SOUTHERN ELECTRONICS CORPORATION
4916 N. ROYAL ATLANTA DRIVE
TUCKER, GEORGIA 30085
Dear Southern Electronics Corporation Stockholders:
You are cordially invited to attend the 1996 Annual Meeting of
Stockholders to be held at the executive offices of the Company,
4916 North Royal Atlanta Drive, Tucker, Georgia, on Thursday,
October 31, 1996, at 12:00 p.m., local time, for the following
purposes:
(I) To elect two Class II directors for terms to expire at
the 1999 Annual Meeting of Stockholders and one Class I
director for a term to expire at the 1998 Annual
Meeting of Stockholders (this director is being elected
to fill a vacancy created by the resignation of a Class
I director);
(ii) To approve an amendment to the Southern Electronics
Corporation (the "Company") 1991 Stock Option Plan to
increase the number of shares available for issuance by
500,000; and
(iii) To transact such other business as may properly
come before the meeting or any adjournment thereof.
During the meeting we will review the results of the year
ended June 30, 1996 and report on significant aspects of our
operations during the first quarter of fiscal 1997.
We would appreciate your completing, signing, dating and
returning to the Company the enclosed proxy card in the envelope
provided at your earliest convenience. If you decide to attend the
meeting, you may, of course, revoke your proxy and vote your own
shares.
Sincerely,
/s/ GERALD DIAMOND
Gerald Diamond,
Chairman of the Board and
Chief Executive Officer
October 1, 1996
<PAGE>
SOUTHERN ELECTRONICS CORPORATION
4916 N. ROYAL ATLANTA DRIVE
TUCKER, GEORGIA 30085
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Southern Electronics
Corporation will be held at the executive offices of the Company,
4916 North Royal Atlanta Drive, Tucker, Georgia, on Thursday,
October 31, 1996 at 12:00 p.m., local time, for the following
purposes:
(I) To elect two Class II directors for terms to expire at
the 1999 Annual Meeting of Stockholders and one Class I
director for a term to expire at the 1998 Annual
Meeting of Stockholders (this director is being elected
to fill a vacancy created by the resignation of a Class
I director);
(ii) To approve an amendment to the Southern Electronics
Corporation (the "Company") 1991 Stock Option Plan to
increase the number of shares available for issuance by
500,000; and
(iii) To transact such other business as may properly
come before the meeting or any adjournment thereof.
The Board of Directors has fixed September 6, 1996 as the
record date for the determination of stockholders entitled to
notice of and to vote at the meeting.
IF YOU ARE UNABLE TO BE PRESENT AT THE MEETING, YOU ARE
REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT YOUR SHARES WILL BE REPRESENTED.
By Order of the Board of Directors,
/s/ LARRY G. AYERS
Larry G. Ayers, Secretary
October 1, 1996
<PAGE>
SOUTHERN ELECTRONICS CORPORATION
4916 N. Royal Atlanta Drive
Tucker, Georgia 30085
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the
Board of Directors of Southern Electronics Corporation (the
"Company") in connection with the solicitation of proxies for use
at the 1996 Annual Meeting of Stockholders of the Company to be
held Thursday, October 31, 1996, at the Company's executive
offices, 4916 North Royal Atlanta Drive, Tucker, Georgia 30085, and
at any adjournments thereof (the "Annual Meeting"). The Notice of
the meeting, this Proxy Statement and the form of proxy will be
first mailed on or about October 1, 1996 to stockholders of record
of the Company on the Record Date (as defined below).
THE BOARD OF DIRECTORS URGES YOU TO COMPLETE, SIGN, DATE AND RETURN
THE ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PRE-PAID ENVELOPE.
SHARES ENTITLED TO VOTE
Each valid proxy given pursuant to this solicitation and
received in time for the Annual Meeting will be voted with respect
to all shares represented by it and will be voted in accordance
with the instructions, if any, given in the proxy. If instructions
are not given in the proxy, it will be voted FOR the election as
directors of the nominees listed in this Proxy Statement, FOR the
proposed amendment to the Company's 1991 Stock Option Plan, and in
accordance with the best judgment of the proxy holders on any other
matter that may properly come before the meeting. The submission of
a signed proxy will not affect a stockholder's right to attend, and
to vote in person at, the Annual Meeting. Stockholders who execute
a proxy may revoke it at any time before it is voted by filing a
written revocation with the Secretary of the Company, executing a
proxy bearing a later date or attending and voting in person at the
Annual Meeting.
Only stockholders of record as of the close of business on
September 6, 1996 (the "Record Date") will be entitled to vote at
the Annual Meeting. As of the close of business on the Record Date,
there were 7,129,747 shares of the Company's Common Stock
outstanding. Each share of Common Stock is entitled to one vote on
all matters presented for stockholder vote.
According to the Bylaws of the Company, the holders of a
majority of shares of Common Stock outstanding and entitled to be
voted at the Annual Meeting must be present in person or be
represented by proxy to constitute a quorum and to act upon
proposed business. Failure of a quorum to be represented at the
meeting will necessitate an adjournment and will subject the
Company to additional expense. When a quorum is present at the
Annual Meeting, the Bylaws provide that the affirmative vote of the
holders of a majority of the shares of Common Stock represented and
entitled to vote at the Annual Meeting will decide the corporate
action taken unless a different vote is required by Delaware law,
the Certificate of Incorporation or the Bylaws. The election of
directors
<PAGE>
and the adoption of the proposed amendment to the Company's 1991 Stock
Option Plan require the vote of a majority of the shares represented
at the Annual Meeting and entitled to vote.
Abstentions and broker non-votes are counted for purposes of
determining the presence or absence of a quorum for the transaction
of business at the Annual Meeting. Abstentions are counted in
tabulations of votes cast on proposals presented to the
stockholders; consequently abstentions will have the effect of
votes against each of the proposals to which the abstentions
relate. Broker non-votes are not counted for purposes of
determining whether a proposal has been approved. As a result,
broker non-votes will have no effect on any matter presented for
approval. If authority to vote for one or more director nominees is
withheld, no vote will be cast with respect to the shares
represented and the outcome of the election will not be affected.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Company's Board of Directors currently consists of five
members. The Board of Directors is divided into three classes of
directors, designated Class I, Class II and Class III, with each
class having two members. The term of the Class II directors
expires at the upcoming Annual Meeting. The terms of the Class III
and Class I directors expire at the 1997 and 1998 Annual Meetings
of Stockholders, respectively. Stockholders of the Company annually
elect directors of one of the three classes to serve for three
years or until their successors have been duly elected and
qualified. At the upcoming Annual Meeting, stockholders will elect
two directors to serve as Class II directors and one director to
serve as a Class I director. The Board of Directors has nominated
the two Class II nominees named below to serve as Class II
directors until the Annual Meeting of Stockholders in 1999 or until
their successors have been duly elected and qualified. The Board
of Directors has nominated the Class I nominee named below to serve
as a Class I director until the Annual Meeting of Stockholders in
1998 or until his successor has been duly elected and qualified.
The Class I nominee was nominated to fill the vacancy created by
the resignation of a former Class I director, Michel Zaleski.
It is the intention of the persons named as proxies to vote
their proxies for the election as directors of the nominees
appearing below. Messrs. Risner and Rosenthal are currently members
of the Board of Directors. Mark Diamond was nominated to serve as
a Class I director at the meeting of the Company's Board of
Directors held on September 12, 1996. Each nominee has consented to
serve as a director of the Company if elected. If at the time of
the Annual Meeting any nominee is unable or declines to serve as a
director, the discretionary authority provided in the enclosed
proxy card will be exercised to vote for a substitute candidate
designated by the Board of Directors. The Board of Directors has no
reason to believe that any of the nominees will be unable or
decline to serve as a director.
Set forth below is certain information furnished to the
Company by each nominee.
<PAGE>
CLASS II: TERM EXPIRES AT 1996 ANNUAL MEETING
RAY D. RISNER
Age: 51
Mr. Risner has been a director of the Company since November
1994 and has served as President and Chief Operating Officer of the
Company since May 1995. Prior to his appointment to the
aforementioned positions, Mr. Risner served as Executive Vice
President-Administration from February 1995 to May 1995. Mr. Risner
has served as President and Chief Operating Officer of Southern
Electronics Distributors, a wholly-owned subsidiary of the Company
("SED") since August 1995. Mr. Risner served as Vice Chairman of
RJM Group, Inc., a private investment advisory firm, from 1989 to
1994. From 1987 to 1989, he served as Vice President, Financial
Administration of RJR Nabisco, Inc. Mr. Risner is also a trustee
and Vice Chairman of The National Faculty and a member of the Board
of American Red Cross Blood Services, Atlanta, Georgia.
CARY ROSENTHAL
Age: 56
Mr. Rosenthal has been a director of the Company since 1992.
Mr. Rosenthal has been President of Phoenix Communications, Inc.,
a commercial printing firm, since 1977.
CLASS I: TERM EXPIRES AT 1998 ANNUAL MEETING
MARK DIAMOND
Age: 31
Mr. Diamond was nominated to be a director of the Company at
the meeting of the Board of Directors held on September 12, 1996 to
fill the vacancy left by the resignation of Michel Zaleski. Mr.
Diamond has been employed by SED on a full-time basis in the Sales
Department since January 1987. In February 1991, Mr. Diamond was
elected Vice President - Sales of SED and in May 1993, was elected
Executive Vice President - Marketing of SED. In February 1994,
Mr. Diamond was elected Executive Vice President - Sales of SED,
and in July 1995, he was elected Executive Vice President of the
Registrant and in August 1995, he was elected Executive Vice
President of SED. Mark Diamond is the son of Gerald Diamond.
The Board of Directors recommends that the stockholders vote FOR
the election as directors of the nominees listed above.
<PAGE>
DIRECTORS CONTINUING IN OFFICE
The three individuals named below are now serving as directors
of the Company with terms expiring at the times indicated.
CLASS III: TERM EXPIRES AT 1997 ANNUAL MEETING
GERALD DIAMOND
Age: 58
Mr. Diamond has been a director of the Company since 1980.
Mr. Diamond currently serves as Chairman of the Board and Chief
Executive Officer of the Company and SED. He was elected President
and Chairman of the Board of the Company and SED in June 1986 and
served in two or more capacities as Chairman of the Board, Chief
Executive Officer and President of the Company and SED from that
time up until May 1995. Mr. Diamond, a founder of the predecessor
to the Company, served as its President and Treasurer from July
1980 through July 1986. Mr. Diamond has been in the
electronics-related business for over 30 years. Mr. Diamond is the
father of Mark Diamond.
G. WILLIAM SPEER
Age: 55
Mr. Speer has been a director of the Company since 1986. He
has practiced law with Powell, Goldstein, Frazer & Murphy in
Atlanta, Georgia since 1965 and has been a partner of that firm
since 1970. He also serves on the Board of Directors of QMS, Inc.,
a manufacturer of computer printers.
CLASS I: TERM EXPIRES AT 1998 ANNUAL MEETING
STEWART I. AARON
Age: 56
Mr. Aaron has been a director of the Company since November
1994. Mr. Aaron has served as President of LABS, Inc., a silk plant
manufacturer based in Atlanta, Georgia, for the past 20 years.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Company's Board of Directors held four meetings during the
fiscal year ended June 30, 1996 (which is sometimes referred to as
"fiscal 1996"). No director attended less than 75% of the aggregate
number of meetings of the Board of Directors or of any committee on
which he served. The Board of Directors has no standing nominating
or compensation committee.
Messrs. Aaron, Rosenthal and Speer constitute the members of
the Company's Audit Committee. The responsibilities of the Audit
Committee include, in addition to such other duties as the Board
may specify: (i) making recommendations to the Board with respect
to the selection of
<PAGE>
independent auditors and their fees and duties; (ii) conferring with
and receiving reports from the Company's independent auditors; (iii)
authorizing any special or supplemental activities of the Company's
independent auditors and considering the effect of such activities on
their independence: and (iv) reviewing internal auditing procedures
and the adequacy of internal controls and monitoring compliance with
such controls. The Audit Committee held one meeting during fiscal
1996.
During fiscal 1996, Messrs. Aaron and Rosenthal each received
aggregate cash compensation of $5,000 for attendance at Board
meetings. No other cash remuneration was paid to directors during
fiscal 1996. The Company pays ordinary and necessary travel
expenses for non-management directors to attend Board and any
committee meetings. As compensation for serving as directors to the
Company in fiscal 1996, Messrs. Aaron, Speer and Rosenthal each
received a non-qualified stock option to purchase up to 10,000
shares of the Company's Common Stock having an exercise price of
$5.88 per share vesting immediately upon grant.
On August 6, 1996, ZS SED L.P. and ZS Southern L.P., each a
Delaware limited partnership (collectively, the "ZS Partnerships"),
sold an aggregate of 1,164,851 shares of the Company's Common Stock
pursuant to the Company's Registration Statement on Form S-3 (File
No. 333-5043), which was declared effective by the Securities and
Exchange Commission on June 11, 1996. In connection therewith,
Michel Zaleski, a general partner of the ZS Partnerships, resigned
as a director of the Company and from all other positions then held
with the Company and its wholly-owned subsidiary, Southern
Electronics Distributors, Inc.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors does not have a standing Compensation
Committee or any other committee performing similar functions.
Rather the Board of Directors acts collectively to determine all
forms of compensation excluding base salaries which are currently
governed by employment agreements and stock options which are
granted by members of the Board's stock option committees. See
"Executive Compensation Executive Compensation Report."
Consequently, relationships that SEC regulations would otherwise
require to be described only with respect to Compensation Committee
members are instead described with respect to all members of the
Board of Directors.
On July 2, 1986, the Company entered into a now expired
five-year Consulting and Financial Advisory Agreement (the
"Advisory Agreement") with The ZS Fund L.P. a Delaware limited
partnership ("ZS Fund") in which Zaleski, Sherwood & Co., Inc.
("Zaleski, Sherwood") owns a 1% interest and is a general partner
(former director Michel Zaleski is a director of Zaleski, Sherwood,
owns 50% of its common stock and serves as its Chairman of the
Board). Zaleski, Sherwood agreed to forego the $75,000 annual fee
due under the aforementioned agreement effective March 1, 1995, and
did not receive any fees with respect to the Advisory Agreement
from March 1, 1995 until the expiration of the term of such
agreement on July 2, 1996. Management believes that the terms of
the Advisory Agreement were no less favorable than could have been
obtained from unaffiliated parties. Mr. Zaleski resigned as a
director of the Company effective August 6, 1996.
<PAGE>
In July 1984, the predecessor to the Company leased its office
and warehouse facility from Royal Park Company ("Royal Park"), a
general partnership whose initial partners included members of SED
Associates, and whose partners currently consist of Gerald Diamond
and his wife Jean Diamond. Royal Park financed the construction of
the facility primarily through the proceeds of an $800,000
industrial revenue bond. The facility's lease term mirrored the
15-year bond repayment period expiring on October 1, 1999, or at
such earlier time as the bond was prepaid in full, and included an
option to renew for five additional years. The lease also provided
the Company with a right of first refusal to purchase the facility
in the event Royal Park proposed to sell the facility during the
lease term. Annual rental payments equalled $176,000 (as of fiscal
1996), subject to adjustment every three years to reflect any
cumulative "cost of living" increase as reported in the U.S.
Department of Labor's Consumer Price Index. Royal Park prepaid all
amounts owing under the industrial revenue bond in December 1990 at
which time the lease, by its terms, terminated. Effective as of
January 1, 1991, Royal Park and the Company entered into a new
lease for the office and warehouse facility expiring October 1,
1999 having substantially the same terms as the original lease,
including a right of first refusal option. The new lease, however,
does not provide for a renewal option. The Company believes that
the original lease was, and the new lease is, on terms no less
favorable than those that could be obtained from unaffiliated
parties.
Pursuant to the terms of the SED Associates Partnership
Agreement (the "Partnership Agreement"), as amended by the first
and second amendments thereto, ZS Partners, a New York general
partnership including Michel Zaleski and Ned L. Sherwood ("ZS
Partners"), was entitled to 20% of the income and gain recognized
by SED Associates a Georgia general partnership ("SED Associates"),
from the sale of the Company's Common Stock owned of record by the
partnership, with the remaining 80% of the income and gain
allocated to the other partners of the partnership in proportion to
the number of shares of Common Stock deemed sold on that partner's
behalf. On August 7, 1996, ZS Partners, of which Mr. Zaleski is a
general partner, withdrew as a general partner of SED Associates.
In connection with such withdrawal and pursuant to the Third
Amendment to the Partnership Agreement dated August 7, 1996, SED
Associates distributed to ZS Partners 134,597 shares of Common
stock, which distribution was based on the then current fair market
value of the Common Stock of the Company. The Partnership
Agreement was amended to provide for the distribution of the
aforementioned shares in lieu of the right to receive 20% of the
income and gain upon the sale of the Company's Common Stock owned
by SED Associates granted to ZS Partners under the terms of the
Partnership Agreement, prior to the third amendment.
Except for Gerald Diamond, who serves as Chairman and Chief
Executive Officer of the Company, Ray D. Risner, who serves as
President and Chief Operating Officer of the Company, and former
director Michel Zaleski, who served as Vice President of the
Company and SED in 1986 and 1987, none of the members of the Board
are or have been officers or employees of the Company.
<PAGE>
OWNERSHIP OF SHARES
The following table sets forth certain information as of
September 12, 1996 regarding the amount of Common Stock
beneficially owned by each director and director nominee of the
Company, each named executive (as defined under the heading
"Executive Compensation-Compensation Tables"), all directors and
executive officers of the Company as a group, and all persons known
to the Company who beneficially own more than five percent of the
outstanding shares of Common Stock. All shares of Common Stock
shown in the table reflect sole voting and investment power except
as otherwise noted.
<TABLE>
Name of Beneficial Owner Amount and Nature of Percent of
Beneficial Ownership Class
<S> <C> <C>
Gerald Diamond (1) . . . . . . . . . 1,024,504(2)(3) 13.5%
Cary Rosenthal . . . . . . . . . . . 42,000(4) *
G. William Speer . . . . . . . . . . 51,500(5) *
Mark Diamond (1) . . . . . . . . . . 621,652(2)(6) 8.6%
Trust FBO Julie Diamond (1). . . . . 538,504(2)(7) 7.6%
Stewart I. Aaron . . . . . . . . . . 20,000(8) *
Ray D. Risner (1) . . . . . . . . . 46,667(9) *
Larry G. Ayers (1) . . . . . . . . . 63,290(10) *
Jean Diamond (1) . . . . . . . . . . 1,024,504(2)(11) 13.5%
Michel Zaleski (12). . . . . . . . . 489,886(13) 6.9%
Ned L. Sherwood (12) . . . . . . . 479,886(14) 6.7%
Pioneering Management
Corporation (15) . . . . . . . . . 695,000 9.7%
SED Associates (1) . . . . . . . . . 538,504 7.6%
All current directors and
executive officers as a group
(8 persons) . . . . . . . . . . . . 1,331,109(16) 16.9%
</TABLE>
____________________
* Represents less than one percent of the outstanding Common
Stock.
(1) 4916 North Royal Atlanta Drive, Tucker, Georgia 30085.
(2) Includes 538,504 shares held of record by SED Associates,
a general partnership comprised of Gerald Diamond, Mark
Diamond and Trust FBO Julie Diamond. Each of the general
partners of SED Associates may be deemed to own
beneficially the aggregate number of shares (538,504) of
Common Stock owned by the partnership. Pursuant to the
SED Associates Partnership Agreement, Gerald Diamond has
been designated as Managing Partner and, as such, has
sole voting and investment power with respect to the
shares of Common Stock owned by SED Associates.
<PAGE>
(3) The shares indicated include 538,504 shares owned of
record by SED Associates, 450,000 shares subject to
options exercisable within 60 days, and 36,000 shares
subject to options exercisable within 60 days by Jean
Diamond, Vice President of Credit of SED and the spouse
of Mr. Diamond, with respect to which Mr. Diamond
disclaims beneficial ownership. See Footnote (2) above.
(4) Includes 41,500 shares subject to options exercisable
within 60 days.
(5) All of the shares indicated are subject to options
exercisable within 60 days.
(6) The shares indicated include: (i) 14,081 shares owned of
record by Mark Diamond (of which 10,000 shares are
restricted stock which will vest on October 14, 1999),
(ii) 69,067 shares subject to options exercisable within
60 days and (iii) 538,504 shares owned of record by SED
Associates. Mark Diamond owns of record an approximately
1.63% general partnership interest in SED Associates. An
approximately 1.63% general partnership interest in SED
Associates is held of record by Mr. Diamond as trustee of
a trust for the benefit of his sister, Julie Diamond
Paterson.
(7) All of the shares indicated are held through SED
Associates.
(8) All of the shares indicated are subject to options
exercisable within 60 days.
(9) Includes 30,000 shares of restricted stock which will
vest on May 23, 1998 and 16,667 shares subject to options
exercisable within 60 days.
(10) Includes 10,271 shares owned of record by Larry G. Ayers
(of which 10,000 shares are restricted stock which will
vest on October 14, 1999); includes 53,000 shares subject
to options exercisable within 60 days, 18 shares held by
Mr. Ayers' spouse and one share held by his child.
(11) The shares indicated include: (i) 538,504 shares held by
SED Associates (See Footnote (2) above), (ii) 36,000
shares subject to options exercisable in 60 days and
(iii) 450,000 shares subject to options exercisable
within 60 days by Gerald Diamond.
(12) 120 West 45th Street, Suite 2600, New York, New York
10036.
(13) The shares indicated include 2,000 shares owned by ZS
Fund L.P., 212,709 shares owned by ZS SED L.P., a
Delaware limited partnership ("ZS SED"), and 187,291
shares held by ZS Southern L.P., a Delaware limited
partnership ("ZS Southern") and 10,000 shares subject to
options exercisable within 60 days. As a general partner
of ZS SED and ZS Southern, the indicated person may be
deemed to own beneficially the entire amount shown.
<PAGE>
(14) The shares indicated include 2,000 shares held by ZS Fund
L.P., 212,709 shares owned by ZS SED and 187,291 shares
held by ZS Southern. As a general partner of ZS SED and
ZS Southern, the indicated person may be deemed to
beneficially own the entire amount shown.
(15) 60 State Street, 20th Floor, Boston, Massachusetts 02109.
(16) Includes 737,734 shares subject to options exercisable
within 60 days.
Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's executive officers, directors and greater than 10%
stockholders ("Reporting Persons") to file certain reports
("Section 16 Reports") with respect to the beneficial ownership of
the Company's equity securities. Based solely on a review of the
Section 16 Reports furnished to the Company by its Reporting
Persons and, where applicable, any written representation by any of
them that no Form 5 was required, the Reporting Persons have
complied with all applicable Section 16(a) filing requirements
during and with respect to the fiscal year ended June 30, 1996,
with the following exceptions: each of Gerald Diamond, Jean
Diamond, Trust FBO Julie Diamond and SED Associates filed two late
reports; and Mark Diamond filed three late reports.
<PAGE>
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION REPORT
The Board of Directors of the Company does not have a standing
compensation committee or any other Board committee performing
equivalent functions. Rather, during each fiscal year, Gerald
Diamond, Chairman of the Board and Chief Executive Officer of the
Company, recommends to the Board (or in some cases a committee
thereof as discussed below) for its approval the non-base salary
compensation to be paid to executive officers of the Company,
excluding himself, subject to any applicable employment agreements
with those persons. Stewart I. Aaron and Cary Rosenthal, directors
of the Company, currently serve as the members of the committees
administering the Company's 1986 Stock Option Plan, 1991 Stock
Option Plan, 1988 Restricted Stock Award Plan and 1995 Formula
Stock Option Plan, and as such, with the exception of the 1995
Formula Stock Option Plan, review and act upon Mr. Diamond's
recommendations with respect to stock option grants and restricted
stock awards under those plans. Gerald Diamond, Stewart Aaron and
Cary Rosenthal also serve as the members of the committee
administering the Company's 401(k) plan available to all eligible
employees of the Company and SED, including executive officers.
Accordingly, this Report is submitted over the names of all of the
members of the Company's Board of Directors.
Executive Compensation Philosophy. The Company's executive
compensation program is designed to help it identify and retain
outstanding executives in the microcomputer and cellular telephone
wholesale distribution industry. The Company believes this focus
will enable it to hire and retain the best executive talent and
help it meet its long-range objectives. Key elements of this
philosophy include the following:
[BULLET] Appeal to the executive who is motivated to position the
Company as a leader in selected markets.
[BULLET] Align the financial interests of the executives with
those of the stockholders.
[BULLET] Reward above-average returns to stockholders.
[BULLET] Provide compensation opportunities that are within the
range of those provided by microcomputer and cellular
telephone wholesale distribution companies of similar
sizes.
As a result of the emphasis on linking executive compensation
to individual and corporate performance, the Company's executives
may be paid more or less than executives of the Company's
competitors.
The Board of Directors anticipates that the design of policies
regarding executive compensation will evolve as the Company grows.
As a baseline, the Board supports the concept that stock ownership
by management and stock-related compensation arrangements are
beneficial in aligning interests and enhancing stockholder value
among management, the Board and the stockholders.
<PAGE>
Executive Compensation Components. There are two components to
the Company's executive compensation program annual cash
compensation (which includes base salary and annual cash bonuses)
and longer-term incentive compensation.
Base Salary. In 1989, SED entered into five-year employment
agreements expiring on June 30, 1994 with each of the named
executives (other than Gerald Diamond, whose compensation
arrangements are discussed separately below). In 1991, the Board of
SED extended the term of each of these agreements until June 30,
1996. In 1996, the Board of Directors of SED determined the initial
base salary for each of the named executives, other than Gerald
Diamond, after taking into account the historical financial
performance of the Company, the performance of that person with
respect to the areas under his or her responsibility, and a desire
by the Board to treat these persons relatively equally. Although
the Board utilized the foregoing guidelines in its deliberations,
the ultimate decision made by the Board was subjective and not
based on any particular stated individual or Company performance
criteria or on salaries paid by the Company's competitors. Salaries
are adjusted annually by an amount equal to the greater of 5% or
the annual increase in the Consumer Price Index. See "Executive
Compensation Employment Agreements" for a summary of the terms of
the employment agreements.
Bonuses. During each fiscal year, Gerald Diamond recommends to
the Board annual cash bonuses for the Company's executive officers
(excluding himself). The Board considers his recommendation and
awards bonuses based on that recommendation and on the Board's own
subjective evaluation of the executive's individual leadership and
performance in his or her area of responsibility and on the net
earnings and return on equity of the Company for the fiscal year
for which the bonus is to be awarded. Although the Board gives the
foregoing factors relatively equal weight in its deliberations, its
ultimate determination is subjective and is not based on any
particular stated individual or Company performance objectives.
Long-Term Incentives. The long-term incentive compensation
program currently consists of stock grant and option plans pursuant
to which the Company may grant executives and other key employees
of the Company restricted shares of Common Stock and options to
purchase shares of the Company's Common Stock. Restricted shares of
Common Stock granted to key employees are in the nature of a bonus
without payment of any consideration by the recipient. The
restricted shares become vested at the time or times specified by
the committee administering this plan. Prior to vesting, however,
recipients of awards have all other rights of a stockholder,
including the right to vote the shares and to receive any dividends
declared and paid on the Common Stock so awarded. Generally, the
exercise price of options granted under a stock option plan is
equal to the fair market value of the underlying shares on the date
of grant, usually options become exercisable in 20% increments on
the first through fifth anniversaries of the date of grant and are
exercisable up to ten years from the date of grant. The Board of
Directors believes that the stock grant and option plans promote
greater interest in the welfare of the Company by retaining
executives and key employees and allowing them to share in the
Company's success.
CEO Compensation. SED has a five-year employment agreement
with Gerald Diamond subject to automatic one-year extension of the
five-year term upon the expiration of each year of
<PAGE>
employment unless the SED Board notifies Mr. Diamond within a
specified period during the year that the term of the agreement will
not be extended.
The employment agreement provides for an annual base salary of
$475,757 (as of fiscal 1997), adjusted annually in accordance with
increases in the Consumer Price Index. Under the terms of the
employment agreement, in addition to annual base salary,
Mr. Diamond is eligible to receive annual cash bonuses equal to 5%
of the Company's Pretax Adjusted Annual Income, which means with
respect to a given year, the sum of (A) earnings before taxes and
minority interests of the Company as reported on its audited
consolidated statement of operations for such year, excluding, in
all cases (i) any nonrecurring income and nonrecurring costs or
expenses which income, costs or expenses are extraordinary in the
reasonable opinion of the Company's Board of Directors, all as
calculated in accordance with generally accepted accounting
principles consistently applied, (ii) any interest income or
expense, and (iii) additional amortization or depreciation or
increase in the costs of goods sold resulting from any asset
revaluations or goodwill, Less (B) $6,000,000 in each of fiscal
1994 through 1996, and $6,000,000 each fiscal year thereafter
unless SED and Mr. Diamond agree upon a different amount. In
February 1995, the Board of Directors, with Mr. Diamond's
concurrence, fixed Mr. Diamond's bonus payable for each year during
the term of his employment agreement following fiscal year 1995 at
Mr. Diamond's actual bonus for fiscal 1995 calculated in accordance
with the above formula. On September 24, 1996, the Company's Board of
Directors determined that, effectie July 1, 1996, Mr. Diamond's bonus
would be calculated in accordance with the foregoing formula and not
be fixed at Mr. Diamond's actual bonus level for fiscal 1995. Mr.
Diamond agreed to forego his bonus for fiscal 1996.
The Board of Directors' philosophy in establishing the base
salary and performance bonus structure reflected in Mr. Diamond's
employment agreement was to consider the pay to CEOs of
similarly-sized companies in the microcomputer and cellular
telephone wholesale distribution industry as a guide and to provide
an incentive to Mr. Diamond to remain with the Company and to
continue to grow the business of the Company. The Board of
Directors intends to evaluate Mr. Diamond's compensation package
during fiscal 1997 based on the factors described above and
Mr. Diamond's duties and responsibilities with respect to
management of the Company. Any new compensation package that the
Board of Directors may propose will be subject to the
re-negotiation of Mr. Diamond's current employment agreement.
Mr. Diamond also is eligible to receive additional
compensation under the Company's long-term incentive compensation
program described above. The Board believes that such compensation
aligns the financial interests of the CEO with those of the
stockholders and with the Company's financial performance.
Other Compensation Plans. The Company and SED maintain two
broad-based employee benefit plans in which the executive officers
are permitted to participate on the same terms as other employees.
These include: (i) The Company's 401(k) Plan and (ii) the Southern
Electronics Distributors Savings Plan and Trust. Pursuant to both
plans, the Company and SED will match 25% of the amount of
contributions of each participant up to 10% of the participant's
compensation. The Company and SED may also elect in any year to
make an additional contribution to either of the plans for that
year, which in any event shall not exceed 15% of all participants'
compensation for the Company's and SED's taxable year. Neither plan
provides for investments in the Company's Common Stock.
<PAGE>
Limitations on the Deductibility of Compensation. Pursuant to
the 1993 Omnibus Budget Reconciliation Act, a portion of annual
compensation payable after 1993 to any of the Company's five
highest paid executive officers would not be deductible by the
Company for federal income tax purposes to the extent such
officer's overall compensation exceeds $1 million. Qualifying
performance - based incentive compensation, however, would be both
deductible and excluded for purposes of calculating the $1 million
base. It has been determined that no portion of anticipated
compensation payable to any executive officer in fiscal 1996 would
be non-deductible. The Board of Directors will continue to address
this issue when formulating compensation arrangements for executive
officers.
SUBMITTED BY THE BOARD OF DIRECTORS
OF SOUTHERN ELECTRONICS CORPORATION
Gerald Diamond
Cary Rosenthal
Stewart I. Aaron
G. William Speer
Ray D. Risner
<PAGE>
FIVE-YEAR PERFORMANCE GRAPH
The following graph presents a comparison of the cumulative
total stockholder return on the Company's Common Stock with the
Nasdaq Stock Market (U.S.) Index and the average performance of a
group consisting of the Company's peer corporations on a
line-of-business basis. The companies making up the peer corporations
group are AmeriQuest Technologies, Inc., Arrow Electronics, Inc.,
Avnet, Inc., Liuski International, Inc., Marshall Industries,
Merisel, Inc., Tech Data Corporation, United Stationers, Inc. and
Western Micro Technology. This year, AmeriQuest Technologies, Inc.
replaces Robec, Inc. since these two companies merged together in
1995. This graph assumes that $100 was invested on June 30, 1991 in
the Company's Common Stock and in the other indices, and that all
dividends were reinvested. The peer corporations were weighted on
a market capitalization basis at the time of each reported data
point. The stock price performance shown below is not necessarily
indicative of future price performance.
[GRAPH HERE]
<TABLE>
Base
Period Return Return Return Return Return
1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
Southern Electronics Corporation 100 161.53 281.24 108.17 86.54 108.17
Peer Group Index 100 128.90 182.33 178.87 234.44 229.26
NASDAQ National Market
(U.S.) Index 100 120.13 151.08 152.52 203.59 261.37
</TABLE>
COMPENSATION TABLES
This section of the Proxy Statement discloses the compensation
awarded or paid to, or earned by, the Company's Chief Executive
Officer and the four other most highly compensated executive
officers of the Company earning over $100,000 in salary and bonus
for the three fiscal years ended June 30, 1996 (together, these
persons are sometimes referred to as the "named executives"). The
Company did not award any stock appreciate rights ("SARs") during
fiscal 1996.
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Other
Annual Restricted Securities All Other
Name and Principal Compen- Stock Underlying LTIP Compen-
Position Year Salary Bonus sation Award(s) Options Payouts sation
($) ($) ($)(1) ($)(2) (#) ($) ($)(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Diamond 1996 $386,810 $ 0 $ 0 $ 0 $ 0 $0 $1,607
Chairman of 1995 622,427 178,250 0 0 0 0 2,310
the Board, 1994 436,937 0 0 0 0 0 2,310
Chief Executive
Officer and
Director of the
Company and SED
Ray D. Risner 1996 $121,549 $ 40,000 $ 0 $ 0 $ 0 $0 $1,398
President and 1995 60,775 30,000 0 165,000 (8) 30,000 0 0
Chief Operating 1994 0 0 0 0 0 0 0
Officer
Mark Diamond 1996 $134,009 $ 72,800 $ 0 0 20,000 $0 $1,800
Executive Vice 1995 127,628 80,000 0 52,500 (4) 0 0 2,919
President of the 1994 121,550 15,000 0 0 (6) 0 616
Company and SED
Larry G. Ayers 1996 $134,000 $ 0 $ 0 $ 0 $ 0 $0 $1,440
Vice President-- 1995 127,628 0 0 52,500 (4) 0 0 2,403
Finance, Chief 1994 121,550 0 0 0 (7) 0 1,537
Financial Officer,
Secretary and
Treasurer of the
Company and SED
Jean Diamond 1996 $167,511 $ 60,000 $ 0 $ 0 $ 0 $0 $2,391
Vice President-- 1995 159,535 0 0 0 0 0 2,405
Credit of SED 1994 151,938 0 0 0 (5) 0 1,901
</TABLE>
__________________________
(1) Does not reflect non-cash compensation in the form of personal
benefits provided by the Company that may have value to the
recipient. Although such compensation cannot be determined
precisely, the Company has concluded that the aggregate amount
thereof with respect to any named executive does not exceed
the lesser of either $50,000 or 10% of the total annual salary
and bonus reported for any fiscal year to which such benefits
pertain.
<PAGE>
(2) At June 30, 1996, the named executives held the following
dollar values of restricted stock previously granted pursuant
to the Company's 1988 Restricted Stock Plan: Gerald Diamond
$0; Jean Diamond $0; Mark Diamond $62,500; Larry G. Ayers
$62,500; and Ray D. Risner $187,500. The dollar value of the
restricted stock was determined by multiplying the number of
restricted shares held at June 30, 1996 by the closing sales
price of the Common Stock as reported by the Nasdaq National
Market ("Nasdaq") on that date. No restricted stock held by
the named executives vested in fiscal 1996. Dividends are
accrued on restricted stock.
(3) The amounts indicated relate to contributions made by the
Company pursuant to its 401(k) Plan and Savings Plan and Trust
for the benefit of each of the named executives.
(4) Calculated based on an award of 10,000 shares of restricted
stock valued at $5.25 per share (the closing price of the
Company's Common Stock on October 13, 1994, the day before the
date of grant).
(5) Ms. Diamond was granted options to purchase 30,000 shares and
20,000 shares of Common Stock in fiscal 1992 and 1993,
respectively. The option to purchase 30,000 shares was
repriced on May 25, 1994. The option to purchase 20,000 shares
was repriced on November 16, 1993 and May 25, 1994.
Consequently, Ms. Diamond was granted new options to purchase
an aggregate of 50,000 shares of Common Stock during fiscal
1994, but each grant accompanied a cancellation of an option
pursuant to the same number of shares.
(6) Mr. Diamond was granted options to purchase 20,000 shares and
29,250 shares of Common Stock in fiscal 1993. The option to
purchase 20,000 shares was repriced on November 16, 1993 and
May 25, 1994 and the option to purchase 29,250 shares was
repriced on May 25, 1994. Consequently, Mr. Diamond was
granted new options to purchase an aggregate of 49,250 shares
of Common stock during fiscal 1994, but each grant accompanied
a cancellation of an option to purchase the same number of
shares.
(7) Mr. Ayers was granted options to purchase 20,000 shares of
Common Stock during fiscal 1993. These options were repriced
on November 16, 1993 and May 25, 1994. Consequently, Mr. Ayers
was granted options to purchase 20,000 shares of Common Stock
on two occasions during fiscal 1994, but each grant
accompanied a cancellation of an option to purchase the same
number of shares.
(8) Calculated based on an award of 30,000 shares of restricted
stock valued at $5.50 per share, the closing price of the
Company's Common Stock on May 22, 1996, the day before the
grant date.
<PAGE>
<TABLE>
OPTION GRANTS IN FISCAL 1996
Potential Realizable Value
Individual Grants at Assumed Annual Rates
of Stock Price Appreciation
for Option Term
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees
Options in Fiscal Exercise Expiration 5% 10%
Name Granted Year Price Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Mark Diamond 20,000(1) 5.7% $5.88 August 30, 2005 $76,000 $200,800
Larry G. Ayers 15,000(1) 4.3% $5.88 August 30, 2005 $57,700 $150,600
</TABLE>
____________________
(1) Represents a grant of options on August 30, 1995. Such
options vest in 33% increments commencing the first
anniversary of the date of grant. In the event of a change in
control (as defined in the applicable stock option agreement),
these options become immediately exercisable.
OPTION EXERCISES IN FISCAL 1996 AND VALUES AT JUNE 30, 1996
This table presents information regarding options exercised
for shares of the Company's Common Stock during fiscal year ended
June 30, 1996 and the value of unexercised options held at June 30,
1996. There were no SARs outstanding during fiscal 1996. The
value of unexercised in-the-money options at fiscal year-end was
calculated based on the closing sales price of the Common Stock
reported by the Nasdaq National Market ("Nasdaq") on that date.
This table assumes no options were exercised by the named executives
in fiscal 1996.
<TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND
1996 FISCAL YEAR-END OPTION VALUE
Number of
Securities Underlying Value of
Unexercised Unexercised
Options in-the Money
at FY-End Options at
(#)(1) FY-End ($)(2)
Shares
Acquired
On Exercise Value Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Gerald Diamond -- -- 450,000 0 $612,000 $ 0
Ray D. Risner -- -- 16,667 13,333 $ 17,500 $10,000
Mark Diamond -- -- 69,067 27,183 $ 56,887 $11,858
Larry G. Ayers -- -- 53,000 18,000 $ 56,810 $ 7,700
Jean Diamond -- -- 36,000 14,000 $ 18,000 $ 7,000
</TABLE>
________________
(1) Includes options granted prior to fiscal 1996.
(2) Value of Unexercised, in-the-Money Options at June 30, 1996 is
calculated as follows: [(Per Share Closing Sales Price on
June 30, 1996) - (Per Share Exercise Price)] x Number of
Shares Subject to Unexercised Options. The per share closing
sales price as reported by Nasdaq on June 30, 1996 was $6.25.
<PAGE>
EMPLOYMENT AGREEMENTS
SED has employment agreements with Gerald Diamond, Larry G.
Ayers, Jean Diamond, Mark Diamond and Ray D. Risner. The
employment agreements with Larry G. Ayers, Mark Diamond and Ray D.
Risner expire on June 30, 1997. Each of the employment agreements
with Gerald Diamond and Jean Diamond has a five-year term subject
to automatic one-year extension of the five-year term, upon the
expiration of each year of employment unless the SED Board notifies
Mr. Diamond or Mrs. Diamond, as the case may be, within a specified
time period during the year that the term of the agreement will not
be extended.
Gerald Diamond's employment agreement provides for an annual
base salary of $475,757 (as of fiscal 1997), adjusted annually in
accordance with increases in the Consumer Price Index. Mr. Diamond
agreed to forego $75,000 of his salary for fiscal 1996. In
addition, Mr. Diamond's employment agreement provides for incentive
compensation in the form of an annual bonus equal to 5% of the
Company's Pretax Adjusted Annual Income (as defined in the section
entitled "Compensation Report of the Board of Directors of Southern
Electronics Corporation"). In February 1995, the Board of Directors
fixed Mr. Diamond's bonus payable for each year during the term of
his employment agreement following fiscal year 1995 at
Mr. Diamond's actual bonus for fiscal 1995 calculated in accordance
with the above formula. Mr. Diamond's fiscal 1995 bonus was
$178,250. Mr. Diamond agreed to forego his bonus for fiscal 1996.
Mr. Diamond's employment agreement provides him with an
automobile allowance and disability insurance coverage and includes
a covenant not-to-compete with SED and the Company for a period of
two years following termination of his employment.
SED's employment agreements with Larry G. Ayers, Mark Diamond
and Ray D. Risner each provide for annual base salaries of
$134,009, $134,009 and $140,000, respectively (as of fiscal 1997).
SED's employment agreement with Jean Diamond provides for an annual
base salary of $175,887 (as of fiscal 1997), adjusted as described
in the previous sentence. All cash bonuses paid to Messrs. Ayers,
Mark Diamond and Ray D. Risner and Ms. Jean Diamond for services
rendered during fiscal 1994, 1995 and 1996 are included in the
Summary Compensation Table appearing on page 17. Each of the
employment agreements for Messrs. Ayers, Mark Diamond and Risner
require SED to provide life and disability insurance coverage and
include a covenant not-to-compete with the Company and SED for a
period of one year following termination of employment. Jean
Diamond's employment contract contains terms similar to those
described in the previous sentence but includes a two-year
non-competition covenant.
Each of the foregoing employment agreements with Gerald
Diamond, Larry G. Ayers, Jean Diamond, Mark Diamond and Ray D.
Risner provides that if a "Change of Control" (as such term is
defined below) occurs while the employee is employed by SED, and it
the employee's employment is terminated involuntarily, or
voluntarily by the employee upon the occurrence of certain events,
the employee may notify SED and request a cash payment in an amount
equal to the aggregate present value of all annual salary, bonuses
and other benefits owing to the employee from the date of
termination through the remainder of the term of his employment
agreement, except that if the
<PAGE>
term remaining in the employee's employment agreement is less than
twelve months, the employee shall receive such amounts on an
annualized basis.
Under each of the employment agreements, a "Change of Control"
is deemed to have occurred when (i) any individual or entity,
including related parties, becomes the beneficial owner of
securities of the Company or SED representing 30% or more of the
combined voting power of the Company's or SED's outstanding
securities; (ii) the Company's Continuing Directors (a term defined
to include directors as of the date of execution of the employment
agreements and their duly approved successors) fail to constitute
at least a majority of the members of the Board of Directors of the
Company; and (iii) all or substantially all of the assets of the
Company or SED are sold or otherwise transferred without the
approval of the Continuing Directors.
CERTAIN TRANSACTIONS
See the discussion in the section entitled under "Compensation
Committee Interlocks and Insider Participation" for a discussion of
certain transactions and arrangements among the Company and its
affiliates.
PROPOSAL 2 - AMENDMENT OF THE 1991 STOCK OPTION PLAN
Introduction
The Company's 1991 Stock Option Plan permits Incentive Stock
Options and Non-Qualified Stock Options to purchase up to an
aggregate of 1,180,000 shares of common stock of the Company,
subject to adjustment in the event of a recapitalization, merger,
stock split or any other change in the corporate structure or
shares of stock of the Company, to be granted to key employees
(including officers and directors who are also employees) of the
Company. The 1991 Stock Option Plan terminates on October 15, 2001.
The form of the proposed amendment to the 1991 Stock Option Plan is
attached hereto as Appendix A.
The following description of the 1991 Stock Option Plan is
qualified in its entirety by reference to the applicable provisions
of the 1991 Stock Option Plan and agreements related to the 1991
Stock Option Plan. The 1991 Stock Option Plan is not subject to the
Employee Retirement Income Security Act of 1974 nor is it qualified
under Section 401(a) of the Internal Revenue Code of 1986 (the
"Code").
Administration
The 1991 Stock Option Plan is administered by a committee (the
"Committee") of the Company's Board of Directors. No one who is, or
within one year prior to his becoming a member of the Committee
was, granted or awarded shares pursuant to the 1991 Stock Option
Plan or any other plan of the Company or an affiliate thereof may
be appointed as a member of the Committee. The Committee currently
consists of Cary Rosenthal and Stewart Aaron. The Company's Board
of Directors may from time to time remove members from or add
members to the Committee and may
<PAGE>
fill vacancies thereon. The Committee has conclusive authority to
interpret the 1991 Stock Option Plan and may prescribe, amend and
rescind rules and regulations relating to it.
Stock Subject to Options
The stock subject to the options is the Company's authorized
but unissued or reacquired Common Stock. On September 20, 1996, the
closing price of the Company's Common Stock as reported by the
Nasdaq National Market on that day was $9.375 per share.
Eligibility
Persons eligible to receive options are key employees
(including officers and directors who are also employees) of the
Company or any parent or subsidiary of the Company. As of
September 6, 1996, approximately 150 key employees, nine executive
officers and two employee directors were eligible to receive
options under the 1991 Stock Option Plan.
Terms and Conditions of Options
Options granted under the 1991 Stock Option Plan may be either
Incentive Stock Options or Non-Qualified Stock Options. Each option
granted pursuant to the 1991 Stock Option Plan must be authorized
by the Committee and must be evidenced by an agreement
("Agreement") containing the terms and conditions of the option,
including the designation of the option as an Incentive Stock
Option or a Non-Qualified Stock Option. Each Agreement must state
(i) the number of shares of Common Stock to which it pertains, (ii)
the exercise price, (iii) the terms and conditions for payment,
(iv) the term of the option and the period(s) during the option
term in which the optionee may exercise the option or portions
thereof, and (v) that the option is not transferable by the
optionee except as provided by the 1991 Stock Option Plan. In the
event of a "Change of Control" (as defined in the 1991 Stock Option
Plan), all options then outstanding will become immediately
exercisable in full and will remain exercisable for the remaining
term of the options, regardless of any vesting schedule set forth
in the Agreement.
Each Agreement is to provide that any option or portion of an
option that is unexercised at the time the optionee is no longer an
employee of the Company, the parent or a subsidiary for any reason
other than death or disability will terminate as of the date of
such change in status (or up to three months thereafter if so
specified in the Agreement and if the termination is not due to
misconduct as described in the 1991 Stock Option Plan). If the
optionee dies while an employee of the Company, the parent or a
subsidiary or within 12 months after termination of employment with
the Company, the parent or a subsidiary due to disability, his or
her options may be fully exercised by his or her heirs or by the
executor of his or her estate until the earlier of the expiration
date specified in the Agreement or the first anniversary of the
optionee's death. If the optionee's employment terminates due to
disability, the optionee may fully exercise his or her options
until the earlier of the expiration date specified in the Agreement
or 12 months after termination of employment.
<PAGE>
In addition, each Agreement evidencing the grant of an
Incentive Stock Option must provide that the exercise price shall
not be less than 100% of the fair market value of the shares of
Common Stock on the date of grant of the option (110% of the fair
market value in the case of an optionee owning more than 10% the
total combined voting power of all classes of stock of the Company
or any parent or subsidiary thereof), provide that the option is
not exercisable after the expiration of 10 years after the date the
option is granted (5 years in the case of an optionee owning more
than 10% of the total combined voting power of all classes of stock
of the Company or any parent or subsidiary thereof) and contain
such limitations and restrictions upon the exercise of the option
as are necessary in order that such option be an "incentive stock
option" as defined in Section 422 of the Code or to conform to any
change in the law.
Exercise Options
The aggregate fair market value of Common Stock with respect
to which Incentive Stock Options are exercisable for the first time
by an optionee during any calendar year shall not exceed $100,000.
For purposes of this limitation all incentive stock option plans of
the Company or a parent or subsidiary thereof shall be aggregated.
To the extent the foregoing limit is exceeded the options exceeding
the limit will no longer be treated as Incentive Stock Options, but
will be treated as Non-Qualified Stock Options.
The option price must be paid in cash unless the Committee
provides in the Agreement that the option price may be paid
otherwise. An Agreement may provide for any or all of the following
alternative methods of payment: (i) by delivery to the Company of
shares of Common Stock of the Company that the optionee has owned
for at least six months prior to the exercise date and having a
fair market value on the date of exercise that either alone or when
combined with cash equals the purchase price; (ii) by receipt of
the purchase price in cash from a broker, dealer or other creditor
pursuant to instructions acceptable to the Committee; or (iii) by
delivery of such other consideration as the Committee deems
appropriate as set forth in the Agreement.
Amendment or Discontinuance of the 1991 Stock Option Plan
The Board of Directors may, insofar as permitted by law, amend
or discontinue the 1991 Stock Option Plan; provided, however, that
the Board of Directors may condition any amendment on the approval
of the stockholders of the Company if such approval is necessary or
advisable with respect to tax securities or other applicable laws.
Stockholder approval is required for amendments materially
increasing the number of shares of Common Stock subject to options
and for material modifications to the eligibility requirements of
the 1991 Stock Option Plan. No amendment or termination of the 1991
Stock Option Plan will affect an optionee's rights with regard to
his or her options without the optionee's written consent.
<PAGE>
Federal Income Tax Matters
The following is a brief summary of the federal income tax
consequences of awards made under the 1991 Stock Option Plan based
upon the federal income tax laws in effect on the date hereof. This
summary is not intended to be exhaustive, and does not describe
state local or foreign tax consequences.
An optionee is not required to recognize income upon the grant
of a Non-Qualified Stock Option under the 1991 Stock Option Plan or
at any time prior to the exercise of the option or a portion
thereof. Generally, at the time the optionee exercises a
Non-Qualified Stock Option or portion thereof, the optionee
recognizes compensation taxable as ordinary income in an amount
equal to the excess of the fair market value of the Common Stock on
the date the option is exercised over the option price of the
Common Stock. The Company generally will be entitled to a
corresponding deduction equal to the amount of ordinary income
recognized by the optionee, provided the Company satisfies
applicable federal income tax withholding requirements. However, if
the optionee is subject to Section 16(b) of the Exchange Act, the
date on which the fair market value of the shares transferred is
determined will be the earlier of the last day of the six month
period beginning on the date the "property" is "purchased" or the
first day on which a sale of the "property purchased" will not
subject the optionee to suit under Section 16(b) of the Exchange
Act. Alternatively, if such an optionee makes a timely election
under Section 83(b) of the Code, such fair market value will be
determined on the date the shares are transferred pursuant to the
exercise without regard to the effect of Section 16(b) of the
Exchange Act. The optionee will recognize ordinary income in the
year in which the fair market value of the shares transferred is
determined.
An optionee is not required to recognize income upon the grant
or exercise of an Incentive Stock Option. Instead, the optionee is
taxed at the time he or she sells the Common Stock purchased
pursuant to the option. The optionee will be taxed on the
difference between the price he or she paid for the stock and the
amount for which he or she sells the stock. If the optionee does
not sell the stock prior to two years from the date of grant of the
option and one year from the date the stock is transferred to the
optionee, the gain will be capital gain and the Company will get no
deduction. If the optionee sells the stock at a gain prior to that
time, the difference between the amount the optionee paid for the
stock and the lesser of the fair market value on the date of
exercise or the amount for which the stock is sold will be taxed as
ordinary income and the Company will be entitled to a corresponding
deduction. If the stock is sold by the optionee for an amount in
excess of the fair market value on the date of exercise, the excess
of the sale price over the fair market value on the date of
exercise will be taxed as capital gain. If the optionee sells the
stock for less than the amount he or she paid for the stock prior
to the one- or two-year periods indicated, no amount will be taxed
as ordinary income and the loss will be taxed as a capital loss. If
the optionee is subject to Section 16(b) of the Exchange Act,
special rules may apply to determine the amount of ordinary income
recognized upon the disposition. Exercise of an Incentive Stock
Option may subject an optionee to, or increase an optionee's
liability for, the alternative minimum tax.
<PAGE>
Proposed Amendment
The Board of Directors of the Company has approved, and
recommends that the stockholders of the Company approve, an
amendment to the 1991 Stock Option Plan to increase the number of
shares authorized for issuance under the 1991 Stock Option Plan
from 1,180,000 to 1,680,000.
Vote Required
Approval of the proposed amendment to the 1991 Stock Option
Plan requires the affirmative vote of the holders of at least a
majority of the outstanding shares of Common Stock of the Company
represented and entitled to be voted at the Annual Meeting.
The Board of Directors recommends a vote FOR
the amendment of the 1991 Stock Option Plan.
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Company's
independent auditors for the fiscal year ended June 30, 1996 and
the Board of Directors has reappointed this firm for fiscal 1997.
A representative of this firm is expected to attend the meeting to
respond to questions from stockholders and to make a statement if
he so desires.
STOCKHOLDER PROPOSALS FOR ANNUAL MEETING
Any stockholder of the Company wishing to submit a proposal
for action at the Company's 1996 Annual Meeting of Stockholders and
desiring the proposal to be considered for inclusion in the
Company's proxy materials relating thereto must provide a written
copy of the proposal to the management of the Company at its
principal executive offices not later than July 27, 1997 and must
otherwise comply with the rules and regulations of the Securities
and Exchange Commission applicable to stockholder proposals.
ANNUAL REPORT
The Company's 1996 Annual Report to Stockholders is being
mailed to the Company's stockholders with this Proxy Statement. The
Annual Report is not part of the proxy soliciting material.
OTHER MATTERS
The Board of Directors does not know of any other matters to
be presented at the Annual Meeting for action by stockholders. If
any other matters requiring a vote of the stockholders arise at the
Annual Meeting or any adjournment thereof, however, it is intended
that votes will be cast pursuant to the proxies with respect to
such matters in accordance with the best judgment of the persons
acting under the proxies.
<PAGE>
The Company will pay the cost of soliciting proxies in the
accompanying form. In addition to solicitation by mail, certain
officers and regular employees of the Company may solicit the
return of proxies by telephone, telegram or personal interview. The
Company may request brokers and others to forward proxies and
soliciting materials to the beneficial owners of Common Stock of
the Company, and will reimburse them for their reasonable expenses
in so doing.
A list of stockholders entitled to be present and vote at the
meeting will be available during the meeting for inspection by
stockholders who are present.
If you cannot be present in person, you are requested to mark,
date, sign and return the enclosed proxy promptly. An envelope has
been provided for your convenience. No postage is required if
mailed in the United States.
By Order of the Board of Directors
/s/LARRY G. AYERS
Larry G. Ayers,
Secretary
October 1, 1996
Tucker, Georgia
<PAGE>
APPENDIX A
THIRD AMENDMENT TO
1991 STOCK OPTION PLAN
THIRD AMENDMENT TO
SOUTHERN ELECTRONICS CORPORATION
1991 STOCK OPTION PLAN
This Third Amendment, made on the 12th day of September, 1996,
by Southern Electronics Corporation, a company organized and
operating under the laws of the State of Delaware (the "Company");
W I T N E S S E T H:
WHEREAS, the Board of Directors and stockholders of the
Company adopted the Southern Electronics Corporation 1991 Stock
Option Plan (the "Plan");
WHEREAS, the Board of Directors of the Company has authorized
and reserved for issuance an additional 500,000 shares of Common
Stock, subject to stockholder approval; and
WHEREAS, the Board of Directors desires to amend the Plan to
reflect the issuance of additional Common Stock under the Plan:
NOW, THEREFORE, the Company hereby amends the Plan effective
immediately, by deleting the first and second sentences of Plan
Section 4 and inserting in lieu thereof the following:
"The Company had previously authorized and reserved
for issuance upon the exercise of Options granted
pursuant to the Plan an aggregate of one million one
hundred eighty thousand (1,180,000) shares of $.01 par
value common stock (the "Common Stock") of the Company.
Subject to shareholder approval, the Board of Directors
of the Company has authorized and reserved for issuance
upon the exercise of Options granted pursuant to the Plan
an additional five hundred thousand (500,000) shares of
Common Stock, resulting in an aggregate of one million
six hundred eighty thousand (1,680,000) shares of Common
Stock available for issuance under the Plan (the
aggregate amount of shares of Common Stock available for
issuance under the Plan is hereinafter referred to as the
"Shares").
Except as specifically amended hereby, the Plan shall remain
in full force and effect as prior to this Third Amendment.
The Company shall submit this Third Amendment to its
shareholders for approval at the 1996 Annual Meeting of
Shareholders. Unless shareholder approval is obtained, both this
Third Amendment and all outstanding Options granted after the date
hereof in excess of the authorized Options available for issuance
under the Plan as in effect prior to this Third Amendment shall be
rendered immediately void and of no effect.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Third
Amendment to be executed and sealed as of the day and year set
forth above.
SOUTHERN ELECTRONICS CORPORATION
By:/s/ Gerald Diamond
Gerald Diamond
Title: Chairman and Chief Executive Officer
ATTEST:
By:/s Larry G. Ayers
Larry G. Ayers
Title: Secretary
[CORPORATE SEAL]
<PAGE>
[ATTACHMENT -- PROXY CARD]
SOUTHERN ELECTRONICS CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, each dated October 1,
1996, and does hereby appoint Gerald Diamond and Larry G. Ayers, and
either of them, with full power of substitution, as proxy or
proxies of the undersigned, to represent the undersigned and vote all
shares of Southern Electronics Corporation Common Stock which the
undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Southern Electronics Corporation to
be held at the principal executive offices of the Company, 4916 N.
Royal Atlanta Drive, Tucker, Georgia, at 12:00 p.m. on October 31,
1996 and at any adjournment(s) thereof:
1. Proposal 1: Election of Directors
FOR all nominees listed below WITHHOLD AUTHORITY to vote
(except as marked to the for all nominees listed [box]
contrary below) below [box]
CLASS I: Nominee to fill the remainder of a term expiring in
1998: Mark Diamond
CLASS II: Nominees for a three-year term expiring in 1999: Ray
D. Risner and Cary Rosenthal
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write the nominee's name in the space provided below.)
2. Proposal 2: Proposal to amend the Company's 1991 Stock Option
Plan to increase the number of shares available for issuance by
500,000.
FOR [box] AGAINST [box] ABSTAIN [box]
3. In their discretion, the proxies are authorized to vote on such
other business as may properly come before the meeting or at any
adjournment(s) thereof. This Proxy may be revoked at any time prior
to the voting thereof.
TO BE SIGNED ON OTHER SIDE
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY
This Proxy, when properly executed, will be voted in accordance with
the directions given by the undersigned stockholder. If no direction
is made, it will be voted in favor of Proposals 1 and 2. The proxies
may vote in their discretion as to other matters that may properly
come before the meeting.
__________ Shares Common Stock
________________________________
________________________________
Date ______________________ , 1996
Please sign exactly as your name(s)
appear hereon, and when signing
as attorney, executor, administrator,
trustee or guardian, give your full
title as such. If the signatory is
a corporation, sign the full
corporation name by a duly
authorized officer.
