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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Transition period from _________ to _________.
Commission file number: 0-25790
CREATIVE COMPUTERS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4518700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2555 West 190th Street, Torrance, California 90504
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (310) 354-5600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock, $.001 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]
As of March 25, 1998, the aggregate market value of the Common Stock held
by non-affiliates of the Registrant was approximately $34 million. The number
of shares outstanding of the Registrant's Common Stock as of March 25, 1998 was
10,120,215.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The table below gives certain information concerning the nominees and other
directors as of July 24, 1998:
<TABLE>
<CAPTION>
Director
Name Age Nominee Since
---- --- ------- --------
<S> <C> <C> <C>
Frank F. Khulusi(1)........ 31 Chairman of the Board, President and 1987
Chief Executive Officer
Sam U. Khulusi............. 42 Director 1987
Ahmed O. Alfi(1)(2)........ 41 Director 1994
Thomas Maloof(2)........... 46 Director 1998
</TABLE>
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(1) Member of Compensation Committee
(2) Member of Audit Committee
Frank F. Khulusi is a co-founder of the Company (and its predecessor) and
has served as Chairman of the Board, President and Chief Executive Officer of
the Company since the Company's inception in 1987. He is the brother of Sam U.
Khulusi.
Sam U. Khulusi is a co-founder of the Company and served as Executive Vice
President and Chief Operating Officer of the Company from October 1994 until
February 1996. From 1987 until October 1994, Mr. Khulusi served as Chief
Financial Officer of the Company. Mr. Khulusi currently is the Chairman and
Chief Executive Officer of Emed, LLC, a software development company. He is
the brother of Frank F. Khulusi.
Ahmed O. Alfi has served as a director of the Company since September 1994.
Mr. Alfi has served as the Chairman of the Board and Chief Executive Officer
of Alfigen, a prenatal diagnostic company, since January 1992. Since January
1996, Mr. Alfi has served as a director of SmarTalk Teleservices, a publicly
traded telecommunications service provider.
Thomas Maloof has served as a director of the Company since May 1998. Mr.
Maloof is the President of Perinatal Practice Management, Inc. From September
1997 until February 1998, Mr. Maloof served as Chief Financial Officer of
Prospect Medical Holdings. From January 1995 until September 1997, Mr. Maloof
was the Chief Executive Officer of Prime Health of Southern California. From
October 1992 until December 1994, Mr. Maloof was President of Foundation
Health, a California health plan provider.
COMPENSATION OF DIRECTORS
The Company compensates directors who are not employed by the Company or its
affiliates $5,000 per meeting, up to a maximum of four meetings per year, plus
expenses for services as a director. Under the Company's Directors' Non-
Qualified Stock Option Plan in effect during 1997, each director who was not
an employee of the Company was entitled to receive an option to purchase 2,000
shares of the Company's Common Stock upon joining the Board. After the initial
grant described above, each director would receive an additional option to
purchase 5,000 shares of the Company's Common Stock on the date of each
succeeding annual meeting of stockholders so long as the director had served
on the Board for at least one year. Options are granted at fair market value
on the date of grant and vest on the first anniversary of the date of grant.
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A list of executive officers of Registrant is included in Part I of this
report. Effective as of March 1, 1998, the Company accepted Al S. Joseph's
resignation as a director of the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file an initial report of ownership on
Form 3 and changes in ownership on Form 4 or 5 with the Securities and Exchange
Commission (the "Commission"). Such officers, directors and 10% stockholders
are also required by the Commission rules to furnish the Company with copies of
all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons the Company believes that
during 1997 all Section 16(a) filing requirements applicable to its officers,
directors and 10% stockholders were complied with except that Ahmed Alfi was one
day late in filing his Form 5. In 1996, one of the Company's directors, Sam
Khulusi, filed a late Form 4 regarding the purchase of 150,000 shares.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth, the cash and noncash compensation for each
of the last three fiscal years awarded to or earned by the Chief Executive
Officer of the Company and the other three executive officers whose
compensation exceeded $100,000 for such fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- ------------
AWARDS
OTHER ANNUAL ------------ ALL OTHER
NAME AND PRINCIPAL FISCAL SALARY BONUS COMPENSATION OPTIONS COMPENSATION
POSITION YEAR ($) ($)(1) ($)(2) (#) ($)(3)
------------------ ------ ------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frank F. Khulusi........ 1997 395,266 25,000 -- 100,000 --
Chairman and Chief 1996 303,900 -- -- 0 --
Executive Officer 1995 300,000 -- -- 0 --
Richard M.
Finkbeiner(4).......... 1997 233,063 94,653 -- 20,000 15,246
Chief Financial Officer 1996 128,195 25,000 -- 150,000(5) 18,504
1995 -- -- -- -- --
Daniel J. DeVries....... 1997 198,486 25,000 -- 15,000 --
Executive Vice
President, 1996 198,702 36,937 23,720(6) 130,000(5) --
Sales and Marketing 1995 122,418 118,189 -- 18,284 --
David R. Burcham(7)..... 1997 197,851 22,500 -- 20,000 --
Executive Vice
President, 1996 166,667 23,333 -- 120,000(5) 50,000
Operations 1995 -- -- -- -- --
</TABLE>
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(1) Reflects bonus paid during the fiscal year.
(2) "Other Annual Compensation" includes the following, to the extent that
the aggregate amount thereof exceeds the lesser of $50,000 or 10% of the
total annual salary and bonus reported for the individual; personal
benefits received by the named individuals and amounts reimbursed the
individuals during the year.
(3) Represents relocation expenses and allowances paid by the Company.
(4) Mr. Finkbeiner joined the Company in June 1996.
(5) Includes options which were repriced in 1996, including 75,000 for Mr.
Finkbeiner, 65,000 for Mr. DeVries and 60,000 for Mr. Burcham.
(6) Represents automobile allowance of $18,182 and health insurance premiums
of $5,538.
(7) Mr. Burcham joined the Company in February 1996 and resigned in May 1998.
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OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information on option grants in fiscal 1997 to
the named executive officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/SARS
SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES IN OR BASE DATE
OPTIONS/SARS FISCAL PRICE EXPIRATION VALUE
NAME GRANTED (#) YEAR(1) ($/SH) DATE ($)(2)
---- ------------ ------------ -------- ------------ -------
<S> <C> <C> <C> <C> <C>
Frank F. Khulusi........ 100,000 28.4 7.125 July 1, 2007 519,100
Richard M. Finkbeiner... 20,000 5.7 7.125 July 1, 2007 103,820
Daniel J. DeVries....... 15,000 4.3 7.125 July 1, 2007 77,865
David R. Burcham........ 20,000 5.7 7.125 July 1, 2007 103,820
</TABLE>
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(1) The Company granted 351,750 options during fiscal 1997.
(2) As suggested by the Commission's rules on executive compensation
disclosure, the Company used the Black-Scholes model of options valuation
to determine grant date present value. The Company does not advocate or
necessarily agree that the Black-Scholes model can properly determine the
value of an option. The present value calculations are based on a ten-year
option term with an expected life of six years. Assumptions include an
interest rate of 6.3%, an annual dividend yield of 0% and volatility of
80%.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE
The following table sets forth, for each of the executive officers named in
the Summary Compensation Table above, the year-end value of unexercised
options.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES
ACQUIRED UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON VALUE OPTIONS AT END OF IN-THE-MONEY OPTIONS AT
EXERCISE REALIZED FISCAL 1997 (#) END OF FISCAL 1997 (1)
-------- -------- ------------------------- -------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Frank F. Khulusi........ -- -- 8,333 91,667 $ 23,437 $257,813
Richard M. Finkbeiner... -- -- 31,165 63,835 $120,838 $230,725
Daniel J. DeVries....... -- -- 57,780 81,020 $243,743 $315,308
David R. Burcham........ -- -- 38,748 41,252 $150,696 $141,804
</TABLE>
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(1) Value based on market value of the Company's Common Stock on December 31,
1997 less the exercise price.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Frank F. Khulusi, a member of the Compensation Committee, is an executive
officer of the Company. There are no Compensation Committee interlocks between
the Company and other entities involving the Company's executive officers and
Board members who serve as executive officers of such companies.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of June 25, 1998: (i) by each of
the executive officers included in the Summary Compensation Table set forth
under the caption "Executive Compensation;" (ii) by each director; (iii) by
all directors and executive officers of the Company as a group; and (iv) by
each person known to the Company to be the beneficial owner of more than 5% of
the outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES SHARES
BENEFICIALLY BENEFICIALLY
NAME AND ADDRESS(1) OWNED OWNED
------------------- ------------ ------------
<S> <C> <C>
Frank F. Khulusi................................... 2,129,333(2) 20.9%
Sam U. Khulusi..................................... 1,911,585(3) 18.8%
Amre A. Youness.................................... 777,752(4) 7.7%
Ahmed O. Alfi...................................... 153,040(5) 1.5%
Richard M. Finkbeiner.............................. 81,916(6) *
Daniel J. DeVries.................................. 75,280(7) *
Thomas Maloof...................................... 2,000(8) *
The SC Fundamental Value Fund, L.P................. 502,755(9) 5.0%
SC Fundamental Value BVI, Ltd...................... 482,945(9) 4.8%
All directors and executive officers as a group (6
persons).......................................... 4,353,154(10) 42.1%
</TABLE>
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* Less than 1%
(1) Unless otherwise indicated, the address for each person is 2555 W. 190th
Street, Torrance, California 90504.
(2) Includes (i) 326,340 shares and 8,575 shares held in trust for the
benefit of the children of Sam Khulusi and Basimah Khulusi,
respectively, and (ii) 33,333 shares issuable within sixty days pursuant
to options granted.
(3) Includes 8,000 shares issuable within sixty days pursuant to options
granted.
(4) The address for Mr. Youness is 301 North Lake, Suite 910, Pasadena, CA
91101.
(5) Includes 8,000 shares issuable within sixty days pursuant to options
granted.
(6) Includes 51,916 shares issuable within sixty days pursuant to options
granted.
(7) Includes 75,280 shares issuable within sixty days pursuant to options
granted.
(8) Includes 2,000 shares issuable within sixty days pursuant to options
granted.
(9) Based on the most recent Schedule 13D by these, and related entities,
jointly on June 3, 1998 with the Securities and Exchange Commission. The
address for the SC Fundamental Value Fund, L.P. and SC Fundamental Value
BVI, Ltd. is 10 East 50th Street, New York, New York 10022.
(10) This figure includes outstanding shares and options described in the
preceding footnotes.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Torrance, State of California, on February 8, 1999.
CREATIVE COMPUTERS, INC.
By: /s/ Ted Sanders
-------------------------------------
Ted Sanders
Chief Financial Officer
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