SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
X Filed by the Registrant
Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Southern Electronics Corporation
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement, if other than 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)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
SOUTHERN ELECTRONICS CORPORATION
4916 NORTH ROYAL ATLANTA DRIVE
TUCKER, GEORGIA 30085
Dear Southern Electronics Corporation Stockholders:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders to be held at the executive offices of the Company, 4916
North Royal Atlanta Drive, Tucker, Georgia, on Tuesday, November 11,
1997, at 12:00 p.m., local time, for the following purposes:
(i) To elect two Class II directors for terms to expire at
the 2000 Annual Meeting of Stockholders;
(ii) To consider and approve the Southern Electronics
Corporation 1997 Stock Option Plan;
(iii) To consider and approve an amendment to the Company's
Certificate of Incorporation increasing the authorized
shares of the Company's Common Stock from 25 million to
100 million shares;
(iv) To consider and approve an amendment to the Company's
Certificate of Incorporation changing the name of the
Company from "Southern Electronics Corporation" to "SED
International Holdings, Inc."; and
(v) To transact such other business as may properly come
before the meeting or any adjournments thereof.
During the meeting we will review the results of the fiscal year
ended June 30, 1997, and report on significant aspects of our
operations during the first quarter of fiscal 1998.
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,
Gerald Diamond,
Chairman of the Board and
Chief Executive Officer
October 3, 1997
<PAGE>
SOUTHERN ELECTRONICS CORPORATION
4916 NORTH ROYAL ATLANTA DRIVE
TUCKER, GEORGIA 30085
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders:
The Annual Meeting of Stockholders of Southern Electronics
Corporation (the "Company") will be held at the executive offices of
the Company, 4916 North Royal Atlanta Drive, Tucker, Georgia, on
Tuesday, November 11, 1997, at 12:00 p.m., local time, for the
following purposes:
(i) To elect two Class II directors for terms to expire at
the 2000 Annual Meeting of Stockholders;
(ii) To consider and approve the Southern Electronics
Corporation 1997 Stock Option Plan;
(iii) To consider and approve an amendment to the Company's
Certificate of Incorporation increasing the authorized
shares of the Company's Common Stock from 25 million to
100 million shares;
(iv) To consider and approve an amendment to the Company's
Certificate of Incorporation changing the name of the
Company from "Southern Electronics Corporation" to "SED
International Holdings, Inc."; and
(v) To transact such other business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed September 15, 1997, 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,
Larry G. Ayers, Secretary
October 3, 1997
<PAGE>
SOUTHERN ELECTRONICS CORPORATION
4916 NORTH ROYAL ATLANTA DRIVE
TUCKER, GEORGIA 30085
PROXY STATEMENT
This Proxy Statement is furnished by and on behalf of the Board
of Directors (the "Board") of Southern Electronics Corporation (the
"Company") in connection with the solicitation of proxies for use at
the 1997 Annual Meeting of Stockholders of the Company (the "Annual
Meeting") to be held at 12:00 p.m., local time, Tuesday, November 11,
1997, at the Company's executive offices, 4916 North Royal Atlanta
Drive, Tucker, Georgia 30085, and at any adjournments thereof. The
Notice of Annual Meeting of Stockholders, this Proxy Statement, and
the form of proxy will be first mailed on or about October 3, 1997, to
the stockholders of the Company ("Stockholders") of record
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, received in
time for the Annual Meeting, and not revoked 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 Southern Electronics Corporation 1997 Stock Option
Plan (the "1997 Stock Option Plan"), FOR the proposed amendment to the
Company's Certificate of Incorporation (the "Certificate of
Incorporation") increasing the authorized shares of the Company's
common stock (the "Common Stock") from 25 million shares to 100
million shares, FOR the proposed amendment to the Certificate
of Incorporation changing the name of the Company from "Southern
Electronics Corporation" to "SED International Holdings, Inc.," 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 at the following address:
Southern Electronics Corporation, 4916 North Royal Atlanta Drive,
Tucker, Georgia 30085, Attn: Larry G. Ayers, Secretary; 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 15, 1997 (the "Record Date"), will be entitled to vote at
the Annual Meeting. As of the close of business on the Record
Date, there were _________ shares of Common Stock outstanding. Each
share of Common Stock is entitled to one vote on all matters presented
for Stockholder vote.
<PAGE>
According to the Amended and Restated By-laws of the Company (the
"By-laws"), the holders of a majority of the 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. If a quorum is not present or
represented by proxy at the Annual Meeting, the meeting will be
adjourned and the Company will be subjected to additional expense.
If a quorum is present or represented by proxy at the Annual Meeting,
the By-laws provide that the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or
represented by proxy 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 By-laws.
Delaware law and the By-laws specify that (i) directors shall be
elected by the holders of a plurality of the shares of Common Stock
present in person or represented by proxy at the Annual
Meeting; (ii) the 1997 Stock Option Plan must be approved by the
holders of a majority of the shares present in person or represented
by proxy at the Annual Meeting and entitled to vote; and (iii) the
amendments to the Certificate of Incorporation to increase the
authorized shares of Common Stock and to change the name of the
Company must be approved by the holders of a majority of all the
outstanding shares of Common Stock, whether or not present or
represented by proxy at the Annual Meeting.
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. With respect to the election of
directors, abstentions and broker non-votes will have the effect of
votes to withhold a vote for all nominees. Abstentions and broker
non-votes will have the effect of votes against each of the
1997 Stock Option Plan, the amendment to the Company's Certificate of
Incorporation to increase the authorized shares of Common Stock, and
the amendment to the Company's Certificate of Incorporation to change
of the name of the Company.
PROPOSAL 1 - ELECTION OF DIRECTORS
The Board currently consists of six members. The Board 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 III directors expires at the Annual Meeting. The terms
of the Class I and Class II directors expire at the 1998 and 1999
Annual Meetings of Stockholders, respectively. Stockholders annually
elect directors of one of the three classes for three-year terms, to
serve until their successors have been duly elected and qualified or
until their earlier death, resignation or removal. At the Annual
Meeting, the Stockholders will elect two directors to serve as Class
III directors. G. William Speer is currently a Class III director but
has decided not to stand for reelection at the Annual Meeting; his
term will end at the conclusion of the Annual Meeting. The Board has
nominated Gerald Diamond, who is currently a Class III director, and
Joel Cohen for election as Class III directors to serve until
the Annual Meeting of Stockholders in 2000 and until their successors
have been duly elected and qualified or until their earlier death,
resignation or removal.
<PAGE>
Each nominee has consented to serve as a director of the Company
if elected. If at the time of the Annual Meeting either 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. The Board
has no reason to believe that either of the nominees will be
unable or will decline to serve as a director.
The Board recommends that the Stockholders vote FOR the election
of the nominees listed above as directors of the Company for
Class III.
NOMINEES FOR DIRECTOR - CLASS III - TERM TO EXPIRE IN 2000
Positions, Offices
Nominee Age and Other Information
Gerald Diamond 59 Mr. Diamond has been a director of
the Company or its predecessor,
Southern Electronics Distributors,
Inc., a Georgia corporation (the
"Predecessor"), since 1980. Mr.
Diamond currently serves as
Chairman of the Board and Chief
Executive Officer of the Company
and SED International, Inc., a
wholly-owned subsidiary of the
Company ("SED International"). He
was elected President and Chairman
of the Board of the Company and
Chief Executive Officer and
Chairman of the Board of SED
International in June 1986 and has
served in two or more capacities as
Chairman of the Board, Chief
Executive Officer and President of
the Company and SED International
from that time until May 1995. Mr.
Diamond was a founder of the
Predecessor and served as its
President and Treasurer from July
1980 through July 1986. Mr.
Diamond has been in the
electronics-related business for
over 35 years. Mr. Diamond is the
father of Mark Diamond, the husband
of Jean Diamond and the
father-in-law of Brian Paterson.
Joel Cohen 58 Mr. Cohen has served as Vice
President of Marketing for Queen
Carpet Corporation since 1973.
Queen Carpet Corporation is the
fifth-largest manufacturer of
commercial
<PAGE>
and residential carpet in the
United States. Mr. Cohen has been
in the textile-related business for
35 years.
DIRECTORS CONTINUING IN OFFICE - CLASS II - TERM TO EXPIRE IN 1999
Positions, Offices
Nominee Age and Other Information
Ray D. Risner 52 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 of the Company from
February 1995 to May 1995. Mr.
Risner has served as President and
Chief Operating Officer of SED
International 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 Chapter,
Atlanta, Georgia.
Cary Rosenthal 57 Mr. Rosenthal has been a director
of the Company since 1992. Mr.
Rosenthal has served as President
of Phoenix Communications, Inc., a
commercial printing firm, since
1977.
<PAGE>
DIRECTORS CONTINUING IN OFFICE - CLASS I - TERM TO EXPIRE IN 1998
Positions, Offices
Nominee Age and Other Information
Stewart I. Aaron 57 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 over 20 years.
Mark Diamond 32 Mr. Diamond has been a director of
the Company since October 1996.
Mr. Diamond has been employed by
SED International on a full-time
basis in the Sales Department since
January 1987. In February 1991,
Mr. Diamond was elected Vice
President - Sales of SED
International; in May 1993, he was
elected Executive Vice President -
Marketing of SED International; and
in February 1994, he was elected
Executive Vice President - Sales of
SED International. Mr. Diamond has
served as Executive Vice President
of the Company since June 1995, and
in August 1995, he was elected
Executive Vice President of SED
International. Mark Diamond is the
son of Gerald Diamond and Jean
Diamond and the brother-in-law of
Brian Paterson.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board held four meetings during the fiscal year ended June
30, 1997 ("Fiscal 1997"). No director attended less than 75% of the
aggregate number of meetings of the Board and of any committee on
which he served except Mr. Speer. The Board has no standing
nominating or compensation committee.
Messrs. Aaron, Rosenthal and Speer constituted the Company's
Audit Committee during Fiscal 1997. 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 independent auditors and their fees and duties; (ii)
conferring with and receiving
<PAGE>
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 1997.
During Fiscal 1997, Messrs. Aaron and Rosenthal each received
aggregate cash compensation of $5,000 for attendance at regular Board
meetings. This compensation was not contingent on the number of
regular Board meetings attended. No other cash remuneration was
paid to directors during Fiscal 1997. The Company also pays ordinary
and necessary travel expenses for non-management directors to attend
Board and any committee meetings.
As additional compensation for serving as directors of the
Company in Fiscal 1997, Messrs. Aaron, Rosenthal and Speer each
received a non-qualified stock option to purchase up to 10,000 shares
of Common Stock having an exercise price of $7.50 per share and
vesting immediately upon grant pursuant to the Company's 1995 Formula
Stock Option Plan. Directors who are salaried employees of the
Company or any of its subsidiaries do not receive fees for their
services as directors.
OWNERSHIP OF SHARES
The following table sets forth certain information as of
September 15, 1997, regarding the number of shares of Common Stock
beneficially owned by each director and director nominee of
the Company, each Named Executive Officer (as defined under "Executive
Compensation - Compensation Tables"), all directors and executive
officers of the Company as a group, and all persons known to the
Company to 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.
Amount and Nature Percent
Name of Beneficial Owner of Beneficial Owner of Class
SED Associates (1)...... 500,416(2) %
Gerald Diamond (1)...... 520,578(3)
Stewart I. Aaron........ 30,000(4) *
Mark Diamond............ 99,847(5)
Ray D. Risner........... 47,333(6) *
Cary Rosenthal.......... 51,500(4) *
G. William Speer........ 61,500(4) *
<PAGE>
Joel Cohen.............. -0- -0-
Larry G. Ayers.......... 72,271(7)
Jean Diamond............ 46,000(8) *
FMR Corp (9)............ 716,600(9)
Paradigm Capital
Management, Inc.(10).. 437,500(10)
All current directors
and executive officers
as a group (9 persons).. 1,399,518(11) %
* Represents less than one percent of the outstanding Common Stock.
(1) 4916 North Royal Atlanta Drive, Tucker, Georgia 30085.
(2) SED Associates is a general partnership of which Gerald
Diamond is the managing partner. As managing partner, Mr.
Diamond has sole voting and investment power with respect to
the Common Stock owned by SED Associates. Therefore, Mr.
Diamond is deemed the indirect beneficial owner of the
shares of Common Stock owned of record by SED Associates.
(3) The shares indicated include 516,666 shares subject to
options exercisable within 60 days and 3,912 shares held of
record by Gerald Diamond as trustee for the benefit of his
grandchildren. The shares indicated do not include 46,000
shares subject to options exercisable within 60 days by Jean
Diamond, the wife of Mr. Diamond, as to which he disclaims
beneficial ownership. The shares indicated also do not
include the shares owned of record by SED Associates of
which Mr. Diamond is deemed the indirect beneficial owner as
described in footnote (2) above.
(4) All of the shares indicated are subject to options
exercisable within 60 days.
(5) The shares indicated include 10,000 shares of restricted
stock that will vest on October 14, 1999, 89,583 shares
subject to options exercisable within 60 days, and 132
shares held of record by Mark Diamond as trustee of a trust
for the benefit of his sister, Julie Diamond Paterson.
(6) The shares indicated include 30,000 shares of restricted
stock that will vest on May 23, 1998, and 17,333 shares
subject to options exercisable within 60 days.
<PAGE>
(7) The shares indicated include 10,000 shares of restricted
stock that will vest on October 14, 1999, 62,000 shares
subject to options exercisable within 60 days, and 19 shares
held by Mr. Ayers' immediate family members.
(8) All of the shares indicated are subject to options
exercisable within 60 days. The shares indicated do not
include 516,666 shares subject to options exercisable within
60 days by Gerald Diamond, the husband of Jean Diamond and
3,912 shares held of record by Mr. Diamond as trustee for
the benefit of their grandchildren, as to which Ms. Diamond
disclams beneficial interest. The shares indicated also do
not include the shares owned of record by SED Associates of
which Mr. Diamond is deemed the indirect beneficial owner as
described in footnote (2).
(9) All of the shares indicated are deemed beneficially owned by
Fidelity Management & Research Company, a wholly-owned
subsidiary of FMR Corp., as a result of its serving as
investment adviser to Fidelity Low-Priced Stock Fund, the
owner of the 716,600 shares. FMR Corp.'s address is 82
Devonshire Street, Boston, Massachusetts 02109.
(10) All the shares indicated are deemed beneficially owned by
Paradigm Capital Management, Inc., as a result of its
serving as investment adviser to certain individual
investors, each of whom retains sole voting power over the
shares attributable to him or her, and having sole
investment power with respect to the shares. Paradigm
Capital Management Inc.'s address is 9 Elk Street, Albany,
New York 12207.
(11) The shares indicated include 899,102 shares subject to
options exercisable within 60 days. The shares indicated do
include the 500,416 shares owned of record by SED
Associates of which Gerald Diamond is deemed the indirect
beneficial owner as described in footnote (2).
EXECUTIVE COMPENSATION
Executive Compensation Report
The Board does not have a standing compensation committee or any
other 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. Messrs. Aaron and Rosenthal currently serve as
the members of the committees administering the Southern Electronics
Corporation 1986 Stock Option Plan, the Southern Electronics
Corporation 1991 Stock Option Plan, the Southern Electronics
Corporation
<PAGE>
1988 Restricted Stock Award Plan, the Southern Electronics Corporation
1995 Formula Stock Option Plan, and the 1997 Stock Option Plan
(pending approval of the 1997 Stock Option Plan by the Stockholders at
the Annual Meeting) (collectively, the "Plans") and as such, with the
exception of the Southern Electronics Corporation 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. Messrs. Gerald Diamond, Aaron and Rosenthal also serve
as the members of the committee administering the Southern Electronics
Corporation 401(k) Plan (the "401(k) Plan") available to all eligible
employees of the Company and SED International, including executive
officers. Accordingly, this Executive Compensation Report is
submitted over the names of all of the members of the Board.
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 executives who are 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 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 enhancing Stockholder value and aligning interests among
management, the Board and the Stockholders.
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
long-term incentive compensation.
<PAGE>
Base Salary. In Fiscal 1997, the initial base salary for each of
the Named Executive Officers was set by an employment agreement
between each Named Executive Officer and SED International.
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.
Gerald Diamond and Jean Diamond each have employment agreements
that provide for an annual bonus in an amount directly related to the
Company's Pretax Adjusted Annual Income (as defined below). See
"Executive Compensation - Executive Compensation Report - CEO
Compensation" and "Executive Compensation - Employment Agreements."
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 and its subsidiaries restricted shares of Common Stock and
options to purchase 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 the stock grant 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. Options
typically become exercisable in twenty percent 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 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. Gerald Diamond's employment agreement with SED
International presently expires on June 30, 2002. The agreement,
however, is subject to automatic one-year extensions following the end
of each year of employment, unless either SED International or Mr.
Diamond gives notice within a specified period prior to the end of the
year that the employment agreement will not be extended beyond its
then-current term.
The employment agreement provides for an annual base salary of
$425,457 (as of fiscal 1997), increased annually in an amount pegged
to 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 five
percent of the Company's Pretax Adjusted Annual Income,
<PAGE>
which means with respect to a given year (A) the sum of earnings
before taxes and minority interests of the Company as reported on its
audited consolidated statement of operations for such fiscal 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 Board, 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 fiscal year commencing in fiscal 1994 thereafter
unless SED International and Mr. Diamond agree upon a different
amount. In February 1995, the Board, with Mr. Diamond's concurrence,
fixed Mr. Diamond's bonus payable for each year during the term of his
employment agreement following fiscal 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. On September 24, 1996,
the Board determined that, effective 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. Mr. Diamond's
Fiscal 1997 bonus was $459,222.
Mr. Diamond's employment agreement also provides him with an
automobile allowance and disability insurance coverage and includes a
covenant not to compete with SED International or the Company for a
period of two years following termination of his employment with SED
International and the Company.
The Board's 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 intends to evaluate Mr. Diamond's
compensation package during fiscal 1998 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 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 International
maintain two broad-based employee benefit plans in which the executive
officers are permitted to participate on the same terms as other
employees. These are: (i) the 401(k) Plan and (ii) the Southern
Electronics Corporation Savings Plan and Trust (the "Savings Plan").
Pursuant to both plans, the Company and SED International will match
twenty-five percent of the amount of contributions of each participant
up to ten percent of the participant's compensation. The Company and
SED International may also elect
<PAGE>
in any year to make an additional contribution to either of the plans
for that year, which additional contribution shall in no event exceed
fifteen percent of all participants' compensation for the Company's
and SED International's taxable year. Neither plan provides for
investments in Common Stock.
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 Named
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 1997 would be non-deductible. The Board will
continue to address this issue when formulating compensation
arrangements for executive officers.
SUBMITTED BY THE BOARD OF DIRECTORS
OF SOUTHERN ELECTRONICS CORPORATION
Stewart I. Aaron
Gerald Diamond
Mark Diamond
Ray D. Risner
Cary Rosenthal
G. William Speer
This Executive Compensation Report shall not be deemed
incorporated by reference by any general statement incorporating by
reference this proxy statement in any filing under the Securities
Act of 1933 or under the Securities Exchange Act of 1934 (together,
the "Acts"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise
be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
The Board does not have a standing compensation committee or any
other committee performing similar functions. Rather, the Board acts
collectively to determine all forms of compensation other than base
salaries, which were governed by employment agreements for Fiscal
1997, and stock options, which are granted by members of the Board's
stock option committees. (See "Executive Compensation-Executive
Compensation Report.") Consequently, relationships that Securities
Exchange Commission ("Commission") 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.
<PAGE>
In July 1984, the Predecessor leased its office and warehouse
facility from Royal Park Company ("Royal Park"), a general partnership
whose initial partners included members of SED Associates, a Georgia
general partnership, and whose partners currently include Gerald
Diamond and Mark 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 equaled $176,363.04 (as of Fiscal 1997). 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. 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.
Except for Gerald Diamond, who serves as Chairman of the Board
and Chief Executive Officer of the Company and SED International; Ray
D. Risner, who serves as President and Chief Operating Officer of the
Company and SED International; and Mark Diamond, who serves as
Executive Vice President of the Company and SED International, none of
the other members of the Board are or have been officers or employees
of the Company.
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 $100,000 in salary and bonus for
the Fiscal 1997 (together, these persons are sometimes referred to as
the "Named Executive Officers"). The Company did not award any stock
appreciation rights ("SARs") during Fiscal 1997.
<PAGE>
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards Payments
Other Securities
Annual Restricted Underlying All Other
Compen- Stock Options LTIP Compen-
Salary Bonus sation Award(s) /SARS Payments sation
Name and Principal Year ($) ($) ($) ($)(1) (#) ($) ($)(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Diamond 1997 425,457 459,222 0 0 200,000 0 2,375
Chairman of the 1996 386,810 0 0 0 0 0 1,607
Board, Chief 1995 622,427 178,250 0 0 0 0 2,310
Executive Officer and
Director of the
Company and SED
International
Ray D. Risner 1997 140,060 0 0 0 0 0 1,749
President, Chief 1996 121,549 40,000 0 0 0 0 1,398
Operating Officer and 1995 60,775 30,000 0 165,000 30,000 0 0
Director of the
Company and SED
International
Mark Diamond 1997 140,710 80,000 0 0 20,000 0 2,660
Executive Vice 1996 134,009 72,800 0 0 20,000 0 1,800
President and Director 1995 127,628 80,000 0 52,500 0 0 2,919
of the Company and
SED International
Larry G. Ayers 1997 140,700 0 0 0 0 0 1,799
Vice President 1996 134,000 0 0 0 0 0 1,440
- Finance, Chief 1995 127,628 0 0 52,500 0 0 2,403
Financial Officer,
Secretary and
Treasurer of the
Company and SED
International
Jean Diamond 1997 175,887 0 0 0 0 0 2,228
Vice President Credit 1996 167,511 60,000 0 0 0 0 2,391
of SED International 1995 159,535 0 0 0 0 0 2,405
</TABLE>
(1) The amounts indicated relate to contributions made by the Company
pursuant to the 401(k) Plan and the Savings Plan for the benefit
of each Named Executive Officer.
(2) At June 30, 1997, the Named Executive Officers held the following
dollar values of restricted stock previously granted pursuant to
the Southern Electronics Corporation 1988 Restricted Stock Plan:
Gerald Diamond $0; Ray D. Risner $363,750; Mark Diamond $121,250;
Larry G. Ayers $121,250; and Jean Diamond $0. The dollar value
of the restricted
<PAGE>
stock was determined by multiplying the number of restricted
shares held at June 30, 1997, by the closing sales price of the
Common Stock as reported by the Nasdaq National Market on that
date. No restricted stock held by the Named Executive Officers
vested in Fiscal 1997. Dividends, if any, are accrued on
restricted stock.
<TABLE>
Option Grants in Fiscal 1997
Potential Realizable
Value
at Assumed Annual Rates
of Stock Price
Appreciation
Individual Grants for Option Term
Percent of
Total
Number of Options
Securities Granted to
Underlying Employees
Options in Fiscal Exercise Expiration 5% 10%
Name Granted Year Price Date ($) ($)
<S> <C> <C> <C> <C> <C> <C>
Gerald Diamond 200,000(1) 51.3% $7.50 September 12, 2006 $944,000 $2,390,000
Mark Diamond 20,000(2) 5.1% $9.00 October 7, 2006 $113,200 $ 286,800
</TABLE>
(1) Represents a grant of options on September 12, 1996. Such
options vest in 33.34% increments commencing on 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.
(2) Represents a grant of options on October 7, 1996. Such options
vest in 20% increments commencing on 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.
Options Exercises in Fiscal 1997 and Values at June 30, 1997
This table presents information regarding options exercised for
shares of Common Stock during the fiscal year ended June 30, 1997, and
the number and value of unexercised options held at June 30, 1997.
There were no SARs outstanding during Fiscal 1997. 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. No options were
exercised by the Named Executive Officers in Fiscal 1997.
<PAGE>
<TABLE>
Aggregated Option Exercises in Fiscal 1997 and 1997 Fiscal Year-End Option Value
Number of
Securities Underlying Value of
Unexercised Unexercised
Options In-The-Money
At Fiscal Year End Options At
(#) Fiscal Year-End ($)(1)
Shares
Acquired Value
On Exercise Realized
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Gerald Diamond 0 0 450,000 200,000 $3,593,250 $1,075,000
Ray D. Risner 0 0 17,333 12,667 129,833 96,417
Mark Diamond 0 0 73,066 43,184 542,949 3,664,756
Larry G. Ayers 0 0 57,000 14,000 436,435 98,450
Jean Diamond 0 0 40,000 10,000 285,000 71,250
</TABLE>
(1) Value of Unexercised, In-The-Money Options at June 30, 1997, is
calculated as follows: [(Per Share Closing Sales Price on June
30, 1997) - (Per Share Exercise Price)] x Number of Shares
Subject to Unexercised Options. Per Share Closing Sales Price as
reported by Nasdaq on June 30, 1997, was $12.875.
Employment Agreements
SED International has employment agreements with Gerald Diamond
and Jean Diamond. The employment agreement with Gerald Diamond is
described under "Executive Compensation - Executive Compensation
Report - CEO Compensation." The employment agreement with Ms.
Diamond provides for an employment term identical to that provided by
Mr. Diamond's employment agreement and is otherwise substantially
similar to Mr. Diamond's employment agreement, except that Ms.
Diamond's employment agreement provides for an annual base salary of
$175,887 (as of fiscal 1997), increased annually in an amount equal to
the greater of five percent of ther then-current salary or an amount
based upon increases in the Consumer Price Index; Ms. Diamond's
employment agreement does not provide for an annual bonus; and Ms.
Diamond's employment agreement does not entitle her to an automobile
allowance. SED International's employment agreements with Larry
G. Ayers, Mark Diamond and Ray D. Risner expired June 30, 1997.
Each of the foregoing employment agreements provides that if a
Change of Control (as such term is defined below) occurs while the
employee is employed by SED International, and if the
<PAGE>
employee's employment is terminated involuntarily, or voluntarily by
the employee upon the occurrence of certain events, the employee may
notify SED International 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 term remaining in the employment agreement is less than
twelve months, the employee shall receive such amounts on an
annualized basis.
Under each of the foregoing employment agreements, a Change of
Control is deemed to have occurred when (i) any individual or entity
becomes the beneficial owner of securities of the Company
or SED International representing thirty percent or more of the
combined voting power of the Company's or SED International's
then-outstanding securities entitled to vote generally in the election
of directors; (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; (iii) all or
substantially all of the assets of the Company or SED International
are sold or otherwise transferred without the approval of the
Continuing Directors; or (iv) with respect to Mr. Diamond only, Mr.
Diamond shall no longer be a member of the Board or the SED
International Board, unless Mr. Diamond shall have declared in
writing his desire to resign such positions or that he no longer
wishes to serve as a director, Mr. Diamond shall have died or become
disabled during the term of the employment agreement, or Mr.
Diamond's employment shall have been terminated for Cause (as the term
"Cause" is defined in Mr. Diamond's employment agreement).
<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 issuers 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 graph assumes that $100 was invested on June 30, 1992, 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 GOES HERE]
<TABLE>
Base
Period Return Return Return Return Return
1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Southern Electronics Corporation 100.00 174.11 66.97 53.57 66.97 137.95
Peer Group Index 100.00 141.45 138.76 181.88 177.86 227.40
NASDAQ National Market 100.00 125.76 126.96 169.95 217.59 264.61
(US) Index
</TABLE>
CERTAIN TRANSACTIONS
See the section entitled "Compensation Committee Interlocks and
Insider Participation" for a discussion of certain other transactions
and arrangements among the Company and its affiliates.
PROPOSAL 2 - ADOPTION OF THE
SOUTHERN ELECTRONICS CORPORATION 1997 STOCK OPTION PLAN
General
The Board has adopted the 1997 Stock Option Plan in the form
attached hereto as Exhibit A, subject to Stockholder approval. The
1997 Stock Option Plan is intended to further the growth and
development of the Company by encouraging employees, directors and
consultants of the Company and its subsidiaries to obtain a
proprietary interest in the Company through the purchase
or grant of Common Stock. The Company believes that the 1997 Stock
Option Plan will aid in attracting and retaining employees, directors
and consultants and in stimulating the efforts of such individuals for
the success of the Company and its subsidiaries. If the 1997 Stock
Option Plan is approved by the Stockholders, it will become effective
as of August 27, 1997 (the "Effective Date").
The following summary of the principal features and effects of
the 1997 Stock Option Plan does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, the
text of the 1997 Stock Option Plan as set forth in the attached
Exhibit A.
Types of Awards
The 1997 Stock Option Plan provides for grants of incentive stock
options ("ISOs") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended ("IRC"), and non-qualified
stock options ("NQSOs"), not intended to qualify under Section 422
(NQSOs and ISOs are referred to collectively as "Options"), as well as
for awards of Restricted Stock (NQSOs, ISOs and awards of Restricted
Stock are referred to collectively as "Stock Rights").
<PAGE>
Administration
The 1997 Stock Option Plan will be administered by a committee
appointed by the Board (the "Committee"), the members of which will
serve at the pleasure of the Board. The members of the Committee must
be "non-employee directors" within the meaning of Rule 16b-3
promulgated by the Commission under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), as well as "outside directors"
within the meaning of Section 162(m) of the IRC and the regulations
promulgated thereunder. The Committee will have full authority in its
sole discretion to (i) determine and designate the employees to whom
Stock Rights will be granted, the manner in and conditions
under which Options are exercisable, the manner and conditions under
which shares of Restricted Stock shall vest, and the time or times at
which Stock Rights shall be granted; (ii) determine whether
an Option will constitute an ISO or a NQSO; and (iii) to interpret the
provisions of, and prescribe, amend and rescind any rules and
regulations relating to, the 1997 Stock Option Plan. Members of
the Committee will be indemnified by the Company against actual or
threatened litigation so long as they act in good faith and in a
manner they reasonably believe to be in the best interests of the
Company.
Eligibility
Pursuant to the 1997 Stock Option Plan, employees, directors and
consultants of the Company and its subsidiaries are eligible for
consideration for the granting of Stock Rights by the Committee. As
of September 15, 1997, approximately _____ people were eligible to
participate in the 1997 Stock Option Plan.
Shares Available
The 1997 Stock Option Plan provides that the Committee may grant
Stock Rights with respect to a maximum aggregate of 350,000 shares of
Common Stock. Shares underlying any Stock Right granted under the
1997 Stock Option Plan that expire or terminate without having been
fully exercised or vested may be added to the Common Stock otherwise
available for grants of Stock Rights under the 1997 Stock Option Plan.
As of September 15, 1997, the fair market value of the Common Stock
was $_____ per share.
Terms of Options
Grant of Options. Options granted under the 1997 Stock Option
Plan represent rights to purchase shares of Common Stock of the
Company within a fixed period of time and at a specified price per
share (the "Option Price"). The Committee is authorized in its sole
discretion to grant to employees either ISOs or NQSOs or both for the
purchase of Common Stock. Directors and consultants of the Company
and its subsidiaries who are not otherwise employees of the Company
or its subsidiaries are not eligible to receive grants of ISOs.
<PAGE>
Option Price. The Option Price of each share of Common Stock
subject to an Option shall be the fair market value of the Common
Stock as of the date of grant (or 110% of the fair market value of
Common Stock as of the date of grant in the case of ISOs granted to
optionees who own more than ten percent of the total combined voting
power of all classes of outstanding stock of the Company or one of its
subsidiaries).
Term and Exercise of Options. Each Option granted under the 1997
Stock Option Plan may be exercised on such dates, during such periods,
and for such number of shares as determined by the Committee. The
term of any Option will be determined by the Committee, but the term
may not exceed ten years from the date of grant (or five years in the
case of ISOs granted to optionees who own more than ten percent of the
total combined voting power of all classes of outstanding stock of
the Company or one of its subsidiaries).
Options are exercisable in cumulative increments of twenty
percent per year, unless otherwise specified by the Committee. Upon
the exercise of an Option, payment must be made in full in cash,
in shares of Common Stock already owned by the optionee (which shares
will be valued for such purpose on the basis of their fair market
value on the date of exercise), by instructing the Company
to retain shares of Common Stock upon the exercise of the Option with
a fair market value equal to the Option Price, or in a combination of
the above. Payment must equal the Option Price of the shares subject
to the Option being exercised multiplied by the number of shares being
purchased.
Transfers; Termination of Employment. Options granted under the
1997 Stock Option Plan will be nontransferable and nonassignable
except at death. Upon the termination of an optionee's employment
with the Company (including its subsidiaries) for any reason other
than termination by the Company without Cause (as defined in the 1997
Stock Option Plan), Disability (as defined in the 1997 Stock Option
Plan) or death, any Option or unexercised portion thereof shall
generally not be exercisable after the last day of employment (or
immediately upon notice of termination if the Company terminates the
optionee's employment for Cause). Upon termination of an optionee's
employment with the Company (including its subsidiaries) by the
Company (or, by any of its subsidiaries) without Cause, any Option or
unexercised portions thereof shall generally not be exercisable after
three months after the last day of employment. Upon the termination
of an optionee's employment with the Company (including its
subsidiaries) due to Disability or death, any Option or unexercised
portion thereof shall generally not be exercisable after one year
after the termination of employment due to such Disability or death.
In the event of the death or Disability of the Optionee, all options
will become immediately exercisable for the full number of shares.
Change of Control. In the event of a Change in Control of the
Company (as defined in the 1997 Stock Option Plan), all Options become
immediately exercisable for the full number of shares.
<PAGE>
Restricted Stock Awards
The Committee may grant Restricted Stock to grantees in its
discretion. Restricted Stock grants will vest in cumulative
increments of 20% per year, unless otherwise specified by the
Committee. The Committee may impose such other restrictions on the
Restricted Stock as it deems appropriate. For each grant of
Restricted Stock, the Committee shall designate a period of time (the
"Restriction Period") at the end of which the grantee must have
satisfied the restrictions imposed upon the stock. If for any reasons
the restrictions imposed upon the stock are not satisfied at the end
of the Restriction Period, any Restricted Stock subject to the
unsatisfied restrictions shall be forfeited by the grantee and
reacquired by the Company. Furthermore, in the event that the grantee
ceases employment with the Company for any reason other than the death
or Disability of the grantee, the grantee shall forfeit any Restricted
Stock subject to an unsatisfied restriction. Upon the death or
Disability of the grantee or in the event of a Change in Control of
the Company, all grants of Restricted Stock will become fully vested.
Adjustments
In the event of changes in the number of outstanding shares of
Common Stock by reason of stock dividends, splits or
recapitalizations, an appropriate and equitable adjustment will be
made by the Committee to the number and kind of shares subject to
outstanding Stock Rights and to the number and kind of shares
remaining available for issuance pursuant to Stock Rights to be
granted under the 1997 Stock Option Plan.
Additionally, in the event that the Company is involved in a
merger, consolidation or acquisition of the stock or assets of the
Company which does not result in a Change in Control of the
Company, the Committee may, effective as of the date it determines and
subject to any further conditions, restrictions or limitations that it
deems appropriate, accelerate all Stock Rights then outstanding so
that they may become immediately exercisable or vested in full.
Termination and Amendment
The 1997 Stock Option Plan will terminate on the later of (i) the
complete exercise or lapse of the last outstanding Stock Right, or
(ii) ten years after the Effective Date, subject to its earlier
termination by the Board at any time. In addition, in the event the
Stockholders of the Company fail to adopt the 1997 Stock Option Plan
within twelve months of its adoption by the Board, the 1997 Stock
Option Plan will become null and void retroactively to the Effective
Date. The Board may amend the 1997 Stock Option Plan at any time,
provided that (i) no amendment would affect, in any way, the rights of
optionees or grantees who have outstanding options or grants without
the consent of such optionees or grantees, and (ii) no amendment may
be effected without the approval of the holders of the majority of the
outstanding Common Stock of the Company if the change would cause
the 1997 Stock Option Plan to fail to qualify as an "Incentive Stock
Option Plan" pursuant to Section 422 of the IRC or such Stockholder
approval is otherwise required under applicable law.
<PAGE>
Federal Income Tax Consequences
The following is a brief general description of the consequences
under the IRC of the receipt or exercise of Stock Rights under the
1997 Stock Option Plan:
Incentive Stock Options. An option holder has no tax
consequences upon issuance or, generally, upon exercise of, an ISO.
An option holder will recognize income when he sells or
exchanges the shares acquired upon exercise of an ISO. This income
will be taxed at the applicable capital gains rate if the sale or
exchange occurs after the expiration of the requisite holding periods.
Generally, the requisite holding periods expire two years after the
date of grant of the ISO and one year after the date of acquisition of
the Common Stock pursuant to the exercise of the ISO.
If an option holder disposes of the Common Stock acquired
pursuant to exercise of an ISO before the expiration of the requisite
holding periods, the option holder will recognize compensation
income in an amount equal to the difference between the option price
and the lesser of (i) the fair market value of the shares on the date
of exercise and (ii) the price at which the shares are sold. This
amount will be taxed at ordinary income rates. If the sale price of
the shares is greater than the fair market value on the date of
exercise, the difference will be recognized as gain by the option
holder and taxed at the applicable capital gains rate. If the sale
price of the shares is less than the option price, the option holder
will recognize a capital loss equal to the excess of the option price
over the sale price.
For these purposes, the use of shares acquired upon exercise of
an ISO to pay the option price of another option (whether or not it is
an ISO) will be considered a disposition of the shares. If this
disposition occurs before the expiration of the requisite holding
periods, the option holder will have the same tax consequences as are
described in the preceding paragraph. If the option holder transfers
any such shares after holding them for the requisite holding periods
or transfers shares acquired pursuant to exercise of a NQSO or on the
open market, he generally will not recognize any income upon the
exercise. Whether or not the transferred shares were acquired
pursuant to an ISO and regardless of how long the option holder has
held such shares, the basis of the new shares received pursuant to the
exercise will be computed in two steps. In the first step, a number
of new shares equal to the number of older shares tendered (in payment
of the option's exercise) will be considered exchanged under IRC
Paragraph 1036 and the rulings thereunder; these new shares will
receive the same holding period and the same basis as the option
holder had in the old tendered shares, if any, plus the
amount included in income from the deemed sale of the old shares and
the amount of cash or other nonstock consideration paid for the new
shares, if any. In the second step, the number of new shares
received by the option holder in excess of the old tendered shares
will receive a basis of zero, and the option holder's holding period
with respect to such shares will commence upon exercise.
An option holder may have tax consequences upon exercise of an
ISO if the aggregate fair market value of shares of the Common Stock
subject to ISO's which first become exercisable by an option holder in
any one calendar year exceeds $100,000. If this occurs, the excess
shares will be treated as though they are subject to a NQSO instead of
an ISO. Upon exercise of an option with
<PAGE>
respect to these shares, the option holder will have the tax
consequences described below with respect to the exercise of NQSO's.
Finally, except to the extent that an option holder has
recognized income with respect to the exercise of an ISO (as described
in the preceding paragraphs), the amount by which the fair market
value of a share of the Common Stock at the time of exercise of the
ISO exceeds the option price will be included in determining an option
holder's alternative minimum taxable income, and may cause the
option holder to incur an alternative minimum tax liability in the
year of exercise.
There will be no tax consequences to the Company upon issuance
or, generally, upon exercise of an ISO. However, to the extent that
an option holder recognizes ordinary income upon exercise, as
described above, the Company generally will have a deduction in the
same amount.
Nonqualified Stock Options. Neither the Company nor the option
holder has income tax consequences from the issuance of NQSO's.
Generally, in the tax year when an option holder exercises NQSO's, the
option holder recognizes ordinary income in the amount by which the
fair market value of the shares at the time of exercise exceeds the
option price for such shares. The Company generally will have a
deduction in the same amount as the ordinary income recognized by
the option holder in the Company's tax year in which or with which the
option holder's tax year (of exercise) ends.
If an option holder exercises a NQSO by paying the option price
with previously acquired Common Stock, the option holder will
recognize income (relative to the new shares he is receiving)
in two steps. In the first step, a number of new shares equivalent to
the number of older shares tendered (in payment of the NQSO exercised)
is considered to have been exchanged in accordance with IRC Paragraph
1036 and the rulings thereunder, and no gain or loss is recognized.
In the second step, with respect to the number of new shares acquired
in excess of the number of old shares tendered, the option holder will
recognize income on those new shares equal to their fair market value
less any nonstock consideration tendered.
The new shares equal to the number of the older shares tendered
will receive the same basis as the option holder had in the older
shares and the option holder's holding period with respect to the
tendered older shares will apply to those new shares. The excess new
shares received will have a basis equal to the amount of income
recognized by the option holder by exercise, increased by any
nonstock consideration tendered. Their holding period will commence
upon exercise of the Option.
Restricted Stock. A holder of restricted stock will recognize
income upon its receipt, but generally only to the extent that it is
not subject to a substantial risk of forfeiture. If the restricted
stock is subject to restrictions that lapse in increments over a
period of time, so that the holder becomes vested in a portion of the
shares as the restrictions lapse, the holder will recognize income
in any tax year only with respect to the shares that become
nonforfeitable during that year. The income recognized will be equal
to the fair market value of those shares, determined as of the time
that the restrictions on those shares lapse. That income generally
will be taxable at ordinary income
<PAGE>
tax rates. The Company generally will be entitled to a deduction in
an amount equal to the amount of ordinary income recognized by the
holder of the restricted stock.
A holder of restricted stock may elect instead to recognize
ordinary income for the taxable year in which he receives an award of
restricted stock in an amount equal to the fair market value of
all shares of restricted stock awarded to him (even if the shares are
subject to forfeiture). That income will be taxable at ordinary
income tax rates. At the time of disposition of the shares, a holder
who has made such an election will recognize gain in an amount equal
to the difference between the sales price and the fair market value of
the shares at the time of the award. Such gain will be taxable
at the applicable capital gains rate. Any such election must be made
within 30 days after the transfer of the restricted stock to the
holder. The Company will generally be entitled to a deduction in an
amount equal to the amount of ordinary income recognized by the holder
at the time of his election.
Limitation on Company Deductions. No federal income tax
deduction is allowed for compensation paid to a Named Executive
Officer in any taxable year of the Company beginning on or after
January 1, 1994, to the extent that such compensation exceeds
$1,000,000. (See "Executive Compensation - Executive Compensation
Report - Limitations on the Deductibility of Compensation.") For this
purpose, the term "compensation" generally includes amounts includable
in gross income as a result of the exercise of stock options or stock
appreciation rights, or the receipt of restricted stock. This
deduction limitation does not apply to compensation that is (a)
commission-based compensation, (b) performance-based compensation, (c)
compensation which would not be includable in an employee's gross
income, and (d) compensation payable under a written binding
contract in existence on February 17, 1993, and not materially
modified thereafter.
ERISA
The 1997 Stock Option Plan is not, and is not intended to be, an
employee benefit plan or tax-qualified retirement plan. The 1997
Stock Option Plan is not, therefore, subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or IRC
Paragarph 401(a).
The Board recommends that the Stockholders vote FOR the proposal
to adopt the Southern Electronics Corporation 1997 Stock Option
Plan.
PROPOSAL 3 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO INCREASE THE AUTHORIZED COMMON STOCK
Description of the Proposed Amendment
The Delaware General Corporation Law (the "DGCL") provides that
the total number of shares of each class of stock that a corporation
is authorized to issue shall be set forth in its Certificate of
Incorporation. Article FOURTH of the Certificate of Incorporation
presently
<PAGE>
authorizes the Company to issue 25,000,000 shares of Common Stock and
129,500 shares of Preferred Stock. As of September 15, 1997, ______
shares of Common Stock were issued and outstanding, _____ shares were
held in the Company's treasury and an additional ________ shares were
reserved for issuance under the Plans. Accordingly, only ____________
shares of Common Stock remained unreserved and available for issuance
as of September 15, 1997.
The Board has unanimously approved, and has unanimously
recommended that the Stockholders approve, a proposal to amend Article
FOURTH of the Certificate of Incorporation to increase the number of
shares of Common Stock that the Company is authorized to issue from
25,000,000 shares to 100,000,000 shares. If the holders of a majority
of the shares of Common Stock issued and outstanding on the Record
Date adopt the proposed amendment, the Company will file with the
Delaware Secretary of State a Certificate of Amendment to the
Certificate of Incorporation, in substantially the form attached
hereto as Exhibit B, increasing the authorized Common Stock of the
Company.
Purposes and Effect of the Proposed Amendment
Acquisitions. The Company from time to time uses Common Stock as
partial or total consideration in the purchase of the stock or assets
of other companies in its line of business. The Company may acquire
the stock or assets of other companies in its line of business, which
purchases may require the use of Common Stock as consideration.
Depending upon the size and type of acquisition and other factors
related to the particular acquisition, additional Stockholder approval
may or may not be required in connection with any such acquisition.
Employee Benefit Plans. The increase in the authorized Common
Stock proposed herein may be used to provide for additional shares
which will be reserved for issuance in connection with certain
employee benefit plans. Subject to Stockholder approval as provided
herein, the Board has reserved 350,000 shares for issuance in
connection with the 1997 Stock Option Plan.
Possible Anti-Takeover Effects. The Board believes that
additional authorized Common Stock will give the Company greater
flexibility and allow shares of Common Stock to be issued without the
expense and delay of a Stockholders' meeting to issue additional
shares if and when the need arises. It should be noted, however, that
Nasdaq, on which the Common Stock is traded, requires Stockholder
approval of the issuance of additional Common Stock in connection with
certain transactions, including certain acquisitions of the stock or
assets of another company, certain transactions which are not public
offerings, issuances which would result in a change in control of the
Company, and certain plans or arrangements pursuant to which Common
Stock may be acquired by directors, officers or key employees of the
Company. The issuance of additional shares of Common Stock by the
Company may, depending upon the circumstances under which such shares
are issued, reduce Stockholders' equity per share and reduce the
percentage of ownership of Common Stock of existing Stockholders. The
issuance of additional shares of Common Stock in payment of a stock
dividend or to effect a stock split, however, would not reduce the
percentage of ownership of the Company by existing Stockholders or
reduce any Stockholder's interest in the
<PAGE>
earnings of the Company. Stockholders have no preemptive right to
subscribe for or purchase any additional shares issued by the Company.
Although the Board presently has no intention of doing so, shares
of authorized unissued and unreserved Common Stock could be issued to
a holder who might thereby obtain sufficient voting power to block a
change in control of the Company or to members of incumbent management
with the result that the voting power of management would become more
concentrated. Under certain circumstances, the issuance of such
shares could be used to create voting impediments that would
frustrate third parties seeking to effect a takeover or otherwise gain
control of the Company against the wishes of incumbent management.
Because the issuance of new shares could be used to hinder a takeover
bid, the amendment could discourage any such bid, whether or not such
a bid is in the best interests of the Stockholders.
The Company has implemented a Stockholder rights plan
("Stockholder Rights Plan") pursuant to which each Stockholder of
record of the Company on November 12, 1996, received a right (a
"Right") to purchase a specified number of shares of Common Stock of
the Company upon the earlier of (i) ten days following a public
announcement that a person or group of affiliated or associated
persons has acquired beneficial ownership of twelve percent or more of
the outstanding shares of Common Stock (such person or persons is
referred to as an "Acquiror") or (ii) ten days following the
commencement of a tender offer or an exchange offer that would result
in a person or group of affiliated or associated persons beneficially
owning twelve percent or more of such outstanding shares of Common
Stock (such person or persons is referred to as a "Potential Acquiror"
and the events described in (i) and (ii) as "Triggering Events"). If
a Triggering Event were to occur, each Right would entitle the holder
thereof to purchase from the Company a number of shares of Common
Stock of the Company equal to eight (8) multiplied by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
on the date of the Triggering Event, and the denominator of which is
the number of Rights outstanding on the date of the Triggering Event
that are not beneficially owned by an Acquiror or a Potential Acquiror
or their affiliates or associates. Each holder of a Right would be
entitled to purchase such shares at a price per share of 20% of the
current market value of a share of the Company's Common Stock,
measured as of the date of the Triggering Event.
The Stockholders of the Company previously approved certain
measures designed to lessen the likelihood of a successful hostile
takeover or change in control of the Company and to encourage
fair treatment of all Stockholders in the event of a takeover. Such
provisions include the classification of the Board, whereby the three
classes of directors serve staggered three-year terms. In addition,
the Board is authorized to issue Preferred Shares in series and to
determine the rights, including voting rights, preferences, the number
of shares constituting the series, the designation of the series,
and other characteristics. The Board could, without Stockholder
approval, issue Preferred Shares with voting rights and other rights
that could adversely affect the voting power of holders of Common
Stock. The issuance of Preferred Shares could have the effect of
delaying or preventing a change of control of the Company. The
Company has no present plans to issue any Preferred Shares.
<PAGE>
At the date of this Proxy Statement, the Company has no
agreements, understandings, commitments or plans with respect to the
sale or issuance of the additional shares of Common Stock. The
proposed amendment to the Certificate of Incorporation is not being
recommended in response to any specific effort of which management is
aware to obtain control of the Company.
The Board recommends that the Stockholders vote FOR the proposal
to amend the Company's Certificate of Incorporation to increase
the authorized number of shares of Common Stock from 25,000,000
shares to 100,000,000 shares.
<PAGE>
PROPOSAL 4 - AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
Description of the Proposed Amendment
The DGCL provides that the name of a corporation shall be set
forth in its Certificate of Incorporation. Article FIRST of the
Certificate of Incorporation presently designates the name of
the Company as "Southern Electronics Corporation."
The Board has unanimously approved, and has unanimously
recommended that the Stockholders approve, a proposal to amend Article
FIRST of the Certificate of Incorporation to change the name of the
Company from Southern Electronics Corporation to "SED International
Holdings, Inc." If the holders of a majority of the shares of Common
Stock issued and outstanding on the Record Date adopt the proposed
amendment, the Company will file with the Delaware Secretary of State
a Certificate of Amendment to the Certificate of Incorporation in
substantially the form attached hereto as Exhibit B, changing the name
of the Company.
Purposes and Effect of the Proposed Amendment
When the Company was formed in 1986, its focus was to develop its
business in the southern region of the United States. Since then, the
Company has expanded rapidly. The Board believes that the Company
must compete successfully in international markets if it is to
continue to recognize its full growth potential. To emphasize its
commitment to an international market, the Company has already changed
the name of its primary operating subsidiary from "Southern
Electronics Distributors, Inc." to "SED International, Inc." The
Board believes that it is in the best interests of the Company
to further reflect its international commitment by changing the
Company's name to "SED International Holdings, Inc."
If the amendment is adopted, Stockholders will not be required to
exchange outstanding stock certificates for new certificates.
The Board recommends that the Stockholders vote FOR the
proposal to amend the Company's Certificate of Incorporation
to change the name of the Company from "Southern Electronics
Corporation" to "SED International Holdings, Inc."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's
executive officers, directors and greater than ten percent
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
<PAGE>
applicable, written representations by reporting persons that no Form
5 was required, the Reporting Persons have complied with all
applicable Section 16(a) filing requirements during and with respect
to Fiscal 1997.
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Company's
independent auditors for Fiscal 1997, and the Board has reappointed
this firm for fiscal 1998. A representative of Deloitte & Touche
LLP is expected to attend the meeting to respond to questions from
Stockholders and to make a statement if he so desires.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
Any Stockholder of the Company wishing to submit a proposal for
action at the Company's 1998 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 June 5, 1998, and must otherwise
comply with the rules and regulations of the Commission applicable to
Stockholder proposals.
ANNUAL REPORT
The Company's 1997 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 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.
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, and will
reimburse them for their reasonable expenses in so doing.
<PAGE>
A list of Stockholders entitled to be present and vote at the
Annual Meeting will be available during the Annual 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,
Larry G. Ayers,
Secretary
October 3, 1997
Tucker, Georgia
<PAGE>
EXHIBIT A
SOUTHERN ELECTRONICS CORPORATION
1997 STOCK OPTION PLAN
ARTICLE 1
Purpose
1.1 General Purpose. The purpose of this Plan is to further the
growth and development of the Company by encouraging employees,
Directors and Consultants of the Company to obtain a proprietary
interest in the Company. The Company intends that the Plan
will provide such persons with an added incentive to continue in the
employ of the Company, or to continue to serve as a Director or
Consultant, as applicable, and will stimulate their efforts in
promoting the growth, efficiency and profitability of the Company.
The Company also intends that the Plan will afford the Company a means
of attracting to its service persons of outstanding quality.
1.2 Intended Tax Effects of Stock Rights. It is intended that
part of the Plan qualify as an ISO (as hereinafter defined) plan and
that any option granted in accordance with such portion of the Plan
qualify as an ISO (as hereinafter defined), all within the meaning of
Code Paragraph 422. The tax effects of any NQSO or Restricted Stock
granted hereunder should be determined under Code Paragraph 83.
ARTICLE 2
Definitions
The following words and phrases as used in this Plan shall have
the meanings set forth in this Article unless a different meaning is
clearly required by the context:
2.1 1933 Act shall mean the Securities Act of 1933, as amended.
2.2 1934 Act shall mean the Securities Exchange Act of 1934, as
amended.
2.3 Beneficiary shall mean, with respect to an Optionee, or
Restricted Stock Recipient, the individual or individuals to whom the
Optionee's Options or Restricted Stock Recipient's Restricted Stock
shall be transferred upon the Optionee's or Restricted Stock
Recipient's death (i.e., the Optionee's or Restricted Stock
Recipient's Beneficiary).
(a) Designation of Beneficiary. An Optionee's or
Restricted Stock Recipient's Beneficiary shall be the individual
who is last designated in writing by the Optionee or
<PAGE>
Restricted Stock Recipient as such Optionee's or Restricted Stock
Recipient's Beneficiary hereunder. An Optionee or Restricted
Stock Recipient shall designate his or her original Beneficiary
in writing on his or her Option Agreement or Restricted Stock
Agreement. Any subsequent modification of the Optionee's or
Restricted Stock Recipient's Beneficiary shall be in a written
executed and notarized letter addressed to the Company and shall
be effective when it is received and accepted by the Committee,
as determined in the Committee's sole discretion.
(b) No Designated Beneficiary. If, at any time, no
Beneficiary has been validly designated by an Optionee or
Restricted Stock Recipient, or the Beneficiary designated by the
Optionee or Restricted Stock Recipient is no longer living at the
time of the Optionee's or Restricted Stock Recipient's death,
then the Optionee's or Restricted Stock Recipient's Beneficiary
shall be deemed to be the individual or individuals in the first
of the following classes of individuals with one or members of
such class surviving or in existence as of the Optionee's or
Restricted Stock Recipient's death, and in the absence thereof,
the Optionee's or Restricted Stock Recipient's estate: (a) the
Optionee's or Restricted Stock Recipient's surviving spouse; or
the Optionee's or Restricted Stock Recipient's then living lineal
descendants, per stirpes.
(c) Designation of Multiple Beneficiaries. An Optionee or
Restricted Stock Recipient may not designate more than one
individual as a Beneficiary. To the extent that a designation
purports to designate more than one individual as a Beneficiary,
the designation shall be null and void.
(d) Contingent Beneficiaries. An Optionee or Restricted
Stock Recipient may designate a contingent Beneficiary to receive
the Optionee's Option or Restricted Stock Recipient's Restricted
Stock in the event that the Optionee's or Restricted Stock
Recipient's original Beneficiary should predecease the Optionee
or Restricted Stock Recipient; otherwise, in the event a
Beneficiary predeceases the Optionee or Restricted Stock
Recipient, then the individual or individuals specified in
subsection (b) above shall be the Optionee's or Restricted Stock
Recipient's Beneficiary.
2.4 Board shall mean the Board of Directors of Southern
Electronics Corporation.
2.5 Cause shall mean an act or acts by an individual involving
the commission of a felony, willful misconduct, fraud, embezzlement,
dishonesty, breach of fiduciary duty or violation or breach of a
written employment or consulting agreement or of Company policy as
described in a Company employee handbook, any of which acts cause the
Company material damage, as determined by the Committee in its sole
discretion.
2.6 Change of Control shall mean the occurrence of any one of
the following events:
<PAGE>
(a) Acquisition By Person of Substantial Percentage of the
Company's Voting Power. Any individual, corporation,
partnership, Group, association or other person or entity,
together with his, its or their Affiliates and Associates, other
than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, hereafter becomes the
Beneficial Owner of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the
Company's then outstanding securities entitled to vote generally
in the election of directors;
(b) Substantial Change of Board Members. The Continuing
Directors of the Company shall at any time fail to constitute a
majority of the members of the Board of Directors of the Company;
(c) Disposition of Assets. All or substantially all of the
assets of the Company are sold, conveyed, transferred or
otherwise disposed of, whether through one event or a series of
related events, without being Duly Approved by the Continuing
Directors of the Company;
(d) Acquisition By Person of Substantial Percentage of a
Subsidiary's Voting Power. Any individual, corporation,
partnership, Group, association or other person or entity,
together with his, its or their Affiliates and Associates, other
than the Company, directly or indirectly, or a trustee or other
fiduciary holding securities under an employee benefit plan of a
Subsidiary, hereafter becomes the beneficial owner of securities
of that Subsidiary representing thirty percent (30%) or more of
the combined voting power of that Subsidiary's then outstanding
securities entitled to vote generally in the election of
directors without being Duly Approved by the Continuing Directors
of that Subsidiary; or
(e) Disposition of Assets of a Subsidiary. All or
substantially all of the assets of a Subsidiary are sold,
conveyed, transferred or otherwise disposed of, whether through
one event or a series of related events, without being Duly
Approved by the Continuing Directors of that Subsidiary.
For purposes of this Section 2.6 only, the following definitions
apply:
Affiliate or Affiliated means any person, firm, corporation,
partnership, association or entity, either directly or
indirectly, that controls, is controlled by, or is under
common control with a specified person, firm, corporation,
partnership, association or entity.
Associate means (1) any corporation, partnership or other
entity of which a specified person is an officer or partner,
or is, directly or indirectly, the beneficial owner of ten
percent (10%) or more of any class of equity securities
thereof, (2) any trust or estate in which the specified
person has a substantial beneficial interest or as to which
the specified person serves as trustee or in a similar
fiduciary
<PAGE>
capacity, (3) any relative or spouse of such specified
person, or any relative of such spouse, who has the same
home as such specified person, and (4) any person who is a
trustee, officer or partner of such specified person or of
any corporation, partnership or other entity that is an
Affiliate of such specified person.
Beneficial Owner shall be defined by reference to Rule 13d-3
under the 1934 Act as such Rule is in effect on the
Effective Date; provided, however, that any individual,
corporation, partnership, Group, association or other person
or entity which, directly or indirectly, owns or has the
right to acquire any of the Company's or a Subsidiary's
outstanding securities entitled to vote generally in the
election of directors at any time in the future, whether
such right is contingent, absolute, direct or indirect,
pursuant to any agreement, arrangement or understanding or
upon exercise of conversion rights, warrants or options or
otherwise, shall be deemed the Beneficial Owner of such
securities.
Company means Southern Electronics Corporation.
Continuing Director means a director who either was a member
of the Board of Directors of either the Company or a
Subsidiary, as the case may be, on the Effective Date, or
who becomes a member of the Board of Directors of either the
Company or a Subsidiary, as the case may be, subsequent to
such date and whose election or nomination for election by
the Board of Directors of that company was Duly Approved by
the Continuing Directors of that company at the time of such
election or nomination, either by a specific vote or by
approval of the proxy statement issued by the company on
behalf of the Board of Directors of the company in which
such person is named as a nominee for director.
Duly Approved by the Continuing Directors means an action
approved by the vote of at least a majority of the
Continuing Directors then on the Board of Directors of
either the Company or a Subsidiary, as the case may be;
provided, however, if the votes of such Continuing Directors
in favor of such action would be insufficient to constitute
an act of the entire Board of Directors of that company as
if a vote by all of its members had been taken, or if the
number of persons constituting the Continuing Directors of
that company shall be equal to or less than three, then the
term Duly Approved by the Continuing Directors shall mean an
action approved by the unanimous vote of the Continuing
Directors then on the Board of Directors of that company.
Group means persons who act in concert as described in
Section 13(d)(3) of the 1934 Act as in effect on the date
hereof.
Subsidiary means SED International, Inc., a Delaware
corporation, and each other subsidiary majority-owned by the
Company, whether directly or indirectly.
<PAGE>
2.7 Code shall mean the Internal Revenue Code of 1986, as
amended.
2.8 Committee shall mean the committee appointed by the Board to
administer and interpret the Plan in accordance with Article 3 below.
2.9 Common Stock shall mean the common stock, par value $.01 per
share, of Southern Electronics Corporation.
2.10 Company shall mean Southern Electronics Corporation, a
Delaware corporation, and shall also mean any parent or subsidiary
corporation of Southern Electronics Corporation unless otherwise
specified.
2.11 Consultant shall mean an individual who is performing
services for the Company pursuant to an agreement with the Company.
2.12 Director shall mean an individual who is serving as a member
of the Board or who is serving as a member of the board of directors
of a parent or subsidiary corporation of Southern Electronics
Corporation.
2.13 Disability shall mean, with respect to an individual, the
total and permanent disability of such individual as determined by the
Committee in its sole discretion.
2.14 Effective Date shall mean the date on which this Plan is
adopted by the Board, subject to stockholder approval. See Article 10
herein.
2.15 Fair Market Value of the Common Stock as of a date of
determination shall mean the following:
(a) Stock Listed and Shares Traded. If the Common Stock is
listed and traded on a national securities exchange (as such term
is defined by the 1934 Act) or on The Nasdaq National Market on
the date of determination, the Fair Market Value per share shall
be the closing price of a share of the Common Stock on said
national securities exchange or The Nasdaq National Market on the
trading date immediately preceding the date of determination. If
the Common Stock is traded in the over-the-counter market, the
Fair Market Value per share shall be the average of the closing
bid and asked prices on the trading date immediately preceding
the date of determination.
(b) Stock Listed But No Shares Traded. If the Common Stock
is listed on a national securities exchange or on The Nasdaq
National Market but no shares of the Common Stock were traded on
the date specified in Section 2.15(a) above but there were shares
traded on a date within a reasonable period before the date of
determination, the Fair Market Value shall be the closing price
of the Common Stock on the most recent date before the date of
determination. If the Common Stock is regularly traded in the
over-the-
<PAGE>
counter market but no shares of the Common Stock were traded on
the date specified in Section 2.15(a) above (or if records of
such trades are unavailable or burdensome to obtain) but there
were shares traded on a date within a reasonable period before
the date of determination, the Fair Market Value shall be the
average of the closing bid and asked prices of the Common Stock
on the most recent date before the date of determination.
(c) Stock Not Listed. If the Common Stock is not listed on
a national securities exchange or on The Nasdaq National Market
or is not regularly traded in the over-the-counter market, then
the Committee shall determine the Fair Market Value of the Common
Stock from all relevant available facts, which may include the
average of the closing bid and ask prices reflected in the
over-the-counter market on a date within a reasonable period
either before or after the date of determination or opinions of
independent experts as to value and may take into account any
recent sales and purchases of such Common Stock to the extent
they are representative.
The Committee's determination of Fair Market Value, which shall be
made pursuant to the foregoing provisions, shall be final and binding
for all purposes of this Plan.
2.16 ISO shall mean an incentive stock option within the meaning
of Code Paragraph 422(b).
2.17 NQSO shall mean an option to which Code Paragraph 421
(relating generally to certain ISO and other options) does not apply.
2.18 Option shall mean ISOs or NQSOs, as applicable, granted to
individuals pursuant to the terms and provisions of this Plan.
2.19 Option Agreement shall mean a written agreement, executed
and dated by the Company and an Optionee, evidencing an Option granted
under the terms and provisions of this Plan, setting forth the terms
and conditions of such Option, and specifying the name of the
Optionee and the number of shares of stock subject to such Option.
2.20 Option Price shall mean the purchase price of the shares of
Common Stock underlying an Option.
2.21 Optionee shall mean an individual who is granted an Option
pursuant to the terms and provisions of this Plan.
2.22 Person shall mean any individual, organization, corporation,
partnership or other entity.
2.23 Plan shall mean this Southern Electronics Corporation 1997
Stock Option Plan.
<PAGE>
2.24 Recipient shall mean an individual who is granted Restricted
Stock pursuant to the terms and provisions of this Plan.
2.25 Restricted Stock shall mean Common Stock subject to a
Restriction Agreement between the Recipient and the Company, whereby
the Recipient has immediate rights of ownership in the shares of
Common Stock underlying the award but such shares are subject to
restrictions in accordance with the terms and provisions of this Plan
and the Restriction Agreement and are subject to forfeiture by the
Recipient until the earlier of (a) the time such restrictions lapse or
are satisfied, or (b) the time such shares are forfeited.
2.26 Restriction Agreement shall mean a written agreement,
executed and dated by the Company and a Recipient, evidencing
restrictions placed on the ownership of Restricted Stock by
a Recipient.
2.27 Southern Electronics Corporation shall mean Southern
Electronics Corporation, a Delaware corporation.
2.28 Stock Rights shall mean Options and/or Restricted Stock.
ARTICLE 3
Administration
3.1 General Administration. The Plan shall be administered and
interpreted by the Committee. Subject to the express provisions of
the Plan, the Committee shall have authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the Option Agreements
or Restriction Agreements (as applicable) by which Stock Rights shall
be evidenced (which shall not be inconsistent with the terms of the
Plan), and to make all other determinations necessary or advisable for
the administration of the Plan, all of which determinations shall be
final, binding and conclusive.
3.2 Appointment. The Board shall appoint the Committee from
among its members to serve at the pleasure of the Board. The Board
from time to time may remove members from, or add members to, the
Committee and shall fill all vacancies thereon. The Committee at all
times shall be composed of two or more directors who shall meet the
following requirements:
(a) Non-Employee Director Rule. Each director serving on
the Committee must be a "non-employee director." To be a
non-employee director, the director must not (i) be an employee
or officer of the Company, (ii) have received compensation
directly or indirectly as a consultant or in any non-director
capacity, or have an interest in any transaction of the Company,
for which disclosure would be required under Item 404(a) of
Regulation S-K of the 1934 Act, or (iii) have been engaged
through another entity in a business relationship with the
Company for which disclosure would be required under
<PAGE>
Item 404(b) of Regulation S-K of the 1934 Act. The requirements
of this subsection are intended to comply with the "non-employee
director rule" of Rule 16b-3 under Section 16 of the 1934 Act or
any successor rule or regulation, and shall be interpreted and
construed in a manner which assures compliance with said Rule.
To the extent said Rule 16b-3 is modified to reduce or increase
the restrictions on who may serve on the Committee, the Plan
shall be deemed modified in a similar manner.
(b) Outside Director Rule. No director serving on the
Committee may be a current employee of the Company or a former
employee of the Company (or any corporation affiliated with the
Company under Code Paragraph 1504) receiving compensation for
prior services (other than benefits under a tax-qualified
retirement plan) during each taxable year during which the
director serves on the Committee. Furthermore, no director
serving on the Committee shall be or have ever been an officer of
the Company (or any Code Paragraph 1504 affiliated corporation),
or shall be receiving remuneration (directly or indirectly) from
such a corporation in any capacity other than as a director. The
requirements of this subsection are intended to comply with the
"outside director" requirements of Treas. Reg. Paragraph
1.162-27(e)(3) or any successor regulation, and shall be
interpreted and construed in a manner which assures compliance
with the "outside" director requirement of Code Paragraph
162(m)(4)(C)(i).
3.3 Organization. The Board or the Committee may select one of
the Committee's members as chairman of the Committee. The Committee
shall hold its meetings at such times, in such manner, and at such
places as the Committee or its chairman shall deem advisable. A
majority of the members of the Committee shall constitute a quorum,
and such majority shall determine the Committee's actions. The
Committee shall keep minutes of its proceedings and shall report the
same to the Board at the meeting next succeeding.
3.4 Indemnification. In addition to such other rights of
indemnification as they have as directors or as members of the
Committee, the members of the Committee, to the extent permitted by
applicable law, shall be indemnified by the Company against reasonable
expenses (including, without limitation, attorneys' fees) actually and
necessarily incurred in connection with the defense of any action,
suit or proceeding, or in connection with any appeal, to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Stock Rights granted
hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved to the extent required by and in
the manner provided by the articles or certificate of incorporation or
the bylaws of the Company relating to indemnification of directors) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be
adjudged in such action, suit or proceeding that such Committee member
or members did not act in good faith and in a manner he or they
reasonably believed to be in or not opposed to the best interest of
the Company.
<PAGE>
ARTICLE 4
Stock
The stock subject to the Stock Rights and other provisions of the
Plan shall be authorized but unissued or reacquired shares of Common
Stock. Subject to readjustment in accordance with the provisions of
Article 8, the total number of shares of Common Stock which may be
granted to, or for which Options may be granted to, persons
participating in the Plan shall not exceed in the aggregate 350,000
shares of Common Stock, subject to adjustment as provided herein.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option or shares of
Restricted Stock returned to the Company by forfeiture again may
become subject to Stock Rights under the Plan.
ARTICLE 5
Eligibility to Receive and Grant of Stock Rights
5.1 Individuals Eligible for Grants of Stock Rights. The
individuals eligible to receive Stock Rights hereunder shall be
employees, Directors and Consultants of the Company; provided,
that only employees of the Company and its "parent" or "subsidiary"
corporations within the meaning of subsections (e) and (f) of Code
Paragraph 424 shall be eligible to receive ISOs.
5.2 Grants of Stock Rights. Subject to the provisions of the
Plan, the Committee or the Board shall have the authority and sole
discretion to determine and designate, from time to time, those
individuals (from among the individuals eligible for a grant of Stock
Rights under the Plan pursuant to Section 5.1 above) to whom Stock
Rights will actually be granted, the Option Price of the shares
covered by any Options granted, the manner in and conditions under
which Options are exercisable (including, without limitation, any
limitations or restrictions thereon), the manner in and conditions
under which shares of Restricted Stock shall vest and the time or
times at which Stock Rights shall be granted. In making such
determinations, the Committee may take into account the nature of the
services rendered or to be rendered by the respective individuals to
whom Stock Rights may be granted, their present and potential
contributions to the Company's success and such other factors as the
Committee, in its sole discretion, shall deem relevant. In its
authorization of the granting of an Option hereunder, the Committee
shall specify the name of the Optionee, the number of shares of stock
subject to such Option and whether such Option is an ISO or a NQSO.
In its authorization of an award of Restricted Stock hereunder, the
Committee shall specify the name of the Recipient, the number of
shares of Restricted Stock to be awarded and the restrictions to which
such Restricted Stock shall be subject. The Committee may grant, at
any time, new Stock Rights to an Optionee or a Recipient who
previously has received Stock Rights, whether such Stock Rights
include prior Stock Rights that still are outstanding, previously
have been exercised in whole or in part, have expired or are canceled
in connection with the issuance of new Stock Rights. No individual
shall have any claim or right to be granted Stock Rights under the
Plan.
<PAGE>
5.3 Limitation on Exercisability of ISOs. Notwithstanding
anything herein to the contrary, the aggregate Fair Market Value of
ISOs which are granted to any employee under the Plan or any other
stock option plan adopted by the Company that are first exercisable in
any one calendar year shall not exceed $100,000. The Committee shall
interpret and administer the limitations set forth in this Section in
accordance with Code Paragraph 422(d).
5.4 Restriction on Grant of Stock Options. No more than the
maximum number of shares of Common Stock available under the Plan may
be made subject to Options granted during a calendar year to any one
individual.
ARTICLE 6
Terms and Conditions of Options
Options granted hereunder and Option Agreements shall comply with
and be subject to the following terms and conditions:
6.1 Requirement of Option Agreement. Upon the grant of an
Option hereunder, the Committee shall prepare (or cause to be
prepared) an Option Agreement. The Committee shall present such
Option Agreement to the Optionee. Upon execution of such Option
Agreement by the Optionee, such Option shall be deemed to have been
granted effective as of the date of grant. The failure of the Optionee
to execute the Option Agreement within 30 days after the date of the
receipt of same shall render the Option Agreement and the underlying
Option null and void ab initio.
6.2 Optionee and Number of Shares. Each Option Agreement shall
state the name of the Optionee and the total number of shares of the
Common Stock to which it pertains, the Option Price, the Beneficiary
of the Optionee and the date as of which the Option was granted
under this Plan.
6.3 Vesting. Each Option shall first become exercisable (i.e.,
vested) with respect to such portions of the shares subject to such
Option as are specified in the schedule set forth hereinbelow, except
as may be otherwise specified by the Committee:
(a) Commencing as of the first anniversary of the date the
Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, 20% of the
shares subject to such Option. Prior to said date, the Option
shall be unexercisable in its entirety.
(b) Commencing as of the second anniversary of the date the
Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, an
additional 20% of the shares subject to the Option.
<PAGE>
(c) Commencing as of the third anniversary of the date the
Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, an
additional 20% of the shares subject to the Option.
(d) Commencing as of the fourth anniversary of the date the
Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, an
additional 20% of the shares subject to the Option.
(e) Commencing as of the fifth anniversary of the date the
Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, the
remainder of the shares subject to such Option.
(f) Notwithstanding subsections (a) through (e) above, any
Options previously granted to an Optionee shall become
immediately vested and exercisable for 100% of the number of
shares subject to the Options upon the Optionee's becoming
Disabled or upon his death or upon a Change of Control.
Other than as provided above, if an Optionee ceases to be an employee,
Director or Consultant of the Company, his rights with regard to all
non-vested Options shall cease immediately.
6.4 Option Price. The Option Price of the shares of Common
Stock underlying each Option shall be the Fair Market Value of the
Common Stock on the date the Option is granted; provided, in no event
shall the Option Price of any ISO be less than 100% (110% in the case
of ISOs of Optionees who own more than ten percent of the voting power
of all classes of stock of either the Company or any "parent" or
"subsidiary" corporation of the Company (within the meaning of
subsections (e) and (f) of Code Paragraph 424)) of the Fair Market
Value of the Common Stock on the date the Option is granted. Upon
execution of an Option Agreement by both the Company and Optionee, the
date as of which the Committee granted the Option as specified in the
Option Agreement shall be considered the date on which such Option is
granted.
6.5 Terms of Options. Terms of Options granted under the Plan
shall commence on the date of grant and shall expire on such date as
the Committee may determine for each Option; provided, in no event
shall any Option be exercisable after ten years (five years in the
case of ISOs granted to Optionees who own more than ten percent of the
voting power of all classes of stock of either the Company or any
parent or subsidiary) from the date the Option is granted. No
Option shall be granted hereunder after ten years from the earlier of
i. the date the Plan is approved by the stockholders, or the date the
Plan is adopted by the Board.
6.6 Terms of Exercise. The exercise of an Option may be for
less than the full number of shares of Common Stock subject to such
Option, but such exercise shall not be made for less than (i) 100
shares or (ii) the total remaining shares subject to the Option, if
such total is less than 100 shares. Subject to the other restrictions
on exercise set forth herein, the unexercised portion of an Option may
be exercised at a later date by the Optionee.
<PAGE>
6.7 Method of Exercise. All Options granted hereunder shall be
exercised by written notice directed to the Secretary of the Company
at its principal place of business or to such other person as the
Committee may direct. Each notice of exercise shall identify the
Option which the Optionee is exercising (in whole or in part) and
shall be accompanied by payment of the Option Price for the number of
shares specified in such notice and by any documents required by
Section 9.1. The Company shall make delivery of such shares within a
reasonable period of time; provided, if any law or regulation requires
the Company to take any action (including, but not limited to, the
filing of a registration statement under the 1933 Act and causing such
registration statement to become effective) with respect to the shares
specified in such notice before the issuance thereof, then the date of
delivery of such shares shall be extended for the period necessary to
take such action. For Options which are ISOs, written statements
shall be furnished to the Optionee in accordance with Code Paragraph
6039 on or before January 31 of the year following the year in which
the Option was exercised. See Treas. Reg. Paragraph Paragraph
1.6039-1 and -2, and 301.6039-1.
6.8 Medium and Time of Payment.
(a) The Option Price shall be payable upon the exercise of
the Option in an amount equal to the number of shares then being
purchased times the per share Option Price. Payment, at the
election of the Optionee (or his Beneficiary as provided in
subsection (c) of Section 6.9), shall be (A) in cash; (B) by
delivery to the Company of a certificate or certificates for
shares of the Common Stock duly endorsed for transfer to the
Company with signature guaranteed by a member firm of a national
stock exchange or by a national or state bank or a federally
chartered thrift institution (or guaranteed or notarized in such
other manner as the Committee may require) or by instructing the
Company to retain shares of Common Stock upon the exercise of the
Option with a Fair Market Value equal to the exercise price as
payment; or (C) by a combination of (A) and (B).
(b) If all or part of the Option Price is paid by delivery
of shares of the Common Stock, the Optionee must have held such
shares as of the date of the payment for at least six months from
(i) the date of acquisition, in the case of shares acquired other
than through a stock option or other stock award plan, or (ii)
the date of grant or award in the case of shares acquired through
such a plan; and the value of such Common Stock which shall be
the Fair Market Value of such Common Stock on the date of
exercise) shall be less than or equal to the total Option Price
payment. If the Optionee delivers shares of Common Stock with a
value that is less than the total Option Price, then such
Optionee shall pay the balance of the total Option Price in cash
as provided in subsection (a) above.
<PAGE>
(c) In addition to the payment of the purchase price of the
shares then being purchased, an Optionee also shall pay in cash
(or have withheld from his normal pay) or, if permitted by the
Board or the Committee, in shares of Common Stock held for the
minimum period of time as specified in Section 6.8 above, an
amount equal to the amount, if any, which the Company at the time
of exercise is required to withhold under the income tax or
Federal Insurance Contribution Act tax withholding provisions of
the Code, of the income tax laws of the state of the Optionee's
residence, and of any other applicable law.
6.9 Effect of Termination of Employment, Disability or Death.
Except as provided in subsections (a), (b), (c) and (d) below, no
Option shall be exercisable unless the Optionee thereof shall have
been an employee, Director or Consultant of the Company from the date
of the granting of the Option until the date of exercise; provided,
the Committee, in its sole discretion, may waive the application of
this Section with respect to any NQSOs granted hereunder and,
instead, may provide a different expiration date or dates in a NQSO
Option Agreement.
(a) Termination of Employment. In the event an Optionee
ceases to be an employee, Director or Consultant of the Company
for any reason other than death, Disability or termination by the
Company without Cause of the Optionee's service as employee,
Director or Consultant of the Company, any Option or unexercised
portion thereof granted to him shall terminate on and shall not
be exercisable after the earliest to occur of (1) the expiration
date of the Option, (ii) the date on which the Optionee ceases to
be an employee, Director or Consultant of the Company or the
date on which the Company gives notice to such Optionee of
termination of service as employee, Director or Consultant if
such service is terminated by the Company for Cause (an
Optionee's resignation of such service in anticipation of
termination of service by the Company for Cause shall constitute
a notice of termination by the Company); provided, the Committee
may provide in the Option Agreement that such Option or any
unexercised portion thereof shall terminate sooner.
Notwithstanding the foregoing and any provision of subsection
(b), in the event that an Optionee's service as employee,
Director or Consultant of the Company terminates for a reason
other than death or Disability at any time after a Change of
Control, the term of all Options of that Optionee shall be
extended through the end of the three-month period immediately
following the date of such termination; provided, this extension
shall apply to ISOs only to the extent it does not cause the term
of such ISOs to exceed the maximum term permitted under Code
Paragraph 422 or does not cause such ISOs to lose their status as
ISOs. Prior to the earlier of the dates specified in the
preceding sentences of this subsection (a), the Option shall be
exercisable only in accordance with its terms and only for the
number of shares exercisable on the date of termination of
service. The question of whether an authorized leave of absence
or absence for military or government service or for any other
reason shall constitute a termination of service for purposes of
the Plan shall be determined by the Committee, which
determination shall be final and conclusive.
<PAGE>
(b) Termination of Employment by Company Without Cause. In
the event that the Company terminates an Optionee's service as
employee, Director or Consultant of the Company without Cause,
any Option or unexercised portion thereof granted to him shall
terminate and not be exercisable after the earlier to occur of
(i) the expiration date of such option or (ii) three months after
the date the Optionee ceases to be an employee, Director or
Consultant of the Company; provided, the Committee may provide in
the Option Agreement that such Option or any unexercised portion
thereof shall terminate sooner. Prior to the earlier of such
dates, such option shall be exercisable only in accordance with
its terms and only for the number of shares exercisable on the
date such Optionee's service is terminated by the Company without
cause.
(c) Disability. Upon the termination of an Optionee's
service as employee, Director or Consultant of the Company due to
Disability, any Option or unexercised portion thereof granted to
him which is otherwise exercisable shall terminate on and shall
not be exercisable after the earlier to occur of (i) the
expiration date of such Option or (ii) one year after the date on
which such Optionee ceases to be an employee, Director or
Consultant of the Company due to Disability; provided, the
Committee may provide in the Option Agreement that such Option or
any unexercised portion thereof shall terminate sooner. Prior to
the earlier of such dates, such Option shall be exercisable only
in accordance with its terms and only for the number of shares
exercisable on the date such Optionee's service ceases due to
Disability.
(d) Death. In the event of the death of the Optionee
while he is an employee, Director or Consultant of the Company,
any Option or unexercised portion thereof granted to him which is
otherwise exercisable may be exercised by his Beneficiary at any
time prior to the expiration of one year from the date of death
of such Optionee, but in no event later than the date of
expiration of the option period; provided, the Committee may
provide in the Option Agreement that such Option or any
unexercised portion thereof shall terminate sooner. Such
exercise shall be effected pursuant to the terms of this Section
as if such Beneficiary is the named Optionee.
6.10 Restrictions on Transfer and Exercise of Options. No Option
shall be assignable or transferable by the Optionee except by transfer
to a Beneficiary upon the death of the Optionee, and any purported
transfer (other than as excepted above) shall be null and void. After
the death of an Optionee and upon the death of the Optionee's
Beneficiary, an Option shall be transferred only by will or by the
laws of descent and distribution. During the lifetime of an Optionee,
the Option shall be exercisable only by him; provided, however, that
in the event the Optionee is incapacitated and unable to exercise
Options, such Options may be exercised by such Optionee's legal
guardian, legal representative, fiduciary or other representative whom
the Committee deems appropriate based on applicable facts and
circumstances.
6.11 Rights as a Stockholder. An Optionee shall have no rights
as a stockholder with respect to shares covered by his Option until
the date of issuance of the shares to him and only after the Option
Price of such shares is fully paid and the tax withholding amount is
paid or
<PAGE>
withheld. Unless specified in Article 8, no adjustment will be made
for dividends or other rights for which the record date is prior to
the date of such issuance.
6.12 No Obligation to Exercise Option. The granting of an Option
shall impose no obligation upon the Optionee to exercise such Option.
6.13 Acceleration. The Committee shall at all times have the
power to accelerate the vesting date of Options previously granted
under this Plan.
6.14 Designation of Option as ISO or NQSO. Subject to the
provisions of this Article, each Option granted under the Plan shall
be designated either as an ISO or a NQSO. An Option Agreement
evidencing both an ISO and a NQSO shall identify clearly the status
and terms of each Option.
6.15 ISOs Converted to NQSOs. In the event any part or all of an
Option granted under the Plan which is intended to be an ISO at any
time fails to satisfy all of the requirements of an ISO, then such ISO
shall be split into an ISO and NQSO so that the portion of the Option,
if any, that still qualifies as an ISO shall remain an ISO and the
portion that does not qualify as an ISO shall become a NQSO. Such
split of an Option into an ISO portion and a NQSO portion shall be
evidenced by one or more Option Agreements, as long as each Option is
identified clearly as to its status as an ISO or NQSO.
ARTICLE 7
Terms and Conditions of Restricted Stock Awards
Restriction Agreements and the Restricted Stock awarded under
this Plan shall comply with and be subject to the following terms and
conditions:
7.1 Requirement of Restriction Agreement. Upon the grant of
Restricted Stock hereunder, the Committee shall prepare (or cause to
be prepared) a Restriction Agreement, and shall present such
Restriction Agreement to the Recipient. The failure of the Recipient
to execute the Restriction Agreement within 30 days after the date of
the receipt of same shall render the Restriction Agreement and the
underlying award of Restricted Stock null and void ab initio.
7.2 Effect of Grant of Restricted Stock. An award of Restricted
Stock granted under the Plan shall provide the Recipient with
immediate rights of ownership in the shares of Common Stock underlying
the award, but such shares shall be subject to such restrictions as
the Committee shall specify and shall be subject to forfeiture by the
Recipient until the earlier of (i) the time such restrictions lapse or
are satisfied, or (ii) the time such shares are forfeited.
7.3 Restricted Stock Recipient and Number of Shares. Each
Restriction Agreement shall state the name of the Restricted Stock
Recipient and the total number of shares of the
<PAGE>
Common Stock to which it pertains, the Beneficiary of the Restricted
Stock Recipient and the date as of which the Restricted Stock was
granted under this Plan.
7.4 Restrictions on Stock.
(a) The vesting of complete ownership rights in any
Restricted Stock awarded under this Plan shall be subject to such
terms and conditions as the Committee may determine in its sole
discretion; provided, no Recipient shall be required to pay any
consideration in the form of cash or other property as a
condition to acquiring the Restricted Stock. A Recipient shall
vest and obtain a nonforfeitable interest in the Restricted Stock
as of the date that the last of such terms and conditions is
satisfied; provided, if such terms and conditions are not
satisfied by the deadline, if any, designated by the Committee
and specified in the Restriction Agreement, the portion of
Restricted Stock still subject to such terms and conditions shall
be forfeited and returned to the Company. The Committee, in its
sole discretion, may provide for the lapse of the terms and
conditions to which Restricted Stock is subject in installments
and may provide for different terms and conditions and/or a
different restriction period with respect to each award, or any
portion of an award, of Restricted Stock.
(b) In addition to such terms and conditions as the
Committee may determine with respect to the vesting of any shares
of Restricted Stock, all Restricted Stock shall vest with respect
to such portion of each grant of Restricted Stock as is specified
in the schedule set forth hereinbelow, except as may otherwise be
specified by the Committee.
(i) Commencing as of the first anniversary of the date
the Restricted Stock is granted, complete ownership rights
shall vest (subject to such other terms and conditions as
the Committee may determine) in 20% of the Restricted Stock
so granted. Prior to said date, none of such Restricted
Stock shall be vested.
(ii) Commencing as of the second anniversary of the
date the Restricted Stock is granted, complete ownership
rights shall vest (subject to such other terms and
conditions as the Committee may determine) in an additional
20% of the Restricted Stock so granted.
(iii) Commencing as of the third anniversary of the
date the Restricted Stock is granted, complete ownership
rights shall vest (subject to such other terms and
conditions as the Committee may determine) in an additional
20% of the Restricted Stock so granted.
(iv) Commencing as of the fourth anniversary of the
date the Restricted Stock is granted, complete ownership
rights shall vest (subject to such other terms and
conditions as the Committee may determine) in an additional
20% of the Restricted Stock so granted.
<PAGE>
(v) Commencing as of the fifth anniversary of the date
the Restricted Stock is granted, complete ownership rights
shall vest (subject to such other terms and conditions as
the Committee may determine) in the remainder of the
Restricted Stock so granted.
Notwithstanding (a) and (b) above, 100% of the shares of Restricted
Stock previously granted to a Restricted Stock Recipient shall become
immediately vested upon a Change of Control or upon a Restricted Stock
Recipient's becoming Disabled or upon his death.
7.5 Delivery of Restricted Stock.
(a) The Company shall make delivery of the shares of
Restricted Stock within a reasonable period of time after
execution of a Restriction Agreement; provided, if any law or
regulation requires the Company to take any action (including,
but not limited to, the filing of a registration statement under
the 1933 Act and causing such registration statement to become
effective) with respect to such shares before the issuance
thereof, then the date of delivery of such shares shall be
extended for the period necessary to take such action.
(b) Unless the certificates representing shares of the
Restricted Stock are deposited with a custodian pursuant to
subsection (c) of this Section, each such certificate shall bear
the following legend (in addition to any other restrictive legend
required pursuant to Article 9):
The transferability of this certificate and the
shares of stock represented hereby are subject to
the restrictions, terms and conditions (including
forfeiture and restrictions against transfer)
contained in the Southern Electronics Corporation
1997 Stock Option Plan and a Restriction
Agreement, dated ___________, ______, between
________________________ and Southern Electronics
Corporation. The Plan and Restriction Agreement
are on file in the office of the Secretary of
Southern Electronics Corporation.
Such legend shall be removed from any certificate evidencing such
shares of Restricted Stock as of the date that such shares become
nonforfeitable.
(c) As an alternative to delivering a stock certificate to
the Recipient pursuant to subsection (b) of this Section, any
certificate evidencing Restricted Stock may be deposited by the
Company with a custodian to be designated by the Committee. The
Company shall cause the custodian to issue to the Recipient a
receipt for any Restricted Stock deposited with it in accordance
with this subsection. Such custodian shall hold the deposited
certificates and deliver the same to the Recipient in whose name
the shares of
<PAGE>
Restricted Stock evidenced thereby are registered only after such
shares become nonforfeitable.
(d) A Recipient shall pay in cash (or have withheld from
his normal pay) or, if permitted by the Board or the Committee,
in shares of Common Stock held for the minimum period of time as
specified in Section 6.8(b) hereof, an amount equal to the
amount, if any, which the Company is required at any time to
withhold under the income tax or Federal Insurance Contributions
Act tax withholding provisions of the Code, of the income tax
laws of the state of the Recipient's residence, and any other
applicable law.
7.6 Termination of Service. Except as otherwise determined by
the Committee and set forth in a Restriction Agreement, in the event
that the service as employee, Director or Consultant of the Company of
a Recipient to whom Restricted Stock has been granted is terminated
for any reason (including retirement of the Recipient or a termination
by the Company whether or not for Cause) other than a Change of
Control, or the Disability or death of the Recipient, before
satisfaction of the terms and conditions to which the Restricted Stock
is subject, all shares of Restricted Stock still subject to
restriction shall be forfeited and shall be reacquired by the Company.
7.7 Restrictions on Transfer. No shares of Restricted Stock
shall be assignable or transferable by the Recipient, except by
transfer to a Beneficiary upon the death of the Recipient, while such
shares are still subject to restriction, and any purported transfer
(other than as excepted above) shall be null and void.
7.8 Rights as a Stockholder. Upon delivery of Restricted Stock
to the Recipient (or the custodian, if any), the Recipient shall,
except as otherwise set forth in this Article and in the Restriction
Agreement, have all of the rights of a stockholder with respect to the
Restricted Stock, including the right to vote the shares of Restricted
Stock and receive all dividends or other distributions paid or made
with respect to the Restricted Stock. Until such delivery, the
Recipient shall have no rights as a stockholder.
7.9 Acceleration. The Committee shall at all times have the
power to accelerate the vesting date of Restricted Stock previously
granted under this Plan.
7.10 Restrictions on Grants. No Restricted Stock shall be
granted hereunder after ten years from the earlier of (a) the date the
Plan is approved by the stockholders, or (b) the date the Plan is
adopted by the Board.
<PAGE>
ARTICLE 8
Adjustments Upon Changes in Capitalization
8.1 Recapitalization. In the event that the outstanding shares
of the Common Stock of the Company are hereafter increased or
decreased or changed into or exchanged for a different number or kind
of shares or other securities of Southern Electronics Corporation by
reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common
Stock, the following rules shall apply:
(a) The Committee shall make an appropriate adjustment in
the number and kind of shares available for the granting of Stock
Rights under the Plan.
(b) The Committee also shall make an appropriate adjustment
in the number and kind of shares as to which outstanding Options,
or portions thereof then unexercised, shall be exercisable; any
such adjustment in any outstanding Options shall be made without
change in the total price applicable to the unexercised portion
of such Option and with a corresponding adjustment in the Option
Price per share. No fractional shares shall be issued or
optioned in making the foregoing adjustments, and the number of
shares available under the Plan or the number of shares subject
to any outstanding Options shall be the next lower number of
shares, rounding all fractions downward.
(c) Any adjustment to or assumption of ISOs under this
Section shall be made in accordance with Code Paragraph 424(a)
and the regulations promulgated thereunder so as to preserve the
status of such Options as ISOs under Code Paragraph 422.
(d) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the
class or classes of stock then set aside for the Plan, each
Optionee shall be entitled to the same rights or warrants on the
same basis as holders of the outstanding shares with respect to
such portion of his Option as is exercised on or prior to the
record date for determining stockholders entitled to receive or
exercise such rights or warrants.
8.2 Reorganization. Subject to any required action by the
stockholders, if the Company shall be a party to any reorganization
involving merger, consolidation, acquisition of the stock or
acquisition of the assets of the Company which does not constitute a
Change of Control, the Committee, in its discretion, may declare that:
(a) any Option granted but not yet exercised shall pertain
to and apply, with appropriate adjustment as determined by the
Committee, to the securities of the resulting corporation to
which a holder of the number of shares of the Common Stock
subject to such Option would have been entitled;
<PAGE>
(b) any or all outstanding Stock Rights granted hereunder
shall become immediately nonforfeitable and fully exercisable or
vested (to the extent permitted under federal or state securities
laws); and/or
(c) any or all Stock Rights granted hereunder shall become
immediately nonforfeitable and fully exercisable or vested (to
the extent permitted under federal or state securities laws) and
are to be terminated after giving at least 30 days' notice to the
Optionees and/or Recipients to whom such Stock Rights have been
granted.
8.3 Dissolution and Liquidation. If the Board adopts a plan of
dissolution and liquidation that is approved by the stockholders of
the Company, the Committee shall give each Optionee and Recipient
written notice of such event at least ten days prior to its effective
date, and the rights of all Optionees and Recipients shall become
immediately nonforfeitable and fully exercisable or vested (to the
extent permitted under federal or state securities laws).
8.4 Limits on Adjustments. Any issuance by the Company of stock
of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of shares of the Common
Stock subject to any Option, except as specifically provided otherwise
in this Article. The grant of Stock Rights pursuant to the Plan shall
not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its
capital or business structure or to merge, consolidate or dissolve, or
to liquidate, sell or transfer all or any part of its business or
assets. All adjustments the Committee makes under this Article shall
be conclusive.
ARTICLE 9
Agreement by Optionee or Recipient and Securities Registration
9.1 Agreement. If, in the opinion of counsel to the Company,
such action is necessary or desirable, no Stock Rights shall be
granted to any Optionee or Recipient, and no Option shall be
exercisable, unless, at the time of grant or exercise, as applicable,
such Optionee or Recipient (i) represents and warrants that he will
acquire the Common Stock for investment only and not for purposes of
resale or distribution, and (ii) makes such further representations
and warranties as are deemed necessary or desirable by counsel to the
Company with regard to holding and resale of the Common Stock. The
Optionee or Recipient shall, upon the request of the Committee,
execute and deliver to the Company an agreement or affidavit to such
effect. Should the Committee have reasonable cause to believe that
such Optionee or Recipient did not execute such agreement or affidavit
in good faith, the Company shall not be bound by the grant of the
Option or Restricted Stock or by the exercise of the Option. All
certificates representing shares of Common Stock issued pursuant to
the Plan shall be marked with the following restrictive legend
or similar legend, if such marking, in the opinion of counsel to the
Company, is necessary or desirable:
<PAGE>
The shares represented by this certificate [have not been
registered under the Securities Act of 1933, as amended, or the
securities laws of any state] [and] [are held by an "affiliate"
(as such term is defined in Rule 144 promulgated by the
Securities and Exchange Commission under the Securities Act of
1933, as amended) of the Corporation]. Accordingly, these shares
may not be sold, hypothecated, pledged or otherwise transferred
except (i) pursuant to an effective registration statement under
the Securities Act of 1933, as amended, and any applicable
securities laws or regulations of any state with respect to such
shares, (ii) in accordance with Securities and Exchange
Commission Rule 144, or (iii) upon the issuance to the
Corporation of a favorable opinion of counsel or the submission
to the Corporation of such other evidence as may be satisfactory
to the Corporation that such proposed sale, assignment,
encumbrance or other transfer will not be in violation of the
Securities Act of 1933, as amended, or any applicable securities
laws of any state or any rules or regulations thereunder. Any
attempted transfer of this certificate or the shares represented
hereby which is in violation of the preceding restrictions will
not be recognized by the Corporation, nor will any transferee be
recognized as the owner thereof by the Corporation.
If the Common Stock is (A) held by an Optionee or Recipient who is not
an "affiliate," as that term is defined in Rule 144 of the 1933 Act,
or who ceases to be an "affiliate," or (B) registered under the 1933
Act and all applicable state securities laws and regulations as
provided in Section 9.2, the Committee, in its discretion and with the
advice of counsel, may dispense with or authorize the removal of the
restrictive legend set forth above or the portion thereof which is
inapplicable.
9.2 Registration. In the event that the Company in its sole
discretion shall deem it necessary or advisable to register, under the
1933 Act or any state securities laws or regulations, any shares with
respect to which Stock Rights have been granted hereunder, then the
Company shall take such action at its own expense before or, if
appropriate and upon the advice of legal counsel, after delivery of
the certificates representing such shares to an Optionee or Recipient.
In such event, and if the shares of Common Stock of the Company shall
be listed on any national securities exchange or on The Nasdaq
National Market at the time of the exercise of any Option or the
vesting of any shares of Restricted Stock, the Company shall make
prompt application at its own expense for the listing on such stock
exchange or The Nasdaq National Market of the shares of Common Stock
to be issued.
ARTICLE 10
Effective Date
The Plan shall be effective as of the Effective Date, and no
Stock Rights shall be granted hereunder prior to said date. Adoption
of the Plan shall be approved by the stockholders of Southern
Electronics Corporation at the earlier of (i) the annual meeting of
the stockholders of Southern Electronics Corporation which immediately
follows the date of the first grant or award
<PAGE>
of Stock Rights hereunder, or (ii) 12 months after the adoption of the
Plan by the Board, but in no event earlier than 12 months prior to the
adoption of the Plan by the Board. Stockholder approval shall be made
by a majority of the votes cast at a duly held meeting at which a
quorum representing a majority of all outstanding voting stock is,
either in person or by proxy, present and voting on the Plan, or by
the written consent in lieu of a meeting of the holders of a majority
of the outstanding voting stock or such greater number of shares of
voting stock as may be required by Southern Electronics Corporation's
articles or certificate of incorporation and bylaws and by applicable
law; provided, however, such stockholder approval, whether by vote or
by written consent in lieu of a meeting, must be solicited
substantially in accordance with the rules and regulations in effect
under Section 14(a) of the 1934 Act. Failure to obtain such approval
shall render the Plan and any Stock Rights granted hereunder null and
void ab initio.
ARTICLE 11
Amendment and Termination
11.1 Amendment and Termination By the Board. Subject to
Section 11.2 below, the Board shall have the power at any time to add
to, amend, modify or repeal any of the provisions of the Plan, to
suspend the operation of the entire Plan or any of its provisions for
any period or periods or to terminate the Plan in whole or in part.
In the event of any such action, the Committee shall prepare written
procedures which, when approved by the Board, shall govern the
administration of the Plan resulting from such addition, amendment,
modification, repeal, suspension or termination.
11.2 Restrictions on Amendment and Termination. Notwithstanding
the provisions of Section 11.1 above, the following restrictions shall
apply to the Board's authority under Section 11.1 above:
(a) Prohibition Against Adverse Effects on Outstanding
Stock Rights. No addition, amendment, modification, repeal,
suspension or termination shall adversely affect, in any way, the
rights of the Optionees or Recipients who have outstanding Stock
Rights without the consent of such Optionees or Recipients; and
(b) Stockholder Approval Required for Certain
Modifications. No modification or amendment of the Plan may be
made without the prior approval of the stockholders of Southern
Electronics Corporation if (3) such modification or amendment
would cause the applicable portions of the Plan to fail to
qualify as an ISO plan pursuant to Code Paragraph 422 or such
modification or amendment would modify the material terms of the
Plan within the meaning of Prop. Treas. Reg. Paragraph
1.162-27(e)(4). Stockholder approval shall be made by the holders
of a majority of the votes cast at a duly held meeting at which a
quorum representing a majority of all outstanding voting stock
is, either in person or by proxy, present and voting, or by the
written consent in lieu of a meeting of the holders of a majority
of the outstanding voting stock or such greater number of shares
of voting stock
<PAGE>
as may be required by Southern Electronics Corporation's articles
or certificate of incorporation and bylaws and by applicable law.
ARTICLE 12
Miscellaneous Provisions
12.1 Application of Funds. The proceeds received by the Company
from the sale of the Common Stock subject to the Stock Rights granted
hereunder will be used for general corporate purposes.
12.2 Notices. All notices or other communications by an Optionee
or Recipient to the Committee pursuant to or in connection with the
Plan shall be deemed to have been duly given when received in the form
specified by the Committee at the location, or by the person,
designated by the Committee for the receipt thereof.
12.3 Term of Plan. Subject to the terms of Article 11, the Plan
shall terminate upon the later of (i) the complete exercise or lapse
of the last outstanding Stock Right, or (ii) the last date upon which
Options may be granted hereunder.
12.4 Governing Law. The Plan shall be governed by and construed
in accordance with the laws of the State of Delaware.
12.5 Additional Provisions By Committee. The Option Agreements
authorized under the Plan may contain such other provisions,
including, without limitation, restrictions upon the exercise of an
Option, as the Committee shall deem advisable. The Restriction
Agreements authorized under the Plan may contain such other
provisions, including, without limitation, restrictions upon the
complete ownership of Restricted Stock, as the Committee shall deem
advisable.
12.6 Plan Document Controls. In the event of any conflict
between the provisions of an Option Agreement and the Plan, or between
a Restriction Agreement and the Plan, the Plan shall control.
12.7 Gender and Number. Wherever applicable, the masculine
pronoun shall include the feminine pronoun, and the singular shall
include the plural.
12.8 Headings. The titles in this Plan are inserted for
convenience of reference; they constitute no part of the Plan and are
not to be considered in the construction hereof.
12.9 Legal References. Any references in this Plan to a
provision of law which is, subsequent to the Effective Date of this
Plan, revised, modified, finalized or redesignated, shall
<PAGE>
automatically be deemed a reference to such revised, modified,
finalized or redesignated provision of law.
12.10 No Rights to Employment or to Perform Services. Nothing
contained in the Plan, or any modification thereof, shall be construed
to give any individual any rights to employment with the Company, or
to perform services for the Company.
12.11 Unfunded Arrangement. The Plan shall not be funded, and
except for reserving a sufficient number of authorized shares to the
extent required by law to meet the requirements of the Plan, the
Company shall not be required to establish any special or separate
fund or to make any other segregation of assets to assure the payment
of any grant under the Plan.
ADOPTED BY BOARD OF DIRECTORS ON AUGUST 26, 1997
APPROVED BY STOCKHOLDERS ON ____________ ___, 1997
<PAGE>
EXHIBIT B
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION, AS AMENDED,
OF
SOUTHERN ELECTRONICS CORPORATION
First: The name of the corporation is Southern Electronics
Corporation (the "Corporation").
Second: The Certificate of Incorporation, as amended, of the
Corporation is hereby further amended by deleting Article First in its
entirety and inserting in lieu thereof the following:
"First: The name of the corporation is SED International
Holdings, Inc. (the "Corporation")."
Third: The Certificate of Incorporation, as amended, of the
Corporation is hereby further amended by deleting the first Paragraph
of Article Fourth in its entirety and inserting in lieu of the
following:
"Fourth: The Corporation is authorized to issue two classes of
shares to be designated respectively as "Common Stock" and
"Preferred Stock." The total number of shares which the
Corporation is authorized to issue is one hundred million one
hundred twenty-nine thousand five hundred shares (100,129,500).
The number of shares of Common Stock authorized is one hundred
million shares (100,000,000), and the par value of each share is
$.01. The number of shares of Preferred Stock authorized is one
hundred twenty-nine thousand five hundred shares (129,500), and
the par value of each share is $1.00."
Fourth: Except as provided herein, all other terms and provisions of
Article Fourth and the other Articles of the Certificate of
Incorporation, as amended, of the Corporation shall remain in full
force and effect.
Fifth: This Amendment to the Certificate of Incorporation, as
amended, of the Corporation was duly approved by the Board of
Directors of the Corporation at a meeting held on August 27, 1997, and
by the stockholders of the Corporation at a meeting held on November
11, 1997, pursuant to the requirements of Section 242 of the Delaware
General Corporation Law.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate
of Amendment to the Certificate of Incorporation to be duly executed
by its authorized officer this 11th day of November, 1997.
SOUTHERN ELECTRONICS CORPORATION
By:
Ray D. Risner
President and Chief Operating Officer
[ATTACHMENT -- PROXY CARD]
[Front of 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 3, 1997, 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., local time, on November 11, 1997,
and at any and all adjournment(s) thereof:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
NOMINEES AND PROPOSALS.
1. Proposal 1:
The election as directors of the two nominees listed
below to serve for a three-year term expiring at the
2000 Annual Meeting of Shareholders and until their
respective successors are elected and qualified.
// FOR ALL nominees listed below
(except as marked to the contrary below)
// WITHHOLD AUTHORITY to vote for
all nominees listed below.
GERALD DIAMOND AND JOEL COHEN
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.
IF NO DIRECTION IS MADE TO WITHHOLD AUTHORITY TO VOTE FOR OF
ANY NOMINEE, THIS PROXY CARD WILL BE VOTED "FOR" EACH OF THE
NOMINEES.
2. Proposal 2:
Approval of the Southern Electronics Corporation 1997
Stock Option Plan.
// For // Against // Abstain
3. Proposal 3:
Amendment of the Company's Certificate of
Incorporation, as amended, to increase the authorized
shares of the Company's Common Stock from 25 million to
100 million shares.
// For // Against // Abstain
4. Proposal 4:
Amendment of the Company's Certificate of
Incorporation, as amended, to change the name of the
Company to "SED International Holdings, Inc."
// For // Against // Abstain
(Continued, and to be signed and dated on the reverse side)
<PAGE>
[Back of Proxy Card]
(Continued from the other side)
5. In their discretion, the proxies are authorized to vote upon
such other business as properly may come before the Annual
Meeting and any adjournments thereof. This proxy may be
revoked at any time prior to the voting thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD PROMPTLY
IF NO DIRECTION IS MADE, THIS PROXY CARD WILL BE VOTED "FOR"
PROPOSALS 2 THROUGH 4 LISTED ON THE REVERSE SIDE OF THIS PROXY
CARD. If any other business is properly presented at the Annual
Meeting, this proxy card will be voted by the proxies in their
discretion. At the present time, the Board of Directors knows of
no other business to be presented to a vote of the shareholders
at the Annual Meeting.
______________________________
Signature
______________________________
Signature, if shares held jointly
Date:___________________, 1997
Please sign exactly as your name
appears hereon. When shares are
held jointly, both holders should
sign. When signing as attorney,
executor, administrator, trustee,
custodian or guardian, please give
your full title. If the holder is a
corporation or partnership the full
corporate or partnership name
should be signed by a duly
authorized officer or Partner,
respectively.
