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
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHS ELECTRONICS, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
CHS ELECTRONICS, INC.
-------------------------------------------
(Name of Persons(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on the 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 transactions apply:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0 -11:
(4) Proposed maximum aggregate value of transaction:
[ ] 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>
CHS ELECTRONICS, INC.
2153 NW 86TH AVENUE, MIAMI, FLORIDA 33122
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 28, 1996
-------------------------
To the Shareholders of CHS Electronics, Inc.
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Shareholders
(the "Annual Meeting") of CHS Electronics, Inc., a Florida corporation (the
"Company"), will be held at 10:00 a.m., local time, on Friday, June 28, 1996, at
the Doral Golf Resort and Spa, 4400 N.W. 87th Avenue, Miami, Florida 33178, for
the following purposes:
(1) The election of six members to the Company's Board of
Directors to hold office until the Company's 1997 Annual
Meeting of Shareholders or until their successors are duly
elected and qualified;
(2) The adoption of an amendment to the Company's 1994 Stock
Incentive Plan;
(3) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants; and
(4) The transaction of such other business as may properly come
before the Annual Meeting and any adjournments or
postponements thereof.
The Board of Directors has fixed the close of business on May 31, 1996
as the record date for determining those shareholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournments or postponements thereof.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the enclosed pre-addressed envelope as promptly as
possible. No postage is required if mailed in the United States.
By Order of the Board of Directors
Claudio Osorio
CHAIRMAN OF THE BOARD
Miami, Florida
June 4, 1996
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE>
1996 ANNUAL MEETING OF SHAREHOLDERS
OF
CHS ELECTRONICS, INC.
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PROXY STATEMENT
-------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of CHS Electronics, Inc., a Florida corporation (the
"Company"), of proxies from the holders of the Company's Common Stock, par value
$.001 per share (the "Common Stock"), for use at the 1996 Annual Meeting of
Shareholders (the "Annual Meeting") of the Company to be held at 10:00 a.m.,
local time, on Friday, June 28, 1996, at the Doral Golf Resort and Spa, 4400
N.W. 87th Avenue, Miami, Florida 33178, or at any adjournment(s) or
postponements(s) thereof (the "Annual Meeting"), pursuant to the foregoing
Notice of Annual Meeting of Shareholders.
Shareholders should review the information provided herein in
conjunction with the Company's 1995 Annual Report to Shareholders, which
accompanies this Proxy Statement. The Company's principal executive offices are
located at 2153 NW 86th Avenue, Miami, Florida 33122 and its telephone number is
(305) 716-8273.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's Board of
Directors. The giving of a proxy does not preclude the right to vote in person
should any shareholder giving the proxy so desire. Shareholders have an
unconditional right to revoke their proxy at any time prior to the exercise
thereof, either in person at the Annual Meeting or by filing with the Company's
Secretary at the Company's headquarters a written revocation or duly executed
proxy bearing a later date; however, no such revocation will be effective until
written notice of the revocation is received by the Company at or prior to the
Annual Meeting.
The cost of preparing, assembling and mailing this Proxy Statement, the
Notice of Annual Meeting of Shareholders and the enclosed proxy is to be borne
by the Company. In addition to the use of mail, employees of the Company may
solicit proxies personally and by telephone. The Company's employees will
receive no compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other custodians, nominees
and fiduciaries to forward copies of the proxy material to their principals and
to request authority for the execution of proxies. The Company may reimburse
such persons for their expenses in so doing.
PURPOSES OF THE MEETING
At the Annual Meeting, the Company's shareholders will consider and
vote upon the following matters:
(1) The election of six members to the Company's Board of
Directors to serve until the Company's 1997 Annual Meeting of
Shareholders or until their successors are duly elected and
qualified;
(2) The adoption of an amendment to the Company's 1994 Stock
Incentive Plan;
(3) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants; and
<PAGE>
(4) The transaction of such other business as may properly come
before the Annual Meeting, including any adjournments or
postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted for the election of the nominees for director named below and in
favor of the other matters presented. In the event a shareholder specifies a
different choice by means of the enclosed proxy, his shares will be voted in
accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on May 31, 1996 as
the record date (the "Record Date") for determining shareholders of the Company
entitled to notice of and to vote at the Annual Meeting. As of the Record Date,
there were __________ shares of Common Stock outstanding. Only the holders of
issued and outstanding shares of Common Stock are entitled to vote at the Annual
Meeting. Shareholders do not have the right to cumulate their votes, and are
entitled to one vote for each share held.
The attendance, in person or by proxy, of the holders of a majority of
the outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum with respect to all matters presented.
Directors will be elected by a plurality of the votes cast by the shares of
Common Stock represented in person or by proxy at the Annual Meeting. Any other
matter that may be submitted to a vote of the shareholders will be approved if
the number of shares of Common Stock voted in favor of the matter exceeds the
number of shares voted in opposition to the matter, unless such matter is one
for which a greater vote in required by law or by the Company's Articles of
Incorporation or Bylaws. If less than a majority of outstanding shares entitled
to vote are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time, or place if the new date, time,
or place is announced at the meeting before an adjournment is taken.
Prior to the Annual Meeting, the Company will select one or more
inspectors of election for the meeting. Such inspector(s) shall determine the
number of shares of Common Stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive, count and
tabulate ballots and votes and determine the results thereof. Abstentions will
be considered as shares present and entitled to vote at the Annual Meeting and
will be counted as votes cast at the Annual Meeting, but will not be counted as
votes cast for or against any given matter.
A broker or nominee holding shares registered in its name, or in the
name of its nominee, which are beneficially owned by another person and for
which it has not received instructions as to voting from the beneficial owner,
may have discretion to vote the beneficial owner's shares with respect to the
election of directors and other matters addressed at the Annual Meeting. Any
such shares which are not represented at the Annual Meeting either in person or
by proxy will not be considered to have cast votes on any matters addressed at
the Annual Meeting.
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<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of the Record
Date concerning the beneficial ownership of the Common Stock by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director of the Company, (iii) each of the
Named Executive Officers, and (iv) all executive officers and directors of the
Company as a group.
NUMBER OF
SHARES
NAME OF BENEFICIAL BENEFICIALLY PERCENT
OWNER(1)(2)(3) OWNED OF SHARES
- ---------------------------------- ---------------- -------------
Claudio Osorio(4,5) 5,663,340 74.4
Alvin Perlman(4) 5,663,340 74.4
Comtrad, Inc.(4,11) 5,663,340 74.4
Comtrad Holdings, Inc.(4,11) 5,663,340 74.4
Antonio Boccalandro(6) 0 *
Otto Gerlach(7) 0 *
Zbynek Kraus(8) 0 *
Donald D. Winstead(9) 45,000 *
Craig Toll(10) 43,750 *
All officers and directors as a
group (7 persons) 5,752,090 74.7
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* Less than 1%
(1) The address for each of the executive officers and directors is 2153 N.W.
86th Avenue, Miami, Florida 33122, except for Alvin Perlman which is 5771
Bridleway Circle, Boca Raton, Florida 33496.
(2) Except as noted, all shares are held beneficially and of record.
(3) Under Rule 13d-3 of the Exchange Act, certain shares may be deemed to be
beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In
addition, shares are deemed to be beneficially owned by a person if the
person has the right to acquire the shares (for example, upon exercise of
an option) within 60 days of the date as of which the information is
provided. In computing the percentage ownership of any person, the amount
of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of
these acquisition rights. As a result, the percentage of outstanding
shares of any person as shown in this table does not necessarily reflect
the person's actual ownership or voting power with respect to the number
of shares of Common Stock actually outstanding at May 31, 1996.
(4) Includes 2,864,800 shares held of record by Comtrad, Inc. ("Comtrad"), a
wholly-owned subsidiary of Comtrad Holdings, Inc. ("CHI"), 1,827,500
shares held of record by CHI, 460,000 shares held of record by Alvin
Perlman, 483,000 shares held of record by Penrose Trading Co. S.A. (a
shareholder of CHI and of which Mr. Osorio has effective control) and
currently exercisable options to purchase 28,040 shares held by Mr.
Osorio. Claudio Osorio and Alvin Perlman together own and control a
majority of the issued and outstanding capital stock of CHI, and Messrs.
Osorio and Perlman have entered into an agreement pursuant to which they
have agreed to vote their shares of CHI common stock together on certain
matters submitted to the shareholders of CHI. Claudio Osorio, Alvin
Perlman, CHI and Comtrad are parties to another agreement, in which they
agree to vote all shares of the Common Stock they own or control,
together on any matter submitted to the shareholders of the Company. In
addition, Messrs. Osorio and Perlman and Comtrad
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<PAGE>
are parties to an agreement which grants to Mr. Osorio and Comtrad, until
December 31, 1996, the right to acquire all, but not less than all, of
the shares of Common Stock of the Company and the shares of Comtrad
Common Stock owned by Mr. Perlman. Mr. Perlman may reject all or a
portion of such exercise; provided, however, that any shares as to which
the option exercise is rejected are excluded from a right granted by the
agreement to Mr. Perlman to put the referenced shares to Mr. Osorio. The
put option may be exercised during the period beginning January 1 and
ending January 31, 1997. Comtrad has guaranteed Mr. Osorio's obligations
and has pledged 1,540,000 shares of Common Stock in connection therewith,
which shares are included in the above aggregate ownership. Subject to
the claims of certain creditors, the holders of CHI Class A common stock
(which includes Penrose Trading Co. S.A.) have a liquidation preference
on the 965,000 shares of Company Common Stock owned by Comtrad. Further,
subject to the claims of certain creditors and subject to the rights of
holders of CHI Class A common stock, the holders of CHI Class B common
stock have a liquidation preference on 287,500 shares of Company Common
Stock held by CHI or any subsidiary thereof. Based on the foregoing
relationships and agreements, Claudio Osorio, Alvin Perlman, CHI, and
Comtrad may be deemed to have shared voting and investment control over
the above-indicated aggregate number of shares of Common Stock. Such
aggregate number of shares of Common Stock includes 1,985,654 shares
pledged to a lender to secure the Company's obligation under a line of
credit and 1,166,667 shares pledged to the former owners of certain of
the Company's subsidiaries to secure the unpaid portion of the purchase
price of the sale of the subsidiaries to Comtrad. Such shares also
exclude 100,000 shares of Common Stock which Comtrad is obligated to
deliver to the sellers of three entities purchased by Comtrad and
subsequently sold to the Company.
(5) Mr. Osorio is the holder of options to purchase a total of 56,080 shares
of the Common Stock, of which 28,040 vested on December 7, 1995. The
balance will vest on December 7, 1996 assuming Mr. Osorio's continued
employment with the Company.
(6) Mr. Boccalandro is a director of CHI, who serves at the discretion of the
controlling shareholders of CHI, Messrs. Osorio and Perlman. Accordingly,
Mr. Boccalandro disclaims any investment or voting control with respect
to the Common Stock owned and controlled by CHI.
(7) Mr. Gerlach owns approximately 11.8% of the outstanding shares of CHI and
16.7% of the shares of Class A common stock of CHI which, subject to the
claims of certain creditors, have a liquidation preference on the 965,000
shares of Common Stock owned by Comtrad. Mr. Gerlach disclaims beneficial
ownership of the shares of Common Stock held by CHI and Comtrad.
(8) Mr. Kraus is a shareholder of Penrose Trading Co. S.A. which is a
shareholder of CHI and the Company. Mr. Kraus disclaims beneficial
ownership of the shares of the Company held by Penrose Trading Co. S.A.
and CHI.
(9) Mr. Winstead is the holder of options to purchase 45,000 shares of
Common Stock.
(10) Mr. Toll is the holder of options to purchase a total of 87,500 shares
of Common Stock. Options to purchase 43,750 shares vested on August 17,
1995. The balance will vest on August 17, 1996, assuming Mr. Toll's
continued employment with the Company.
(11) The address for Comtrad and CHI is 3620 North East Miami Place, Miami,
Florida 33137.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
met.
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<PAGE>
ELECTION OF DIRECTORS
Six persons are nominated for election as directors to serve until the
next Annual Meeting of Shareholders and until the director's successor is duly
elected and qualified. Although the Company anticipates that all of the nominees
will be able to serve, if any nominee is unable or unwilling to serve at the
time of the Annual Meeting, the proxy will be voted for a substitute nominee
chosen by Management, or the number of directors to be elected may be reduced in
accordance with the Company's Bylaws.
The following table sets forth certain information as to the persons
nominated for election as directors of the Company at the Annual Meeting.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------- ---------- ---------------------------------------------------------
<S> <C> <C>
Claudio Osorio 36 Chairman of the Board, President, and Chief Executive
Officer
Alvin Perlman 69 Executive Vice President - South American Region and
Director
Antonio Boccalandro 29 Secretary and Director
Zbynek Kraus 43 Vice President - East European Region and Director
Otto Gerlach 69 Director
Donald D. Winstead 58 Director
</TABLE>
CLAUDIO OSORIO (full name - Claudio Eleazar Osorio Rodriguez), the
founder of the Company's current business and operations, has served as the
President, Chief Executive Officer, and a Director of the Company since 1993.
Mr. Osorio has served as president of Comtrad since 1988. Mr. Osorio is an
attorney with a degree from UCAB (Catholic University of Andres Bello), located
in Venezuela. Mr. Osorio also holds a Master of Business Administration degree
from IESA, also located in Venezuela. Mr. Osorio is a director of Comtrad and
the president and a director of CHI.
ALVIN PERLMAN has been a Director and the Executive Vice President and
Chief Operating Officer, South American Region, of the Company since 1994. He
has served for the past five years as the chief executive officer of Zemex
Electronics, Inc., d/b/a CHS Promark, and was the sole owner of CHS Promark
prior to its acquisition by the Company in June 1994. Mr. Perlman has also
served as a director of CHI since November 1994. Mr. Perlman has a Bachelor of
Science degree from the University of Connecticut.
ANTONIO BOCCALANDRO has been a Director and Secretary of the Company
since 1993. He was Treasurer of the Company from 1994 to June 1995. He has also
been employed in various capacities by Comtrad since 1988. Mr. Boccalandro
became a director of Comtrad in 1990 and he has been a director of CHI since
June 1994.
ZBYNEK KRAUS has been a Director since March 1996 and the Vice President
- - East European Region of the Company since January 1996. He was an owner and
from 1990 to 1993 the sales director and thereafter, the general manager of the
Czech Republic operations which were acquired by the Company. Mr. Kraus holds a
degree in engineering from Chemical University in Pribram in the Czech Republic.
OTTO GERLACH has been a Director since August 1994 and is a principal
owner and has served for over five years as the president of Larco, C.A., a
privately-owned wholesale import/export and manufacturing company based in
Caracas, Venezuela.
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<PAGE>
DONALD D. WINSTEAD has been a Director since December 1993 and has been
self-employed as a business consultant since June 1991. In connection with his
consulting activities he has served since October 1993, as the chief executive
officer and a director of Medical Resource Group Inc., a closely-held Nevada
corporation engaged in the business of medical equipment leasing and rental. For
over three years prior to June 1991, Mr. Winstead was the chairman of the board
and chief executive officer of Netcor Inc., a company engaged in the manufacture
and sale of communications equipment. Mr. Winstead has a Bachelor of Science
degree in Electrical Engineering from Ohio Northern University.
The term of office of each director of the Company ends at the next
annual meeting of the Company's shareholders or when his successor is elected
and qualified. Officers of the Company serve at the discretion of the Board of
Directors, subject to the terms of any employment agreements with the Company.
See "-Employment Arrangements." There are no family relationships among any of
the Company's executive officers and directors.
All of the Company's directors receive $250 for attendance at each Board
meeting and are reimbursed for travel expenses incurred to attend such meetings.
Effective June 1, 1996 there will be no fee for directors who are employees of
the Company. No separate payment is made for attending committee meetings.
During fiscal year 1995, the Board of Directors held 4 meetings. No
director attended fewer than 75% of such meetings of the Board of Directors or
any committee thereof during the period of such director's service.
The Company has an Audit Committee and a Compensation Committee. The
Audit Committee is responsible for reviewing and making recommendations
regarding the Company's employment of independent auditors, the annual audit of
the Company's financial statements and the Company's internal accounting
practices and policies. It consists of Messrs. Gerlach and Winstead. The
Compensation Committee, composed of Messrs. Gerlach and Winstead, is responsible
for making recommendations to the Board of Directors regarding compensation
arrangements for senior management, recommendations concerning the adoption of
any compensation plans in which management is eligible to participate and grants
of stock options or other benefits under such plans.
The Company does not have a Nominating Committee.
MANAGEMENT
EXECUTIVE OFFICERS AND KEY EMPLOYEES
The executive officers of the Company, as well as certain key employees,
and their ages as of May 31, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION(1)
- ------------------------------- ----- ---------------------------------------
<S> <C> <C>
Claudio Osorio 36 Chairman of the Board, Chief Executive
Officer and President
Alvin Perlman 69 Executive Vice President-South American
Region
Craig Toll 48 Chief Financial Officer and Treasurer
Antonio Boccalandro 29 Secretary
Garry Boon (2) 36 Chief Operating Officer-European Region
Pasquale Giordano(2) 46 Chief Operating Officer-South American
Region
Zbynek Kraus(2) 43 Vice President-East European Region
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<PAGE>
<FN>
- -------------------
(1) Reference is made to the description of the business experience of
Messrs. Osorio, Perlman, Boccalandro and Kraus, who are also director
nominees, set forth above under "Election of Directors," which is
incorporated herein by reference.
(2) Each of these persons is a key employee, but not an executive officer of
the Company.
</FN>
</TABLE>
CRAIG TOLL has been the Chief Financial Officer of the Company since
July 1994 and its Treasurer since June 1995. Mr. Toll was self-employed as a
consultant to CHS Promark from April 1994 to June 1994. For over five years
prior to April 1994, Mr. Toll was a partner in the accounting firm of Deloitte &
Touche. Mr. Toll has a Bachelor of Science degree in Economics and a Master of
Science degree in Accounting, both from the Wharton School of the University of
Pennsylvania.
GARRY BOON has been the Chief Operating Officer - European Region of the
Company since January 1996. From February 1989 until January 1996, Mr. Boon was
the Managing Director of the United Kingdom operations which were acquired by
the Company. Mr. Boon has a Bachelor of Science degree from University College
London.
PASQUALE GIORDANO has been the Chief Operating Officer - South American
Region of the Company since January 1, 1996. From January 1989, Mr. Giordano has
been the President and Chief Operating Officer of CHS Promark. Prior to such
service, he was a Vice President of CHS Promark in charge of its New York
office. From 1988 until he joined CHS Promark in 1989, Mr. Giordano was the
operating vice president of the electronics division of Caldor, Inc. Mr.
Giordano has a Bachelors degree from City College of New York.
INCREASE IN THE NUMBER OF SHARES RESERVED
FOR ISSUANCE PURSUANT TO THE COMPANY'S 1994 STOCK INCENTIVE PLAN
The Company's Board of Directors has unanimously adopted, subject to the
approval by the Company's shareholders, a resolution to increase to 647,000
shares the number of shares in the Company's 1994 Stock Incentive Plan (the
"1994 Plan") that are reserved for issuance. The 1994 Plan, which was approved
by the Company's shareholders on June 21, 1995, presently authorizes 497,000
shares for issuance upon exercise of stock options. The Company has granted
options under such plan, net of canceled options, to purchase 585,508 shares of
Common Stock. The current text of the 1994 Plan, as modified pursuant to this
amendment, is attached hereto as Exhibit A. The material features of the 1994
Plan are discussed below, but the description is subject to, and is qualified in
its entirety by, the full text of the 1994 Plan.
The 1994 Plan permits the Company to grant key employees and directors
incentive stock options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended (the Internal Revenue Code"), non-statutory stock options,
restricted stock awards, SARs, and other equity-based incentive awards that can
be individually designed to achieve maximum focus on incentive for benefit of
the Company and its shareholders.
The purposes of the 1994 Plan are to promote growth and profitability of
the Company by enabling it to attract and retain the best available personnel
for positions of substantial responsibility, to provide key employees with an
opportunity for investment in the Common Stock, and to give key employees and
directors an additional incentive to increase their efforts on behalf of the
Company. The Company estimates that approximately 250 key employees (including
those executive officers identified in the Summary Compensation Table under the
caption "EXECUTIVE COMPENSATION") are eligible to receive awards under the 1994
Plan.
The 1994 Plan is administered by a Committee, which is composed of two
Directors who are not employees of the Company. Each member of the Committee
must be a "disinterested person" within the meaning of Rule 16b- 3 of the
General Rules and Regulations under the Securities Exchange Act of 1934 (the
"Exchange Act"), as
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<PAGE>
amended from time to time, or any law, rule, regulation or other provision that
may replace such rule ("Rule 16b-3").
Subject to the provisions of the 1994 Plan, the Committee has the
authority to determine and designate the key employees or Directors to whom
incentive awards are to be granted, the number of shares subject to awards, the
exercise price, if any, the type of award, the exercise and/or vesting period,
the terms of payment of the award, the terms and conditions of each award and
the restrictions to be placed on the exercise of options or receipt of
restricted stock. The Committee may grant more than one award to an individual.
Consideration for the awards granted under the 1994 Plan is provided by
the recipients' past, present, and expected future contributions to the Company.
No monetary consideration is provided by the recipients with respect to the
grant of any award, except for payment of the exercise price of an option.
The 1994 Plan will last for ten years. No award granted under the 1994
Plan is transferable, except in the event of a holder's death, by will or the
laws of descent and distribution. In addition, award holders may, during their
lifetime, designate a beneficiary to exercise or receive the benefits of vested
awards after the holder's death.
Awards may be exercised or realized by the holder or his or her guardian
or legal representative or by such other means as the Committee may approve from
time to time. Special provisions in the 1994 Plan govern issues of death,
termination of employment, retirement, etc. as they relate to outstanding
awards. The Committee may, at its discretion, waive the restrictions with
respect to exercisability of options or realization of awards.
Assuming approval of this proposed corporate action, an aggregate of
647,000 shares of Common Stock will be reserved for purposes of the 1994 Plan.
The 1994 Plan provides for adjustment of such aggregate number and of the number
of shares at the time subject to any outstanding option in the event a stock
dividend is paid or in the event the shares of Common Stock are changed into or
exchanged for a different number or kind of shares of stock or other securities.
The Board of Directors may, in accordance with the recommendation of the
Committee, amend the 1994 Plan as it shall deem advisable. The Board of
Directors may not, however, without further shareholder approval, (a) increase
the total number of shares that may be granted under the 1994 Plan; (b) increase
the benefits accruing to participants; or (c) modify the requirements as to
eligibility for participation in the 1994 Plan. Nor may the Board withdraw
administration of the 1994 Plan from a Committee of Directors meeting the
requirements of Rule 16b-3.
STOCK OPTIONS
The Committee may award incentive options, qualified under the Internal
Revenue Code, other statutory stock options, and non-qualified stock options.
These are all contracts allowing the holder to purchase a specified number of
shares of Common Stock during a given period of time at a designated price.
Stock options granted under the 1994 Plan will expire no later than ten years
from the date of grant. Shares not purchased under options which expire or are
terminated unexercised will again be available for purposes of the 1994 Plan.
Under the 1994 Plan, the exercise price of a stock option will be
determined by the Committee, but may not be less than 75% of the fair market
value of the Common Stock (100% for incentive stock options) on the date the
option is granted. The exercise price of a stock option, in the discretion of
the Committee, shall be paid in the manner determined by the Committee, which
may include any one or a combination of the following: (a) paid in U.S. funds
(including check, draft or wire transfer made payable to the order of the
Company); or (b) paid by the delivery of already owned shares of Common Stock.
Optionees who are subject to Section 16(b) of the Exchange Act and, if
determined by the Committee, other optionees, may elect to pay no more than the
required withholding taxes in connection with the exercise of a nonstatutory
option by delivering to the Company already owned shares of Common Stock or
having shares of Common Stock otherwise issuable to optionees under the 1994
Plan withheld by the Company.
- 8 -
<PAGE>
STOCK APPRECIATION RIGHTS
The Committee may grant stock appreciation rights (SARs) either singly or
in combination with an underlying stock option. The term of a SAR may be fixed
by the Committee. SARs entitle the grantee to receipt of the same economic value
that would have been derived from exercise of an option. Payment would be made
in cash, in shares, or a combination of both at the discretion of the Committee.
If an SAR granted in combination with an underlying stock option is exercised,
the right under the underlying option to purchase shares would terminate.
To the extent that SARs are exercised, the underlying stock option shall
be deemed exercised and the shares of Common Stock which otherwise would have
been issued upon the exercise of such stock option shall not be the subject of
the grant of any further options under the 1994 Plan.
SPECIALLY DESIGNED PERFORMANCE SHARE AWARDS
The Committee may grant performance share awards under which payment
would be made in shares of Common Stock, a combination of shares and cash, or
cash if the performance of the Company or any subsidiary or division selected by
the Committee meets certain goals established by the Committee during an award
period. The Committee would determine the goals, the length of an award period,
the maximum payment value of an award, and the minimum performance required
before a payment would be made. The Committee may revise the goals and the
computation of payment at any time to account for unforeseen events which occur
during an award period and which have substantial effect on the performance of
the subsidiary or division. In order to receive payment, a grantee must remain
in the employ of the Company until the completion of the award period, except
that the Committee may provide complete or partial exceptions to that
requirement as it deems equitable.
RESTRICTED STOCK GRANTS
The Committee may also issue or transfer shares under a restricted stock
grant. The grant would set forth a restriction period during which the grantee
must remain in the employ of the Company. If the grantee's employment terminates
during the period, the grant would terminate and the grantee must return the
shares to the Company. However, the Committee may provide complete or partial
exceptions to this requirement as it deems equitable. The grantee may not
dispose of the shares prior to the expiration of the restriction period. During
this period, the grantee would be entitled to vote the shares and, at the
discretion of the Committee, receive dividends. Each certificate would bear a
legend giving notice of the restrictions in the grant. Restricted stock granted
to a participant in the 1994 Plan, but which never vests will also return to the
1994 Plan for reuse in other awards.
FEDERAL INCOME TAX CONSEQUENCES
Based upon the present provisions of the Internal Revenue Code and
regulations thereunder, the federal income tax consequences of the grant and
exercise of awards under the 1994 Plan and the subsequent disposition of stock
acquired thereby are described below. The 1994 Plan is not subject to the
qualification requirements of Section 401(a) of the Internal Revenue Code.
NON-STATUTORY OPTIONS
Under present Treasury Regulations holding that an option does not have a
readily ascertainable fair market value unless it is freely transferable and
meets certain other conditions, an optionee who is granted a nonstatutory option
will not realize taxable income at the time the option is granted.
(a) In general, an optionee will be subject to tax for the year
of exercise on an amount of ordinary income equal to the
excess of the fair market value of the shares on the date of
exercise over the option price and the Company will receive a
corresponding deduction. Income tax withholding requirements
apply upon exercise. The optionee's basis in the shares so
acquired will be equal to the option price plus the amount of
ordinary income upon which he is taxed. Upon subsequent
- 9 -
<PAGE>
disposition of the shares, he will realize capital gain or
loss, long-term or short-term depending upon the length of
time he has held the shares since the option was exercised.
(b) The general rule will not apply, unless a specific election is
filed within 30 days after exercise, if sale of the shares at
a profit could subject the optionee to suit under Section
16(b) of the Exchange Act. If no election is made, the time of
the taxable event and the application of the withholding
requirements will be postponed until the earlier of (i) six
months after the purchase of shares or (ii) the first day on
which sale of the shares at a profit will not subject the
optionee to suit under Section 16(b) of the Exchange Act, and
the optionee's ordinary income and the Company's deduction
will be equal to the excess of the then value (or sale price)
of the shares over the option price.
(c) If an optionee exercises a nonstatutory option by delivering
shares of the Company's Common Stock as payment of the option
price, no gain or loss will be recognized with respect to the
shares delivered and the optionee will be subject to tax in an
amount of ordinary income equal to the excess of the fair
market value of the shares he is entitled to receive on the
date of exercise over the option price. The optionee's basis
in shares received equivalent in number to the shares
surrendered will be the same as the optionee's basis in the
surrendered shares and the basis in the additional shares
obtained by the exercise of the option will be the amount of
compensation income realized. The optionee's holding period
for the shares having the transferred basis will include the
holding period for the shares surrendered; the holding period
for the additional shares obtained by the exercise of the
option will commence on the date of exercise.
INCENTIVE STOCK OPTIONS
An optionee is not taxed at the time an incentive option is granted. The
tax consequences upon exercise and later disposition depend upon whether the
optionee was an employee of the Company or a subsidiary at all times from the
date of grant until three months preceding exercise (one year in the case of
disability) and on whether the optionee holds the shares for more than one year
after exercise and two years after the date of grant of the option.
(a) If the optionee satisfies both the employment rule and the
holding rule, for regular tax purposes the optionee will not
realize income upon exercise of the option and the Company
will not be allowed an income tax deduction at any time. The
difference between the option price and the amount realized
upon disposition of the shares by the optionee will constitute
a long-term capital gain or a long-term capital loss, as the
case may be.
(b) If the optionee meets the employment rule but fails to observe
the holding rule, the portion of any gain realized upon such
disqualifying disposition of the shares which does not exceed
the excess of the value at date of exercise over the option
price will be treated as ordinary income, the balance of any
gain or any loss will be treated as capital gain or loss
(long-term or short-term depending on the length of time the
stock was held after the option was exercised) and the Company
will be entitled to a deduction equal to the amount of
ordinary income upon which the optionee is taxed.
(c) If an optionee exercises an incentive option but does not meet
the employment rule, the option will be treated as a
non-statutory option.
(d) For purposes of calculating an optionee's liability for the
alternative minimum tax ("AMT"), the special deferral rules
relating to incentive options generally do not apply.
Alternative minimum taxable income for the year of exercise
will include the excess of the fair market value of the shares
at date of exercise (or, if less, the sales price of any such
shares sold in the year of exercise) over the option price. If
the incentive option shares are sold in a later year, the
shares will have basis for AMT purposes equal to the amount
that was included in alternative minimum taxable income for
the year of exercise.
- 10 -
<PAGE>
SARS
An optionee is not taxed upon the grant of SARs. Upon exercise of such
rights, the optionee will be taxed at ordinary income tax rates (subject to
withholding) on the amount of cash received, and the Company will be entitled to
a corresponding deduction.
RESTRICTED STOCK GRANTS
The grant of restricted stock should not result in income for the grantee
or in a deduction for the Company for federal income tax purposes, assuming the
shares transferred are subject to restrictions resulting in a "substantial risk
of forfeiture" as intended by the Company, unless a specific election is filed
within 30 days after the grant. If there are no such restrictions, the grantee
would recognize ordinary income upon receipt of the shares equal to the value of
the shares on the date of grant. Dividends, if any, paid to the grantee while
the stock remained subject to restriction would be treated as compensation for
federal income tax purposes. At the time the restrictions lapse, the grantee
will receive ordinary income, and the Company will be entitled to a deduction
measured by the fair market value of the shares at the time of lapse. Income tax
withholding will be required. If the grantee files a specific election within 30
days after the grant of restricted stock, the grantee will recognize ordinary
income upon receipt of the shares equal to the value of the shares on the date
of grant determined without regard to any restrictions, and the Company will be
entitled to a corresponding deduction.
LONG-TERM GAIN OR LOSS
Except where the special one and two year holding rules for incentive
stock options apply, a capital gain or loss is long-term or short-term depending
on whether the stock has been held for more than one year. Long-term capital
gains currently are taxed at 28%. Capital losses may offset capital gains
without limitation, but may offset ordinary income up to only $3,000 ($1,500 for
a married individual filing separately).
OTHER LIMITATIONS ON INCOME TAX DEDUCTION
To the extent that any payments constitute "excess parachute payments"
under Section 280G of the Internal Revenue Code, the Company would not be
entitled to a deduction with respect to such amount and the recipient would be
subject to a 20% excise tax.
- 11 -
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid during each of the
three years ended December 31, 1995 to the Company's Chief Executive Officer and
each of the other two executive officers of the Company whose total 1995 salary
and bonus exceeded $100,000 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------ --------------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS (#) COMPENSATION
- --------------------------------- ------- ----------- ---------- -------------------- ------------------
<S> <C> <C> <C> <C> <C>
Claudio Osorio, 1995 366,402 -0- -0- 139,240
Chief Executive Officer and 1994 82,126 -0- 56,080 140,200
President 1993 -0- -0- -0- -0-
Alvin Perlman, 1995 500,000 -0- -0- 1,000
Executive Vice President - 1994 248,726 -0- -0- -0-
South American Region 1993 -0- -0- -0- -0-
Craig Toll, 1995 110,000 -0- -0- -0-
Chief Financial Officer and 1994 55,000 -0- 87,500 -0-
Treasurer 1993 -0- -0- -0- -0-
</TABLE>
EMPLOYMENT ARRANGEMENTS
In August 1994, the Board of Directors approved a compensation
arrangement for Claudio Osorio, the Chief Executive Officer and President of the
Company, pursuant to which he was entitled to receive an annual salary of
$219,600, in addition to annual stock awards with a total value of $280,400, for
the year ended June 1995. The stock awards may have been made in any one or a
combination of Company stock, stock options, stock appreciation rights, or
phantom stock grants, as determined by agreement between the Compensation
Committee and Mr. Osorio, subject to the approval of the Board of Directors. Mr.
Osorio was also entitled to participate in any group or employee benefit or
insurance plans. In June 1995, the Board approved a compensation arrangement for
Mr. Osorio whereby he became entitled to an annual salary and bonus of $500,000,
excluding option grants, for the year ended June 1996. Mr. Osorio's
aforementioned employment arrangement has been modified as set forth below.
In August 1994, the Board of Directors approved an employment arrangement
for Craig Toll, the Chief Financial Officer of the Company, pursuant to which he
was entitled to receive an annual salary of $110,000 for the year ended June
1995. Mr. Toll was also granted certain options to purchase Common Stock. Mr.
Toll was also entitled to participate in any group or employee benefit or
insurance plans. In June 1995, the Board approved a compensation arrangement for
Mr. Toll whereby he was entitled to an annual salary of $150,000 for the year
ended June 1996. Mr. Toll's aforementioned employment arrangement has been
modified as set forth below.
The Company has entered into three-year employment agreements with
Messrs. Osorio and Toll which supersede the above-described employment
arrangements. Mr. Osorio's agreement was effective January 1, 1996 and Mr.
Toll's agreement will be effective July 1, 1996. The agreements for Messrs.
Osorio and Toll provide for annual salaries of $350,000 and $150,000,
respectively, and require the executives to devote their full time and attention
to the business and affairs of the Company. Mr. Osorio's agreement also provides
for a minimum bonus of $150,000 per year. The agreements also provide that upon
termination of employment without "cause" or termination by the executive for
"good reason" (which includes a change of control of the Company), the executive
is entitled to receive, in addition to all accrued or earned but unpaid salary,
bonus or benefits, an amount equal to two and one-half times base salary paid to
the executive during the last full year prior to termination of employment,
together with an amount equal to the bonus paid to the executive in the prior
year multiplied by a fraction, the
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<PAGE>
numerator of which is the number of days elapsed in the then current year
through termination and the denominator of which is 365. The agreements also
provide that the executive will not compete with the Company during his
employment and for two years thereafter unless the Company terminates the
executive without "cause" or the executive terminates his employment for
"good reason."
Under the terms of the Company's employment agreement with Alvin Perlman
dated June 30, 1994, Mr. Perlman is employed as an Executive Vice President -
South American region of the Company, and Chief Executive Officer and Chairman
of the Board of CHS Promark. The term of the agreement is five years. Mr.
Perlman receives an annual salary of $500,000 and other benefits commensurate
with his position, and is entitled to participate in any group or employee
benefit or insurance plans. Upon termination of Mr. Perlman's employment as a
result of death or disability, he (or his estate) receives 50% of his
compensation for the balance of the term of the agreement. Mr. Perlman may
terminate the agreement upon a change in more than 50% of the ownership of CHS
Promark in which case he is to receive his full compensation for the balance of
the term of the agreement. Under the agreement, Mr. Perlman is prohibited from
competing with the Company for two years in the Western Hemisphere.
On March 22, 1996, the Board of Directors of the Company adopted an
Executive Bonus Plan for 1996 and subsequent years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1995 were Donald D.
Winstead and Otto Gerlach. Neither of these persons has previously served as an
officer or employee of the Company or any of its subsidiaries.
Mr. Winstead provided consulting services to the Company for a fee of
$4,000 per month, which resulted in payments of $48,000 to Mr. Winstead in 1995.
Otto Gerlach holds, indirectly, 11.8% of the outstanding Common Shares of
CHI and 16.7% of the shares of Class A common stock of CHI which, subject to the
claims of certain creditors, have a liquidation preference on the 965,000 shares
of Company stock owned by Comtrad. In the past, the Company has engaged in
numerous transactions with Comtrad. See "Certain Transactions."
OPTION GRANTS DURING 1995
Of the options to purchase 223,000 shares of Common Stock granted in
1995, none were granted to any of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN 1995 AND YEAR END OPTION VALUES
The following table sets forth information with respect to (i) the number
of unexercised options held by the Named Executive Officers as of December 31,
1995 and (ii) the value as of December 31, 1995 of unexercised in- the-money
options. No options were exercised by any of the Named Executive Officers in
1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1995 AT DECEMBER 31, 1995 ($)(1)
----------------------------------------------- --------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------- --------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Claudio Osorio 28,040 28,040 224,320 224,320
Alvin Perlman -- -- -- --
Craig Toll 43,750 43,750 131,250 131,250
</TABLE>
- --------------------
(1) Market value of shares covered by in-the-money options on December 31,
1995, less option exercise price. Options are in-the-money if the
market value of the shares covered thereby is greater than the option
exercise price.
- 13 -
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE ROLE
The Compensation Committee of the Board of Directors is responsible for
making recommendations to the Board of Directors concerning the salaries of
executive officers. The Compensation Committee is also responsible for
overseeing other forms of compensation and benefits to other senior officers.
The Compensation Committee's responsibilities include the review of salaries,
benefits and other compensation of senior officers and making recommendations to
the full Board of Directors with respect to these matters.
COMPENSATION POLICY
The Company's executive compensation policy is designed to establish an
appropriate relationship between executive pay and the Company's annual
performance, its long-term growth objectives and its ability to attract and
retain qualified executive officers. The Compensation Committee attempts to
achieve these goals by integrating competitive annual base salaries with: (a)
bonuses based on corporate performance and on the achievement of internal
strategic objectives; and (b) stock options and awards through the Company's
1994 Plan. The Compensation Committee believes that cash compensation in the
form of salary and bonus provides Company executives with short-term rewards for
success in operations, and that long-term compensation through the award of
stock options and other stock incentives encourages growth in management stock
ownership, which in turn leads to the expansion of management's stake in the
long-term performance and success of the Company. With regard to the Internal
Revenue Code provision limiting the deductibility of compensation to certain
executive officers in excess of $1 million, the Company intends to take all
necessary steps to cause the compensation paid to its executive officers to be
deductible by the Company.
BASE SALARY
In 1995 the Compensation Committee approved, and ultimately the Board
of Directors approved, compensation arrangements for Messrs. Osorio and Toll
defining their base salary. Mr. Perlman's salary was based principally on a
five-year employment agreement negotiated at arms length with the Company in
connection with the acquisition of CHS Promark in June 1994. The base salaries
of other senior officers were determined by Mr. Osorio, with respect to the
Company's subsidiaries in Europe, and by Mr. Perlman, with respect to CHS
Promark, with Mr. Osorio providing a review of these base salary amounts.
BONUSES
In 1995, no executive officer was subject to bonus compensation.
Certain senior officers and managers of subsidiaries were subject to bonus
compensation based on achieving certain operating goals specific to their area
of responsibility. On March 22, 1996, the Compensation Committee recommended and
the Board of Directors approved an executive bonus plan for 1996 and subsequent
years. In addition, the Compensation Committee recommended and the Board of
Directors approved bonus compensation arrangements for 1996 for Messrs. Osorio
and Perlman under the plan. The plan provides for bonuses based on performance
of the Company against established targets.
STOCK OPTION AWARDS
The Company's 1994 Incentive Stock Option Plan (the "1994 Plan") is
designed to align executive officers' and shareholders' interests in the
enhancement of shareholder value. Stock options and other equity based awards
are granted under the 1994 Plan by the disinterested members of the Board of
Directors. Executive officers are eligible to receive options under the 1994
Plan. The Compensation Committee strongly believes that the interest of the
shareholders and executives become more closely aligned when such executives are
provided an opportunity to acquire a proprietary interest in the Company through
ownership of the Company's Common Stock. Accordingly, key employees of the
Company, including executive officers and directors, as part of their overall
compensation package, are eligible for participation in the Company's 1994 Plan.
Because no benefit is received
- 14 -
<PAGE>
unless the Company's stock price performs favorably, awards under the 1994 Plan
are intended to provide incentives for Executive Officers to enhance long-term
Company performance, as reflected in stock price appreciation, thereby
increasing shareholder value. The Compensation Committee believes that stock
option awards are rewards for past services and the incentive for continued
growth. The 1994 Plan is the Company's only long-term deferred compensation plan
as compared to other companies which have other deferred compensation plans in
addition to stock option plans. No member of the Compensation Committee is a
former or current officer or employee of the Company or any of its subsidiaries.
Mr. Winstead was replaced on the Compensation Committee by Antonio Boccalandro
for portions of 1995 when Mr. Winstead was ineligible to be on such committee.
In December 1995, Mr. Winstead resumed his role on the Committee. No options
were granted to any of the Named Executive Officers in 1995.
COMPENSATION COMMITTEE
Otto Gerlach
Don Winstead
CERTAIN TRANSACTIONS
The Company acquired many of its subsidiaries from Comtrad, as
depicted below. In certain cases, Comtrad organized the entities which were
subsequently purchased by the Company. Comtrad has advised the Company that the
entities purchased by it and subsequently sold to the Company were acquired from
unrelated parties. The Company acquired Comtrad-owned entities after completing
its own evaluations (which for significant acquisitions involved the
consideration of a valuation report prepared by an independent third party), and
the affirmative vote of an independent director of the Company. Comtrad also
loaned funds to and borrowed funds from the Company during the years in which it
was first developing its European and South American operations. The Company
does not intend to purchase any operations from or enter into any new
transactions with Comtrad in the future, including the borrowing or loaning of
funds. As of March 31, 1996, the Company was not indebted to Comtrad. Comtrad
has advised the Company that it intends to repay all of the indebtedness owed by
it to the Company, approximately $2.5 million, as of March 31, 1996, with the
proceeds from the sale of the shares of Common Stock to be sold by it in this
offering. Comtrad has also agreed not to engage in businesses competitive with
those of the Company.
<TABLE>
<CAPTION>
CHS ACQUISITION CHS PURCHASE COMTRAD COMTRAD
SUBSIDIARY(1) DATE PRICE(2) ACQUISITION DATE PURCHASE PRICE
------------------- -------------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
CHS Belgium April 1995 1,750,000 shares September 1994 (3)
CHS England September 1994
CHS France September 1994
CHS Portugal January 1993 (4)
CHS BEK October 1995 287,500 shares July 1995 (5)
CHS Czechia October 1995 92,000 shares January 1993 $758,000(6)
CHS Finland December 1995 $2,300,000 July 1995 (7)
CHS Sweden December 1995 $2,400,000 July 1995 (8)
CHS Poland December 1995 $2,300,000 November, 1995 (9)
CHS Brazil March 1996 $5,300,000 November 1994 52,632 shares
of Comtrad
CHS Slovakia March 1996 $5,300,000 January 1994 (10)
CHS Baltic March 1996 $1,500,000 September 1994 $50,000
CHS Bulgaria
CHS Romania
CHS Croatia
- 15 -
<PAGE>
<FN>
- -------------------------
(1) The names set forth are those by which the Company commonly refers to its
subsidiaries and are not necessarily the legal names of the entities.
(2) References to "shares" are to shares of Common Stock.
(3) Comtrad delivered 60,000 shares of Common Stock, a $7 million promissory
note and cash of $860,000.
(4) Comtrad delivered 23,200 of its shares.
(5) CHI delivered 1,000 of its Class B shares which, upon liquidation of CHI,
have a preferential claim to 258,750 shares of Common Stock. Up to 28,750
additional shares of Common Stock owned by Comtrad may be subject to this
preference based upon an earnout formula.
(6) Represents an investment by Comtrad in exchange for a 16% interest.
(7) Comtrad has agreed to deliver an as yet undetermined number of shares of
Common Stock owned by Comtrad based upon the 1996 financial performance of
CHS Finland.
(8) Comtrad has agreed to deliver an as yet undetermined number of shares of
Common Stock owned by Comtrad based upon the 1996 financial performance of
CHS Sweden.
(9) Comtrad delivered 23,076 of its shares and a promissory note for $600,000.
In addition, Comtrad has agreed to deliver an as yet undetermined number
of shares of Common Stock owned by Comtrad based upon the 1996 financial
performance of CHS Poland.
(10) Comtrad purchased 65% of the equity interest for $3,000 and has purchased
the remaining 35% by agreeing to deliver an as yet undetermined number of
shares of Common Stock owned by Comtrad based upon the 1996 financial
performance of CHS Slovakia.
</FN>
</TABLE>
In 1993, Comtrad established a number of operating subsidiaries to
market microcomputer equipment and peripherals throughout Europe. Comtrad used
the name "CHS" in establishing these subsidiaries. Comtrad subsidiaries
purchased products from the Company for resale. Comtrad subsidiaries accounted
for approximately $36,364,000 of the Company's net sales in 1995.
At December 31, 1995, the Company had a receivable from Comtrad of
$843,000 (which arose from loans and the sale of goods). Interest expensed on
the payables to Comtrad was $126,000 in 1995. Interest charged to Comtrad was
$438,000 in 1995. At March 31, 1996, the Company had a receivable from Comtrad
of $2,462,000 which subsequently increased to approximately $4.4 million.
In July 1995, the Company obtained a $20 million line of credit, a
portion of which represented the assumption of an approximately $14.8 million
obligation owed by Comtrad to the same lender. Approximately $7 million of such
obligation had previously been loaned by Comtrad to a subsidiary of the Company.
This $7 million obligation to Comtrad was canceled as a result of this
transaction. The resulting $7.8 million receivable from Comtrad was offset
against amounts due to Comtrad as a result of the acquisition of certain
entities by the Company from Comtrad, and was recorded as of December 31, 1994.
Effective October 27, 1995, the Company acquired CHS Czechia S.R.O., a
limited liability company formed under the laws of the Czech Republic ("CHS
Czechia") from Comtrad and Zbynek Kraus, an individual who was the manager and
principal owner of CHS Czechia prior to its acquisition by Comtrad. Mr. Kraus
became a director of the Company in March 1996. Based upon an independent
valuation of CHS Czechia which placed the value at approximately $4,800,000, the
Company issued 575,000 shares of Common Stock, 483,000 of which were issued to
Mr. Kraus and 92,000 of which were issued to Comtrad. Pursuant to agreements
entered into in January 1993 between Mr. Kraus and Comtrad, Mr. Kraus
contributed the shares of Common Stock received by him to Penrose Trading Co.
S.A. in exchange for an 8.4% interest in Penrose. Mr. Osorio owns 50.2% of
Penrose Trading Co. S.A. which is a shareholder of Comtrad.
Effective March 1996, the Company guaranteed the obligations of Comtrad
arising under the Stock Purchase Agreement dated October 12, 1995 pursuant to
which Comtrad acquired CHS Poland. Under such agreement, as amended, Comtrad is
obligated to deliver shares of Common Stock as calculated pursuant to an
- 16 -
<PAGE>
earnout provision based on the 1996 calendar year earnings of CHS Poland. If
Comtrad fails to deliver such shares, the Company has agreed to do so.
Comtrad and Claudio Osorio, the Chairman of the Company, have
guaranteed the obligations of the Company under a $20 million credit agreement.
Comtrad has pledged certain shares of the Company owned by it to secure its
guarantee of repayment of amounts advanced under the line of credit. Comtrad has
also guaranteed the obligation of CHS Promark under a Loan and Security
Agreement providing for borrowings up to $20 million.
During 1995, assets of CHS Germany were pledged to secure a loan from a
third party lender to Comtrad. This loan was repaid by Comtrad in 1995.
Comtrad has guaranteed the Company's obligations to certain vendors.
The Company is a party to a separate consulting agreement with
Donald D. Winstead, a director of the Company. Under the terms of the agreement,
Mr. Winstead provides management consulting and related services for a fee of
$4,000 per month. Mr. Winstead received $48,000 under the arrangement in 1995.
- 17 -
<PAGE>
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative shareholder returns
from an assumed $100 investment in the Company's Common Stock, including
reinvestment of dividends, from August 15, 1994 through December 31, 1995 with
(i) the NASDAQ Stock Market - US & Foreign Index, (ii) the Company's 1995 peer
group and (iii) the Company's 1994 peer group. The Company did not pay any
dividends on its Common Stock during this period.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHS ELECTRONICS, INC.
NASDAQ STOCK MARKET - US & FOREIGN INDEX, A 1994 PEER GROUP
AND A 1995 PEER GROUP
* The 1994 Peer Group is comprised of the following companies: Arrow
Electronics, Inc., Avnet, Inc., Liuski Int'l. Inc., Tech Data Corp., Marshall
Industries, Inc., Merisel, Inc., Southern Electronics Corp., Ameriquest
Technologies, Inc., United Stationers, Inc., Westn Micro Tech, Inc., Bell
Microproducts, Inc. and Cbc Technologies, Inc. Ing Technologies, Inc., which was
included in the Company's 1994 Peer Group as reported in the Company's 1995
Information Statement, is no longer publicly traded and is thus no longer
included as part of the 1994 Peer Group. The 1995 Peer Group is comprised of the
companies included in the 1994 Peer Group, except for Arrow Electronics, Inc.
and Avnet, Inc. as such entities are not deemed to be in the same line of
business as the Company.
The Comparisons in this table are required by the Securities and
Exchange Commission and are not intended to forecast or be indicative of
possible future performance of the Common Stock.
- 18 -
<PAGE>
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected the firm of Grant
Thornton LLP as the independent certified public accountants of the Company for
the current fiscal year. Although the selection of Grant Thornton LLP as the
independent certified public accountants of the Company does not require
ratification by the Company's shareholders, the Board of Directors considers it
appropriate to obtain such ratification. Accordingly, the vote of the Company's
shareholders on this matter is advisory in nature and has no effect upon the
Board of Directors' appointment of an accountant, and the Board of Directors may
change the Company's accountant at any time without the approval or consent of
the shareholders. The Board proposes and unanimously recommends that the
shareholders ratify the selection of Grant Thornton LLP.
If the shareholders do not ratify the selection of Grant Thornton LLP
by the affirmative vote of the holders of a majority of votes cast by the shares
represented in person or by proxy at the Annual Meeting, the Audit Committee
will investigate the reason for shareholder rejection and the Board will
reconsider the appointment.
Representatives of Grant Thornton LLP are expected to be present at the
Annual Meeting and will be afforded the opportunity to make a statement if they
so desire and to respond to appropriate questions.
GENERAL INFORMATION
OTHER MATTERS. The Board of Directors does not intend to present any
matter for action at this Meeting other than the matters described in this Proxy
Statement. If any other matters properly come before the Annual Meeting, it is
intended that the holders of the proxies hereby solicited will act in respect to
such matters in accordance with their best judgment.
DEADLINE FOR SHAREHOLDER PROPOSALS. Proposals by holders of the
Company's Common Stock which are intended to be presented at the next annual
meeting of shareholders must be received by the Company for inclusion in the
Company's next proxy statement and form of proxy relating to that meeting no
later than February 4, 1997. Such proposals must also comply in full with the
requirements of Rule 14a-8 promulgated under the Securities Exchange Act of
1934.
By Order of the Board of Directors,
CLAUDIO OSORIO
CHAIRMAN OF THE BOARD
Miami, Florida
June 4, 1996
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CHS ELECTRONICS, INC.
1994 STOCK INCENTIVE PLAN, AS AMENDED
1. PURPOSE. The purpose of the 1994 Stock Incentive Plan, as
amended (the "Plan"), is to aid the Company in attracting, retaining and
motivating officers and key employees, whether or not they are directors of the
Company, by providing them with incentives for making significant contributions
to the growth and profitability of the Company. The Plan is designed to
accomplish this goal by offering stock options and other incentive awards,
thereby providing Participants with a proprietary interest in the growth,
profitability and success of the Company.
2. DEFINITIONS.
(a) CHS. CHS Electronics, Inc.
(b) AWARD. Any form of stock options, stock appreciation
right, stock or cash award granted under the Plan, whether granted singly, in
combination or in tandem, pursuant to such terms, conditions and limitations as
the Committee may establish in order to fulfill the objectives, and in
accordance with the terms and conditions, of the Plan.
(c) AWARD AGREEMENT. An agreement between the Company
and a Participant setting forth the terms, conditions and limitations applicable
to an Award.
(d) BOARD. The Board of Directors of CHS.
(e) CHANGE IN CONTROL. In addition to circumstances
deemed by the Committee to constitute a Change in Control, a Change in Control
shall be deemed to have occurred if (i) any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company or any
"person" who on the date hereof is a director or officer of the Company or whose
shares of Stock are treated as "beneficially owned" (as defined in Rule 13d-3
under the Exchange Act) by any such director or officer, is or becomes the
beneficial owner, directly or indirectly, of the securities of CHS representing
25% or more of the combined voting power of CHS's then outstanding securities,
(ii) any change in the composition of the Board results in a majority of the
present directors of CHS not constituting a majority two years hence, provided,
that in making such determination, the majority of present directors shall be
deemed to include directors who were elected by, or on the recommendation of,
such present majority as if such directors had
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been in office continuously throughout such two-year period or (iii) if the
Company shall have defaulted in the performance of any agreement to which the
Company is a party or by which the Company or its assets is bound, and such
default entitled the obligee of such agreement to name new directors or replace
existing directors, such that a majority of the Board is comprised of nominees
of such obligee.
(f) CODE. The Internal Revenue Code of 1986, as amended
from time to time.
(g) COMMITTEE. Such committee of the Board as may be
designated from time to time by the Board to administer the Plan or any subplan
under the Plan, any such committee to consist of not less than two members of
the Board who are not officers or employees of the Company, provided each such
member is a Disinterested Person. If at any time no Committee shall be in
office, then the functions of the Committee specified in the Plan shall be
exercised by those members of the Board who are Disinterested Persons.
(h) COMPANY. CHS Electronics, Inc. and its direct and
indirect subsidiaries.
(i) DISABLED OR DISABILITY. Permanent and total
disability as determined under the Company's long-term disability program or, if
no such program has been adopted, the continuous absence of an employee for 187
consecutive days or more due to physical or mental illness or incapacity.
(j) DISINTERESTED PERSON. A person defined as such in
Rule 16b-3(c)(i) under the Exchange Act, or any successor definition adopted by
the Securities and Exchange Commission.
(k) EARLY RETIREMENT. Retirement, with consent of the
Committee at the time of retirement, from active employment with the Company
pursuant to the early retirement provisions of the Company's then applicable
standard policies and procedures.
(l) EXCHANGE ACT. Securities Exchange Act of 1934, as
amended, together with the rules and regulations thereunder.
(m) FAIR MARKET VALUE. The value of a share of Stock on
a particular date, determined as follows: (i) if the Stock is not listed on such
date on any national securities exchange nor included in the National
Association of Securities Dealers, Inc. Automated Quotation System, National
Market System ("NASDAQ/NMS"), but is traded in the over-the-counter market, the
highest "bid" quotation of a share of Stock on such date (or if none, on the
most recent date on which there were bid quotations of a share of Stock), as
reported on the National Association of Securities Dealers, Inc. Automated
Quotation System, Smallcap Market, or, if
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not so reported, as reported by the OTC Bulletin Board operated by the National
Association of Securities Dealers, Inc., or any other similar service selected
by the Board; or (ii) if the Stock is not listed on such date on any national
securities exchange but is included in the NASDAQ/NMS, the mean between the
highest "bid" and lowest "offered" quotations of a share of Stock on such date
(or if none, on the most recent date on which there were bid and offered
quotations of a share of Stock), as reported on the NASDAQ/NMS; or (iii) if the
Stock is listed on such date on one or more national securities exchanges, the
last reported sale price of a share of Stock on such date as recorded on the
composite tape system, or, if such system does not cover the Stock, the last
reported sales price of a share of Stock on such date on the principal national
securities exchange on which the Stock is listed, or if no sale of Stock took
place on such date, the last reported sale price of a share of Stock on the most
recent day on which a sale of a share of Stock took place as recorded by such
system or on such exchange, as the case may be; or (iv) if the Stock is neither
listed on such date on a national securities exchange nor traded in the
over-the-counter market, as determined by the Committee.
(n) NORMAL RETIREMENT. Retirement from active employment
with the Company on or after the normal retirement date specified in the
Company's then applicable standard policies and procedures, provided, that if
the Company has not otherwise adopted a standard retirement policy, the normal
retirement age for purposes of this Plan shall be 65 years, unless otherwise
waived by the Committee.
(o) PARTICIPANT. An officer, director or employee of the
Company to whom an Award has been granted.
(p) RETIREMENT. Normal Retirement or Early Retirement.
(q) STOCK. Authorized and issued or unissued shares of
Common Stock of CHS or any security issued in exchange or substitution therefor.
3. ELIGIBILITY. Only officers, key employees, and directors who
are also officers or employees of the Company or who have been designated by the
Board as eligible to receive Awards are eligible to receive Awards under the
Plan. Key employees are those employees who hold positions of responsibility or
whose performance, in the judgment of the Committee, can have a significant
effect on the growth and profitability of the Company.
4. STOCK AVAILABLE FOR AWARDS. Subject to Section 14 hereof, a
total of 647,000 shares of Stock shall be available for issuance pursuant to
Awards granted under the Plan. From time to time, the Board and appropriate
officers of CHS shall file such documents with governmental authorities and, if
the Stock is listed on a national exchange, with such stock exchange, as are
required
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to make shares of Stock available for issuance pursuant to Awards and publicly
traceable. Shares of Stock related to Awards, or portions of Awards, that are
forfeited, canceled or terminated, expire unexercised, are surrendered in
exchange for other Awards, or are settled in cash in lieu of Stock or in such
manner that all or some of the shares of Stock covered by an Award are not and
will not be issued to a Participant, shall be restored to the total number of
shares of Stock available for issuance pursuant to Awards.
5. ADMINISTRATION.
(a) GENERAL. The plan shall be administered by the
Committee, which shall have full and exclusive power to (i) authorize and grant
Awards to persons eligible to receive Awards under the Plan; (ii) establish the
terms, conditions and limitations of each Award or class of Awards; (iii)
construe and interpret the Plan and all Award Agreements; (iv) grant waivers
of Plan restrictions; (v) adopt and amend such rules, procedures, regulations
and guidelines for carrying out the Plan as it may deem necessary or desirable;
and (vi) take any other action necessary for the proper operation and
administration of the Plan, all of which powers shall be exercised in a manner
consistent with the objectives, and in accordance with the terms and conditions,
of the Plan. The Committee's powers shall include, but shall not be limited to,
the authority to (A) adopt such subplans as may be necessary or appropriate (1)
to provide for the authorization and granting of Awards to promote specific
goals or for the benefit of specific classes of Participants, (2) to provide for
grants of Awards by means of formulae, standardized criteria or otherwise, or
(3) for any other purposes as arc consistent with the objectives of the Plan,
and to segregate shares of Stock available for issuance under the Plan generally
as being available specifically for the purposes of one or more subplans, and
(B) subject to Section 11 hereof, adopt modifications, amendments, rules,
procedures, regulations, subplans and the like as may be necessary or
appropriate (1) to comply with provisions of the laws of other countries in
which the Company may operate in order to assure the effectiveness of Awards
granted under the Plan and to enable Participants employed in such other
countries to receive advantages and benefits under the Plan and such laws, (2)
to effect the continuation, acceleration or modification of Awards under certain
circumstances, including events which might constitute a Change in Control of
CHS, or (3) for any other purposes as are consistent with the objectives of the
Plan. All such modifications, amendments, rules, procedures, regulations and
subplans shall be deemed to be a part of the Plan as if stated herein.
(b) COMMITTEE ACTIONS. All actions of the Committee with
respect to the Plan shall require a vote of the majority of its members or, if
there are only two members, by the vote of both. Any action of the Committee may
be taken by a written instrument
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signed by a majority (or both members) of the Committee, and any action so taken
shall be as effective as if it had been taken by a vote at a meeting. All
determinations and acts of the Committee as to any matters concerning the Plan,
including interpretations or constructions of the Plan and any Award Agreement,
shall be conclusive and binding on all Participants and on any parties validly
claiming through any Participants.
6. DELEGATION OF AUTHORITY. The Committee may delegate to the
Chief Executive Officer of CHS and to other executive officers of the Company
certain of its administrative duties under the Plan, pursuant to such conditions
or limitations as the Committee may establish, except that the Committee may not
delegate its authority with respect to (a) the selection of eligible persons as
Partici- pants in the Plan, (b) the granting or timing of Awards (c)
establishing the amount, terms and conditions of any such Award, (d)
interpreting the Plan, any subplan or any Award Agreement or (e) amending or
otherwise modifying the terms or provisions of the Plan, any subplan or any
Award Agreement.
7. AWARDS. The Committee shall determine the types and timing of
Awards to be made to each Participant and shall set forth in the related Award
Agreement the terms, conditions and limita- tions applicable to each Award.
Awards may include, but are not limited to, those listed below in this Section
7. Awards may be granted singly, in combination or in tandem, or in substitution
for Awards previously granted under the Plan. Awards may also be made in
combination or in tandem with, in substitution for, or as alternatives to,
grants or rights under any other benefit plan of the Company, including any such
plan of any entity acquired by, or merged with or into, the Company. Awards
shall be effected through Award Agreements executed by the Company in such forms
as are approved by the Committee from time to time.
All or part of any Award may be subject to conditions established by
the Committee, and set forth in the Award Agreement, which conditions may
include, without limitation, achievement of specific business objectives,
increases in specified indices, attainment of growth rates and other
measurements of Company performance.
The Committee may determine to make any or all of the following
Awards:
(a) STOCK OPTIONS. A grant of a right to purchase a
specified number of shares of Stock at an exercise price not less than 100% of
the Fair Market Value of the Stock on the date of grant (or, from time to time,
under circumstances in which the Committee deems a lesser exercise price to be
appropriate to carry out the objectives of the Plan and to be consistent with
the best interests of the Company, at an exercise price less than 100%, but not
less than 75%, of such Fair Market Value), during a specified
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period, all as determined by the Committee. Without limitation, a stock option
may be in the form of (i) an incentive stock option which, in addition to being
subject to such terms, conditions and limitations as are established by the
Committee, complies with Section 422 of the Code or (ii) a non-qualified stock
potion subject to such terms, conditions and limitations as are established by
the Committee. The aggregate Fair market Value (determined as of the time of
grant) of the Stock with respect to which incentive stock options are
exercisable for the first time by any employee in any calendar year under the
Plan (and/or any other incentive stock option plans of the Company) shall not
exceed $100,000.
(b) STOCK APPRECIATION RIGHTS. A right to receive a payment,
in cash or Stock, equal to the excess of the Fair Market Value (or other
specified valuation) of a specified number of shares of Stock on the date the
stock appreciation right ("SAR") is exercised over the Fair Market Value (or
other specified valuation) on the date of grant of the SAR, except that if an
SAR is granted in tandem with a stock option, valuations on the grant and
exercise dates shall be no less than as determined on the basis of Fair Market
Value.
(c) STOCK AWARDS. An Award made in Stock or denominated in
units of Stock. The eventual amount, vesting or issuance of a Stock Award may be
subject to future service and such other restrictions and conditions as may be
established by the Committee. Stock Awards may be based on Fair Market Value or
another specified valuation.
(d) CASH AWARDS. An Award made or denominated in cash.
The eventual amount of a cash Award may be subject to future service and such
other restrictions and conditions as may be established by the Committee.
Dividend equivalency rights, on a current or deferred basis,
may be extended to and be made part of any Award denominated in whole or in part
in Stock or units of Stock, subject to such terms, conditions and restrictions
as the Committee may establish.
Notwithstanding the provisions of the paragraphs of this
Section 7, Awards may be subject to acceleration of exercisability or vesting in
the event of a Change in Control of CHS (i) as set forth in agreements between
CHS and certain of its officers, directors and key employees which provide for
certain protections and benefits in the event of a change in control (as defined
in such agreements) or (ii) as may otherwise be determined by the Committee
under and in accordance with the terms and conditions of the Plan.
8. PAYMENT UNDER AWARDS. Payment by the Company pursuant to Awards may
be made in the form of cash, Stock or combinations
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thereof and may be subject to such restrictions as the Committee determines,
including, in the case of Stock, restrictions on transfer and forfeiture
provisions. Stock subject to transfer restrictions or forfeiture provisions is
referred to herein as "Restricted Stock". The Committee may provide for payments
to be deferred, such future payments to be made in installments or by lump-sum
payment. The Committee may permit selected Participants to elect to defer
payments of some or all types of Awards in accor- dance with procedures
established by the Committee to assure that such deferrals comply with
applicable requirements of the Code.
The Committee may also establish rules and procedures for the
crediting of interest on deferred cash payments and of dividend equivalencies on
deferred payments to be made in Stock or units of Stock.
At the discretion of the Committee, a Participant may be
offered an election to substitute an Award for another Award or Awards, or for
awards made under any other benefit plan of the company, of the same or
different type.
9. STOCK OPTION EXERCISE. The price at which shares of Stock may be
purchased upon exercise of a stock option shall be paid in full at the time of
the exercise, in cash or, if permitted by the Committee, by (a) tendering Stock
or surrendering another Award, including Restricted Stock, or an option or
other award granted under another benefit play of the Company, in each case
valued at, or on the basis of, Fair Market Value on the date of exercise, (b)
delivery of a promissory note issued by a Participant to the Company, containing
terms and conditions determined by the Committee, or (c) any other means
acceptable to the Committee. The Committee shall determine acceptable methods
for tendering Stock or surrendering other Awards or grants and may impose such
conditions on the use of Stock or other Awards or grants to exercise a stock
option as it deems appropriate. If shares of Restricted Stock are tendered as
consideration for the exercise of a stock option, the Committee may require that
the number of shares issued upon exercise of the stock option equal to the
number of shares of Restricted Stock used as consideration therefor be subject
to the same restrictions as the Restricted Stock so surrendered and any other
restrictions as may be imposed by the Committee. The Committee may also permit
Participants to exercise stock options and simultaneously sell some or all of
the shares of Stock so acquired pursuant to a brokerage or similar arrangement
which provides for the payment of the exercise price substantially concurrently
with the delivery of such shares.
10. TAX WITHHOLDING. The Company shall have the right to deduct
applicable taxes from any Award payment or shares of Stock receivable under an
Award and to withhold an appropriate number of shares of Stock for payment of
taxes required by law or to take such other action as may be necessary in the
opinion of the Company
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to satisfy all tax withholding obligations. In addition, the Committee may
permit Participants to elect to (a) have the Company deduct applicable taxes
resulting from any Award payment to, or exercise of any Award by, such
Participant by withholding an appropriate number of shares of Stock for payment
of tax obligations or (b) tender to the Company for the purpose of satisfying
tax payment obligations other Stock held by the Participant. If the Company
withholds shares of Stock to satisfy tax payment obligations, the value of such
Stock in general shall be its Fair Market Value on the date of the Award payment
or the date of exer- cise of an Award, as the case may be. If a Participant
tenders shares of Stock pursuant to clause (b) above to satisfy tax payment
obligations, the value of such Stock shall be the Fair Market Value on the date
the Participant tenders such Stock to the Company.
11. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN.
Except as otherwise limited herein, the Board may amend, modify, suspend or
terminate the Plan, or adopt subplans under the Plan, (a) for the purpose of
meeting or addressing any changes in any applicable tax, securities or other
laws, rules or regulations or (b) for any other purpose permitted by law.
Subject to changes in law or other legal requirements which would permit
otherwise, the Plan may not be amended without the approval of the holders of a
majority of the shares of Stock voting on such amendment to (i) materially
increase the aggregate number of shares of Stock that may be issued under the
Plan (except for any increase resulting from adjustments pursuant to Section
14(a) hereof), (ii) materially increase the benefits accruing to participants
or (iii) materially modify the requirements as to eligibility for participation
in the Plan. In addition, no subplan which provides for the granting and timing
of Awards and the terms and conditions of such Awards, shall be amended with
respect to such provisions more frequently than once every six months (other
than to comport with changes in the Code of the Employment Retirement Income
Security Act or the rules thereunder). Further, the Plan may not be amended in
a manner that would alter, impair, amend, modify, suspend or terminate any
rights of a Participant or obligation of the Company under any Awards
theretofore granted, in any manner adverse to any such affected Participant,
without the consent of such affected Participant.
12. TERMINATION OF EMPLOYMENT. Except as otherwise set forth in an
applicable Award Agreement or determined by the Committee, or as otherwise
provided in paragraph (a) or (b) of this Section 12, if a Participant's
employment or association with the Company terminates, all unexercised,
deferred and unpaid Awards (or portions of Awards) shall be canceled
immediately.
(a) RETIREMENT, RESIGNATION OR OTHER TERMINATION. If a
Participant's employment or association with the Company terminates by reason of
the Participant's Retirement or for any other reason (other than the
Participant's death or Disability), the Committee may, under circumstances in
which it deems an exception from the
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provisions of the first sentence of this Section 12 to be appro- priate to carry
out the objectives of the Plan and to be consistent with the best interest of
the Company, permit Awards to continue in effect and be exercisable or payable
beyond the date of such termination, up until the expiration date specified in
the applicable Award Agreement and otherwise in accordance with the terms of the
applicable Award Agreement, and may accelerate the exercisability or vesting of
any Award, in either case, in whole or in part.
(b) DEATH OR DISABILITY.
(i) In the event of a Participant's death, the
participant's estate or beneficiaries shall have a period, not
extending beyond the expiration date specified in the applicable Award
Agreement (except as otherwise provided in such Award Agreement),
within which to exercise any outstanding Award held by the Participant,
as may be specified in the Award Agreement or as may otherwise be
determined by the Committee. All rights in respect of any such
outstanding Awards shall pass in the following order: (A) to
beneficiaries so designated in writing by the Participant; or if none,
then (B) to the legal representative of the Participant; or if none,
then (C) to the persons entitled thereto as determined by a court of
competent jurisdiction. Awards so passing shall be exercised or paid
at such times and in such manner as if the Participant were living,
except as otherwise provided in the applicable Award Agreement or as
determined [b>], the Committee.
(ii) If a Participant ceases to be employed or
associated with the Company because the Participant is deemed by the
Company to be Disabled, outstanding Awards held by the Participant may
be paid to or exercised by the Participant, if legally competent, or by
a committee or other legally designated guardian or representative if
the Participant is legally incompetent, for a period, not extending
beyond the expiration date specified in the applicable Award Agreement
(except as otherwise provided in such Award Agreement), following the
termination of his employment or association with the Company, as may
be specified in the Award Agreement or as may otherwise be determined
by the Committee.
(iii) After the death or Disability of a Participant,
the Committee may at any time (A) terminate restrictions with respect
to Awards held by the Participant, (B) accelerate the vesting or
exercisability of any or all installments and rights of the Participant
in respect of Awards held by the Participant and (c) instruct the
Company to pay the total of any accelerated payments under the Awards
in a lump sum to the Participant or to the Participant's estate,
beneficiaries or representatives, notwithstanding that, in the
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absence of such termination of restrictions or acceleration of
payments, any or all of the payments due under the Awards might
ultimately have become payable to other beneficiaries.
(iv) in the event of uncertainty as to the interpre-
tation of, or controversies concerning, paragraph (b) of this Section
13 the Committee's determinations shall be binding and conclusive on
all Participants and any parties validly claiming through them.
13. NONASSIGNABILITY.
(a) Except as provided for in paragraphs (a) and (b) of
Section 12 hereof and paragraph (b) of this Section 13, no Award or any other
benefit under the Plan, or any right with respect thereto, shall be assignable
or transferable, or payable to or exercisable by, anyone other than the
Participant to whom it is granted.
(b) If a Participant's employment or association with the Company
terminates in order for such Participant to assume a position with a
governmental, charitable or educational agency or institution, and the
Participant retains Awards pursuant to para- graph (a) of Section 12
hereof, the Committee, in its discretion and to the extent permitted by
law, may authorize a third party (including, without limitation, the
trustee of a "blind" trust), acceptable to the applicable authorities,
the Participant and the Committee, to act on behalf of the Participant
with respect to such Awards.
14. ADJUSTMENTS; REDUCTION IN NUMBER OF SHARES OF STOCK AVAILABLE FOR
AWARDS. In the event of any change in the outstanding Stock by reason
of a stock split, stock dividend combination or reclassification of
shares, recapitalization, merger or similar event, the Committee shall
adjust proportionally (a) the number of shares of Stock (i) reserved
under the Plan, (ii) available for options or other Awards and (iii)
covered by outstanding Awards denominated in Stock or units of Stock;
(b) the prices related to outstanding Awards; and (c) the appropriate
Fair Market Value and other price determinations for such Awards. In
the event of any other change affecting the Stock or any distribution
(other than normal cash dividends) to holders of Stock, such
adjustments as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give proper
effect to such event. In the event of a corporate merger,
consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Committee shall be authorized to
issue or assume stock options or other awards, whether or not in a
transaction to which Section 425(a) of the Code applies, by means of
substitution of new stock options or Awards for previously issued
options or awards or an assumption of previously issued stock options
or awards. Except as expressly provided in this Section 14(a), the
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issuance by the Company of shares of Stock or of securities con- vertible into
shares of Stock of any class for cash, property, labor or services, upon direct
sale, upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or other securities, and in any case whether or not for
Fair Market Value, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of shares of Stock subject to Awards
theretofore granted.
15. NOTICE. Any written notice to CHS required by any of the
provisions of the Plan shall be addressed to the Committee, c/o the Secretary of
CHS, and shall become effective when received by the Secretary.
16. UNFUNDED PLAN. Insofar as the Plan provides for Awards of cash or
Stock, the Plan shall be unfunded unless and until the Board otherwise
determines. Although bookkeeping accounts may be established with respect to
Participants who arc entitled to cash Stock or rights thereto under the Plan,
any such accounts shall be used merely as a bookkeeping convenience. Unless the
Board other- wise determines, (a) the Company shall not be required to segregate
any assets that may at any time be represented by cash, Stock or rights thereto,
nor shall the Plan be construed as providing for such segregation, nor shall the
Company, the Board or the Committee be deemed to be a trustee of any cash, Stock
or rights thereto to be granted under the Plan; (b) any liability of the Company
to any Participant with respect to a grant of cash, Stock or rights thereto
under the Plan shall be based solely upon any contractual obligations that may
be created by the Plan and an Award Agreement; (c) no such obligation of the
Company shall be deemed to be secured by any pledge or other encumbrance on any
property of the Company; and (d) neither the Company, the Board nor the
Committee shall be required to give any security or bond for the performance of
any obligation that may be created by or pursuant to the Plan.
17. PAYMENTS TO TRUST. Notwithstanding the provisions of Section 16
hereof, the Committee may cause to be established one or more trust agreements
pursuant to which the Committee may make pay- ments of cash, or deposit shares
of Stock, due or to become due under the Plan to Participants.
18. NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor the
granting of any Award shall confer on any Participant any right to continued
employment of association with the Company or in any way interfere with the
Company's right to terminate the employ- ment or association of any Participant
at any time, with or without cause, and without liability therefor. Awards,
payments and other benefits received by a Participant under the Plan shall not
be deemed a part of the Participant's regular, recurring compensation for any
purpose, including, without limitation, for the purposes of any termination
indemnity or severance pay law of any jurisdiction
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19. GOVERNING LAW. The Plan and all determinations made and actions
taken pursuant hereto, to the extent not otherwise governed by the Code or the
securities laws of the United States, shall be governed by and construed under
the laws of the State of Florida.
20. INDEMNIFICATION BOARD. The members of the Committee and the Board
shall be indemnified, to the full extent permitted by the Articles of
Incorporation and By-Laws of the Company, in connection with any action, suit or
proceeding or in connection with any appeal therein or settlement thereof, 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 Award granted
thereunder.
21. EFFECTIVE AND TERMINATION. The Plan, and any amendment hereof
requiring stockholder approval, shall become effective as of the date of its
adoption by the board, subject to the subsequent approval of the stockholders
of CHS by the affirmative vote of a majority of the votes cast at a
stockholders' meeting at which the approval of the Plan (or any such amendment)
is considered, provided that the total vote cast represents over 50% of all
shares entitled to vote on the proposal. The Plan shall terminate ten years
after its initial effective date, subject to earlier termina- tion by the Board
pursuant to Section 1 hereof, except as to Awards then outstanding.
22. SECTION 16. With respect to persons subject to Section 16 of the
Exchange Act, transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the Exchange Act.
To the extent any provision of the Plan or action by the Committee fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Committee.
12
<PAGE>
CHS ELECTRONICS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
The undersigned, a holder of Common Stock of CHS Electronics, Inc., a
Florida corporation (the "Company"), hereby appoints Claudio Osorio and Craig
Toll, and each of them, as proxies for the undersigned, each with full power of
substitution, for and in the name of the undersigned to act for the undersigned
and to vote, as designated below, all of the shares of stock of the Company
that that the undersigned is entitled to vote at the 1966 Annual Meeting of
Shareholders of the Company, to be held on Friday, June 28, 1996, at 10:00
a.m., local time, at the Doral Golf Resort & Spa, 4400 N.W. 87th Avenue, Miami,
Florida 33178, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND
THE OTHER PROPOSALS SET FORTH.
(1) ELECTION OF CLAUDIO OSORIO, ALVIN PERLMAN, ANTONIO BOCCALANDRO, ZBYNEK
KRAUS, OTTO GERLACH AND DONALD D. WINSTEAD as directors.
[ ] VOTE FOR all nominees listed above, except vote withheld from the
following nominees (if any):
[ ] VOTE WITHHELD from all nominees listed above.
[ ] ABSTAIN
(2) PROPOSAL to amend the Company's 1994 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) PROPOSAL to ratify the reappointment of Grant Thornton LLP, as the
Company's independent certified public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) Upon such other matters as may properly come before the Annual Meeting and
any adjournments thereof. In their discretion, the proxies are authorized
to vote upon such other business as may properly come before the Annual
Meeting, and any adjournments or postponements thereof.
(see reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED "FOR" ALL OF THE PROPOSALS.
Dated: , 1996
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(Signature)
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(Signature if held jointly)
IMPORTANT: Please sign exactly as your name appears and mail it promptly even
though you now plan to attend the meeting. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by president or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENVELOPE
PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
