PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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240.14a-12
SPEC'S MUSIC, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
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-----------------------------------------------------------------------
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14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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[SPEC'S LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 12, 1995
Notice is hereby given that the Annual Meeting of Shareholders of
Spec's Music, Inc. (the "Company") will be held on Tuesday, December 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 seven 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 October 16,
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
November 15, 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 520248 Miami, Florida 33152-0248
(305) 592-7288
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF SHAREHOLDERS
December 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 December 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 November 17, 1995. The
Company's Annual Report, including audited financial statements for the fiscal
year ended July 31, 1995, 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
October 16, 1995, are entitled to vote at the meeting. On that date, there were
5,247,762 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 Emissions. The Company will reimburse
-1-
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 October 31, 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)....................................... 1,283,895(3) 24.3%
President, Chief Executive
Officer and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Rosalind Spector Zacks(1)(4).................................. 1,270,506(3) 24.1%
Vice President and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Martin W. Spector(5).......................................... 105,938 2.0%
Peter Blei(6)................................................. 12,668 *
William Lieff(7).............................................. 39,608(3) *
Arthur H. Hertz............................................... 6,250(3) *
Dorothy J. Spector(8)......................................... 5,049 *
David Hainline(9)............................................. 0 *
Cynthia C. Turk(10)........................................... 1,637(3) *
Barry Gibbons................................................. 0 *
All directors and officers as a group
(12 persons including those
named above).............................................. 2,709,042(11) 50.2%
b) Other Beneficial Owner
Wellington Management Company ("WMC")
Wellington Trust Company, N.A.(12)............................ 279,988 5.3%
75 State Street
Boston, Massachusetts 02109
<FN>
- --------------------
(Notes on next page.)
-3-
* 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 or presently exercisable options to
purchase 26,800 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 62,935 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 November 1, 1995 plus shares which may be purchased under
stock options held by such person and presently exercisable or
exercisable within 60 days after November 1, 1995 as follows: Ann S.
Lieff, 37,750 options; Rosalind S. Zacks, 30,750 options; William Lieff,
26,800 options; Arthur H. Hertz, 1,250 options; and Cynthia C. Turk,
1,250 options.
(4) Includes 8,300 shares held by the minor children of Ms. Zacks and 62,935
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) Mr. Blei resigned from the Company effective August 11, 1995.
(7) Includes 8,300 shares held by the minor children of Mr. Lieff, over which
Ms. Lieff shares voting and investment power with Mr. Lieff. Does not
include 1,177,949 shares or presently exercisable options to purchase
37,750 shares owned by Mr. Lieff's wife, Ann Spector Lieff, as to which
Mr. Lieff disclaims beneficial ownership.
(8) Does not include 105,938 shares owned by Ms. Spector's husband, Martin W.
Spector, as to which Ms. Spector disclaims beneficial ownership.
(9) Mr. Hainline resigned from the Company effective March 31, 1995.
(10) Does not include 1,000 shares owned by Ms. Turk's husband, as to which
Ms. Turk disclaims beneficial ownership.
(11) Includes 150,234 shares which may be purchased pursuant to outstanding
stock options which are presently exercisable or exercisable within 60
days after November 1, 1995. Also includes the 62,935 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.
(12) 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, 1995, the Company's
directors and executive officers complied with all applicable filing
requirements of Section 16(a) of the Securities Exchange Act of 1934, except
that a Form 5 for each of the following people was filed one day late: Peter
Blei (two transactions), Vicki Carmichael (two transactions), Jeff Clifford (two
transactions), Arthur Hertz (one transaction), Ann Leiff (ten transactions),
William Leiff (four transactions), Cynthia Turk (one transaction), Leonard
Turkel (one transaction) and Rosalind Zacks (eight transactions).
-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 NOVEMBER 1, 1995 AND DIRECTORSHIPS SINCE
- ---- ---------------- -------------------- ------
Barry Gibbons(1).................... 49 Consultant with Festina, a business consulting 1995
company, since 1993; Chairman and Chief Executive
Officer of Burger King Corporation, a fast food
business, between 1989 and 1993
Arthur H. Hertz(1)(2)............... 62 Chairman of the Board and Chief Executive Officer 1985
of Wometco Enterprises, Inc., f/k/a WOM
Enterprises, Inc., an entertainment services
company, since 1985
Ann Spector Lieff(3)................ 43 President and Chief Executive Officer of the 1979
Company since 1980
Dorothy J. Spector(3)............... 76 Secretary of the Company since 1980 1970
Martin W. Spector(3)................ 90 Chairman of the Board of Directors of the Company 1970
since 1980
Cynthia Cohen Turk(2)............... 42 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(3)........... 45 Vice President since 1993; Executive Vice 1979
President and Treasurer of the Company between
1981 and 1993
<FN>
- ------------------------
(1) Member of Stock Option and Compensation Committee.
(2) Member of Audit Committee.
(3) 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.
</FN>
-5-
BOARD OF DIRECTORS
GENERAL
The Board of Directors of the Company held eight meetings during fiscal
1995. The Board has an Audit Committee and Stock Option and Compensation
Committee. The Stock Option and Compensation Committee met three times and the
Audit Committee met one time each during fiscal 1995. During fiscal 1995, 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 1995, 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 Gibbons) 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 1993, 1994, and 1995 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 $100,000.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
LONG TERM
COMPENSATION
AWARDS
------------
OTHER SECURITIES ALL
NAME & PRINCIPAL FISCAL SALARY BONUS ANNUAL UNDERLYING OTHER
POSITION YEAR ($) ($) COMPENSATION OPTIONS COMPENSATION**
- --------------------- ------ --------- --------- ------------ ----------- ------------
ANN SPECTOR LIEFF 1995 $173,250 $ 0 * 15,000 $3,697
PRESIDENT & CEO 1994 173,250 0 * 15,000 4,511
1993 173,250 0 * 6,000 4,809
ROSALIND SPECTOR 1995 137,550 0 * 7,000 4,447
ZACKS 1994 137,550 0 * 7,000 4,148
VICE PRESIDENT 1993 137,550 0 * 6,000 4,150
DAVID HAINLINE*** 1995 104,462 0 * 20,000 485
SR. VICE PRESIDENT 1994 118,462 0 $ 41,974 20,000 0
MERCHANDISING &
MARKETING
PETER BLEI**** 1995 122,430 6,120 10,000 6,339
VICE PRESIDENT 1994 120,290 0 * 10,000 9,065
CHIEF FINANCIAL 1993 111,300 16,700 * 4,800 2,485
OFFICER AND TREASURER
WILLIAM LIEFF 1995 105,180 0 * 7,000 1,561
VICE PRESIDENT 1994 104,034 0 * 7,000 1,929
DEVELOPMENT 1993 99,225 14,880 * 4,800 2,215
<FN>
- --------------------
(Notes on next page.)
* Other Annual Compensation includes reimbursement of moving expenses
($30,000) plus reimbursement for the payment of taxes on such
compensation ($11,979) 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.
-7-
** All Other Compensation includes:
(a) contributions to the 401(k) Plan for Ms. Lieff in the amounts of
$1,500, $2,135, and $2,533 for 1995, 1994 and 1993, respectively; for
Ms. Zacks in the amounts of $2,141, $1,692, and $2,011 for 1995, 1994
and 1993, respectively; for Mr. Blei in the amounts of $2,050, $1,565
and $1,739 for 1995, 1994 and 1993, respectively; and for Mr. Lieff in
the amounts of $910, $1,258 and $1,550, for 1995, 1994 and 1993,
respectively; (b) premiums paid for long-term disability insurance for
Ms. Lieff in the amounts of $1,072, $1,161 and $1,161 for 1995, 1994
and 1993, respectively; for Ms. Zacks in the amounts of $851, $922 and
$922 for 1995, 1994 and 1993, respectively; for Mr. Hainline in the
amount of $1,074 for 1995; for Mr. Blei in the amounts of $757, $758
and $746 for 1995, 1994 and 1993, respectively; and for Mr. Lieff in
the amounts of $651, $671 and $665 for 1995, 1994 and 1993,
respectively; (c) premiums paid for life insurance for Ms. Lieff in
the amounts of $1,325, $1,215 and $1,115 for 1995, 1994 and 1993,
respectively; and for Ms. Zacks in the amounts of $1,455, $1,325 and
$1,215 for 1995, 1994 and 1993, respectively; and (d) payments to Mr.
Blei in lieu of vacation in the amount of $3,532 and $6,742 for 1995
and 1994.
*** Mr. Hainline resigned from the Company effective March 31, 1995.
**** Mr. Blei resigned from the Company effective August 11, 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 1995. 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 1995
fiscal year.
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS GRANTED EXERCISE PRICE APPRECIATION FOR
OPTIONS TO EMPLOYEES IN PRICE PER EXPIRATION OPTION TERM(3)
NAME GRANTED(1) FISCAL YEAR 1995 SHARE(2) DATE 5% 10%
- ---- ---------- ---------------- -------- ---- -- ---
Ann Spector Lieff 15,000 13.4% $4.50 September 30, 2004 $42,600 $107,400
Rosalind Spector Zacks 7,000 6.3% $4.50 September 30, 2004 19,880 50,120
Peter Blei 10,000 8.9% $4.50 September 30, 2004 28,400 71,600
David Hainline 20,000 17.9% $4.50 September 30, 2004 56,800 143,200
William Lieff 7,000 6.3% $4.50 September 30, 2004 19,880 50,120
<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) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date that the respective options were granted
through their expiration date. Actual gains, if any, on stock option
exercises will depend on the future performance of the Common Stock.
</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, 1995. None of the named executive
officers exercised any stock options in the year ended July 31, 1995.
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
-------------------------- ---------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Ann Spector Lieff 27,250 30,750 $ (2) $ (2)
Rosalind Spector Zacks 27,250 14,750 (2) (2)
Peter Blei 21,300 21,100 (2) (2)
David Hainline 0 0 0 0
William Lieff 21,200 15,200 (2) (2)
<FN>
- --------------------
(1) Based on a fair market value of $3.50 per share for the Common Stock, as
determined by using the closing bid quotation on July 31, 1995.
(2) Options were not in-the-money on July 31, 1995.
</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
-9-
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 1995, no bonuses were
paid to executive officers of the Company except for Mr. Blei. 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.
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 1995 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
Barry Gibbons
EMPLOYMENT AGREEMENTS
David Hainline was employed during fiscal year 1995 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. Prior to June 12,
1995, the members of the Stock Option and Compensation Committee were as
follows: Arthur H. Hertz, Martin W. Spector and
-10-
Leonard Turkel. Mr. Turkel resigned from the Company's Board of Directors in May
1995. In addition, on June 12, 1995, the Board of Directors appointed members of
the Stock Option and Compensation Committee to serve until December 31, 1995.
These persons are Arthur H. Hertz and Barry Gibbons.
One officer of the Company, Mr. Martin W. Spector, was a member of the
Stock Option and Compensation Committee during fiscal 1995. 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.
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, 1995 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, 1995
1990 1991 1992 1993 1994 1995
NASDAQ US 100 118 139 169 174 243
NASDAQ RETAIL 100 133 140 147 144 171
SPEC'S MUSIC 100 62 73 65 77 54
<FN>
- --------------------
(1) Assumes that the value of the investment in the Company and each index was
$100 on July 31, 1990, and that all dividends are reinvested.
</FN>
-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,
1995, the total rents paid to the Trust were $154,000, including sales tax. The
lease expired October 31, 1995. The independent members of the Board of
Directors have approved in principle the expansion of such store by the addition
of approximately 5,000 square feet 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. Until such time, the Company is leasing the store on a
month-to-month basis at the rental it paid just prior to the lease's expiration.
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,
1995, the total rents paid to the 1989 Trusts were $152,000. 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, 1995. A
representative of Deloitte & Touche LLP is expected to be present at the meeting
with the opportunity to make a statement if such representative desires to do so
and is expected to be available to respond to appropriate questions.
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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 July 18, 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
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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
December 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
FOR all nominees except as indicated [X]
WITHHOLD AUTHORITY to vote for all nominees [X]
Arthur H. Hertz Ann S. Lieff Dorothy J. Spector Barry Gibbons
Martin W. Spector Rosalind S. Zacks Cynthia C. Turn
(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 purposes as set forth herein.
The undersigned acknowledges receipt of Notice of Annual Meeting of
Shareholders dated November 15, 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.