SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRE IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO
SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
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 ss. 240.14a-11(c) or ss. 240.14a-12
SPEC'S MUSIC, INC.
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(Name of Registrant as Specified In Its Charter)
Not Applicable
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(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:
..................................................
[SPEC'S LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
December 10, 1996
Notice is hereby given that the Annual Meeting of Shareholders of Spec's
Music, Inc. (the "Company") will be held on Tuesday, December 10, 1996, 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:
A. To elect a board of six directors to serve until the next Annual
Meeting of Shareholders or until their successors are elected and
qualified.
B. To consider and act upon a proposal to adopt the Spec's Music,
Inc. 1996 Non-Employee Directors Stock Option Plan, as set forth
in Exhibit A to the Proxy Statement.
C. 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 25,
1996, 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 4, 1996
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 10, 1996
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 10, 1996, 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 12, 1996. The
Company's Annual Report, including audited financial statements for the fiscal
year ended July 31, 1996, 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 25, 1996, are entitled to vote at the meeting. On that date, there were
5,318,169 issued and outstanding shares of Common Stock . The holder of each
share of Common Stock is entitled to one 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 transmissions. 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 November 1, 1996, 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.
AMOUNT AND
NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- ------------------------ -------------------- --------
a) Directors and Officers
Ann Spector Lieff(1)(2)................. 1,309,698(3) 24.5%
President, Chief Executive
Officer and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Rosalind Spector Zacks(1)(4)............ 1,294,809(3) 24.2%
Vice President and Director
1666 Northwest 82nd Avenue
Miami, Florida 33126
Martin W. Spector(5).................... 105,935 2.0%
Arthur H. Hertz......................... 9,500(3) *
Cynthia C. Turk......................... 4,500(3) *
Barry J. Gibbons........................ 82,481(3) 1.5%
Jeffrey J. Fletcher..................... 51,996(3) 1.0%
All directors and officers as a group
(9 persons including those
named above)........................ 2,777,730(6) 50.2%
b) Other Beneficial Owner
Dimensional Fund Advisors, Inc. (7)..... 286,265 5.4%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
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(Notes on next page.)
* Less than one percent.
-3-
(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 86,238 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, 1996 plus shares which may be purchased under
stock options held by such person and presently exercisable or exercisable
within 60 days after November 1, 1996 as follows: Ann S. Lieff, 37,750
options; Rosalind S. Zacks, 31,750 options; Arthur H. Hertz, 4,500
options; Cynthia C. Turk, 4,500 options, Barry J. Gibbons, 82,481 options;
and Jeffrey J. Fletcher, 51,996 options.
(4) Includes 8,300 shares held by the minor children of Ms. Zacks and 86,238
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 212,977 shares which may be purchased pursuant to outstanding
stock options which are presently exercisable or exercisable within 60
days after November 1, 1996. Also includes the 86,238 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.
(7) Based solely on information contained in a Schedule 13G dated February 7,
1996 filed with the Securities and Exchange Commission, which states as
follows: Dimensional Fund Advisors Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 286,265
shares of Spec's Music, Inc. stock as of December 31, 1995, all of which
shares are held in portfolios of DFA Investment Dimensions Group Inc., a
registered open-end investment company, or in series of the DFA Investment
Trust Company, a Delaware business trust, or the DFA Group Trust and DFA
Participation Group Trust, investment vehicles for qualified employee
benefit plans, all of which Dimensional Fund Advisors Inc. serves as
investment manager. Dimensional disclaims beneficial ownership of all such
shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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, 1996, the Company's
directors and executive officers complied with all applicable filing
requirements of Section 16(a) of the Securities Exchange Act of 1934.
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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, 1996 AND DIRECTORSHIPS SINCE
- ---- ---------------- ------------------- ------
Barry J. Gibbons.............. 50 Chairman of the Board since 1996; 1995
Consultant with Festina, a business
consulting 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)......... 63 Chairman of the Board and Chief 1985
Executive Officer of Wometco
Enterprises, Inc., f/k/a WOM Enter-
prises, Inc., an entertainment
services company, since 1985
Ann Spector Lieff(3).......... 44 President and Chief Executive Officer 1979
of the Company since 1980
Martin W. Spector(3).......... 91 Chairman Emeritus since 1996; 1970
Chairman of the Board of Directors of
the Company from 1980 until 1996
Cynthia Cohen Turk(1)(2)...... 43 President of Marketplace 2000 1992
Consulting, a marketing and strategy
consulting company, since 1990; a
partner with Deloitte & Touche, an
independent public accounting firm,
between 1984 and 1990; presently a
director of Loehmann's Holdings,
Inc., One Price Clothing, Inc.,
Capital Factors, Inc., and Office
Depot, Inc.
Rosalind Spector Zacks(3)..... 46 Vice President since 1993; Executive 1979
Vice President and Treasurer of the
Company between 1981 and 1993
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(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 (the Secretary of
the Company). William Lieff (a Vice President of the Company during part
of fiscal 1996) is the husband of Ann Spector Lieff. There are no family
relationships between any other directors or executive officers of the
Company.
-5
BOARD OF DIRECTORS
GENERAL
The Board of Directors of the Company held eight meetings during fiscal
1996 and acted by written consent three times. The Board has an Audit Committee
and Stock Option and Compensation Committee. The Stock Option and Compensation
Committee met two times and the Audit Committee met one time each during fiscal
1996. The Board does not have a Nominating Committee. During fiscal 1996, each
director attended at least 75% 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
Effective in June 1996, each director who is not an officer or employee
of the Company began receiving $20,000 per year, paid quarterly, for service on
the Company's Board of Directors, regardless of the number of meetings the Board
holds or the amount of time each director must devote to the Company. Directors
who are officers or employees of the Company receive no additional compensation
for attendance at Board or committee meetings. During fiscal 1996, the Company
also paid $70,000 in consulting fees to Festina, a company controlled by the
Company's Chairman, Barry J. Gibbons. Festina provides strategic planning,
marketing and new business development services to the Company pursuant to the
terms of a consulting agreement with the Company. The Company did not make any
other payments to directors with respect to participation on Board committees or
with respect to special assignments during fiscal 1996.
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,
Mr. Hertz and Mr. Gibbons prior to the time he became an executive officer of
the Company) 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 1994, 1995, and 1996 by (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 1996 $125,000 $ 0 * 0 $3,083
PRESIDENT & CEO 1995 173,250 0 * 15,000 3,697
1994 173,250 0 * 15,000 4,511
ROSALIND SPECTOR 1996 107,550 0 * 0 3,864
ZACKS 1995 137,550 0 * 7,000 4,447
VICE PRESIDENT 1994 137,550 0 * 7,000 4,148
JEFFREY J. FLETCHER*** 1996 131,342 0 --- 208,000 ---
EXECUTIVE VICE PRESIDENT, 1995 --- --- --- --- ---
CHIEF OPERATING AND 1994 --- --- --- --- ---
FINANCIAL OFFICER
- --------------------
* 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
$851, $2,135, and $2,533 for 1996, 1995 and 1994, respectively; and for
Ms. Zacks in the amounts of $1,656, $1,692, and $2,011 for 1996, 1995
and 1994, respectively; (b) premiums paid for long-term disability
insurance for Ms. Lieff in the amounts of $942, $1,161 and $1,161 for
1996, 1995 and 1994, respectively; and for Ms. Zacks in the amounts of
$748, $922 and $922 for 1996, 1995 and 1994, respectively; and (c)
premiums paid for life insurance for Ms. Lieff in the amounts of
$1,290, $1,215, and $1,115 for 1996, 1995 and 1994, respectively; and
for Ms. Zacks in the amounts of $1,460, $1,325 and $1,215 for 1996,
1995 and 1994, respectively.
*** Mr. Fletcher receives such compensation as the principal shareholder of
Transition Strategies, Inc. ("TSI"), a consulting company with which the
Company contracts to receive his services. The Company retained the
services of TSI beginning in November 1995. Mr. Fletcher's salary
includes $15,167 associated with the grant of his stock options on January
23, 1996 at below fair market value.
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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 1996. 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 1996
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 1996 SHARE(2) DATE 5% 10%
- ---- ---------- ---------------- -------- ---- -- ---
Ann Spector Lieff 0 0% $ --- ---- $ --- $ ---
Rosalind Spector Zacks 0 0% $ --- ---- --- ---
Jeffrey J. Fletcher(4 )208,000 44% $1.3125 January 22, 2001 $ 192,005 $313,726
- --------------------
(1) The options vest at the rate of 8,666 per month beginning February 23,
1996, subject to acceleration in the event of certain mergers, sales of
assets or other change of control transactions.
(2) The exercise price is $.44 less than 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, which is
assumed to be 5 years for this purpose. 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 assumed
expiration date. Actual gains, if any, on stock option exercises will
depend on the future performance of the Common Stock.
(4) Mr. Fletcher is not an employee of the Company, but rather an employee of
TSI, a consultant to the Company. The options granted to Mr. Fletcher are
included herein because Mr. Fletcher serves as an executive officer of the
Company pursuant to the Company's consulting agreement with TSI.
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, 1996. None of the named executive
officers exercised any stock options in the year ended July 31, 1996.
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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 37,750 20,750 $ (2) $ (2)
Rosalind Spector Zacks 31,750 10,250 (2) (2)
Jeffrey J. Fletcher 51,996 156,004 3,250 9,750
- --------------------
(1) Based on a fair market value of $1.375 per share for the Common Stock, as
determined by using the closing bid quotation on July 31, 1996.
(2) Options were not in-the-money on July 31, 1996.
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, and was
decreased in fiscal 1996.
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 1996, 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 five 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%
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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 Stock Option and Compensation Committee decided not to
award options to any of the Company's executive officers, including Ms. Lieff,
during fiscal 1996 due to the Company's declining financial performance. As part
of the consulting agreements with Festina and TSI, the Board of Directors
awarded options to purchase a total of 469,766 shares of Common Stock to Barry
J. Gibbons and Jeffrey J. Fletcher, who are executive officers of the Company
and the principals of Festina and TSI, respectively.
Arthur H. Hertz
Cynthia Cohen Turk
EXECUTIVE OFFICER CONSULTING AGREEMENTS
Effective January 1, 1996, the Company entered into a consulting
agreement (the "Festina Agreement") with Barry Gibbons d/b/a Festina
("Festina"). Pursuant to the Festina Agreement, Barry J. Gibbons agreed to serve
as Chairman of the Board of the Company, devote 40% of his business time to the
Company, and provide advice on strategic planning, marketing and new business
development for the Company. The term of the Festina Agreement is three years,
although either party may terminate the Festina Agreement on 30 days' written
notice during the term. The Company has agreed to pay Festina $10,000 per month
and has granted Mr. Gibbons options to purchase 261,766 shares of the Company's
Common Stock at an exercise price of $1.125 per share. The options vest over a
three-year period in monthly installments of 7,271. In the event of certain
changes in control of the Company, the options vest immediately.
Effective January 23, 1996, the Company entered into a consulting
agreement (the "TSI Agreement") with Transition Strategies, Inc. ("TSI").
Pursuant to the TSI Agreement, TSI agreed to cause Jeffrey J. Fletcher to serve
as Executive Vice President and Chief Operating Officer for the Company on a
full-time basis, and to provide financial consulting services to the Company.
The term of the TSI Agreement is three years. During the term, the Company has
agreed to pay TSI $13,750 per month during the first year, which fee shall be
increased to $15,000 in the second year of the term. The Company has also
granted Mr. Fletcher, the principal shareholder of TSI, options to purchase
208,000 shares of the Company's Common Stock at an exercise price of $1.3125 per
share. The options vest over a two-year period in monthly installments of 8,666.
In the event of certain changes in control of the Company, the options vest
immediately.
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. On December 12, 1995,
the Board of Directors appointed members of the Stock Option and Compensation
Committee to serve until December 31, 1996. These persons are Arthur H. Hertz
and Cynthia Cohen Turk.
-10-
One officer of the Company, Barry J. Gibbons, was a member of the Stock
Option and Compensation Committee during a portion of fiscal 1996. Mr. Gibbons
abstains from voting on issues concerning the compensation of his consulting
company, Festina.
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, 1996 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, 1996
1991 1992 1993 1994 1995 1996
NASDAQ US 100 117 143 147 206 225
NASDAQ RETAIL 100 106 111 108 128 139
SPEC'S MUSIC 100 119 106 125 88 38
- --------------------
(1) Assumes that the value of the investment in the Company and each index was
$100 on July 31, 1991, 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,
1996, the total rents paid to the Trust were $152,702, excluding sales tax. The
Company entered into a new lease with the Trust on March 1, 1996. This lease was
approved by the independent members of the Board of Directors. Under the new
lease, the lease term was extended to 1999, and the annual rent was increased to
$164,160, plus applicable sales tax, subject to escalation based upon a
percentage of sales. The lease approval was based, among other things, on an
independent analysis of the applicable market rental rate for such store.
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, a Vice President of the Company
during a portion of fiscal 1996, 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, 1996, the total rents paid to the 1989 Trusts
were $152,982, excluding sales tax. 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.
BOARD OF DIRECTORS' PROPOSAL RELATING TO THE
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
In order to continue to effectively attract and retain employees and
directors, the Board of Directors adopted the Spec's Music, Inc. 1993 Incentive
Stock Plan (the "1993 Plan") and the Spec's Music, Inc. 1993 Non-Employee
Directors Stock Option Plan (the "1993 Non- Employee Plan") on September 21,
1993. The 1993 Plan and 1993 Non-Employee Plan were approved by the stockholders
at the 1993 Annual Meeting of Stockholders. Pursuant to the terms of the 1993
Non-Employee Plan, the Company was permitted to grant options to purchase an
aggregate of up to 50,000 shares of Common Stock to non-employee directors. The
Company has awarded 20,000 stock options to 3 non-employee directors since the
inception of the 1993 Non-Employee Plan. Since such time, the Company has found
that both the total number of option shares available for award and the number
of option shares allocated annually
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to each non-employee director are insufficient to adequately attract and retain
qualified non-employee directors. In order to rectify this problem, the Board of
Directors adopted the 1996 Non-Employee Directors Stock Option Plan (the "1996
Non-Employee Plan"), subject to the approval of the stockholders at the 1996
Annual Meeting of Stockholders. The 1996 Non- Employee Plan is substantially
similar to the 1993 Non-Employee Plan except as noted herein. The Board
recommends that the 1996 Non-Employee Plan be approved.
SUMMARY OF THE 1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
On June 4, 1996, the Company's Board of Directors adopted the 1996
Non-Employee Plan, subject to approval by the Company's shareholders. The
purpose of the 1996 Non- Employee Plan is to help attract, retain and compensate
highly qualified individuals, who are not employees of the Company, as members
of the Board of Directors, and to encourage the Company's Board of Directors to
maintain a personal investment in the Company. The following is a general
description of the principal features of the 1996 Non-Employee Plan. A copy of
the complete 1996 Non-Employee Plan is attached hereto as Exhibit "A."
A total of 150,000 shares of Common Stock have been reserved for
issuance under the 1996 Non-Employee Plan. As of October 25, 1996, there were
5,318,169 shares of Common Stock outstanding and the closing bid quotation for a
share of Common Stock was $1.25. In addition, there were two Non-Employee
Directors on such date. All Non-Employee Directors will receive stock options
under the 1996 Non-Employee Plan.
Under the 1996 Non-Employee Plan, members of the Board of Directors who
are not employees of the Company or any of its subsidiaries or affiliates
("Non-Employee Directors") will receive annual stock options to purchase Common
Stock in the Company pursuant to the following formula. Each Non-Employee
Director will receive a non-qualified option to purchase 20,000 shares when such
person is first elected to the Board of Directors (or when the Plan is adopted,
if the person is already a member of the Board), and will receive a
non-qualified option to purchase 2,000 shares each year that he or she is
re-elected commencing in 1996.
The exercise price for options granted under the 1996 Non-Employee Plan
may not be less than the fair market value of the Common Stock, which is defined
as the closing bid quotation for the Common Stock at the end of the day
preceding the grant. The initial 20,000 share grant of options first becomes
exercisable 30 days after the date of grant, in monthly installments of 555
shares underlying such option, with the option becoming exercisable three years
after the date of grant. The annual 2,000 share grants become exercisable one
year after the date of grant. All options expire five years after the date of
grant and the exercise price must be paid in cash. In the event of certain
corporate events or a change of control of the Company (as set forth in the 1996
Non-Employee Plan), the exercisability of options will be accelerated.
Upon a non-employee director's death or disability, all of the
non-employee director's options shall terminate. Should an individual cease to
serve as a non-employee director for any
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reason other than death or disability, the individual will have thirty days
within which to exercise those options which were exercisable as of the date the
individual ceased to serve as a director.
The Board of Directors may amend or terminate the 1996 Non-Employee
Plan; however, no amendment may increase the number of shares of Common Stock
reserved for options, extend the termination date of the 1996 Non-Employee Plan,
permit the grant of options with terms greater than five years, change the class
of persons eligible to receive options, give the Board of Directors discretion
with respect to the grant options, or permit any change or modification of the
1996 Non-Employee Plan which requires shareholder approval under Rule 16b-3 of
the Securities Exchange Act of 1934, unless the Board of Directors also obtains
the approval of the Company's shareholders to such change. Except in accordance
with the 1996 Non-Employee Plan, no amendment or termination of the 1996
Non-Employee Plan may, without the consent of the participant, impair the rights
of a participant with respect to options granted prior to such amendment or
termination. In addition, the Board of Directors may take whatever action is
necessary to assure the 1996 Non-Employee Plan's compliance with all applicable
laws.
If approved by the Company's shareholders, the 1996 Non-Employee Plan
will become effective as of June 4, 1996, and will terminate on June 4, 2001,
unless terminated earlier by the Board of Directors.
The Company granted options to purchase 20,000 shares of Common Stock to
each of its two Non-Employee Directors on June 4, 1996. Except as provided in
the New Plan Benefits table below, the amount of options received or to be
received by the directors who are not executive officers as a group is not
determinable.
Under current Federal income tax laws, stock options granted under the
1996 Non- Employee Plan will generally have the following tax consequences. The
directors will realize no income for federal income tax purposes upon the grant
of such stock options, and the Company, therefore, will receive no deduction at
such time. At the time of exercise, however, the holder generally will recognize
income, taxable as ordinary income, to the extent that the fair market value of
the Common Stock received on the exercise date exceeds the exercise price. The
Company will be entitled to a corresponding deduction for federal income tax
purposes in the year in which the stock option is exercised. If the Common Stock
is held for at least one year and one day after exercise, long term capital gain
will be realized upon disposition of such Common Stock to the extent the amount
realized on such disposition exceeds its fair market value as of the exercise
date.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
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NEW PLAN BENEFITS TABLE
1996 NON-EMPLOYEE PLAN
----------------------
NUMBER
OLLAR VALUE(1) OF UNITS
-------------- --------
NAME AND POSITION
- -----------------
Executive Group................................. -- --
Non-Executive Director Group.................... $75,000 40,000
Non-Executive Officer Employee Group............ -- --
- --------------------
(1) Represents exercise price per share of Common Stock.
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, 1996. 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.
SHAREHOLDER PROPOSALS
Shareholder proposals which are to be considered for inclusion in the
proxy materials of the Company for its 1997 Annual Meeting of Shareholders must
be received by the Company by July 18, 1997. 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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EXHIBIT "A"
SPEC'S MUSIC, INC.
1996 NON-EMPLOYEE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The purpose of this Plan is to help attract, retain and
compensate highly qualified individuals who are not current employees of Spec's
Music, Inc. (the "Company") as members of the Board of Directors and, by
encouraging ownership of a stock interest in the Company, to gain for the
Company the advantages inherent in directors having a greater personal financial
investment in the Company. Options granted under the Plan are intended to be
options which do not meet the requirements of Section 422 of the Code.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
"Annual Meeting Date" means 5:00 p.m. on the date of the annual
meeting of the Company's shareholders at which the Directors are elected.
"Board" means the Company's Board of Directors.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $.01 per share of
the Company.
"Company" refers to Spec's Music, Inc., a Florida corporation.
"Director" means a member of the Board.
"Effective Date" is the date specified in Section 15.1.
"Eligible Director" means any person who is a member of the Board and
who is neither an employee, full time or part time, of the Company, nor an
independent contractor providing services to the Company, directly or
indirectly, other than as a director.
"Fair Market Value" of the Common Stock on any date of reference
means the Closing Price on the business day immediately preceding such date of
the Common Stock. For this purpose, the
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Closing Price of the Common Stock on any business day shall be (i) if such
Common Stock is listed or admitted for trading on any United States national
securities exchange, or if actual transac- tions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation, (ii) if the Common Stock is quoted on the National
Association of Securities Dealers Automated Quotations Systems ("NASDAQ"), or
any similar system of automated dissemination of quotations of securities prices
in common use, the closing bid quotation for such day of the Common Stock on
such system, or (iii) if neither clause (i) or (ii) is applicable, the mean
between the high bid and low ask quotations for the Common Stock as reported by
the National Quotation Bureau, Incorporated if at least two securities dealers
have inserted both bid and ask quotations for the Common Stock on at least 5 of
the 10 preceding days.
"First Exercise Date" shall have the meaning set forth in Section
6(a) of this Plan.
"Initial Grant Date" means the date on which a person is first
elected as a member of the Board, or the Effective Date of this Plan in the case
of persons who were members of the Board prior to the adoption of this Plan, as
applicable.
"Option" (when capitalized) means any stock option granted under this
Plan.
"Option Agreement" means the agreement between the Company and the
Optionee for the grant of an option.
"Option Period" means the period five (5) years from the date an
Option is granted.
"Optionee" means a person to whom a stock option is granted under
this Plan or any person who succeeds to the rights of such person under this
Plan by reason of the death of such person.
"Plan" shall mean this 1996 Non-Employee Directors' Stock Option Plan
for the Company.
"Share(s)" shall mean a share or shares of the Common Stock.
3. SHARES AND OPTIONS. Subject to Section 9 of this Plan, the Company
may grant to Optionees from time to time Options to purchase an aggregate of up
to One Hundred and Fifty Thousand (150,000) Shares. Such Shares may be
authorized and unissued Shares, Shares issued and thereafter acquired by the
Company, and/or Shares bought on the market for purposes of this Plan. If any
Option granted under this Plan shall terminate, expire, or be
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cancelled or surrendered as to any Shares, new Options may thereafter be granted
covering such Shares.
4. GRANTS OF OPTIONS. Each Eligible Director shall receive an initial
grant of an Option to purchase Twenty Thousand (20,000) Shares on the Initial
Grant Date. In addition, commencing in 1996, each Eligible Director who is
re-elected to serve as a director on the Annual Meeting Date, shall be granted
an option to purchase Two Thousand (2,000) Shares each year on the Annual
Meeting Date. Upon the grant of each Option, the Company and the Eligible
Director shall enter into an Option Agreement, which shall specify the grant
date and the exercise price and shall include or incorporate by reference the
substance of the Plan and such other provisions consistent with this Plan as the
Board may determine.
5. EXERCISE PRICE. The exercise price per Share of any Option shall be
the Fair Market Value of the Shares underlying such Option
on the date such Option is granted.
6. VESTING AND EXERCISE OF OPTIONS. Each Option granted hereunder upon
an Eligible Director's re-election to the Board shall become fully exercisable
one year following its grant. An Option granted on the Initial Grant Date under
the Plan shall vest and become exercisable in installments as follows:
(a) the Options shall not vest nor be exercisable prior to the
expiration of thirty days from the Effective Date of this Agreement, or in the
case of the Options granted upon re-election of a Director, such Options shall
not vest nor be exercisable prior to the expiration of thirty days from the
Annual Meeting Date, (each, a "First Exercise Date");
(b) after the First Exercise Date and until the three years after the
Effective Date or Annual Meeting Date, as applicable, the Options shall vest and
first become exercisable at the rate of Five Hundred and Fifty-Five (555) of the
Shares underlying the Options per month;
(c) the Options to purchase the remaining twenty (20) Shares shall
vest and be exercisable three (3) years after the Effective Date or Annual
Meeting Date, as applicable;
(d) an Option shall be deemed exercised when (i) the Company has
received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate exercise price of the Shares as to
which the Option is exercised has been made, and (iii) arrangements that are
satisfactory to the Board in its sole discretion have been made for the
Optionee's payment to the Company of the amount that is necessary for the
Company to withhold in accordance with applicable Federal or state withholding
requirements. The exercise price of any Shares purchased, and any required tax
payment, shall be paid in full and
A-3
in cash, by payment in cash or by certified, cashier's or official bank check,
personal check or money order, and the Company shall not be required to deliver
certificates for such Shares until such payment has been made.
No Optionee shall be deemed to be a holder of any Shares subject to an Option,
nor shall an Optionee have any rights of a stockholder of the Company, unless
and until a stock certificate or certificates for such Shares are issued to such
person(s) under the terms of the Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 9
hereof.
7. EXERCISE SCHEDULE FOR OPTIONS.
7.1 Each Option granted hereunder upon the Initial Grant Date and
upon an Eligible Director's re-election to the Board shall be exercised in
accordance with the Plan.
7.2 Notwithstanding the foregoing provisions, each outstanding Option
shall become fully exercisable immediately:
(a) If there occurs any transaction (which shall include a series
of transactions occurring within 60 days or occurring pursuant to a plan), that
has the result that stockholders of the Company immediately before such
transaction cease to own at least 51 percent of the voting stock of the Company
or of any entity that results from the participation of the Company in a
reorganization, recapitalization, consolidation, merger, share, exchange,
liquidation or any other form of corporate transaction;
(b) If the stockholders of the Company shall approve a plan of
merger, consolidation, share exchange, reorganization, recapitalization,
liquidation or dissolution in which the Company does not survive, unless (i) the
approved merger, consolidation, share exchange, reorganization,
recapitalization, liquidation or dissolution is subsequently abandoned, or (ii)
the entity surviving or resulting from such transaction (x) is controlled by
substantially the same persons as was the Company (y) assumes all obligations of
the Company under the Option, and (z) has a financial condition and operations
substantially equivalent or superior to those of the Company immediately prior
to the transaction; or
(c) If the stockholders of the Company shall approve a plan for
the sale, lease, exchange or other disposition of all or substantially all the
property and assets of the Company (unless such plan is subsequently abandoned).
A-4
7.3 The expiration date of an Option shall be five (5) years from the
date of grant of the Option, subject to earlier termination pursuant to Section
8.
8. TERMINATION OF OPTION PERIOD. In the event an Optionee's directorship
is terminated, any Options that have not yet vested will terminate on such date.
An Optionee whose directorship is terminated for any reason other than death or
disability (as defined in the Americans With Disabilities Act of 1990 shall be
entitled to exercise any Options which are then exercisable only within the
thirty day period after the date he ceases to serve as a director; after such
thirty day period, such Options shall be null and void. In the case of
termination of the directorship by reason of the Director's death or disability
as defined in the Americans With Disabilities Act of 1990, the Option or any
portion thereof which was not exercisable on the date of termination shall
terminate on such date.
9. ADJUSTMENT OF SHARES.
9.1 Options Agreements evidencing Options shall be subject to
adjustment by the Board as to the number and price of Shares subject to such
Options in the event of changes in the outstanding Shares by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges, or other relevant changes in
capitaliza- tion occurring after the date of grant of any such Option. In the
event of any such change in the outstanding Shares, the aggregate number of
Shares available under the Plan shall be appropriately adjusted by the Board,
whose determination shall be conclusive.
9.2 Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
a direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or exercise price of the
Shares then subject to outstanding Options granted under the Plan.
9.3 Without limiting the generality of the foregoing, the existence
of outstanding Options granted under the Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other
A-5
corporate act or proceedings, whether of a similar character or otherwise.
10. TRANSFERABILITY OF OPTIONS. Each Option shall provide that such
Option may not be transferred, sold, pledged or assigned by the Optionee
otherwise than by will or the laws of descent and distribution, and each Option
shall be exercisable during the Optionee's lifetime only by the Optionee.
11. ISSUANCE OF SHARES. As a condition of any sale or issuance of Shares
upon exercise of any Option, the Board may require such agreements or
undertakings, if any, as the Board may deem necessary or advisable to assure
compliance with any applicable law or regulation including, but not limited to,
the following:
(a) A representation and warranty by the Optionee to the Company, at
the time any Option is exercised, that Optionee is acquiring the Shares to be
issued for investment and not with a view to, or for sale in connection with,
the distribution of any such Shares; and
(b) A representation, warranty and/or agreement to be bound by any
legends that are, in the opinion of the Board, necessary or appropriate to
comply with the provisions of any securities law deemed by the Board to be
applicable to the issuances of the Shares and are endorsed upon the Share
certificates.
12. RESTRICTIONS ON ISSUING SHARES. The exercise of each Option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of Shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
13. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board, which shall have the authority to adopt such rules and regulations and to
make such determinations as are not inconsistent with the Plan and as are
necessary or desirable for the implementation and administration of the Plan,
provided that the Board does not have any discretion with respect to the grant
of options under the Plan.
A-6
14. INTERPRETATION.
14.1 If any provision of the Plan should be held invalid or illegal
for any reason, such determination shall not affect the remaining provisions
hereof, but instead the Plan shall be construed and enforced as if such
provision had never been included in the Plan. Without limiting the generality
of the foregoing, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and this Plan is
intended to constitute a "Formula Plan" pursuant to Rule 16b-3(c)(2)(ii). To the
extent any provision of the Plan or action by the Board hereunder is
inconsistent with the foregoing requirements, it shall be deemed null and void
to the extent permitted by law and deemed advisable by the Board.
14.2 The determinations and the interpretation and construction of
any provision of the Plan by the Board shall be final and conclusive. This Plan
shall be governed by the laws of the State of Florida. Headings contained in
this Plan are for convenience only and shall in no manner be construed as part
of this Plan. Any reference to the masculine, feminine, or neuter gender shall
be a reference to such other gender as is appropriate.
15. TERM OF PLAN, AMENDMENT AND TERMINATION OF THE PLAN.
15.1 This Plan is effective as of June 4, 1996, the date of its
original adoption by the Board, subject to approval by the affirmative vote of
the holders of a majority of the Shares present or represented and entitled to
vote at the Annual Meeting of the Shareholders of the Company, which is
scheduled to be held on December 10, 1996. This Plan shall continue in effect
until all Options granted hereunder have expired or been exercised, unless
sooner terminated under the provisions relating thereto. No Option shall be
granted after five years from the Effective Date.
15.2 The Board may from time to time amend, terminate or suspend the
Plan or any Option; provided, however, that except to the extent provided in
Section 9, no such amendment may (i) without approval by the Company's
shareholders, increase the number of Shares reserved for Options or change the
class of persons eligible to receive Options or involve any other change or
modification requiring shareholder approval under Rule 16b-3 of the 1934 Act;
(ii) permit the granting of Options that expire beyond the maximum five-year
period described in Subsection 7.3; (iii) extend the termination date of the
Plan as set forth in Section 15.1; or (iv) give the directors discretion with
respect to the grant of options; and, provided further, that, except to the
extent otherwise specifically provided in Section 8, no amendment, termination
or suspension of the Plan or any Option issued hereunder shall substantially
impair any Option previously granted to any Optionee without the consent of such
Optionee. Any
A-7
termination or suspension of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated.
15.3 Notwithstanding anything else contained herein, the provisions
of this Plan which govern the number of Options to be awarded to Directors, the
exercise price per share under each such Option, when and under what
circumstances an Option will be granted, and the period within which each Option
may be exercised, shall not be amended more than once every six months (even
with shareholder approval), other than to conform to changes in the Code, or the
rules promulgated thereunder, and under the Employee Retirement Income Security
Act of 1974, as amended, or the rules promulgated thereunder, or with rules
promulgated by the Securities and Exchange Commission.
16. RESERVATIONS OF SHARES. The Company, during the term of the
Plan, will at all times reserve and keep available a number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
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SPEC'S MUSIC, INC.
1666 NORTHWEST 82ND AVENUE
MIAMI, FLORIDA
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
10, 1996, 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 ADN TO BE SIGNED ON OTHER SIDE)
[FOLD AND DETACH HERE]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSALS. Please mark
your votes as [X]
indicated in
this example
1. ELECTION OF DIRECTORS 2. Adoption of Spec's Music, Inc.
FOR WITHHOLD Arthur H. Hertz Ann S. Lieff Barry J. Gibbons 1996 Non-Employee Directors
all nominees AUTHORITY Martin W. Spector Rosalind S. Zacks Cunthia C. Turk Stock Option Plan.
examples to vote for
indicated all nominees
[ ] [ ] (INSTRUCTION: To withhold authority to vote for any FOR AGAINST ABSTAIN
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 ill be voted FOR the
proposals as set forth herein.
The undersigned acknowledge receipt of Notice of Annual
Meeting of Shareholders dated November 4, 1996, and the
accompanying Proxy Statement.
Dated: ,1996
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 offer. 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.
[FOLD AND DETACH HERE]