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 Section 240.14a-11(c) or Section
240.14a-12
EUROPEAN MICRO HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:____________
(3) Filing Party:_________________________________________
(4) Date Filed:___________________________________________
<PAGE>
EUROPEAN MICRO HOLDINGS, INC.
6073 N.W. 167th Street, Unit C-25
Miami, Florida 33015
Dear Stockholder:
You are cordially invited to attend the 1998 Annual Meeting of
Stockholders of European Micro Holdings, Inc. The annual meeting will be held on
Monday, November 16, 1998 at 2:00 p.m., local time, at the Intercontinental
Hotel, 100 Chopin Plaza, Miami, Florida 33131.
Your vote is important and I urge you to vote your shares by proxy,
whether or not you plan to attend the meeting. After you read this proxy
statement, please indicate on the proxy card the manner in which you want to
have your shares voted. Then date, sign and mail the proxy card in the
postage-paid envelope that is provided. If you sign and return your proxy card
without indicating your choices, it will be understood that you wish to have
your shares voted in accordance with the recommendations of the Company's Board
of Directors.
We hope to see you at the meeting.
Sincerely,
/s/ John B. Gallagher
---------------------
John B. Gallagher,
Co-Chairman and Co-President
October 30, 1998
<PAGE>
EUROPEAN MICRO HOLDINGS, INC.
6073 N.W. 167th Street, Unit C-25
Miami, Florida 33015
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 16, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"ANNUAL MEETING") of European Micro Holdings, Inc. (the "COMPANY") will be held
at the Intercontinental Hotel, 100 Chopin Plaza, Miami, Florida 33131 on Monday,
November 16, 1998 at 2:00 p.m., local time, for the following purposes, as more
fully described in the attached Proxy Statement:
1. To elect two Class I directors, each for a term of three years; and
2. To consider any other matters that may properly come before the
Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on October 23, 1998
as the record date for determining the stockholders entitled to notice of and to
vote at the Annual Meeting or at any adjournment thereof. A complete list of the
stockholders entitled to vote at the Annual Meeting will be open for examination
by any stockholder during ordinary business hours for a period of ten days prior
to the Annual Meeting at the executive offices of the Company, 6073 N.W. 167th
Street, Unit C-25, Miami, Florida 33015.
You are cordially invited to attend the Annual Meeting in person. In order
to ensure your representation at the meeting, however, please promptly complete,
date, sign and return the enclosed proxy in the accompanying envelope. If you
should decide to attend the Annual Meeting and vote your shares in person, you
may revoke your proxy at that time.
By Order of the Board of Directors,
/s/ John B. Gallagher
---------------------
John B. Gallagher,
Co-Chairman and Co-President
October 30, 1998
<PAGE>
EUROPEAN MICRO HOLDINGS, INC.
6073 N.W. 167th Street, Unit C-25
Miami, Florida 33015
---------------------
PROXY STATEMENT
October 30, 1998
-------------------------
PROXY SOLICITATION AND VOTING INFORMATION
The accompanying proxy is solicited by the Board of Directors of European
Micro Holdings, Inc. (the "COMPANY") for use at the 1998 Annual Meeting of
Stockholders (the "ANNUAL MEETING") to be held on Monday, November 16, 1998 at
the Intercontinental Hotel, 100 Chopin Plaza, Miami, Florida 33131 at 2:00 p.m.,
local time, and at any adjournment or postponement thereof. The proxies will be
voted as specified if properly signed, received by the Secretary of the Company
prior to the close of voting at the Annual Meeting, and not revoked. If no
direction is given in the proxy, it will be voted "FOR" the election of the
directors nominated by the Board of Directors. The Company has not received
timely notice of any stockholder proposals for presentation at the Annual
Meeting as required by Section 14a-4(c) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Therefore, with respect to any other item of
business that may come before the Annual Meeting, the proxy holders have the
right to and will vote in accordance with their judgment.
A stockholder who has returned a proxy may revoke it at any time before it
is voted at the Annual Meeting by delivering a revised proxy bearing a later
date, by voting by ballot at the Annual Meeting, or by delivering a written
notice withdrawing the proxy to the Secretary of the Company. This notice may be
mailed to the Secretary at the address set forth above or may be given to the
inspector of election at the Annual Meeting.
This Proxy Statement, together with the accompanying proxy, is first being
mailed to stockholders on or about October 30, 1998. The cost of this
solicitation of proxies will be borne by the Company. In addition to soliciting
proxies by mail, directors, officers and employees of the Company, without
receiving additional compensation for these services, may solicit proxies by
telephone, in person or by other means. Arrangements also will be made with
brokerage firms and other custodians, nominees and fiduciaries to forward proxy
soliciting material to the beneficial owners of common stock, par value $0.01
per share, of the Company ("Common Stock") held of record by such persons and
the Company will reimburse such brokerage firms, custodians, nominees and
fiduciaries for reasonable out-of-pocket expenses incurred by them in doing so.
The cost of this proxy solicitation will consist primarily of printing, legal
fees, and postage and handling.
Holders of record of Common Stock at the close of business on October 23,
1998 (the "Record Date") are entitled to vote at the Annual Meeting. On that
date, 4,933,900 shares of Common Stock were outstanding. The presence, in person
or by proxy, of stockholders holding at least a majority of the shares of stock
entitled to be voted will constitute a quorum for the transaction of business at
the Annual Meeting. Stockholders are entitled to cast one vote per share on each
matter presented for consideration and action at the Annual Meeting.
Approval of the proposals to be brought before the Annual Meeting,
including the election of directors, will require the affirmative vote of at
least a majority in voting interest of the stockholders present in person or by
proxy at the Annual Meeting and entitled to vote thereon. Votes may be cast in
favor of or withheld from the nominees for director. Abstentions may be
specified as to any proposal brought before the Annual Meeting, other than the
election of directors. An abstention will have the effect of a negative vote,
but if a broker indicates that it does not have authority to vote certain shares
(so-called "BROKER NON-VOTES"), those shares will not be considered present and
entitled to vote with respect to that proposal and therefore will have no effect
upon the outcome of the vote.
<PAGE>
BOARD OF DIRECTORS AND ELECTION OF DIRECTORS
The Board of Directors of the Company (the "Board of Directors") consists
of six members, divided into three classes. The terms of office of the three
classes of directors (Class I, Class II and Class III) end in successive years.
The terms of the Class I directors expire this year and their successors are to
be elected at the Annual Meeting for a three-year term expiring in 2001. The
terms of the Class II and Class III directors do not expire until 1999 and 2000,
respectively.
The Board of Directors has nominated Laurence Gilbert and Bernadette
Spofforth for election as Class I directors. The accompanying proxy will be
voted for the election of these nominees, unless authority to vote for one or
more nominees is withheld. In the event that any of the nominees is unable or
unwilling to serve as a director for any reason (which is not anticipated), the
proxy will be voted for the election of any substitute nominee designated by the
Board of Directors. The nominees for directors have previously served as members
of the Board of Directors of the Company.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors unanimously recommends a vote "FOR" the election of
each of the Class I nominees.
<TABLE>
<CAPTION>
CLASS I DIRECTORS--NOMINEES FOR TERMS TO EXPIRE IN 2001
<S> <C>
Laurence Gilbert Mr. Gilbert has been a Director of the Company since January 1998. He
Age 53 has been Managing Director of European Micro Plc, a wholly-owned
subsidiary of the Company ("European Micro UK"), since 1996. He was
Finance Director to a group (the "Group") of related companies called the
Micro Computer Center Group(1) from 1995 to 1996. He served as a
management consultant from 1994 to 1995 and Managing Director of Gilbert
Lawton Ltd. from 1991 to 1994. Mr. Gilbert is a Chartered Accountant.
Bernadette Spofforth Ms. Spofforth has been a Director of the Company since January 1998.
Age 29 She has been Director of Sales of European Micro UK since 1996 and
served as Sales Manager of European Micro UK from 1991 to 1994. Ms.
Spofforth was a Sales Executive with Cavelle Data Systems Ltd. from 1988
to 1991.
CONTINUING CLASS II DIRECTOR--PRESENT TERM EXPIRES IN 1999
Kyle R. Saxon Mr. Saxon has been a Director of the Company since January 1998. He
Age 47 has also been a Director of European Micro UK since March 1998. He
has been a shareholder and vice president with the law firm of Catlin,
Saxon, Tuttle and Evans, P.A. since 1988. Mr. Saxon has a Bachelor of Arts
and a Juris Doctorate from the University of Florida.
2
<PAGE>
Barrett Sutton Mr. Sutton has been a Director of the Company since February 1998. He
Age 47 has also been a Director of European Micro UK since March 1998. Since
January 1, 1998, he has been a partner at the law firm of Tuke Yopp &
Sweeney. Prior to that he was an attorney, Executive Vice-President and
General Counsel for General Capital Corporation and Gen Cap America, Inc.
since 1995. He practiced law with the firm of White & Reasor from 1981 to
1994. Mr. Sutton has a Bachelor of Arts from Vanderbilt University and a
Juris Doctorate from the University of Virginia.
CONTINUING CLASS III DIRECTORS--PRESENT TERM EXPIRES IN 2000
John B. Gallagher Mr. Gallagher is co-founder of the Company and European Micro UK. He has
Age 43 served as Co-Chairman, Co-President and Director of the Company since it
was formed in December 1997. Mr. Gallagher has also served as Co-Chairman
and Director of European Micro UK since it was formed in 1991. He was a
Director and President of Ameritech Exports from 1992 to 1997, and
President of American Micro Computer Center since 1989. Mr. Gallagher is a
non-practicing attorney with a Bachelor of Arts and a Juris Doctorate from
the University of Florida.
Harry D. Shields Mr. Shields is co-founder of the Company and European Micro UK. He has
Age 48 served as Co-Chairman, Co-President and Director of the Company since it
was formed in December 1997. Mr. Shields has also served as Co-Chairman
and Director of European Micro UK since it was formed in 1991. He has
served as President of Technology Express since 1986, and was a Director
of Ameritech Exports from 1992 to 1997. Mr. Shields has a Bachelor of Arts
from DePaul University and a Masters of Science from the University of
Tennessee.
</TABLE>
- --------------------------
(1) The Group was comprised of European Micro UK, Technology Express, Inc. in
Nashville, Tennessee, American Surgical Supply Corp. of Florida d/b/a American
Micro Computer Center in Miami, Florida, and, until August 1, 1997, Ameritech
Exports Inc. in Miami, Florida and Ameritech Argentina S.A. in Buenos Aires,
Argentina. Harry D. Shields owns all of the outstanding capital stock of
Technology Express, Inc. and, until August 1, 1997, had an ownership interest in
Ameritech Exports Inc. and Ameritech Argentina S.A. John B. Gallagher has an
ownership interest in American Surgical Supply Corp. and, until August 1, 1997,
had an ownership interest in Ameritech Exports, Inc. and Ameritech Argentina
S.A.
MEETINGS AND COMMITTEES OF THE BOARD
During the fiscal year ended June 30, 1998 ("FISCAL 1998"), the Board of
Directors met on one occasion. This Board meeting was attended by all of the
members of the Board. None of the members of the Board attended less than 75% of
the aggregate of the total number of meetings of the Board and the total number
of meetings of all committees on which such members served. The Board has three
standing committees: the Audit, Compensation and Stock Option Committees. The
Board does not have a nominating committee.
The Audit Committee currently consists of Laurence Gilbert, Barrett Sutton
and Kyle Saxon. This committee did not meet during Fiscal 1998. It has met on
two occasions since the end of Fiscal 1998 to review the financial results of
Fiscal 1998. This committee recommends annually to the Board the appointment of
the independent auditors of the Company, discusses and reviews the scope and
fees of the annual audit and reviews the results thereof with the independent
auditors, reviews and approves non-audit services of the independent auditors,
reviews compliance with existing major accounting and financial reporting
policies of the Company, reviews the adequacy of the financial organization of
the Company, and reviews management's policies and procedures relating to the
adequacy of the Company's internal accounting controls and compliance with
applicable laws relating to accounting practices.
3
<PAGE>
The Compensation Committee currently consists of John B. Gallagher, Harry
D. Shields, Barrett Sutton and Kyle Saxon. This committee did not meet during
Fiscal 1998. This committee recommends to the Board the compensation
arrangements for the Company's officers.
The Stock Option Committee currently consists of Barrett Sutton and
Kyle Saxon. This committee met on one occasion during Fiscal 1998, which meeting
was unanimously attended by the members thereof. This committee recommends to
the Board the adoption of any employee benefit plans and administers the 1998
Stock Incentive Plan and the 1998 Employee Stock Purchase Plan and the grant of
stock options or other benefits under such plans.
COMPENSATION OF DIRECTORS
Non-employee directors receive $1,000 for attendance at Board meetings
whether in person or by telephone and are reimbursed for all out-of-pocket
expenses incurred in attending such meetings. In addition, each non-employee
director receives options to purchase (i) 10,000 shares of Common Stock of the
Company in connection with his or her appointment to the Board and (ii) 5,000
shares of Common Stock of the Company each year thereafter that such
non-employee director serves on the Board. The options granted to the Company's
initial non-employee directors will have an exercise price of $10.00 per share
(the price of such shares in the Company's initial public offering). Options
granted in subsequent years will be priced no less than 100% of the fair market
value on the date of grant. Options granted to non-employee directors will be
non-statutory options and will become exercisable after one year of service
(unless otherwise determined by the Board or in the event of a change of control
of the Company) on the Board and will be exercisable for ten years from the date
of grant, except that options exercisable at the time of death may be exercised
for twelve months thereafter. Neither the Board nor any committee thereof has
any discretion with respect to options granted to non-employee directors.
EXECUTIVE OFFICERS
In addition to John B. Gallagher, Harry D. Shields, Laurence Gilbert and
Bernadette Spofforth, who are listed above, the following individual is an
executive officer of the Company:
<TABLE>
<CAPTION>
<S> <C>
Jay Nash Mr. Nash has been Chief Financial Officer, Controller, Secretary and
Age 36 Treasurer of the Company since January 1998. He has served as Vice
President of Technology Express, Inc. since 1992 and was an accountant
with Jacques Miller from 1986 to 1992 and KPMG Peat Marwick from 1983 to
1986. Mr. Nash is a Certified Public Accountant with a Bachelor of Science
in Accounting from the University of Tennessee.
</TABLE>
4
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the three
fiscal years ended June 30, 1998 for the Company's Chief Executive Officers, the
other executive officer of the Company and two most highly compensated executive
officers of European Micro UK for Fiscal 1998 (the "NAMED EXECUTIVE OFFICERS").
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------------- --------------
Securities
Other Annual Underlying All Other
Fiscal Compensation Options (#s)(1) Compensation
Name and Principal Position(s) Year Salary ($) Bonus ($) $ ($)(2)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
John B. Gallagher 1998 $87,500 -- -- -- --
Co-Chairman and Co-President 1997 -- -- -- -- --
1996 -- -- -- -- --
Harry D. Shields 1998 $87,500 -- -- -- --
Co-Chairman and Co-President 1997 -- -- -- -- --
1996 -- -- -- -- --
Jay Nash 1998 $16,666 -- -- 10,000 --
Chief Financial Officer, 1997 -- -- -- -- --
Controller, Secretary and 1996 -- -- -- -- --
Treasurer
Laurence Gilbert 1998 $100,293 $561,358 -- 25,000 $16,351
Managing Director(3) 1997 $64,364 $90,152 -- -- $11,160
1996 -- -- -- -- $29,418
Bernadette Spofforth 1998 $59,716 $832,017 -- 50,000 $18,475
Director of Sales(4) 1997 $48,328 $248,902 -- -- $13,979
1996 $28,433 $168,971 -- -- $10,509
</TABLE>
- -----------------------
(1) Options granted pursuant to the Incentive Plan to purchase shares of Common
Stock. Options granted during Fiscal 1998 are described in greater detail below.
(2) This consists primarily of employee benefits, including the use of a company
owned car, pension plan and medical insurance.
(3) Mr. Gilbert is the Managing Director of European Micro UK.
(4) Ms. Spofforth is the Director of Sales of European Micro UK.
5
<PAGE>
Option Grants in Last Fiscal Year
The table below sets forth information with respect to stock options
granted to the Named Executive Officers in Fiscal 1998. No options were
exercised by the Named Executive Officers in Fiscal 1998. The options listed
below are included in the Summary Compensation Table above.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
% of Total
Options
Securities Granted to Potential Realizable Value at
Underlying Employees Assumed Rates of Stock
Options in Fiscal Exercise Expiration Price Appreciation for
Name Granted(1) Year Price($/Sh) Date Option Term(2)
- ------------------------------------------------------------------------------------------------------------------
5% 10%
----------------- ------------------
John B. Gallagher -- -- -- -- -- --
Harry D. Shields -- -- -- -- -- --
Jay Nash 10,000 3.4% 10.00 5/6/2008 $62,889 $159,400
Bernadette Spofforth 50,000 17.0% 10.00 5/6/2008 $314,500 $796,871
Laurence Gilbert 25,000 8.5% 10.00 5/6/2008 $157,250 $398,436
</TABLE>
- --------------------
(1) Options granted pursuant to the Incentive Plan to purchase shares of Common
Stock. The exercise price and applicable withholding taxes may be paid in cash
or in shares of the Company's Common Stock (whether previously owned or to be
acquired upon exercise), or by other methods which comply with the Incentive
Plan and applicable law. These options have a term of ten years and one-quarter
of these options vest and become exercisable on May 6, 2001, 2002, 2003 and
2004, respectively.
(2) These assumed "potential realizable values" are mathematically derived from
certain prescribed rates of stock appreciation. The actual value of these option
grants is dependent on the future performance of Company Common Stock and
overall stock market conditions. There is no assurance that the values reflected
in this table will be achieved. Calculated using $10.00 per share, the price of
the shares of Common Stock at the time of grant.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENTS WITH THE CHIEF EXECUTIVE OFFICERS.
The Company has entered into five-year employment agreements with each
of Messrs. Gallagher and Shields. Pursuant to the agreements, each executive is
employed as Co-Chairman and Co-President of the Company. These agreements were
effective as of January 1, 1998, and each provides for annual base salaries of
$175,000, plus annual cost of living adjustments and other increases to be
determined at any time or from time to time by the Board of Directors or any
committee thereof. In addition, each executive is entitled to annual incentive
bonus compensation in an amount to be determined by the Board of Directors or a
committee thereof.
Each agreement further provides that each of Messrs. Gallagher and
Shields will devote a significant amount of his working time and efforts to the
business and affairs of the Company (which means no less than 50% of his working
time); provided, however, that each of Messrs. Gallagher and Shields may devote
a reasonable amount of time and effort to other business affairs, including, in
the case of Mr. Gallagher, American Micro Computer Center and, in the case of
Mr. Shields, Technology Express and in each case other activities disclosed to
the Board of Directors.
The agreements also provide that upon termination of employment without
"cause" or termination by the executive for "good reason" (which includes a
change of control of the Company), the executive is entitled to receive, in
addition to all accrued or earned but unpaid salary, bonus or benefits, an
amount equal to three times the compensation such executive would be entitled to
receive in the then current fiscal year, including base salary and incentive
bonus compensation. For the purposes of the employment agreement, the amount of
incentive bonus compensation such executive would be entitled to receive in the
then current fiscal year is equal to the largest amount accrued for any of the
two most recently completed fiscal years. In addition, the Company will pay
certain relocation expenses incurred by the executive in change of principal
residence and will indemnify the executive for any loss sustained in the sale of
his principal residence. The agreements also provide that the executive will not
6
<PAGE>
compete with the Company during his employment (except for activities related to
American Micro Computer Center and Technology Express and such other activities
disclosed to the Board of Directors) and for two years thereafter unless the
Company terminates the executive without "cause" or the executive terminates his
employment for "good reason."
In addition, the agreements grant each of Messrs. Gallagher and Shields
demand and piggy-back registration rights with respect to the shares of Common
Stock held by each. Each executive may individually require the Company to file
a registration statement with respect to these shares on an annual basis.
Moreover, each executive may include these shares in certain other offerings by
the Company.
EMPLOYMENT ARGEEMENTS WITH OTHER NAMED EXECUTIVE OFFICERS.
European Micro UK has entered into an employment agreement with Ms.
Bernadette Spofforth. Pursuant to the agreement, Ms. Spofforth is employed as
Sales Director of European Micro UK. Ms. Spofforth's agreement was effective
April 30, 1996, will continue until terminated by either party delivering not
less than six months' written notice to the other party and provides for an
annual base salary of (pound)30,000 (approximately $48,000 assuming an exchange
rate of $1.60 to (pound)1.00) plus a bonus based on the level of net profit
earned by the Company. Ms. Spofforth is also entitled to the use of a Company
owned vehicle under the terms of her employment agreement.
European Micro UK has entered into an employment agreement with Mr.
Lawrence Gilbert. Pursuant to the agreement, Mr. Gilbert is employed as Managing
Director of European Micro UK. Mr. Gilbert's agreement was effective January 1,
1998, will continue until terminated by either party delivering not less than
six months' written notice to the other party and provides for an annual base
salary of (pound)60,000 (approximately $96,000 assuming an exchange rate of
$1.60 to (pound)1.00) plus a bonus based on the level of net profit earned by
the Company. The minimum bonus is (pound)30,000 (approximately $48,000 assuming
an exchange rate of $1.60 to (pound)1.00). Mr. Gilbert is also entitled to the
use of a Company owned vehicle under the terms of his employment agreement.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
INTRODUCTORY STATEMENT. The Board of Directors of the Company approved
all of the compensation arrangements with the officers of the Company prior to
the consummation of the Company's initial public offering on June 12, 1998. With
the exception of Jay Nash, each of the Company's officers has entered into
long-term employment agreements with the Company as described in the section
entitled "Employment Agreements." The compensation arrangements with the
officers of European Micro UK were approved by the Board of Directors of
European Micro UK, which at that time consisted of Messrs. Gallagher and
Shields. Future decisions regarding the compensation of officers of the Company
will be made by the Compensation Committee. Such decisions will be made pursuant
to the following compensation policy.
COMPENSATION POLICY. The Compensation Committee of the Board of Directors
is responsible for making recommendations to the Board of Directors concerning
the compensation arrangements for the Company's officers, including salaries and
benefits. The Company's compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified officers. The Compensation Committee will attempt to achieve
these goals by integrating competitive annual base salaries with bonuses based
on corporate performance and on the achievement of internal strategic
objectives. In addition, this policy is coordinated with stock options awards
through the Company's 1998 Stock Incentive Plan which is administered by the
Company's Stock Option Committee. The Compensation Committee believes that cash
compensation in the form of salary and bonuses provides the Company's officers
with short-term rewards for success in operations. Long-term compensation comes
in the form of stock options awards and other stock incentives which encourages
growth in management stock ownership. Awards of stock options and other stock
incentives are administered by the Stock Option Committee.
BASE SALARY. Base salaries and adjustments of base salaries for officers
will be determined based on the Compensation Committee's assessment of each
individual's experience level, the scope and complexity of the position held and
7
<PAGE>
the Company's knowledge of salaries being paid for similar positions in the
marketplace. The base salaries of the officers of European Micro UK were
determined by Messrs. Gallagher and Shields prior to the consummation of the
Company's initial public offering.
BONUS COMPENSATION. In 1998, European Micro Holdings, Inc. did not pay any
bonuses. The officers of European Micro UK received bonus awards pursuant to
employment agreements based on achieving certain operating goals. See "Executive
Compensation - Summary Compensation Table." These bonuses and operating goals
were determined by Messrs. Gallagher and Shields prior to the consummation of
the Company's initial public offering. The Compensation Committee may grant
bonus compensation to the officers of the Company based on the performance and
contribution of such individual to the Company's operations.
COMPENSATION OF CHIEF EXECUTIVE OFFICERS. In 1998, the Board of Directors
of the Company approved five-year employment agreements for Messrs. Gallagher
and Shields. The compensation arrangements were determined based on their
performance and contributions to date, their experience and the compensation
arrangements of officers in similar positions in the marketplace. Messrs.
Gallagher and Shields will be entitled to adjustments to their base salaries and
bonus awards at the discretion of the Board of Directors.
COMPENSATION COMMITTEE
John B. Gallagher
Harry D. Shields
Barrett Sutton
Kyle R. Saxon
REPORT OF STOCK OPTION COMMITTEE ON EXECUTIVE COMPENSATION
STOCK OPTION POLICY. The Stock Option Committee of the Board of
Directors is responsible for making recommendations to the Board of Directors
concerning the adoption of any employee benefit plans and the administration of
the 1998 Stock Incentive Plan and the 1998 Employee Stock Purchase Plan. In
addition, the Stock Option Committee is responsible for making recommendations
regarding awards of stock options or other benefits under these plans. The
Company's stock option policy is designed to provide long-term incentives by
encouraging growth in management stock ownership. The Stock Option Committee
believes that the award of stock options provides an incentive to the recipients
to enhance shareholder value which in turn benefits the stockholders. Stock
options and other equity based awards are granted under the 1998 Stock Incentive
Plan by the non-employee members of the Company's Board of Directors. Key
employees, non-employee directors and consultants of the Company and its
subsidiaries are eligible to participate in the 1998 Stock Incentive Plan. No
member of the Stock Option Committee is a former or current officer or employee
of the Company or any of its subsidiaries.
STOCK OPTION AWARDS. In 1998, the Stock Option Committee awarded stock
options at the fair market value of the shares of common stock of the Company on
the date of the grant. In determining the number of stock options awarded in
1998, the Stock Option Committee took into account each recipient's performance
and contribution to the Company's operations.
STOCK OPTION AWARDS TO CHIEF EXECUTIVE OFFICERS. In 1998, the Stock Option
Committee did not award any stock options to Messrs. Gallagher and Shields.
Future awards of stock options will be determined based on their performance and
contributions to the Company's operations, their experience and the compensation
arrangements of officers in similar positions in the marketplace. Messrs.
Gallagher and Shields will be entitled to stock option awards at the discretion
of the Stock Option Committee.
STOCK OPTION COMMITTEE
Barrett Sutton
Kyle R. Saxon
8
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998, the Company's Compensation
Committee was comprised of John B. Gallagher, Harry D. Shields, Barrett Sutton
and Kyle R. Saxon. Each of Messrs. Gallagher and Shields is a Co-Chairman,
Co-President and Director of the Company and Co-Chairman of each of the
subsidiaries. The Compensation Committee is responsible for making
recommendations to the Board of Directors regarding compensation arranagements
for the Company's officers. In addition to the Compensation Committee, the Board
of Directors has also formed a Stock Option Committee which is responsible for
making recommedations to the Board of Directors regarding the adoption of any
employee benefit plans and administering the 1998 Stock Incentive Plan and the
1998 Employee Stock Purchase Plan and the grant of stock options or other
benefits under such plans. During the fiscal year ended June 30, 1998, the
Company's Stock Option Committee was comprised of Barrett Sutton and Kyle R.
Saxon.
COMPARATIVE STOCK PERFORMANCE
The following graph compares the performance of the Company's Common Stock
against the Nasdaq Composite Stock Index and a peer group index for the period
commencing with the consummation of the Company's initial public offering on
June 12, 1998 and ending September 30, 1998. The Company has included cumulative
total returns through September 30, 1998 to provide a more meaningful comparison
of the performance of its common stock than if such returns were provided
through June 30, 1998, the end of the Company's fiscal year. The peer group
consists of CHS Electronics, Inc., Ingram Micro, Inc., Tech Data Corporation
and Liuski International Inc.
The graph assumes that $100 was invested on June 12, 1998, and that
dividends were reinvested.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG EUROPEAN MICRO HOLDINGS, INC., THE NASDAQ STOCK MARKET (U.S.) INDEX, AND
A PEER GROUP
6/12/98 6/98 7/98 8/98 9/98
------- ---- ---- ---- ----
European Micro Holdings, Inc. 100.00 102.50 97.50 82.50 91.25
Peer Group* 100.00 111.92 115.10 106.74 127.62
Nasdaq Stock Market (U.S.) Index 100.00 108.98 107.80 86.73 98.70
- -----------------
*The Peer Group is comprised of CHS Electronics, Inc., Ingram Micro Inc., Liuski
International, Inc. and Tech Data Corporation.
9
<PAGE>
CERTAIN TRANSACTIONS AND RELATIONSHIPS WITH THE COMPANY
On January 31, 1998, European Micro Holdings, Inc. acquired one hundred
percent (100%) of the issued and outstanding shares of ordinary stock of
European Micro UK in consideration for the issuance of 4,000,000 newly issued
shares of Common Stock. The 4,000,000 shares of Common Stock has been issued to
the stockholders of European Micro UK on a pro rata basis in accordance with
such shareholder's respective ownership interests in European Micro UK. As a
result of the exchange, the stockholders of European Micro UK together received
all of the issued and outstanding shares of Common Stock of European Micro
Holdings, Inc. prior to the consummation of its initial public offering. These
stockholders were John B. Gallagher, Harry D. Shields, Thomas H. Minkoff, as
trustee of the Gallagher Family Trust, and Stuart S. Southard and Robert H.
True, Trustees of the 1997 Henry Daniel Shields Irrevocable Educational Trust.
See "Security Ownership of Certain Beneficial Owners and Management."
The Company has granted options to purchase up to 25,000 shares of Common
Stock to Thomas H. Minkoff for consulting services rendered to the Company. The
options have an exercise price equal to $10.00 per share. Mr. Minkoff is the
Trustee of the Gallagher Family Trust and the first cousin of John B. Gallagher,
Co-Chairman, Co-President and Director of the Company. See "Security Ownership
of Certain Beneficial Owners and Management."
Since its formation in 1991, European Micro UK has belonged to the Group.
Harry D. Shields owns all of the outstanding capital stock of Technology Express
and, until August 1997, had an ownership interest in Ameritech Exports and
Ameritech Argentina. John B. Gallagher has an ownership interest in American
Micro Computer Center and, until August 1997, had an ownership interest in
Ameritech Exports and Ameritech Argentina. In order to facilitate fast and
efficient international transactions, each member of the Group has acted as a
supplier for, and purchaser from, the other members of the Group. Such factors
as country supply, currency fluctuation, and manufacturer's geographic pricing
strategy lead to a constantly changing model where purchases and sales to other
members of the Group depend on the then current economic balance. Inter-Group
sales have historically been one percent above the selling Group member's cost.
The low mark-up has enabled each Group member to buy product quickly and
efficiently in the others' primary territories and to take advantage of quantity
purchasing, financing and logistics of the other members of the Group. The Group
has made numerous exceptions to the general one-percent mark-up pricing policy
in times of short supply, to cover build-up costs and to reward certain Group
members for exceptional low-cost purchases. Additionally, the Company has paid
certain management and consulting fees to the other members of the Group.
Inter-Group purchases and sales are as follows:
<TABLE>
<CAPTION>
($ in thousands)
Year ended June 30,
<S> <C> <C> <C> <C>
1995 1996 1997 1998
--------------- ------------- -------------- ---------------
SALES TO GROUP MEMBERS
American Micro Computer Center $323 306 66 9,875
Technology Express 22 104 (2) 19,217
Ameritech Argentina -- -- 90 --
Ameritech Exports 1 26 -- --
=============== ============= ============== ===============
$346 436 154 29,092
=============== ============= ============== ===============
PURCHASES FROM GROUP MEMBERS
American Micro Computer Center $4,082 2,289 1,092 507
Technology Express 3,265 14,890 20,717 8,749
Ameritech Argentina -- -- -- --
Ameritech Exports 70 1,116 848 --
=============== ============= ============== ===============
$7,417 18,295 22,657 9,256
=============== ============= ============== ===============
10
<PAGE>
The management and consulting fees paid by the Company to other Group
members are as follows:
Year ended June 30,
(dollars in thousands)
1995 1996 1997 1998
MANAGEMENT FEES
American Micro Computer Center $56 50 60 45
Technology Express 56 50 60 45
=============== ============= ============== ===============
$112 100 120 90
=============== ============= ============== ===============
CONSULTANCY FEES
Technology Express $32 37 16 14
=============== ============= ============== ===============
$32 37 16 14
=============== ============= ============== ===============
RECHARGED CONSULTANCY FEES
American Micro Computer Center $-- (14) (27) --
Technology Express -- (14) (27) --
Ameritech Argentina -- (8) (13) --
Ameritech Exports -- (7) (14) --
=============== ============= =============== ===============
$-- (43) (81) --
=============== ============= =============== ===============
144 94 55 104
=============== ============= =============== ===============
Sales to and from Group members has resulted in the following accounts
receivable:
($ in thousands)
Year ended June 30,
1995 1996 1997 1998
--------------- ------------- -------------- ---------------
SALES TO GROUP MEMBERS
American Micro Computer Center $97 259 240 54
Technology Express -- 15 -- 844
Ameritech Argentina -- 274 329 --
Ameritech Exports -- 160 -- --
=============== ============= ============== ===============
$97 708 569 898
=============== ============= ============== ===============
Accounts payable to Group members are as follows:
Year ended June 30,
1995 1996 1997 1998
--------------- ------------- -------------- ---------------
SALES TO GROUP MEMBERS
American Micro Computer Center $34 90 -- 12
Technology Express 242 535 188 226
Ameritech Argentina -- 281 -- --
Ameritech Exports 2 238 -- --
=============== ============= ============== ===============
$278 1,144 188 238
=============== ============= ============== ===============
</TABLE>
11
<PAGE>
The entities listed above are related to the Company or its officers,
directors and principal stockholders in the following manner:
AMERICAN MICRO COMPUTER CENTER
American Micro Computer Center is a distributor of computer hardware based
in Miami, Florida. John B. Gallagher who is Co-Chairman, Co-President, Director
and shareholder (owning approximately 38.5% of the outstanding shares of Common
Stock of the Company) of the Company, is the President of American Micro
Computer Center, and owns 33.3% of the outstanding shares of common stock of
that company.
TECHNOLOGY EXPRESS
Until 1996, Technology Express was a full service authorized reseller of
computers and related products based in Nashville, Tennessee, selling primarily
to end-users. Technology Express was sold to Inacom Computers in 1996.
Concurrently with the sale, Mr. Shields founded a new computer company by the
same name. This new company is a distributor of computer products, focusing
primarily on governmental and international sales. It does not sell to
end-users. Harry D. Shields, who is the Co-Chairman, Co-President, director and
shareholder (owning approximately 32.5% of the outstanding shares of Common
Stock of the Company) of the Company, is President of Technology Express, and
owns all of the outstanding capital stock of that company.
AMERITECH ARGENTINA
Ameritech Argentina is an authorized distributor of Compaq, Hewlett
Packard, IBM and ACER computers and accessories in Argentina. Each of Messrs.
Gallagher and Shields owned 50% of the outstanding shares of that company's
common stock until its sale in August 1997.
AMERITECH EXPORTS
Ameritech Exports is an authorized distributor of Compaq computers and
accessories into the Caribbean and certain parts of Central and South America.
Messrs. Gallagher and Shields owned 25% and 50%, respectively, of the
outstanding shares of common stock of that company until its sale in August
1997.
12
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following table sets forth the beneficial ownership of the Company's
Common Stock as of October 23, 1998 by each person or group known by the Company
to beneficially own more than five percent of outstanding Common Stock,
stockholders who have an agreement to vote shares together, each director,
nominee for director and the Named Executive Officers, and by all directors and
executive officers as a group. Unless otherwise indicated, the holders of all
shares shown in the table have sole voting and investment power with respect to
such shares. As of October 23, 1998, there were 4,933,900 outstanding shares of
Common Stock.
<TABLE>
<CAPTION>
Shares
Beneficially Percent of
Name and Address Owned Class
- ---------------------------------------------------------------------------------------
<S> <C> <C>
John B. Gallagher(1) 1,900,000 38.5%
Harry D. Shields(2) 1,602,696 32.5%
Stuart S. Southard and Robert H. True, Trustees
of the 1997 Henry Daniel Shields Irrevocable
Educational Trust(3) 397,304 8.1%
Thomas H. Minkoff, Trustee of the Gallagher
Family Trust(4) 100,000 2.0%
Jay Nash(5) -- --
Laurence Gilbert(6) -- --
Bernadette Spofforth(7) -- --
Barrett Sutton(8) -- --
Kyle Saxon(9) 1,000 *
All officers and directors as a group 3,901,000 79.1%
</TABLE>
- -----------------------
* Indicates that the ownership percent is less than one percent (1%).
(1) Business address is 6073 N.W. 167th Street, Unit C-25, Miami, Florida
33015. Mr. Gallagher is Co-Chairman, Co-President and Director of the
Company.
(2) Business address is 808 Third Avenue South, Nashville, Tennessee 37210.
Mr. Shields is Co-Chairman, Co-President and Director of the Company.
(3) Business address for Mr. Southard is 614 Fourth Avenue, Nashville,
Tennessee 37210. Business address for Mr. True is First American Center,
No. 2070, 315 Deaderick Street, Nashville, Tennessee 37278.
(4) Business address is 1635D Royal Palm Drive South, Gulfport, Florida 33707.
(5) Mr. Nash is the Chief Financial Officer, Controller, Secretary and
Treasurer of the Company. He has been granted options to purchase 10,000
shares of Common Stock of the Company. These options are excluded from the
table because they are not exercisable within 60 days of the date hereof.
See "Option Grants in Last Fiscal Year" for additional information
regarding these options.
(6) Mr. Gilbert is a Director of the Company and the Managing Director of
European Micro UK. He has been granted options to purchase 25,000 shares
of Common Stock of the Company. These options are excluded from the table
because they are not exercisable within 60 days of the date hereof. See
"Option Grants in Last Fiscal Year" for additional information regarding
these options.
(7) Ms. Spofforth is a Director of the Company and the Director of Sales for
European Micro UK. She has been granted options to purchase 50,000 shares
of Common Stock of the Company. These options are excluded from the table
because they are not exercisable within 60 days of the date hereof. See
"Option Grants in Last Fiscal Year" for additional information regarding
these options.
13
<PAGE>
(8) Mr. Sutton is a Director of the Company. He has been granted options to
purchase 10,000 shares of Common Stock of the Company. These options are
excluded from the table because they are not exercisable within 60 days of
the date hereof. See "Option Grants in Last Fiscal Year" for additional
information regarding these options.
(9) Mr. Saxon is a Director of the Company. He has been granted options to
purchase 10,000 shares of Common Stock of the Company. These options are
excluded from the table because they are not exercisable within 60 days of
the date hereof. See "Option Grants in Last Fiscal Year" for additional
information regarding these options.
STOCKHOLDERS AGREEMENT
Pursuant to a stockholders agreement, each of Messrs. Gallagher and
Shields agreed to vote his Shares in concert on all matters submitted to a vote
of stockholders of the Company, including the election of all directors. In the
event that either Messrs. Gallagher or Shields cannot agree to vote his Shares
in concert with the other, neither shall vote his Shares. It is expected that
Messrs. Gallagher and Shields will vote their Shares for the election of each of
the Class I nominees.
The stockholders agreement also provides that each of Thomas H. Minkoff,
Trustee of the Gallagher Family Trust, and Stuart S. Southard and Robert H.
True, Trustees of the 1997 Henry Daniel Shields Irrevocable Educational Trust,
will vote the Shares subject to such trusts in concert on all matters submitted
to a vote of the stockholders of the Company, including the election of all
directors. If the parties cannot agree to vote his Shares in concert with the
other, neither may vote his Shares. It is expected that Thomas H. Minkoff,
Trustee of the Gallagher Family Trust and Stuart S. Southard and Robert H. True,
Trustees of the 1997 Henry Daniel Shields Irrevocable Educational Trust, will
vote the Shares subject to such trusts for the election of each of the Class I
nominees.
INDEPENDENT ACCOUNTANTS
The firm of KPMG served as the Company's independent accountants for
Fiscal 1998. Representatives of this firm will be available to respond to
questions at the 1998 Annual Meeting of the Stockholders. It is anticipated that
the Audit Committee of the Company will recommend that KPMG be selected to serve
as the Company's independent accountants for 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
its executive officers and any persons beneficially holding more than ten
percent of the Company's Common Stock are required to report their ownership of
the Company's Common Stock and any changes in that ownership to the United
States Securities and Exchange Commission (the "Commission") and the Nasdaq
National Market. Specific due dates for these reports have been established and
the Company is required to report in this proxy statement any failure to file by
these dates. To the Company's knowledge, all reports required to be filed have
been filed by these dates. In making these statements, the Company has relied on
copies of the reports that its officers and directors have filed with the
Commission.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Rule 14a-8 of the Exchange Act contains the procedures for including
certain stockholder proposals in the Company's proxy statement and related
materials. The deadline for submitting a stockholder proposal pursuant to Rule
14a-8 for the 1999 Annual Meeting of Stockholders (the "1999 Annual Meeting") of
the Company is June 25, 1999. With respect to any stockholder proposal outside
the procedures provided in Rule 14a-8 and received by the Company between April
26, 1999 and June 25, 1999, the Company may be required to include certain
limited information concerning such proposal in the Company's proxy statement so
that proxies solicited for the 1999 Annual Meeting may confer discretionary
authority to vote on any such matter. Any stockholder proposals should be
addressed to the Secretary of the Company, 6073 N.W. 167th Street, Unit C-25,
Miami, Florida 33015.
14
<PAGE>
OTHER MATTERS
The Board of Directors does not know of any matter other than those
described in this proxy statement that will be presented for action at the 1998
Annual Meeting of Stockholders. If other matters properly come before the
meeting, the persons named as proxies intend to vote the shares they represent
in accordance with their judgment.
By Order of the Board of Directors
/s/ John B. Gallagher
--------------------------------
John B. Gallagher
Co-Chairman and Co-President
Miami, Florida
October 30, 1998
15
<PAGE>
EUROPEAN MICRO HOLDINGS, INC.
P
6073 N.W. 167th Street, Unit C-25, Miami, Florida 33015
R Proxy for Annual Meeting of Stockholders on November 16, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
The undersigned hereby appoints Jay Nash and Frank Cruz,
and each or either of them as proxies, each with power to appoint
X his or her substitute, and hereby authorizes any of them to
represent and to vote, as designated on the reverse side of this
proxy card, all shares of the Common Stock, par value $0.01 per
Y share (the "Common Stock"), of European Micro Holdings, Inc. (the
"Company"), which the undersigned is entitled to vote at the Annual
Meeting of Stockholders of the Company (the "Annual Meeting") to be
held on Monday, November 16, 1998, commencing at 2:00 P.M., local
time, at the Intercontinental Hotel, 100 Chopin Plaza, Miami,
Florida 33131, or any adjournment or postponement thereof as
follows on the reverse side of this proxy card.
PLEASE DATE AND SIGN ON REVERSE SIDE
16
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Please mark
your |X|
votes as
indicated
in this example
The Board of Directors recommends voting FOR the following propsals:
1. ELECTION OF DIRECTORS.
Nominees for Class I Directors: Bernadette Spofforth and Laurence Gilbert
<S> <C> <C> <C> <C> <C> <C>
FOR the AUTHORITY (Instruction: To withhold authority 2. OTHER MATTERS. Unless a line is
nominees listed WITHHELD to vote for any individual nominee, stricken through this sentence, the proxies
above (except to vote for the strike a line through the nominee's herein named may in their discretion vote the
as marked to nominees listed name in the list above.) shares represented by this Proxy upon such
the contrary). above. other matters as may properly come before
the Annual Meeting.
| | | | The undersigned acknowledges receipt of
(1) the Company's 1998 Annual Report to
Stockholders and (2) the Company's Notice of
Annual Meeting and Proxy Statement dated
October 30, 1998 relating to the Annual
Meeting. The undersigned does hereby revoke
any proxy previously given with respect to the
shares represented by this Proxy.
Dated: , 1998
---------------------
--------------------------------------------
Signature
--------------------------------------------
Signature if held jointly
NOTE: Your signature should appear as your
name appears hereon. As to shares held in
joint names, each joint owner should sign. If
the signer is a corporation, please sign full
corporate name by a duly authorized officer.
If a partnership, please sign in partnership
name by an authorized person. If signing as
attorney, executor, administrator, trustee,
guardian, or in other representative capacity,
please give full title as such.
</TABLE>
Please mark, sign and date this proxy card
and promptly return it using the enclosed envelope.
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT TO US. PLEASE COMPLETE, DATE
AND SIGN THE ABOVE PROXY CARD AND RETURN IT PROMPTLY
IN THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
17
