SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of l934
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 Section 240.14a-11(c) or
Section 240.14a-12
Spec's Music, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 12, 1995
Notice is hereby given that the Annual Meeting of Shareholders of
Spec's Music, Inc. (the "Company") will be held on Monday, June 12, 1995,
at 10:00 a.m., Eastern Daylight Time, at the Radisson Mart Plaza Hotel,
Salon H, 711 N.W. 72nd Avenue, Miami, Florida 33126, for the following
purposes, as described in the attached proxy statement:
1. To elect a board of six directors to serve until the next
Annual Meeting of Shareholders or until their successors
are elected and qualified.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April
17, 1995, as the record date for the determination of shareholders entitled
to notice of and to vote at the meeting and at any adjournment thereof.
Accordingly, only shareholders of record at the close of business on that
date will be entitled to vote at the meeting.
By order of the Board of Directors.
DOROTHY J. SPECTOR
Secretary
May 4, 1995
YOU ARE URGED TO COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY
IN THE ACCOMPANYING POSTAGE-FREE ENVELOPE.
SPEC'S MUSIC, INC.
1666 Northwest 82nd Avenue
Miami, Florida 33126
P.O. Box 652009, Miami, Florida 33265-2009
(305) 592-7288
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 12, 1995
This Proxy Statement has been prepared and is furnished by the
Board of Directors of Spec's Music, Inc. (the "Company") in connection with
the solicitation of proxies for the Annual Meeting of Shareholders of the
Company to be held on June 12, 1995, and at any adjournment thereof, for
the purposes set forth in the accompanying notice of meeting.
It is anticipated that this Proxy Statement and the accompanying
form of proxy will be mailed to shareholders on or about May 4, 1995. The
Company's Annual Report, including audited financial statements for the
fiscal year ended July 31, 1994, is being mailed or delivered concurrently
with this Proxy Statement. The Annual Report is not to be regarded as proxy
soliciting material.
Only holders of record of the Company's common stock, $.01 par
value (the "Common Stock"), on the books of the Company at the close of
business on April 17, 1995, are entitled to vote at the meeting. On that
date, there were 5,247,649 issued and outstanding shares of Common Stock
entitled to vote on each matter to be presented at the meeting.
Shares represented by a properly executed proxy received in time
to permit its use at the meeting or any adjournment thereof will be voted
in accordance with the instructions indicated therein. If no instructions
are indicated, the shares represented by the proxy will be voted FOR the
election of all nominees for director and, in the discretion of the proxy
holders, as to any other matter which may properly come before the meeting.
A shareholder who has given a proxy may revoke it at any time before it is
voted at the meeting by giving
written notice of revocation to the Secretary, by submitting a proxy
bearing a later date, or by attending the meeting and voting in person.
The expense of soliciting proxies will be borne by the Company.
Proxies will be solicited principally by mail, but directors, officers and
regular employees of the Company may solicit proxies personally, by
telephone or by facsimile transmission. The Company will reimburse
custodians, nominees or other persons for their out-of-pocket expenses in
sending proxy material to beneficial owners.
In determining the presence of a quorum at the Annual Meeting,
abstentions are counted and broker non-votes are not. The Company's By-Laws
provide that the affirmative vote of a majority of the shares represented
and entitled to vote on a matter shall be the act of the stockholders,
except as otherwise provided, among other things, by Florida law. The
current Florida Business Corporation Act (the "Act") provides that
directors are elected by a plurality of the votes cast and all other
matters are approved if the votes cast in favor of the action exceed the
votes cast against the action (unless the matter is one for which the Act
or the Company's Articles of Incorporation require a greater vote).
Therefore, under the Act, as to all matters to be voted on by shareholders
at the Annual Meeting, abstentions and broker non-votes have no legal
effect on whether a matter is approved.
You are requested, regardless of the number of shares you hold, to
sign the proxy and return it promptly in the enclosed envelope.
2
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock, as of March 20, 1995,
by each person known by the Company to be the beneficial owner of more than
5% of the Company's outstanding Common Stock, by each director, by each
named executive officer, and by all directors and officers of the Company
as a group. All shares were owned directly with sole voting and dispositive
power unless otherwise indicated.
SHARES OF COMMON STOCK PERCENT
NAME BENEFICIALLY OWNED OF CLASS
- ---- ---------------------- --------
a) Directors and Officers
Ann Spector Lieff (1)(2).......................................... 1,265,829(3) 24.0%
President, Chief Executive Officer and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Rosalind Spector Zacks (1)(4)..................................... 1,257,440(3) 23.8%
Vice President and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Martin W. Spector (5)............................................. 105,938 2.0%
Peter Blei........................................................ 33,683(3) *
William Lieff(6).................................................. 33,145(3) *
Arthur H. Hertz................................................... 6,250(3) *
Dorothy J. Spector(7)............................................. 5,049 *
David Hainline(8)................................................. 5,000(3) *
Leonard Turkel.................................................... 3,750(3) *
Cynthia C. Turk(9)................................................ 1,637(3) *
All directors and officers as a group
(12 persons including those named above)........................ 2,705,036(10) 50.2%
b) Other Beneficial Owner
Wellington Management Company ("WMC")
Wellington Trust Company, N.A.(11)................................ 279,988 5.3%
75 State Street
Boston, Massachusetts 02109
<FN>
(Notes on next page.)
* Less than one percent.
(1) Ms. Lieff and Ms. Zacks have entered into an agreement whereby each
has granted to the other certain first refusal rights with respect to
the Common Stock owned by each of them and certain rights to purchase
such stock in the event of death.
(2) Does not include 2,500 shares owned by Ms. Lieff's husband, as to
which Ms. Lieff disclaims beneficial ownership. Includes 8,300 shares held
by the minor children of Ms. Lieff, over which Ms. Lieff shares voting and
investment power with Mr. Lieff, and 55,369 shares held in the Spec's
Music, Inc. 401(k) Plan over which Ms. Lieff and Ms. Zacks have shared
voting and investment power in their capacities as trustees of such plan.
(3) This number represents outstanding shares of Common Stock owned by
such person as of March 20, 1995 plus shares which may be purchased
under stock options held by such person and presently exercisable or
exercisable within 60 days after March 20, 1995 as follows: Ann S.
Lieff, 27,250 options; Rosalind S. Zacks, 25,250 options; Peter Blei,
21,300 options; William Lieff, 20,550 options; Arthur H. Hertz, 1,250
options; David Hainline, 5,000 options; Leonard Turkel, 1,250 options;
and Cynthia C. Turk, 1,250 options.
(4) Includes 8,300 shares held by the minor children of Ms. Zacks and
55,369 shares held in the Spec's Music, Inc. 401(k) Plan over which Ms.
Lieff and Ms. Zacks have shared voting and investment power in their
capacities as trustees of such plan.
(5) Does not include 5,049 shares owned by Mr. Spector's wife, Dorothy J.
Spector, as to which Mr. Spector disclaims beneficial ownership.
(6) Includes 8,300 shares held by the minor children of Mr. Lieff,
over which Ms. Lieff shares voting and investment power with Mr. Lieff.
(7) Does not include 105,938 shares owned by Ms. Spector's husband, Martin W.
Spector, as to which Ms. Spector disclaims beneficial ownership.
(8) Mr. Hainline resigned from the Company effective March 31, 1995.
(9) Does not include 1,000 shares owned by Ms. Turk's husband, as to which
Ms. Turk disclaims beneficial ownership.
(10) Includes 141,484 shares which may be purchased pursuant to outstanding
stock options which are presently exercisable or exercisable within 60
days after March 20, 1995. Also includes the 55,369 shares held in the
Spec's Music, Inc. 401(k) Plan over which Ms. Lieff and Ms. Zacks have
shared voting and investment power in their capacities as trustees of
such plan.
(11) Based solely on information contained in an amendment to Schedule 13G
dated February 5, 1995 filed with the Securities and Exchange Commission.
The amendment states that such shares are owned by Wellington Trust
Company, N.A., a wholly owned subsidiary of WMC, in its capacity as
investment adviser to numerous investment counseling clients and that the
voting and dispositive power is shared.
</FN>
To the Company's knowledge, based solely on a review of the copies of
the reports furnished to the Company and written representations that no
other reports were required, during the fiscal year ended July 31, 1994,
the Company's directors and executive officers complied with all applicable
filing requirements of Section 16(a) of the Securities Exchange Act of
1934.
4
ELECTION OF DIRECTORS
The persons named in the accompanying form of proxy intend to vote all
valid proxies received in favor of the election of each of the persons
named below as nominees for director unless authority is withheld.
Directors elected at the meeting will serve until the next Annual Meeting
of Shareholders and until their successors are elected and qualified. In
the event that any nominee is unable or unwilling to serve, discretionary
authority is reserved to the persons named in the accompanying form of
proxy to vote for substitute nominees. Management does not anticipate that
such an event will occur. Each director shall be elected by a plurality of
the votes cast.
The six nominees are currently serving as directors of the Company.
BUSINESS EXPERIENCE
AGE AS OF DURING PAST FIVE YEARS DIRECTOR
NAME MAY 1, 1995 AND DIRECTORSHIPS SINCE
- ---- ----------- ---------------------- --------
Arthur H. Hertz (2)(3)................ 61 Chairman of the Board and Chief Executive 1985
Officer of Wometco Enterprises, Inc., f/k/a
WOM Enterprises, Inc., an entertainment
services company, since 1985
Ann Spector Lieff (1)................. 42 President and Chief Executive Officer of the 1979
Company since 1980
Dorothy J. Spector(1)................. 76 Secretary of the Company since 1980 1970
Martin W. Spector (1)(2)(3)........... 89 Chairman of the Board of Directors of the 1970
Company since 1980
Cynthia Cohen Turk (3)................ 41 President of Marketplace 2000 Consulting, a 1992
marketing and strategy consulting company,
since 1990; and a principal with Deloitte &
Touche, an independent public accounting
firm, between 1984 and 1990
Rosalind Spector Zacks (1)............ 44 Vice President since 1993; Executive Vice 1979
President and Treasurer of the Company
between 1981 and 1993
<FN>
(1) Ann Spector Lieff and Rosalind Spector Zacks are sisters, and are the
daughters of Martin W. Spector and Dorothy J. Spector. William Lieff
(a Vice President of the Company) is the husband of Ann Spector Lieff.
There are no family relationships between any other directors or executive
officers of the Company.
(2) Member of Stock Option and Compensation Committee and Audit Committee.
(3) Member of Audit Committee.
</FN>
5
BOARD OF DIRECTORS
GENERAL
The Board of Directors of the Company held four meetings during fiscal
1994. The Board has an Audit Committee and Stock Option and Compensation
Committee. The Stock Option and Compensation Committee and the Audit
Committee met one time each during fiscal 1994. During fiscal 1994, each
director attended all of the meetings of the Board and any committee on
which such director served.
The Stock Option and Compensation Committee sets salaries and bonuses
for officers of the Company, and determines the number of stock options to
be awarded to officers and eligible employees of the Company. The Audit
Committee performs the following principal functions: recommends to the
Board of Directors the engagement of independent auditors for the ensuing
year; reviews the scope of the annual audit; reviews with auditors the
results of the audit engagement, including review of the financial
statements and the management letter; and, reviews the scope of and
compliance with the Company's internal controls.
COMPENSATION OF DIRECTORS
Each director who is not an officer or employee of the Company
receives $500 for attendance at each meeting of the Board of Directors or
committee thereof. Directors who are officers or employees of the Company
receive no additional compensation for attendance at Board or committee
meetings. During fiscal 1994, the Company made no other payments to
directors with respect to participation on Board committees or with respect
to special assignments.
Under the 1993 Non-Employee Directors Stock Option Plan, members of
the Board of Directors of the Company who are not employees of the Company
or any of its subsidiaries or affiliates ("Non-Employee Directors") receive
stock options to purchase Common Stock in the Company. Each Non-Employee
Director (Ms. Turk and Messrs. Hertz and Turkel) received an initial
non-qualified option to purchase 5,000 shares at the time of effectiveness
of such plan. Thereafter, each future Non-Employee Director will receive a
non-qualified option to purchase 5,000 shares when such person is first
elected to the Board of Directors. In addition, each Non-Employee Director
will receive a non-qualified option to purchase 1,000 shares each
subsequent year that he or she is re-elected. The initial 5,000 share
grants become exercisable in 25% annual increments beginning one year after
grant. The 1,000 share grants become exercisable one year after grant. The
exercise price of all options is the fair market value of the Company
Common Stock at the time of the grant.
6
COMPENSATION OF OFFICERS
The following table summarizes the compensation paid or accrued by the
Company for services rendered during fiscal years 1992, 1993, and 1994 to
(i) the Company's Chief Executive Officer and (ii) each of the Company's
four other most highly compensated executive officers or significant
employees whose total annual salary and bonus exceed $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
LONG TERM
COMPENSATION
AWARDS
-------------
SECURITIES
NAME & PRINCIPAL FISCAL SALARY BONUS OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR ($) ($) COMPENSATION* OPTIONS COMPENSATION**
---------------- ------ -------- ----- ------------- ------------ --------------
ANN SPECTOR LIEFF
PRESIDENT & CEO 1994 $173,250 $ 0 * 15,000 $4,511
1993 173,250 0 * 6,000 4,809
1992 173,250 0 * 6,000 3,038
ROSALIND SPECTOR ZACKS
VICE PRESIDENT 1994 137,550 0 * 7,000 4,148
1993 137,550 0 * 6,000 4,150
1992 137,550 0 * 6,000 2,721
DAVID HAINLINE***
SR. VICE PRESIDENT 1994 118,462 0 $ 30,000 20,000 0
MERCHANDISING &
MARKETING
PETER BLEI
VICE PRESIDENT 1994 120,290 0 * 10,000 9,065
CHIEF FINANCIAL 1993 111,300 16,700 * 4,800 2,485
OFFICER AND TREASURER 1992 113,440 5,565 * 4,800 1,453
WILLIAM LIEFF
VICE PRESIDENT 1994 104,034 0 * 7,000 1,929
DEVELOPMENT 1993 99,225 14,880 * 4,800 2,215
1992 99,225 4,960 * 4,800 1,258
<FN>
(Notes on next page.)
7
* Other Annual Compensation includes reimbursement of moving expense
for Mr. Hainline. Aggregate amount of Other Annual Compensation
for each other person is less than $50,000 or 10% of such person's
annual salary and bonus.
** All Other Compensation includes:
(a) contributions to the 401(k) Plan for Ms. Lieff in the amounts
of $2,135, $2,533, and $1,713 for 1994, 1993 and 1992,
respectively; for Ms. Zacks in the amounts of $1,692, $2,011, and
$1,376 for 1994, 1993 and 1992, respectively; for Mr. Blei in the
amounts of $1565, $1,739 and $1,267 for 1994, 1993 and 1992,
respectively; and for Mr. Lieff in the amounts of $1,258, $1,550
and $1,092, for 1994, 1993 and 1992, respectively; (b) premiums
paid for long-term disability insurance for Ms. Lieff in the
amounts of $1,161, $1,161 and $290 for 1994, 1993 and 1992,
respectively; for Ms. Zacks in the amounts of $922, $922 and $230
for 1994, 1993 and 1992, respectively; for Mr. Blei in the amounts
of $758, $746 and $186 for 1994, 1993 and 1992, respectively; and
for Mr. Lieff in the amounts of $671, $665 and $166 for 1994, 1993
and 1992, respectively; (c) premiums paid for life insurance for
Ms. Lieff in the amounts of $1,215, $1,115 and $1,035 for 1994,
1993 and 1992, respectively; and for Ms. Zacks in the amounts of
$1,325, $1,215 and $1,115 for 1994, 1993 and 1992, respectively;
and (d) payments to Mr. Blei in lieu of vacation in the amount of
$6,742 for 1994.
*** Mr. Hainline resigned from the Company effective March 31, 1995.
</FN>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding the grant of stock
options to the named executive officers in fiscal year 1994. In addition,
hypothetical gains of 5% and 10% are shown for these stock options. These
hypothetical gains are based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the stock options were
granted over the full option term. No stock appreciation rights were
granted during the 1994 fiscal year.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION FOR
NUMBER OF OPTIONS GRANTED OPTION TERM(3)
OPTIONS TO EMPLOYEES IN EXERCISE PRICE -----------------------
NAME GRANTED(1) FISCAL YEAR 1994 PER SHARE(2) EXPIRATION DATE 5% 10%
- ---- ---------- ---------------- ------------ --------------- ------- -------
Ann Spector Lieff 15,000 13.8% $6.00 Oct. 24, 2002 $49,650 $122,250
Rosalind Spector Zacks 7,000 6.4% $6.00 Oct. 24, 2002 $23,170 57,050
Peter Blei 10,000 9.2% $6.00 Oct. 24, 2002 $33,100 81,500
David Hainline 20,000 18.3% $5.00 Sept. 21, 2002 $55,200 135,800
William Lieff 7,000 6.4% $6.00 Oct. 24, 2002 $23,170 57,050
<FN>
(1) All options vest in 25% increments beginning one year
after the date of grant, subject to acceleration in the
event of certain mergers, sales of assets or other
change of control transactions.
(2) The exercise price is the fair market value as of the date of grant.
(3) If the 5% or 10% annual compound stock price appreciation shown in the
table were to occur, the per share price of the Common Stock would be
$9.31/$7.76 and $14.15/$11.79 on October 24, 2002/September 21, 2002,
respectively.
</FN>
8
AGGREGATED STOCK OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Set forth below is certain information pertaining to stock options
held by the named executive officers as of July 31, 1994. None of the named
executive officers exercised any stock options in the year ended July 31,
1994.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END*
-------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ------------- ----------- -------------
Ann Spector Lieff 19,000 24,000 $3,750 $3,750
Rosalind Spector Zacks 19,000 16,000 3,750 3,750
Peter Blei 15,200 17,200 3,000 3,000
David Hainline 0 20,000 0 0
William Lieff 15,200 14,200 3,000 3,000
<FN>
* Based on a fair market value of $5.00 per share for the Common
Stock, as determined by using the closing bid quotation on July 31, 1994.
</FN>
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
GENERAL. The Company's management compensation philosophy is to
attract and retain quality executives through a combination of competitive
base salaries and performance-based bonuses. The Company also believes that
its officers and key employees should have an equity interest in the
Company, either through direct stock ownership or through ownership of
stock options. As a result, the Company grants stock options to its
officers and key employees.
BASE SALARY. The Company's approach to base compensation is to
offer competitive salaries in comparison to market standards. The Company
has conducted a market study of the salaries of officers of publicly held
companies in the Company's industry and has set officer salaries to be
competitive with these companies. Increases in base compensation are based
on the performance of the Company's executives, the performance of the
Company and salaries paid to officers of similar companies. Ms. Lieff's
salary is reviewed annually and is based on salaries paid to chief
executive officers of companies similar to the Company. Ms. Lieff's base
salary has not been increased since 1990.
BONUS COMPENSATION. The Company rewards its executive officers with
annual bonuses based on the performance of the Company. Bonuses are
generally based on a percentage of each executive's base salary. The
percentage increases as the Company surpasses a certain financial target
for annual net income. Both the percentages and the financial target are
generally established each year by the Stock Option and Compensation
Committee. For fiscal 1994, no bonuses were paid to executive officers of
the Company. Ms. Lieff has asked the Stock Option and Compensation
Committee not to grant either her or Rosalind Spector Zacks a bonus during
the last four fiscal years in order to maximize stockholder value.
9
STOCK OPTIONS. Stock options are currently the Company's principal
vehicle for payment of long-term incentive compensation. Stock options
generally are granted at the prevailing market price on the date of grant
and will have value only if the Company's stock price increases. Options
granted under the Company's employee stock option plan vest in annual 25%
increments beginning one year after the date of the grant. Grants of stock
options generally are based upon the performance of the Company, the level
of the executive's position within the Company and an evaluation of the
executive's past and expected future performance. The Company generally
grants stock options on an annual basis. The number of stock options
granted to Ms. Lieff during fiscal 1994 was based on her position and the
performance of the Company. On this basis, the Stock Option and
Compensation Committee decided to award Ms. Lieff options to purchase
15,000 shares.
Arthur H. Hertz
Martin W. Spector
Leonard Turkel
EMPLOYMENT AGREEMENTS
David Hainline was employed during fiscal year 1994 by the Company
as its Senior Vice President of Merchandising and Marketing under an
employment agreement entered into in August, 1993 (the "Agreement"). Under
the Agreement, Mr. Hainline was entitled to an annual salary of $140,000
plus a performance based bonus and other fringe benefits including
reimbursement for certain relocation related expenses and participation in
the Company's employee benefit plans. The Agreement also called for Mr.
Hainline to receive two grants of options to purchase Company Common Stock
of 20,000 shares each, one of which grants was made during fiscal year 1994
and the second of which was made in September, 1994. Effective March 31,
1995, Mr. Hainline resigned from the Company and is not entitled to receive
any further compensation, including any severance payment, from the
Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has a Stock Option and Compensation Committee which sets
compensation levels for the Company's executive officers. One officer of
the Company, Mr. Martin W. Spector, is a member of the Stock Option and
Compensation Committee. Mr. Spector is also the father of Ann Spector Lieff
and Rosalind Spector Zacks, and the father-in-law of William Lieff, all of
whom are officers of the Company. Mr. Spector abstains from voting on
issues concerning his own proposed compensation.
10
STOCK PERFORMANCE GRAPH
In accordance with Securities and Exchange Commission regulations,
the following graph compares the cumulative total shareholder return to the
Company's stockholders during the five year period ended July 31, 1994 to
the NASDAQ Index (U.S. Stocks) and a NASDAQ Retail Trade Stocks Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (1)
AMONG SPEC'S MUSIC, INC., NASDAQ (U.S.) AND NASDAQ RETAIL
FOR THE FIVE FISCAL YEARS ENDED JULY 31, 1994
1989 1990 1991 1992 1993 1994
NASDAQ US 100 98 116 136 166 170
NASDAQ RETAIL 100 113 151 158 166 163
SPEC'S MUSIC 100 97 60 71 64 75
(1) Assumes that the value of the investment in the Company and each index
was $100 on July 31, 1989, and that all dividends are reinvested.
11
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company leases one of its stores from the Martin W. Spector
Irrevocable Trust (the "Trust"). Dorothy J. Spector, Secretary of the
Company, is a trustee of the Trust, along with her daughters, Ann Spector
Lieff and Rosalind Spector Zacks, and her two sons. Ms. Lieff, Ms. Zacks,
and their two brothers are the beneficiaries of the Trust. During the year
ended July 31, 1994, the total rents paid to the Trust were $143,000,
including sales tax. The lease expires October 31, 1995. The lease provides
over the remainder of the term for annual rental payments of $134,250 plus
applicable sales tax. The independent members of the Board of Directors
have approved in principle the expansion of such store by the addition of
approximately 5,000 sq. ft. at an estimated cost to the Company of
approximately $810,000 and the extension of the Company's lease to 2010,
with three successive five-year options to renew. Under the proposed lease,
annual rent would be increased to $182,000, plus applicable sales tax,
subject to escalation based upon a percentage of sales. Such approval was
based, among other things, on an independent analysis of the applicable
market rental rate for such store. The proposed store expansion and lease
is subject to negotiation of definitive agreements and further review by
the independent members of the Board of Directors.
During fiscal 1994, the Company, as lessee, and the Rosalind S. Zacks
Family 1989 Trust and the Lieff Family 1989 Trust (collectively, the "1989
Trusts"), as lessor, executed a lease for a store in St. Petersburg,
Florida. Ms. Lieff is the trustee, and Ms. Zacks' son is the beneficiary,
of the Rosalind S. Zacks Family 1989 Trust. William A. Lieff, Vice
President of the Company and the spouse of Ms. Lieff, is the trustee, and
Ms. Lieff's daughter is the beneficiary, of the Lieff Family 1989 Trust.
During the year ended July 31, 1994, the total rents paid to the 1989
Trusts were $154,000. The lease expires on July 31, 2000 and provides the
Company with the right to renew the lease for two additional five-year
terms under the same terms and conditions as set forth in the initial term.
The lease provides for an annual minimum rental of $140,000, plus capped
cost-of-living adjustments commencing in the fourth year of the lease term,
and additional rent based upon a percentage of gross sales from the leased
premises.
In addition, under each of the leases described above, the Company
is, or will be, responsible for all expenses incurred in connection with
maintenance, real estate taxes and insurance of the respective properties.
The Company believes that the terms of the leases are, or will be, no less
favorable to the Company than would be obtainable from unaffiliated
parties.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected the firm of Deloitte & Touche
LLP, Certified Public Accountants, Broward Financial Centre, 500 East
Broward Blvd., Suite 900, Fort Lauderdale, Florida 33394-3073, as
independent public accountants of the Company for the ensuing year. The
firm was the independent public accountants of the Company for the fiscal
year ended July 31, 1994. A representative of Deloitte & Touche LLP is
expected to be present at the meeting with the opportunity
12
to make a statement if such representative desires to do so and is
expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals which are to be considered for inclusion in the
proxy materials of the Company for its 1996 Annual Meeting of Shareholders
must be received by the Company by January 5, 1996. Such proposals must
comply with requirements as to the form and substance established by
applicable law and regulations in order to be included in the proxy
statement.
ADDITIONAL INFORMATION
The Board of Directors is not aware of any matters to be presented at
the meeting other than the matters described herein and does not intend to
bring any other matters before the meeting. However, if any other matters
should come before the meeting, or any adjournment thereof, the persons
named in the enclosed proxy will have discretionary authority to vote all
proxies in accordance with their best judgment.
Kindly date, sign and return the enclosed proxy card.
By Order of the Board of Directors
DOROTHY J. SPECTOR
Secretary
13
SPEC'S MUSIC, INC.
1666 Northwest 82nd Avenue
Miami, Florida 33126
THIS PROXY IS SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Martin W. Spector and Dorothy J. Spector,
and each of them, with power of substitution, proxies of the undersigned,
to vote all the shares of common stock of Spec's Music, Inc. which the
undersigned would be entitled to vote at the Annual Meeting of Shareholders
to be held on June 12, 1995, or any adjournment thereof, upon the matter
referred to on the reverse side and, in their discretion, upon any other
business as may come before the meeting.
(Continued and to be signed on other side)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
1. ELECTION OF DIRECTORS
Arthur H. Hertz Ann S. Lieff Dorothy J. Spector
Martin W. Spector Rosalind S. Zacks Cynthia C. Turk
FOR WITHHOLD
all nominees authority to vote
except as for all nominees
indicated
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for any individual
nominee, strike a line through that nominee's
name in the list above).
This Proxy when properly executed will be voted in the
manner directed herein by the undersigned shareholder.
If no direction is made, this proxy will be voted FOR the
proposal as set forth herein.
The undersigned acknowledges receipt of Notice of Annual
Meeting of Shareholders dated May 4, 1995, and the
accompanying Proxy Statement.
Dated:_________________________________________, 1995
_____________________________________________________
Signature
Please sign exactly as name appears herein. When
shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation,
please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.