such Acts.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE OF THE BOARD OF DIRECTORS
The key components of the Corporation's executive officer compensation are
annual base salary, cash bonuses and stock option awards. The Compensation and
Stock Option Committee (the "Committee"), none of whose members are eligible to
receive stock options under the Stock Option Plan, has authority and
responsibility to determine and administer the Corporation's officer
compensation policies and to fix officer compensation, as well as to administer
and determine the grant of options under the Corporation's Stock Option Plan.
See "Information Concerning the Board of Directors."
COMPENSATION POLICIES
The Corporation's compensation policies are intended to (i) ensure a
direct correlation between individual performance and total compensation and
(ii) improve earnings per share and return to shareholders by increasing
productivity and efficiency and creating a well-trained and highly motivated
work force capable of addressing current and future competitive conditions. Base
salary should be sufficient to attract and retain qualified executive talent,
while bonuses and stock option awards should be significant components of the
total executive officer compensation package both to reward current and past
superior performance and to provide strong incentives, both short-term and
long-term, for superior future performance.
-9-
<PAGE> 12
The level of base salaries is reviewed annually by the Committee and
adjusted on the basis of individual performance, the Corporation's overall
performance and industry comparisons. While individual performance is
emphasized, no specific weight is given to any of these factors.
Bonuses are designed primarily to reward current and past performance and
to provide short-term incentives. An executive officer's bonus is determined on
the basis of the officer's individual contribution to the Corporation's
operating performance and attainment of its short-term and long-term goals, as
well as the Corporation's overall performance for the period both in terms of
financial results and shareholder return. No specific weight is given to any of
these factors in evaluating executive officer bonuses. However the significance
of overall corporate performance increases as an officer's seniority and
responsibility increase.
The Corporation's Stock Option Plan was adopted in 1991 for the purpose of
providing long-term incentives to key employees. In determining the size of a
stock option award, the Committee considers an individual's past performance,
the anticipated value of the individual's contribution to the Corporation's
future performance and the total number of shares subject to previously granted
stock options held by the individual. No specific weight is given to any of
these factors in determining the size of a stock option award.
The 1993 Omnibus Budget Reconciliation Act ("OBRA") became law in August
1993. Under OBRA, compensation paid to certain executive officers of the
Corporation in excess of $1 million may be non-deductible unless it is
"performance based" compensation or is otherwise exempt under the law and
applicable regulations. Proposed regulations were issued in December 1993 and
were amended in December 1994. No compensation paid by the Corporation to date
pursuant to any employment agreement now or heretofore in effect has exceeded $1
million. The law is subject to varying interpretations, and final regulations
may or may not be consistent with the proposed regulations. Consequently, the
Committee has not yet established a policy with respect to the changes in the
law effected by OBRA but will review the subject as the law and regulations are
clarified and in the light of the potential impact on the Corporation.
FISCAL 1998 COMPENSATION
Mr. Pate's compensation for fiscal 1998 was fixed pursuant to the letter
agreement between BRS and the Corporation. Mr. Pate did not receive any options
in fiscal 1998.
COMPENSATION AND STOCK OPTION COMMITTEE
Macy T. Block
Brady J. Churches
Paul D. Bauer
Frank Doczi
-10-
<PAGE> 13
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG THE CORPORATION, THE NASDAQ STOCK MARKET - U.S. INDEX
AND THE NASDAQ RETAIL INDEX
The following Performance Graph compares the performance of the
Corporation with that of the Nasdaq Stock Market - U.S. Index and the Nasdaq
Retail Index, which is a published industry index. The comparison of the
cumulative total return to shareholders for each of the periods assumes that
$100 was invested on July 17, 1991 (the effective date the Corporation's Common
Stock was registered under the Securities Exchange Act of 1934, as amended) in
the Common Stock of the Corporation, and on June 30, 1991, in the Nasdaq Stock
Market - U.S. Index and the Nasdaq Retail Index and that all dividends were
reinvested.
Research Data Group
Sun Tv & Appliances Inc (SNTV)
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
---------------------------------------------------------
2/28/93 2/28/94 2/28/95 2/28/96 2/28/97 2/28/98
<S> <C> <C> <C> <C> <C> <C>
Sun Tv & Appliances Inc SNTV 100.00 80.46 51.01 21.39 12.53 13.25
NASDAQ STOCK MARKET (U.S.) 100.00 118.34 119.99 167.20 199.47 273.10
NASDAQ RETAIL TRADE 100.00 110.97 101.93 120.33 134.03 177.17
</TABLE>
-11-
<PAGE> 14
EMPLOYMENT AND SEVERANCE AGREEMENTS
On October 22, 1997, the Corporation and Dennis L. May, the Corporation's
Executive Vice President and Chief Operating Officer, entered into a Severance
Agreement. The Severance Agreement provides that if Mr. May's employment is
terminated within 90 days of a "triggering event," other than for good cause, he
would be entitled to receive an amount equal to his base annual compensation,
paid in monthly installments over a twelve-month period. In the event Mr. May
accepts employment with another employer within the twelve-month period
following his termination of employment with the Corporation, his severance
benefit shall cease, provided, however, that in no event will the payments cease
prior to the sixth monthly payment (one-half of the severance benefit). For
purposes of the Severance Agreement, a "triggering event" is (i) the sale of
substantially all the Corporation's assets, (ii) a merger, reorganization or
consolidation whereby there is a change in control of the Corporation, (iii) a
complete liquidation of the Corporation, or (iv) a transaction occurs which does
not fit into categories (i), (ii) or (iii) above, but which the Board of
Directors deems to be a triggering event.
On February 12, 1998, the Corporation and Beth A. Savage, the
Corporation's Chief Financial Officer and Treasurer, entered into an Employment
Agreement. The Employment Agreement provides for minimum base salary of $140,000
per year, and participation in an annual incentive compensation program. The
Employment Agreement provides that if Ms. Savage's employment is terminated by
the Corporation, or is terminated by her at the request of the Corporation,
within 120 days of a "triggering event" and other than for good cause, she would
be entitled to receive an amount equal to nine months of her base salary, paid
in monthly installments over a nine-month period. In the event Ms. Savage
accepts employment with another employer within the nine-month period following
her termination of employment with the Corporation, her severance benefit shall
cease, provided, however, that in no event will the payments cease prior to the
sixth monthly payment (two-thirds of the severance benefit). For purposes of the
Employment Agreement, a "triggering event" is (i) the sale of substantially all
the Corporation's assets, (ii) a merger, reorganization or consolidation whereby
there is a change in control of the Corporation, (iii) a complete liquidation of
the Corporation, (iv) an order for relief is filed with respect to the
Corporation under Title 11 United States Bankruptcy Code, (v) a receiver,
custodian, or trustee is appointed for the Corporation under any insolvency laws
of any state, (vi) a case under Title 11 United States Bankruptcy Code is
initiated against the Corporation or an application for appointment of a
receiver, custodian or trustee is sought with respect to the Corporation, and in
any such instance, such proceeding shall not be timely contested, or if timely
contested, remains unstayed or undismissed for a period of 60 days, or (vii) a
transaction occurs which does not fit within (i), (ii), (iii), (iv), (v), or
(vi) above, but which the Board of Directors deems to be a triggering event.
Additionally, in the event Ms. Savage's employment is terminated by the
Corporation without good cause and without the occurrence of a triggering event,
she would be entitled to receive an amount equal to six months of her base
salary payable in monthly installments.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee consists of Messrs. Block,
Sherwood, Doczi and Bauer. An affiliate of Mr. Sherwood is a party to an
agreement with the Corporation as described below.
On February 24, 1994, the Corporation entered into an agreement with
Claims Administration Corporation, a Delaware corporation ( CAC ), whereby CAC
from time to time assumes certain extended service contracts sold by the
Corporation to its retail customers. During fiscal 1998, CAC assumed $5,555,211
of extended service contracts. For the fiscal 1998, the Corporation paid
approximately $1,954,000 to CAC with respect to contracts assumed during and
prior to fiscal 1998. This amount represents payment for a percentage of the
cost of the service policies sold, the fees owed for expired contracts net of
the expenses of servicing these contracts, and the return deposit on expired
contracts. The agreement is cancelable by either party on one month's notice.
CAC is a wholly owned subsidiary of Kaye Group, Inc. a publicly held corporation
( Kaye Group ), of which Mr. Sherwood is a director. Mr. Sherwood owns 43.71% of
ZS Kaye, Inc., the general partner of ZS Kaye, L.P., which is, in turn, one of
two general partners of Kaye International, L.P., the owner of 71.84% of the
outstanding common stock of Kaye Group. The other general partner, which is the
managing general partner of Kaye International, L.P. is Kaye Investments, L.P.
Mr. Sherwood has a limited partnership interest in Kaye International, L.P. Mr.
Sherwood may be deemed to be beneficial owner of the common stock of Kaye Group
owned by Kaye International, L.P., but he disclaims such beneficial ownership.
-12-
<PAGE> 15
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers, directors and persons who are beneficial owners of more
than ten percent of the Corporation's Common Stock ("reporting persons") to file
reports of ownership and changes in ownership with the Securities and Exchange
Commission. Reporting persons are required by Securities and Exchange Commission
regulations to furnish the Corporation with copies of all Section 16(a) forms
filed by them. Based on its review of the copies of Section 16(a) forms received
by it, the Corporation believes that, during fiscal 1998 all reporting persons
fully complied with the filing requirements applicable to such persons.
PROPOSALS BY SHAREHOLDERS FOR 1999 ANNUAL MEETING
If any shareholder of the Corporation wishes to submit a proposal to be
included in next year's Proxy Statement and acted upon at the annual meeting of
the Corporation to be held in 1999, the proposal must be received by the
Secretary of the Corporation at the principal executive offices of the
Corporation, 6600 Port Road, Groveport, Ohio 43125, prior to the close of
business on January 30, 1999. Any proposal submitted after that date may be
omitted by the Corporation from the proxy statement and form of proxy relating
to that meeting.
OTHER MATTERS
As of the date of this Proxy Statement, management knows of no other
business that will come before the meeting. Should any other matter requiring a
vote of the shareholders arise, the proxy in the enclosed form confers upon the
persons designated to vote the shares discretionary authority to vote with
respect to such matter in accordance with their best judgment.
The Corporation's 1998 Annual Report to Shareholders, including financial
statements, was furnished to shareholders prior to or concurrently with the
mailing of this proxy material.
By Order of the Board of Directors,
Nicholas A. Mytro
Secretary
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<PAGE> 16
PROXY--SUN TELEVISION AND APPLIANCE, INC.
The undersigned shareholder of Sun Television and Appliances, Inc.
hereby appoints Dennis L. May, Beth A. Savage and John B. Pisaris, or any one
or more of them, as attorneys and proxies with full power of substitution to
vote all of the Common Stock of Sun Television and Appliances, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of Sun
Television and Appliances, Inc. to be held at the Hyatt on Capitol Square, 75
East State Street, Columbus, Ohio, on Tuesday, June 30, 1998, and at any
adjournment or adjournments thereof as follows:
1. Election of Directors.
[ ] FOR all nominees listed below (except as marked to
the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE
FOR ANY INDIVIDUAL NOMINEE STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
Paul D. Bauer Brady J. Churches Thomas Epstein
Macy T. Block R. Carter Pate Ned L. Sherwood
Dennis L. May
2. Ratification of appointment of KPMG Peat Marwick L.L.P. to
serve as independent public accountants for the Corporation
for fiscal 1999.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. In their discretion to vote upon such other matters as may
properly come before the meeting.
<PAGE> 17
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR THE ELECTION OF
DIRECTORS, AND RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK.
Please sign and date this Proxy below and return in the enclosed envelope.
Date: , 1998
-------------------------
------------------------------------
(Signature)
------------------------------------
(Signature)
When signing as attorney, executor,
administrator or guardian, please
give full title. All joint owners
must sign.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
