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
(Amendment No. )
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
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
CHS ELECTRONICS, INC.
(Name of Registrant as Specified in Its Charter)
CHS ELECTRONICS, INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 JULY 31, 1997
-------------------------
To the Shareholders of CHS Electronics, Inc.
NOTICE IS HEREBY GIVEN that the 1997 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 Thursday, July 31, 1997,
at the Doral Golf Resort and Spa, 4400 N.W. 87th Avenue, Miami, Florida 33178,
for the following purposes:
(1) The election of eight members to the Company's Board of
Directors to hold office until the Company's 1998 Annual
Meeting of Shareholders or until their successors are duly
elected and qualified;
(2) The approval of an amendment to the Company's 1994 Stock
Incentive Plan;
(3) The approval of the Company's Directors and Officers 1997
Stock Option Plan;
(4) The approval of the Company's 1996 Chief Executive Officer
Stock Option Plan;
(5) The approval of the Company's 1997 Chief Executive Officer
Stock Option Plan;
(6) The approval of the Company's 1997 Chief Executive Officer
Cash Bonus Performance Plan;
(7) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants; and
(8) 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 June 5, 1997
as the record date for determining those shareholders entitled to notice of, and
to vote at, the Annual Meeting and any adjournment(s) or postponement(s)
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 11, 1997
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>
1997 ANNUAL MEETING OF SHAREHOLDERS
OF
CHS ELECTRONICS, INC.
-------------------------------
PROXY STATEMENT
-------------------------------
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors (the "Board") of CHS Electronics, Inc. (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 1997 Annual Meeting of Shareholders
(the "Annual Meeting") of the Company to be held at 10:00 a.m., local time, on
Thursday, July 31, 1997, at the Doral Golf Resort and Spa, 4400 N.W. 87th
Avenue, Miami, Florida 33178, or at any adjournment(s) or postponement(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 1996 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. 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 eight members to the Company's Board to serve
until the Company's 1998 Annual Meeting of Shareholders or
until their successors are duly elected and qualified;
(2) The approval of an amendment to the Company's 1994 Stock
Incentive Plan;
(3) The approval of the Company's Directors and Officers 1997
Stock Option Plan;
(4) The approval of the Company's 1996 Chief Executive Officer
Stock Option Plan;
(5) The approval of the Company's 1997 Chief Executive Officer
Stock Option Plan;
(6) The approval of the Company's 1997 Chief Executive Officer
Cash Bonus Performance Plan;
(7) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants; and
<PAGE>
(8) 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 has set the close of business on June 5, 1997 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
14,709,643 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 Company's bylaws provide that a majority of shares entitled to vote
and represented in person or by proxy at a meeting of the shareholders
constitutes a quorum. 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.
Under the Florida Business Corporation Act (the "Act"), directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. Other matters are approved
if affirmative votes cast by the holders of the shares represented at a meeting
at which a quorum is present exceed votes opposing the action, unless a greater
number of affirmative votes or voting by classes is required by the Act or the
Company's Amended and Restated Articles of Incorporation. Therefore, abstentions
and broker non-votes have no effect under Florida law. A broker non-vote
generally occurs when a broker who holds shares in street name for a customer
does not have authority to vote on certain non-routine matters because its
customer has not provided any voting instructions on the matter.
-2-
<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 and nominee for 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 PERCENT
NAME OF BENEFICIAL OWNER(1)(2)(3) BENEFICIALLY OWNED OF SHARES
- ----------------------------------- ------------------ ------------
Claudio Osorio 4 3,959,385 26.2%
Alvin Perlman 4 3,959,385 26.2%
Comtrad, Inc. 4, 10 3,959,385 26.2%
Comtrad Holdings, Inc. 4, 10 3,959,385 26.2%
Carsten Frank 2,200,000 15.0%
Antonio Boccalandro 5 938 *
Otto Gerlach 6 0 *
Zbynek Kraus 7 0 *
Pierino Lardi 0 *
Donald D. Winstead 8 22,500 *
Craig Toll 9 67,500 *
All officers and directors as 6,250,323 41.2%
a group (8 persons)
- --------------------
* 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 and for Carsten Frank which
is Hansestrasse 47, 38112 Braunschweig Germany.
(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 June 5, 1997.
(4) Includes 367,029 shares held of record by Comtrad, Inc. ("Comtrad"), a
wholly-owned subsidiary of Comtrad Holdings, Inc. ("CHI"), 3,169,500
shares held of record by CHI, 47,576 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 375,280
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
-3-
<PAGE>
Perlman, CHI and Comtrad have agreed 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 are parties to an agreement which grants to Mr. Osorio and
Comtrad, until June 30, 1997, 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 July
1 and ending July 31, 1997. CHI has guaranteed Mr. Osorio's obligations
and has pledged 676,006 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 CHI. 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
shares 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. Boccalandro holds currently exercisable options to purchase 938
shares of Common Stock. In addition, 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.
(6) 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.
(7) 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.
(8) Mr. Winstead is the holder of currently exercisable options to purchase
22,500 shares of Common Stock.
(9) Mr. Toll holds currently exercisable options to purchase a total of
47,500 shares of Common Stock.
(10) The address for Comtrad and CHI is P.O. Box 660708, Miami Springs,
Florida 33266.
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
except for Messrs. Perlman, Osorio, Comtrad Holdings, Inc. and Comtrad, who each
filed a late report documenting certain share transactions.
-4-
<PAGE>
ELECTION OF DIRECTORS
Eight 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 37 Chairman of the Board, President, and Chief Executive
Officer
Alvin Perlman 70 Executive Vice President - Latin American Region and
Director
Carsten Frank 34 Executive Vice President - European Region and Director
Antonio Boccalandro 30 Chief Officer of Mergers and Acquisitions,
Secretary and Director
Zbynek Kraus 44 Manager - Czech Republic Operations and Director
Otto Gerlach 70 Director
Pierino Lardi 49 Director
Donald D. Winstead 59 Director
</TABLE>
CLAUDIO OSORIO (full name - Claudio Eleazar Osorio Rodriguez), the
founder of the Company's current business and operations, has served as the
Chief Executive Officer, President and a director of the Company since 1993. Mr.
Osorio has served as president of Comtrad since 1988. 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 --
Latin American Region, of the Company since 1994. He has served for the past
five years as the chief executive officer of Zemex Electronics International,
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.
CARSTEN FRANK has been a director of the Company since May 1997 and has
been Executive Vice President - European Region of the Company since January
1997. Mr. Frank founded Frank & Walter Computer GmbH ("Frank & Walter") in 1988
and has served as such company's Managing Director since its formation. Frank &
Walter was acquired by the Company in March 1997.
ANTONIO BOCCALANDRO has been a director and Secretary of the Company
since 1993 and Chief Officer of Mergers and Acquisitions since January 1, 1997.
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.
-5-
<PAGE>
ZBYNEK KRAUS has been a director since March 1996 and Manager - Czech
Republic Operations 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.
OTTO GERLACH has been a director of the Company since August 1994. Mr.
Gerlach 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.
PIERINO LARDI has been a director of the Company since May 1997. Mr.
Lardi has been Chief Executive Officer and President of Banca Commerciale Lugano
since 1995. Mr. Lardi served as Executive Vice President of United Overseas Bank
from 1985 through 1995.
DONALD D. WINSTEAD has been a director of the Company since December
1993 and has been self-employed as a business consultant since June 1991. Mr.
Winstead 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.
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,
subject to the terms of any employment agreements with the Company. See
"AEmployment Arrangements." There are no family relationships among any of the
Company's executive officers and directors. On March 20, 1997, Carsten Frank,
the sole owner of Frank & Walter, sold and transferred to the Company all (100%)
of his interest in Frank & Walter pursuant to a Stock Exchange Agreement (the
"Exchange Agreement") dated December 19, 1996. In connection with the Exchange
Agreement, Comtrad and CHI have agreed to vote their shares of Common Stock in
favor of Mr. Frank's election to the Board at the Annual Meeting.
Directors who are employees of the Company do not receive fees for
their service as directors. All of the Company's non-employee directors receive
$250 for attendance at each Board meeting and are reimbursed for travel expenses
incurred to attend such meetings. No separate payment is made for attending
committee meetings.
During fiscal year 1996, the Board held nine meetings. No director
attended fewer than 75% of such meetings of the Board 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, composed of Messrs. Gerlach and Winstead, 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. The Compensation
Committee, composed of Messrs. Gerlach and Winstead, is responsible for making
recommendations to the Board 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.
-6-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid during the years
ended December 31, 1996, 1995 and 1994 to the Company's Chief Executive Officer
and each of the other executive officers of the Company whose total 1996 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, 1996 350,000 324,375 432,494 50,000
Chief Executive Officer and 1995 366,402 -0- -0- 139,240
President 1994 82,126 -0- 56,080 140,200
Alvin Perlman, 1996 345,666 150,000 -0- -0-
Executive Vice President - Latin 1995 500,000 -0- -0- 1,000
American Region 1994 248,726 -0- -0- -0-
Craig Toll, 1996 191,567 75,000 20,000 -0-
Chief Financial Officer and 1995 110,000 -0- -0- -0-
Treasurer 1994 55,000 -0- 87,500 -0-
Antonio Boccalandro 1996 101,690 -0- -0- -0-
Chief Officer of Mergers and 1995 -0- -0- 3,750 1,000
Acquisitions and Secretary 1994 -0- -0- -0- -0-
</TABLE>
EMPLOYMENT ARRANGEMENTS
In August 1994, the Board 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. 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 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 earned $55,000 for the first six months of the contract year and
$95,000 for the second six
-7-
<PAGE>
months of such contract year). 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 was effective July 1, 1996. The agreements for Messrs. Osorio
and Toll provide for annual salaries of $350,000 and $200,000, respectively, and
in the case of Mr. Osorio, requires him to devote substantially all of his time
and attention to the business and affairs of the Company, and, in the case of
Mr. Toll, requires him to devote his 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 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." Effective May 1, 1997, Mr. Osorio's employment
agreement was amended to provide for an increase in annual base salary to
$750,000.
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 Latin America. 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 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 1996 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 pursuant to an
agreement for a fee of $4,000 per month, which resulted in payments of $48,000
to Mr. Winstead in 1996. Such agreement terminated on December 31, 1996.
Otto Gerlach holds, indirectly, 11.8% of the outstanding Common Shares
of CHI and 16.7% of the shares of Class A common stock of CHI which, subject to
the claims of certain creditors, have a liquidation preference on the 965,000
shares of Company stock owned by Comtrad. In the past, the Company has engaged
in numerous transactions with Comtrad. See "Certain Transactions."
-8-
<PAGE>
OPTION GRANTS DURING 1996
OPTION GRANTS TABLE. The following table sets forth certain information
concerning grants of stock options made during 1996 to each of the Named
Executive Officers. The Company did not grant any stock appreciation rights in
1996.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS IN 1996
- --------------------------------------------------------------------------------------------------------------------
SHARES OF
COMMON
STOCK % OF TOTAL
NAME UNDERLYING GRANTED ALTERNATIVE
OPTIONS OPTION EXPIRATION TO GRANT DATE
GRANTED PRICE($) DATE EMPLOYEES VALUE(1)($)
- ------------------------------- ---------------- ----------------- ---------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Claudio Osorio 104,369 12.63 9/17/06 9.9 801,554
200,000 12.63 10/06/06 18.9 1,526,000
35,621 15.88 12/05/06 3.4 340,537
92,204 18.63 12/20/06 8.7 1,036,373
Alvin Perlman -- -- -- --
Craig Toll 20,000 15.88 12/05/06 1.9 191,200
Antonio Boccalandro -- -- -- --
</TABLE>
- -------------------------
(1) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The estimated values under that model
are based on certain assumptions as to variables such as interest
rates, stock price volatility and future dividend yields. The actual
value, if any, that an executive may realize will depend on the excess
of the stock price over the exercise price on the date the option is
exercised, so that there is no assurance that the value realized by an
executive will be at or near the value estimated by the Black-Scholes
model.
AGGREGATED OPTION EXERCISES IN 1996 AND YEAR END OPTION VALUES
The following table sets forth information with respect to (i) the
number of unexercised options held by the Named Executive Officers as of
December 31, 1996 and (ii) the value as of December 31, 1996 of unexercised
in-the-money options. No options were exercised by any of the Named Executive
Officers in 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1996 AT DECEMBER 31, 1996 ($)(1)
-------------------------------------------- ---------------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------------------- ---------------------- -------------------- -----------------
<S> <C> <C> <C> <C>
Claudio Osorio 272,779 215,795 1,878,352 439,773
Alvin Perlman -- -- -- --
Craig Toll 87,500 20,000 973,438 24,900
Antonio Boccalandro 938 2,812 7,621 22,848
</TABLE>
- --------------------
(1) Market value of shares covered by in-the-money options on December 31,
1996, 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.
-9-
<PAGE>
COMPENSATION COMMITTEE REPORT
COMPENSATION COMMITTEE ROLE
The Compensation Committee of the Board is responsible for making
recommendations to the Board 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 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 or other plans, as appropriate. 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 1996 the Compensation Committee approved, and ultimately the Board
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 in connection with the acquisition by the
Company of CHS Latin America (f/k/a 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 Latin
America, with Mr. Osorio providing a review of these base salary amounts.
BONUSES
In 1996, Messrs. Osorio and Perlman were subject to bonus compensation
pursuant to a Company bonus plan and Mr. Toll was subject to a bonus award at
the discretion of the Compensation Committee. In addition, certain senior
officers and managers of subsidiaries were subject to bonus compensation based
on achieving certain operating goals specific to their area of responsibility.
The plan provides for bonuses based on performance of the Company against
established targets, taking into account the operating responsibilities of each
of these individuals.
STOCK OPTION AWARDS
The Company's 1994 Incentive Stock Option Plan, Directors and Officers
1997 Stock Option Plan and 1996 and 1997 Chief Executive Officer Stock Option
Plans (collectively such plans are referred to herein as the "Company Option
Plans") are designed to align directors', officers' and shareholders' interests
in the enhancement of shareholder value. Stock options and other equity based
awards are granted under the Company Option Plans by the disinterested members
of the Board. The Compensation Committee strongly believes that the interest of
the directors, officers and shareholders become more closely aligned when such
directors and officers of the Company 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 directors and
officers, as part of their overall compensation package, are eligible for
participation in certain of the Company Option Plans. Because no benefit is
received unless the Company's stock price performs favorably, awards under the
Company Option Plans are intended to provide incentives for directors and
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. No member of the Compensation Committee is a
former or current officer or employee of the Company or any of its subsidiaries.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The Compensation Committee considered a number of factors in
determining the compensation to be paid to the Company's Chief Executive
Officer, including levels generally paid to executives in the Company's
industry, the Company's performance to date, the Chief Executive Officer's
contribution to the Company's development and the Company's short- and long-term
prospects.
COMPENSATION COMMITTEE
Otto Gerlach
Don Winstead
-10-
<PAGE>
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 Latin American operations. The Company
does not intend to purchase any operations from Comtrad in the future. Comtrad
has agreed not to engage in businesses competitive with those of the Company.
<TABLE>
<CAPTION>
CHS COMTRAD COMTRAD
SUBSIDIARY(1) CHS ACQUISITION DATE PURCHASE PRICE ACQUISITION DATE PURCHASE PRICE
- ------------------------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C>
CHS Croatia March 1996 $1,500,000 September 1994 $50,000
CHS Romania(2)
CHS Bulgaria
CHS Baltic
CHS Slovakia March 1996 $1,000,000 January 1994 (3)
CHS Brazil March 1996 $5,300,000 November 1994 52,632
Shares of
Comtrad(4)
</TABLE>
- ---------------------
(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) Transferred back to Comtrad as of October 31, 1996 in exchange for a
payment of $523,000 from Comtrad to CHS.
(3) Comtrad purchased 65% of the equity interest for $3,200 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.
(4) The Company believes that the aggregate value of the Comtrad shares was
$762,000.
At December 31, 1996, the Company carried a receivable from Comtrad in
an amount of $3.2 million. This receivable is in the form of a promissory note
which Comtrad has agreed to collateralize with 210,000 shares of Common Stock
owned by Comtrad. The amount is due 60 days after demand. Interest charged in
1996 to Comtrad by the Company was $86,000.
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 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 has guaranteed the Company's obligations to certain vendors.
The Company was a party to a separate consulting agreement with Donald
D. Winstead, a director of the Company. Under the terms of such agreement, which
terminated on December 31, 1996, Mr. Winstead provided management consulting and
related services for a fee of $4,000 per month. Mr. Winstead received $48,000
under the arrangement in 1996.
-11-
<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, 1996 with
(i) the NASDAQ Stock Market - US & Foreign Index and (ii) the Company's 1996
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.,
THE NASDAQ STOCK MARKET - US & FOREIGN INDEX,
AND A 1996 PEER GROUP**
8/15/94 12/94 12/95 12/96
------- ----- ----- -----
CHS ELECTRONICS, INC 100 80 90 171
PEER GROUP 100 98 90 109
NASDAQ STOCK MARKET
(U.S. & FOREIGN) 100 103 144 177
* $100 invested on 8/15/94 in stock or index-including reinvestment of
dividends. Fiscal year ending December 31.
** The 1996 Peer Group is comprised of the following companies: Liuski Int'l
Inc., Tech Data Corp., Marshall Industries, Inc., Merisel, Inc., Southern
Electronics Corp., Ameriquest Technologies, Inc., United Stationers, Inc.,
Western Micro Tech, Inc. and Bell Microproducts, Inc. GBC Technologies,
Inc., which was included in the Company's 1996 Proxy Statement, is no longer
included as part of the Company's Peer Group as it is no longer a publicly
traded 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.
-12-
<PAGE>
INCREASE IN THE NUMBER OF SHARES RESERVED
FOR ISSUANCE PURSUANT TO THE COMPANY'S 1994 STOCK INCENTIVE PLAN
The Company's Board has unanimously adopted, subject to the approval by
the Company's shareholders, a resolution to increase to 1,747,000 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 647,000 shares for
issuance upon exercise of stock options. Through December 31, 1996, the Company
has granted options under such plan, net of canceled options, to purchase
1,095,065 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 350 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 to be administered by a committee (the "Committee"),
consisting of two or more directors designated by the Board or, in the absence
of such a Committee, the entire Board.
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
1,747,000 shares of Common Stock will have been 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.
-13-
<PAGE>
The Board may, in accordance with the recommendation of the Committee,
amend the 1994 Plan as it shall deem advisable. The Board 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.
The following table sets forth certain information regarding options
granted under the 1994 Plan to the persons and groups indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF
SUBJECT TO OPTIONS EXERCISE PRICE OPTIONS AT
NAME AND POSITION AS OF MARCH 31, 1997 PER SHARE JUNE 2, 1997 (1)
- ---------------------------------------------- --------------------- ------------------ ---------------------
<S> <C> <C> <C>
Claudio Osorio -- -- --
Chairman of the Board, Chief Executive
Officer and President
Alvin Perlman -- -- --
Executive Vice President - Latin
American Region and Director
Craig Toll 67,500 $6.00-$15.88 $1,076,563
Chief Financial Officer and Treasurer
Antonio Boccalandro 3,750 $9.00 $59,531
Chief Officer of Mergers and
Acquisitions and Secretary
All current executive officers as a group 71,250 $6.00-$15.88 $1,136,094
All current directors who are not executive 22,500 $6.00 $424,688
officers as a group
Non-Executive Officer Employee Group 835,803 $6.00-15.88 $10,312,854
</TABLE>
- -----------------------
(1) The closing sale price of the Common Stock on June 2, 1997 was $24.875
per share. Value is calculated by multiplying (a) the difference between
$24.875 and the option exercise price by (b) the number of shares of
Common Stock underlying the option.
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
-14-
<PAGE>
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.
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 receive 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
The Stock Option Plan is not qualified under the provisions of Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and is not
subject to any of the provisions of the Employee Retirement Income Security Act
of 1974, as amended.
NON-QUALIFIED STOCK OPTIONS. On exercise of a non-qualified stock
option granted under the 1994 Plan, an Optionee (other than an officer or
director of the Company) will recognize ordinary income equal to the excess, if
any, of the fair market value on the date of exercise of the Option of the
shares of Common Stock acquired on exercise over the exercise price. That income
will be subject to the withholding of Federal income tax. The Optionee's tax
basis in those shares will be equal to their fair market value on the date of
exercise of the Option, and his holding period for those shares will begin on
that date.
An officer or director of the Company or any other person to whom the
short-swing profit recovery provisions of section 16(b) of the Exchange Act
apply in connection with an option under the 1994 Plan (a
-15-
<PAGE>
"Reporting Person") generally will not recognize ordinary income until the
earlier of the expiration of the six month period after the exercise of an
Option and the first day on which a sale at a profit of shares acquired on
exercise of the Option would not subject the Reporting Person to suit under
section 16(b) of the Exchange Act. The amount of ordinary income will equal the
excess, if any, of the fair market value of the shares on the date the income is
recognized over the exercise price of the Option. A Reporting Person, however,
is entitled under section 83(b) of the Code to elect to recognize ordinary
income on the date of exercise of the Option, in which case the amount of income
will be equal to the excess, if any, of the fair market value of the shares on
that date over the exercise price of the Option. A section 83(b) election must
be made within 30 days after exercising an Option.
If an Optionee pays for shares of Common Stock on exercise of an Option
by delivering shares of the Company's Common Stock, the Optionee will not
recognize gain or loss on the shares delivered, even if their fair market value
at the time of exercise differs from the Optionee's tax basis in them. The
Optionee, however, otherwise will be taxed on the exercise of the Option in the
manner described above as if he had paid the exercise price in cash. If a
separate identifiable stock certificate is issued for that number of shares
equal to the number of shares delivered on exercise of the Option, the
Optionee's tax basis in the shares represented by that certificate will be equal
to his tax basis in the shares delivered, and his holding period for those
shares will include his holding period for the shares delivered. The Optionee's
tax basis and holding period for the additional shares received on exercise of
the Option will be the same as if the Optionee had exercised the Option solely
in exchange for cash.
The Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to the Optionee,
provided that amount constitutes an ordinary and necessary business expense for
the Company and is reasonable in amount, and either the employee includes that
amount in income or the Company timely satisfies its reporting requirements with
respect to that amount.
INCENTIVE STOCK OPTIONS. Under the Code, an Optionee generally is not
subject to tax upon the grant or exercise of an incentive stock option. In
addition, if the Optionee holds a share received on exercise of an incentive
stock option for at least two years from the date the Option was granted and at
least one year from the date the Option was exercised (the "Required Holding
Period"), the difference, if any, between the amount realized on a sale or other
taxable disposition of that share and the holder's tax basis in that share will
be long-term capital gain or loss.
If, however, an Optionee disposes of a share acquired on exercise of an
incentive stock option before the end of the Required Holding Period (a
"Disqualifying Disposition"), the Optionee generally will recognize ordinary
income in the year of the Disqualifying Disposition equal to the excess, if any,
of the fair market value of the share on the date the incentive stock option was
exercised over the exercise price. If, however, the Disqualifying Disposition is
a sale or exchange on which a loss, if realized, would be recognized for Federal
income tax purposes, and if the sales proceeds are less than the fair market
value of the share on the date of exercise of the Option, the amount of ordinary
income the Optionee recognizes will not exceed the gain, if any, realized on the
sale. If the amount realized on a Disqualifying Disposition exceeds the fair
market value of the share on the date of exercise of the Option, that excess
will be short-term or long-term capital gain, depending on whether the holding
period for the share exceeds one year.
An Optionee who exercises an incentive stock option by delivering
shares of Common Stock acquired previously pursuant to the exercise of an
incentive stock option before the expiration of the Required Holding Period for
those shares is treated as making a Disqualifying Disposition of those shares.
This rule prevents "pyramiding" the exercise of an incentive stock option (that
is, exercising an incentive stock option for one share and using that share, and
others so acquired, to exercise successive incentive stock options) without the
imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the
fair market value of a share of Common Stock acquired on exercise of an
incentive stock option exceeds the exercise price of that Option generally will
be an item of adjustment included in the Optionee's alternative minimum taxable
income for the year in which the Option is exercised. If, however, there is a
Disqualifying Disposition of the share in the year in which the Option is
exercised, there will be no item of adjustment with respect to that share. If
there is a Disqualifying
-16-
<PAGE>
Disposition in a later year, no income with respect to the Disqualifying
Disposition is included in the Optionee's alternative minimum taxable income for
that year. In computing alternative minimum taxable income, the tax basis of a
share acquired on exercise of an incentive stock option is increased by the
amount of the item of adjustment taken into account with respect to that share
for alternative minimum tax purposes in the year the Option is exercised.
The Company is not allowed an income tax deduction with respect to the
grant or exercise of an incentive stock option or the disposition of a share
acquired on exercise of an incentive stock option after the Required Holding
Period. However, if there is a Disqualifying Disposition of a share, the Company
is allowed a deduction in an amount equal to the ordinary income includible in
income by any particular optionee, provided that amount constitutes an ordinary
and necessary business expense for the Company and is reasonable in amount, and
either the employee includes that amount in income or the Company timely
satisfies its reporting requirements with respect to that amount.
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 GRANT 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.
IMPORTANCE OF TAX ADVISER The information set forth above is a summary
only and does not purport to be complete. In addition, the information is based
upon current Federal income tax rules and therefore is subject to change when
those rules change. Moreover, because the tax consequences to any optionee under
the Stock Option Plan may depend on his particular situation, each optionee
should consult his tax adviser as to the Federal, state, local and other tax
consequences of the grant or exercise of an Option or the disposition of Common
Stock acquired on exercise of an option.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE 1994 PLAN.
-17-
<PAGE>
PROPOSAL TO APPROVE THE COMPANY'S
DIRECTORS AND OFFICERS 1997 STOCK OPTION PLAN
The Company's Board of Directors has unanimously adopted, subject to the
approval by the Company's shareholders, a resolution to approve the Company's
Directors and Officers 1997 Stock Option Plan (the "Stock Option Plan"). The
Stock Option Plan authorizes 900,000 shares for issuance upon exercise of stock
options. The current text of the Stock Option Plan is attached hereto as Exhibit
B. The material features of the Stock Option Plan are discussed below, but the
description is subject to, and is qualified in its entirety by, the full text of
the Stock Option Plan.
The purpose of the Stock Option Plan is to provide additional incentives
to attract and retain qualified and competent directors and officers, upon whose
efforts and judgment the success of the Company is largely dependent, through
the encouragement of stock ownership in the Company by such persons. In
furtherance of this purpose, the Stock Option Plan authorizes (a) the granting
of incentive or non-qualified stock options to purchase Common Stock to
directors and officers of the Company, (b) the provision of loans for the
purpose of financing the exercise of options and the amount of taxes payable in
connection therewith and (c) the use of already owned Common Stock as payment of
the exercise price for options granted under the Stock Option Plan.
The Stock Option Plan provides that it shall be administered by a
committee (the "Committee") consisting of two or more directors designated by
the Board or, in the absence of such a Committee, the entire Board. The
Committee in its sole discretion, determines the persons to be awarded options,
the number of shares subject thereto and the exercise price and other terms
thereof (the Board may, however, reserve to itself the power to grant options to
employees or directors who are not Covered Employees (as such term is defined in
the Stock Option Plan)). Options granted under the Stock Option Plan become
exercisable in 1/3 increments on each anniversary of the date of grant thereof.
In addition, the Committee has full power and authority to construe and
interpret the Stock Option Plan, and the acts of the Committee are final,
conclusive and binding upon all interested parties, including the Company, its
shareholders, its directors and officers, recipients of grants under the Stock
Option Plan and all persons or entities claiming by or through such persons.
Options are intended to be granted primarily to those persons who possess
a capacity to contribute significantly to the successful performance of the
Company. Because persons to whom grants of options are to be made are to be
determined from time to time by the Committee, in its discretion, it is
impossible at this time to indicate the precise number or name of persons who
will receive options or the number of shares for which options will be granted
to any such employee, except to the extent already granted or conditionally
granted.
Assuming approval of the Stock Option Plan, an aggregate of 900,000 shares
of Common Stock (subject to adjustment as discussed below) will be reserved for
sale upon exercise of options granted under the Stock Option Plan. As of June 2,
1997, options to purchase 790,000 shares of Common Stock are issued and
outstanding under the Stock Option Plan. The Company's shareholders will not
have any preemptive rights to purchase or subscribe for the shares reserved for
issuance under the Stock Option Plan. If any option granted under the Stock
Option Plan should expire or terminate for any reason other than having been
exercised in full, the unpurchased shares subject to that option will again be
available for purposes of the Stock Option Plan.
-18-
<PAGE>
The following table sets forth as of June 2, 1996 certain information
regarding options granted under the Stock Option Plan to the persons and groups
indicated. None of such options are currently exercisable.
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE VALUE OF
NAME AND POSITION SUBJECT TO OPTIONS PER SHARE OPTIONS (1)
- ---------------------------------------------- --------------------- ------------------ ---------------------
<S> <C> <C> <C>
Claudio Osorio 450,000 $25-$18 $1,375,000
Chairman of the Board, Chief Executive
Officer and President
Alvin Perlman 80,000 $18 $550,000
Executive Vice President - South
American Region and Director
Craig Toll 30,000 $18 $206,250
Chief Financial Officer and Treasurer
Antonio Boccalandro 30,000 $18 $206,250
Chief Officer of Mergers and
Acquisitions and Secretary
All current executive officers as a group 590,000 $18 $2,337,500
All current directors who are not executive 140,000 $18 $962,500
officers as a group
Non-Executive Officer Employee Group 60,000 $18 $412,500
</TABLE>
- -----------------------
(1) The closing sale price of the Common Stock on June 2, 1997 was $24.875 per
share. Value is calculated by multiplying (a) the difference between
$24.875 and the option exercise price by (b) the number of shares of
Common Stock underlying the option.
TERMS AND CONDITIONS
All options granted under the Stock Option Plan shall be evidenced by a
written agreement between the Company and the grantee. Such agreements shall
contain such terms and conditions, consistent with the Stock Option Plan,
relating to the grant, the time or times of exercise and other terms of the
options as the Committee prescribes.
Under the Stock Option Plan, the option price per share for incentive
stock options may not be less than the fair market value of the underlying
shares on the date of grant. For purposes of the Stock Option Plan and subject
to the Committee's sole discretion to determine otherwise in a fair and uniform
manner, the term "fair market value" means (i) the last reported sale price of
the Common Stock as reported on a national securities exchange or by the
National Association of Securities Dealers Automated Quotation National Market
System or (ii) the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated. If
neither (i) nor (ii) above are applicable, then fair market value shall be
determined in good faith by the Committee in a fair and uniform manner.
The exercise price of an option may be paid in (1) in cash, (2) by
certified or official bank check, (3) by money order, (4) with shares of Common
Stock owned by the Optionee that have been owned by the Optionee for
-19-
<PAGE>
more than 6 months on the date of surrender or such other period as may be
required to avoid a charge to the Company's earnings for financial accounting
purposes, (5) by authorization for the Company to withhold shares of Common
Stock issuable upon exercise of the Option, (6) by delivery of a properly
executed exercise notice together with such other documentation as the Committee
shall require to effect an exercise of the an option and delivery to the Company
of the sale or loan proceeds required to pay the option price, or (7) any
combination of the foregoing. The Stock Option Plan also authorizes the Company
to make loans to optionees to enable them to exercise their options. Such loans
must at a minimum (i) provide for recourse to the optionee, (ii) bear interest
at a rate no less than the prime rate of interest of the Company's principal
lender, and (iii) be secured by the shares of Common Stock purchased. Cash
payments will be used by the Company for general corporate purposes.
The use of already owned shares of Common Stock may be applied to
payment for the exercise of an option in a single transaction and to the
"pyramiding" of already owned shares in successive, simultaneous option
exercises. In general, pyramiding permits an option holder to start with as
little as one share of Common Stock and exercise an entire option to the extent
then exercisable. By utilizing already owned shares of Common Stock, no cash
(except for fractional share adjustments) is needed to exercise an option.
Consequently, the optionee would receive Common Stock equal in value to the
spread between the fair market value of the shares subject to the option and the
exercise price of the option.
No option granted under the Stock Option Plan is assignable or
transferable, other than by will or by the laws of descent and distribution,
unless the Committee's prior written consent is obtained and the proposed
transaction does not violate the requirements of Rule 16b-3 promulgated under
the Exchange Act or preclude the registration of underlying securities on Form
S-8. During the lifetime of an optionee, an option is exercisable only by such
optionee. The expiration date of an option will be determined by the Committee
at the time of the grant, but in no event will an option be exercisable after
the expiration of ten years from the date of grant. An option may be exercised
at any time or from time to time or only after a period of time or in
installments, as the Committee determines. The Committee may in its sole
discretion accelerate the date on which any option may be exercised.
The unexercised portion of any option granted to an employee under the
Stock Option Plan shall automatically be terminated (a) three months after the
date on which the optionee's employment is terminated for any reason other than
(i) Cause (as defined in the Stock Option Plan); (ii) mental or physical
disability; or (iii) death; (b) immediately upon the termination of the
optionee's employment for Cause; (c) one year after the date on which the
optionee's employment is terminated by reason of mental or physical
disabilities; or (d) one year after the date on which the optionee's employment
is terminated by reason of the death of the employee; or one year after the date
on which the optionee shall die if such death shall occur during the one year
period following the termination of the optionee's employment by reason of
mental or physical disability.
To prevent dilution of the rights of a holder of an option, the Stock
Option Plan provides for adjustment of the number of shares for which options
may be granted, the number of shares subject to outstanding options and the
exercise price of outstanding options in the event of any increase or decrease
in the number of issued and outstanding shares through the declaration of a
stock dividend or through any recapitalization resulting in a stock split,
combination or exchange of shares. Provisions governing the effect upon options
of a merger, consolidation or other reorganization of the Company are also
included in the Stock Option Plan.
AMENDMENTS
No option may be granted under the Stock Option Plan after January 21,
2007. The Board and the Committee each may from time to time amend the Stock
Option Plan or any option granted thereunder; provided, however, that, except to
the extent provided in the Stock Option Plan with respect to certain corporate
actions, no such amendment may, without approval by the shareholders of the
Company, (i) increase the number of securities which may be issued under the
Stock Option Plan pursuant to the exercise of incentive stock options, (ii)
modify the requirements as to eligibility for participation in the Stock Option
Plan or (iii) increase the aggregate number of options that may be granted to
any one optionee under the Stock Option Plan.
-20-
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES
The Federal income tax consequences applicable to Non-Qualified Stock
Options and Incentive Stock Options are discussed in the section titled "Federal
Income Tax Consequences" on pages 16 and 17, respectively, of this Proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE STOCK OPTION PLAN.
PROPOSAL TO APPROVE THE COMPANY'S
1996 CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN
The Company's Board of Directors has unanimously adopted, subject to
the approval by the Company's shareholders, a resolution to approve the
Company's 1996 Chief Executive Officer Stock Option Plan (the "1996 CEO Option
Plan"). The 1996 CEO Option Plan authorizes 500,000 shares for issuance upon
exercise of stock options. The current text of the 1996 CEO Option Plan is
attached hereto as Exhibit C. The material features of the 1996 CEO Option Plan
are discussed below, but the description is subject to, and is qualified in its
entirety by, the full text of the 1996 CEO Option Plan.
The purpose of the 1996 CEO Option Plan is to provide an additional
incentive to Claudio Osorio ("Osorio"), the Company's Chief Executive Officer,
to pursue future acquisitions on behalf of the Company. In furtherance of this
purpose, the 1996 CEO Option Plan authorizes the granting of non-qualified stock
options to purchase Common Stock and the use of already owned shares of Common
Stock as payment of the exercise price for options granted under the 1996 CEO
Option Plan.
The 1996 CEO Option Plan provides that it shall be administered by the
Board. In accordance with the 1996 CEO Option Plan, the Board must grant Osorio
a determined number of Options upon the approval by the Board of each Qualifying
Acquisition. The term "Qualifying Acquisition" means any acquisition by the
Company where greater than 50% of the purchase price is comprised of Common
Stock as calculated by an earn-out formula at the end of the particular earn-out
period. The number of options to be granted to Osorio at the time each
Qualifying Acquisition is approved will be determined by multiplying the prior
year net revenue (as indicated in financial statements audited by an independent
accounting firm) of the target company of the Qualifying Acquisition (the
"Acquired Company") by one percent and then dividing such calculated amount by
the closing market price of the Company's Common Stock as reported on the Nasdaq
National Market on the date of the grant of the option or such other price as
recommended by the Company's Compensation Committee and approved by the Board;
provided, however, that the Company's Compensation Committee may recommend an
alternative method for determining the number of options in such cases where
prior net revenues for any particular Acquired Company are deemed to be
inconsistent with such company's reasonably expected future results as
determined solely by the Company's Compensation Committee and approved by the
Board. In addition, Osorio may be granted Options in connection with
acquisitions made by the Company that are not Qualifying Acquisitions upon the
recommendation of the Company's Compensation Committee and approval by the
Board.
Assuming approval of the 1996 CEO Option Plan, an aggregate of 500,000
shares of Common Stock (subject to adjustment as discussed below) will be
reserved for sale upon exercise of options granted under the 1996 CEO Option
Plan. As of June 2, 1997, options to purchase 500,000 shares of Common Stock are
issued and outstanding under the 1996 CEO Option Plan with respect to
transactions to acquire operations in Switzerland, Hungary, Estonia, Slovakia,
Denmark, Miami and the Frank & Walter acquisition and the acquisition of certain
operations of Merisel, Inc. The Company's shareholders will not have any
preemptive rights to purchase or subscribe for the shares reserved for issuance
under the 1996 CEO Option Plan.
The following table sets forth as of June 2, 1996 certain information
regarding options granted under the Company's 1996 CEO Option Plan to the
persons and groups indicated.
-21-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE VALUE OF
NAME AND POSITION SUBJECT TO OPTIONS PER SHARE OPTIONS (1)
- ---------------------------------------------- --------------------- ------------------ ---------------------
<S> <C> <C> <C> <C>
Claudio Osorio 500,000 $12.63 - $23.63 $4,713,430
Chairman of the Board, Chief Executive
Officer and President
</TABLE>
- -----------------------
(1) The closing sale price of the Common Stock on June 2, 1997 was $24.875 per
share. Value is calculated by multiplying (a) the difference between
$24.875 and the option exercise price by (b) the number of shares of Common
Stock underlying the option.
CONDITIONS
All options granted under the 1996 CEO Option Plan shall be evidenced
by a written agreement between the Company and Osorio. Such agreements shall
contain such terms and conditions consistent with the 1996 CEO Option Plan
relating to the grant, the time or times of exercise and other terms of the
options as the Board prescribes.
The use of already owned shares of Common Stock may be applied to
payment for the exercise of an option in a single transaction and to the
"pyramiding" of already owned shares in successive, simultaneous option
exercises. In general, pyramiding permits an option holder to start with as
little as one share of Common Stock and exercise an entire option to the extent
then exercisable. By utilizing already owned shares of Common Stock, no cash
(except for fractional share adjustments) is needed to exercise an option.
Consequently, Osorio would receive Common Stock equal in value to the spread
between the fair market value of the shares subject to the option and the
exercise price of the option.
As a condition of any sale or issuance of Common Stock upon exercise of
an option, the Board may require such agreements or undertakings, if any, as the
Board may deem necessary or advisable to assure compliance with any such law or
regulation including, but not limited to, (i) a representation and warranty by
Osorio to the Company, at the time an option is exercised, that he is acquiring
the shares of Common Stock to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such shares of
Common Stock and (ii) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Board, necessary or appropriate to
comply with the provisions of any securities law deemed by the Board to be
applicable to the issuance of the shares of Common Stock and are endorsed upon
the share certificates.
The unexercised portion of any option granted to an employee under the
1996 CEO Option Plan shall automatically be terminated (a) three months after
the date on which Osorio ceases to be the Company's Chief Executive Officer by
reason other than (i) Cause (as defined in the 1996 CEO Option Plan); (ii)
mental or physical disability; or (iii) death; (b) immediately upon the removal
of Osorio as Chief Executive Officer for Cause; (c) one year after the date on
which Osorio ceases to be the Company's Chief Executive Officer by reason of his
death; or (d) on the fifth anniversary of the issuance of an Option.
To prevent dilution of the rights of Osorio, the 1996 CEO Option Plan
provides for adjustment of the number of shares for which options may be
granted, the number of shares subject to outstanding options and the exercise
price of outstanding options in the event of any increase or decrease in the
number of issued and outstanding shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split, combination
or exchange of shares.
-22-
<PAGE>
TERM OF PLAN; AMENDMENTS
No option may be granted under the 1996 CEO Option Plan after September
16, 2006. The Board and the Committee each may from time to time amend the 1996
CEO Option Plan or any option granted thereunder; provided, however, that, no
amendment of the 1996 CEO Option Plan or any option issued thereunder shall
substantially impair any option previously granted to Osorio under the 1996 CEO
Option Plan without his consent.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1996 CEO OPTION PLAN
The 1996 CEO Option Plan is not qualified under the provisions of
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
On exercise of a non-qualified stock option granted under the 1996 CEO
Option Plan Osorio will not recognize ordinary income until the earlier of the
expiration of the six month period after the exercise of such an option and the
first day on which a sale at a profit of shares acquired on exercise of such an
option would not subject Osorio to suit under section 16(b) of the Exchange Act.
The amount of ordinary income will equal the excess, if any, of the fair market
value of the shares on the date the income is recognized over the exercise price
of the option. Osorio, however, is entitled under section 83(b) of the Code to
elect to recognize ordinary income on the date of exercise of the option, in
which case the amount of income will be equal to the excess, if any, of the fair
market value of the shares on that date over the exercise price of the option. A
section 83(b) election must be made within 30 days after exercising an option.
Osorio's tax basis in those shares will be equal to their fair market value on
the date of exercise of the option, and his holding period for those shares will
begin on that date.
If Osorio pays for shares of Common Stock on exercise of an option by
delivering shares of the Company's Common Stock, Osorio will not recognize gain
or loss on the shares delivered, even if their fair market value at the time of
exercise differs from Osorio's tax basis in them. Osorio, however, otherwise
will be taxed on the exercise of the option in the manner described above as if
he had paid the exercise price in cash. If a separate identifiable stock
certificate is issued for that number of shares equal to the number of shares
delivered on exercise of an option, Osorio's tax basis in the shares represented
by that certificate will be equal to his tax basis in the shares delivered, and
his holding period for those shares will include his holding period for the
shares delivered. Osorio's tax basis and holding period for the additional
shares received on exercise of an option will be the same as if Osorio had
exercised an option solely in exchange for cash.
The Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to Osorio, provided that
amount constitutes an ordinary and necessary business expense for the Company
and is reasonable in amount, and either the employee includes that amount in
income or the Company timely satisfies its reporting requirements with respect
to that amount.
The information set forth above is a summary only and does not purport
to be complete. In addition, the information is based upon current Federal
income tax rules and therefore is subject to change when those rules change.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE THE 1996 CEO OPTION PLAN.
-23-
<PAGE>
PROPOSAL TO APPROVE THE COMPANY'S
1997 CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN
The Company's Board of Directors has unanimously adopted, subject to
the approval by the Company's shareholders, a resolution to approve the
Company's 1997 Chief Executive Officer Stock Option Plan (the "1997 CEO Option
Plan"). The 1997 CEO Option Plan authorizes 500,000 shares for issuance upon
exercise of stock options. The current text of the 1997 CEO Option Plan is
attached hereto as Exhibit D. The material features of the 1997 CEO Option Plan
are discussed below, but the description is subject to, and is qualified in its
entirety by, the full text of the 1997 CEO Option Plan.
The purpose of the 1997 CEO Option Plan is to provide an additional
incentive to Osorio to pursue future acquisitions on behalf of the Company. In
furtherance of this purpose, the 1997 CEO Option Plan authorizes the granting of
non-qualified stock options to purchase Common Stock and the use of already
owned shares of Common Stock as payment of the exercise price for options
granted under the 1997 CEO Option Plan.
The 1997 CEO Option Plan provides that it shall be administered by the
Board. In accordance with the 1997 CEO Option Plan, the Board may grant Osorio a
determined number of Options upon the approval by the Board of any business
acquisition. The number of options to be granted to Osorio at the time a
business acquisition is approved will be determined by multiplying the prior
year net revenue (as indicated in financial statements audited by an independent
accounting firm) of the target business entity (the "Acquired Company") by one
percent and then dividing such calculated amount by the closing market price of
the Company's Common Stock as reported on the Nasdaq National Market on the date
of the grant of the option or such other price as recommended by the Company's
Compensation Committee and approved by the Board; provided, however, that the
Company's Compensation Committee may recommend an alternative method for
determining the number of options in such cases where prior net revenues for any
particular Acquired Company are deemed to be inconsistent with such company's
reasonably expected future results as determined solely by the Company's
Compensation Committee and approved by the Board.
Assuming approval of the 1997 CEO Option Plan, an aggregate of 500,000
shares of Common Stock (subject to adjustment as discussed below) will be
reserved for sale upon exercise of options granted under the 1997 CEO Option
Plan. As of June 2, 1997, options to purchase 20,503 shares of Common Stock are
issued and outstanding under the 1997 CEO Option Plan with respect to
transactions to acquire operations in Brazil. The Company's shareholders will
not have any preemptive rights to purchase or subscribe for the shares reserved
for issuance under the 1997 CEO Option Plan.
The following table sets forth as of June 2, 1997 certain information
regarding options granted under the Company's 1995 1997 CEO Option Plan to the
person indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE VALUE OF
NAME AND POSITION SUBJECT TO OPTIONS PER SHARE OPTIONS (1)
- ---------------------------------------------- --------------------- ------------------ ---------------------
<S> <C> <C> <C>
Claudio Osorio 20,503 $24.875 $0
Chairman of the Board, Chief Executive
Officer and President
</TABLE>
- -----------------------
(1) The closing sale price of the Common Stock on June 2, 1997 was $24.875 per
share. Value is calculated by multiplying (a) the difference between
$24.875 and the option exercise price by (b) the number of shares of Common
Stock underlying the option.
-24-
<PAGE>
CONDITIONS
All options granted under the 1997 CEO Option Plan shall be evidenced
by a written agreement between the Company and Osorio. Such agreements shall
contain such terms and conditions consistent with the 1997 CEO Option Plan
relating to the grant, the time or times of exercise and other terms of the
options as the Board prescribes.
The use of already owned shares of Common Stock may be applied to
payment for the exercise of an option in a single transaction and to the
"pyramiding" of already owned shares in successive, simultaneous option
exercises. In general, pyramiding permits an option holder to start with as
little as one share of Common Stock and exercise an entire option to the extent
then exercisable. By utilizing already owned shares of Common Stock, no cash
(except for fractional share adjustments) is needed to exercise an option.
Consequently, Osorio would receive Common Stock equal in value to the spread
between the fair market value of the shares subject to the option and the
exercise price of the option.
As a condition of any sale or issuance of Common Stock upon exercise of
an option, the Board may require such agreements or undertakings, if any, as the
Board may deem necessary or advisable to assure compliance with any such law or
regulation including, but not limited to, (i) a representation and warranty by
Osorio to the Company, at the time an option is exercised, that he is acquiring
the shares of Common Stock to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such shares of
Common Stock and (ii) a representation, warranty and/or agreement to be bound by
any legends that are, in the opinion of the Board, necessary or appropriate to
comply with the provisions of any securities law deemed by the Board to be
applicable to the issuance of the shares of Common Stock and are endorsed upon
the share certificates.
The unexercised portion of any option granted to an employee under the
1997 CEO Option Plan shall automatically be terminated (a) three months after
the date on which Osorio ceases to be the Company's Chief Executive Officer by
reason other than (i) Cause (as defined in the 1997 CEO Option Plan); (ii)
mental or physical disability; or (iii) death; (b) immediately upon the removal
of Osorio as Chief Executive Officer for Cause; (c) one year after the date on
which Osorio ceases to be the Company's Chief Executive Officer by reason of his
death; or (d) on the fifth anniversary of the issuance of an Option.
To prevent dilution of the rights of Osorio, the 1997 CEO Option Plan
provides for adjustment of the number of shares for which options may be
granted, the number of shares subject to outstanding options and the exercise
price of outstanding options in the event of any increase or decrease in the
number of issued and outstanding shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split, combination
or exchange of shares.
TERM OF PLAN; AMENDMENTS
No option may be granted under the 1997 CEO Option Plan after September
16, 2006. The Board and the Committee each may from time to time amend the 1997
CEO Option Plan or any option granted thereunder; provided, however, that, no
amendment of the 1997 CEO Option Plan or any option issued thereunder shall
substantially impair any option previously granted to Osorio under the 1997 CEO
Option Plan without his consent.
FEDERAL INCOME TAX CONSEQUENCES OF THE 1997 CEO OPTION PLAN
The 1997 CEO Option Plan is not qualified under the provisions of
section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and is not subject to any of the provisions of the Employee Retirement Income
Security Act of 1974, as amended.
On exercise of a non-qualified stock option granted under the 1997 CEO
Option Plan Osorio will not recognize ordinary income until the earlier of the
expiration of the six month period after the exercise of such an
-25-
<PAGE>
option and the first day on which a sale at a profit of shares acquired on
exercise of such an option would not subject Osorio to suit under section 16(b)
of the Exchange Act. The amount of ordinary income will equal the excess, if
any, of the fair market value of the shares on the date the income is recognized
over the exercise price of the option. Osorio, however, is entitled under
section 83(b) of the Code to elect to recognize ordinary income on the date of
exercise of the option, in which case the amount of income will be equal to the
excess, if any, of the fair market value of the shares on that date over the
exercise price of the option. A section 83(b) election must be made within 30
days after exercising an option. Osorio's tax basis in those shares will be
equal to their fair market value on the date of exercise of the option, and his
holding period for those shares will begin on that date.
If Osorio pays for shares of Common Stock on exercise of an option by
delivering shares of the Company's Common Stock, Osorio will not recognize gain
or loss on the shares delivered, even if their fair market value at the time of
exercise differs from Osorio's tax basis in them. Osorio, however, otherwise
will be taxed on the exercise of the option in the manner described above as if
he had paid the exercise price in cash. If a separate identifiable stock
certificate is issued for that number of shares equal to the number of shares
delivered on exercise of an option, Osorio's tax basis in the shares represented
by that certificate will be equal to his tax basis in the shares delivered, and
his holding period for those shares will include his holding period for the
shares delivered. Osorio's tax basis and holding period for the additional
shares received on exercise of an option will be the same as if Osorio had
exercised an option solely in exchange for cash.
The Company will be entitled to a deduction for Federal income tax
purposes equal to the amount of ordinary income taxable to Osorio, provided that
amount constitutes an ordinary and necessary business expense for the Company
and is reasonable in amount, and either the employee includes that amount in
income or the Company timely satisfies its reporting requirements with respect
to that amount.
The information set forth above is a summary only and does not purport
to be complete. In addition, the information is based upon current Federal
income tax rules and therefore is subject to change when those rules change.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE THE 1997 CEO OPTION PLAN.
PROPOSAL TO APPROVE THE COMPANY'S
1997 CHIEF EXECUTIVE OFFICER CASH BONUS PERFORMANCE PLAN
The Company's Board of Directors has unanimously adopted, subject to
the approval by the Company's shareholders, a resolution to approve the
Company's 1997 Chief Executive Officer Cash Bonus Performance Plan (the "Cash
Bonus Plan"). The current text of the Cash Bonus Plan is attached hereto as
Exhibit E. The material features of the Cash Bonus Plan are discussed below, but
the description is subject to, and is qualified in its entirety by, the full
text of the Cash Bonus Plan.
The purpose of the Cash Bonus Plan is to promote the success of the
Company by providing to Osorio bonus incentives that qualify as
performance-based compensation within the meaning of Section 162(m) of the Code
("162(m)"). In furtherance of this purpose, the Cash Bonus Plan authorizes the
Company's Compensation Committee to establish and administer performance
criteria pursuant to which the Company's Chief Executive Officer may receive
designated cash bonus ("Bonus") compensation.
The Compensation Committee has the authority to construe and interpret
the Cash Bonus Plan, except as otherwise provided in the Cash Bonus Plan, and
may adopt rules and regulations governing the administration thereof. The
Compensation Committee in its sole discretion determines the amounts of any
Bonuses to be awarded. The specific performance criteria applicable to any
particular Bonus must be established by the Compensation Committee in advance of
the deadlines applicable under Section 162(m) and while the performance relating
to the performance criteria remains substantially uncertain within the meaning
of Section 162(m). Osorio may receive a Bonus if and only if the performance
criteria established by the Compensation Committee is attained. Notwithstanding
the fact that the performance criteria established by the Compensation Committee
has been met,
-26-
<PAGE>
the Company may pay a Bonus of less than the amount determined by the
Compensation Committee or may pay no Bonus at all, unless the Compensation
Committee otherwise expressly provides by written contract or other written
commitment.
MAXIMUM INDIVIDUAL BONUS. Osorio shall not receive a Bonus under the
Cash Bonus Plan for any fiscal year in excess of $2.5 million. In addition,
Osorio shall not receive any payment under the Cash Bonus Plan unless the
Compensation Committee has certified, by resolution or other appropriate action
in writing, that the amount thereof has been accurately determined in accordance
with the terms, conditions and limits of the Cash Bonus Plan and that the
performance criteria and any other material terms previously established by the
Compensation Committee or set forth in the Cash Bonus Plan were in fact
satisfied.
Any Bonuses granted by the Compensation Committee under the Cash Bonus
Plan shall be paid as soon as practicable, unless the Compensation Committee
elects to defer such payment in its sole discretion, following the Compensation
Committee's written certification of its determinations. Any such payment shall
be in cash or cash equivalents, subject to applicable withholding requirements.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE CASH BONUS PLAN.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board 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 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's appointment of an
accountant, and the Board 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 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.
-27-
<PAGE>
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 11, 1998. 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 11, 1997
-28-
<PAGE>
ANNEX A
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 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.
<PAGE>
(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 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-thecounter 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
1,747,000 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 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
2
<PAGE>
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 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
Participants 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 limitations 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:
3
<PAGE>
(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 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 denomi- nated 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 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 accordance 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.
4
<PAGE>
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 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 exercise 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 provisions of the first sentence of this
Section 12 to be appropriate 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
5
<PAGE>
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 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 interpretation 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.
(aa) 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 paragraph (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
6
<PAGE>
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 issuance by the Company of shares
of Stock or of securities convertible 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 otherwise 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 payments 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 employment 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.
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
7
<PAGE>
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 termination 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.
8
<PAGE>
ANNEX B
---------------------------------------
CHS ELECTRONICS, INC.
DIRECTORS AND OFFICERS 1997 STOCK OPTION PLAN
---------------------------------------
1. Purpose. The purpose of this Plan is to advance the interests of CHS
Electronics, Inc., a Florida corporation (the "Company"), by providing an
additional incentive to attract, retain and motivate qualified and competent
directors and officers of the Company and its Subsidiaries, and upon whose
efforts and judgment the success of the Company is largely dependent, through
the encouragement of stock ownership in the Company by such persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Affiliate" shall mean any corporation other than the
Company that is a member of an affiliated group of corporations, as defined in
Section 1504 (determined without regard to Section 1504(b)) of the Code, of
which the Company is a member.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the committee appointed pursuant to
Section 13 hereof to administer the Plan.
(e) "Common Stock" shall mean the Company's Common Stock, par
value $0.001 per share.
(f) "Company" shall refer to CHS Electronics, Inc.
(g) "Covered Employee" shall mean any individual who, on the
last day of the taxable year of the Company, is (i) the Chief Executive Officer
of the Company or is acting in such capacity (the "CEO"), (ii) among the four
highest compensated officers of the Company and its Affiliates (other than the
CEO), or (iii) otherwise considered to be a "Covered Employee" within the
meaning of Section 162(m) of the Code and the regulations thereunder.
(h) "Director" shall mean a member of the Board or of the
Board of Directors of any Subsidiary.
(i) "Effective Date" shall mean December 2, 1996.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(k) "Fair Market Value" of a Share on any date of reference
shall be the "Closing Price" (as defined below) of the Common Stock on the
business day immediately preceding such date, unless the Committee in its sole
discretion shall determine otherwise in a fair and uniform manner. For the
purpose of determining Fair Market Value, the "Closing Price" of the Common
Stock on any business day shall be (i) if the Common Stock is listed or admitted
for trading on any United States national securities exchange, or if actual
transactions are otherwise reported on a consolidated transaction reporting
system, the last reported sale price of Common Stock on such exchange or
reporting system, as reported in any newspaper of general circulation, (ii) if
the Common Stock is quoted on the National Association of Securities Dealers
Automated Quotations System, or any similar system of automated dissemination of
quotations of securities prices in common use, the last reported sale price of
Common Stock for such day on such system, or (iii) if neither clause (i) or (ii)
is applicable, the mean between the high bid and low asked quotations for the
Common Stock as reported by the National Quotation Bureau, Incorporated if at
<PAGE>
least two securities dealers have inserted both bid and asked quotations for
Common Stock on at least five of the ten preceding days. If neither (i), (ii),
or (iii) above is applicable, then Fair Market Value shall be determined in good
faith by the Committee in a fair and uniform manner.
(l) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.
(m) "Non-Employee Director" shall refer to a Director who is
not an employee of the Company or any Subsidiary.
(n) "Non-Qualified Stock Option" shall mean an Option which is
not an Incentive Stock Option.
(o) "Option" (when capitalized) shall mean any option granted
under this Plan.
(p) "Optionee" shall mean a person to whom a stock option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(q) "Outside Director" shall mean a member of the Board who
(i) is not a current employee of the Company or any Affiliate, (ii) is not a
former employee of the Company or any Affiliate who receives compensation for
prior services (other than benefits under a tax-qualified retirement plan)
during the taxable year; (iii) has not been an officer of the Company or any
Affiliate; (iv) does not receive remuneration either directly or indirectly, in
any capacity other than as a director; and (v) satisfies any other conditions
that shall from time to time be required to qualify as an "outside director"
under Section 162(m) of the Code and the regulations thereunder and as a
"Non-Employee Director" under Rule 16b-3 promulgated under the Exchange Act. For
this purpose, "Remuneration" shall have the meaning afforded that term pursuant
to Treasury Regulations issued under Section 162(m) of the Code, and shall
exclude any de minimis remuneration excluded under those Treasury Regulations.
(r) "Plan" shall mean this CHS Electronics, Inc. Directors and
Officers 1997 Stock Option Plan.
(s) "Share(s)" shall mean a share or shares of the Common
Stock.
(t) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. The Committee may grant to Optionees from time
to time, Options to purchase an aggregate of up to 900,000 Shares from
authorized and unissued Shares. If any Option granted under the Plan shall
terminate, expire, or be canceled or surrendered as to any Shares, new Options
may thereafter be granted covering such Shares. An Option granted hereunder
shall be either an Incentive Stock Option or a Non-Qualified Stock Option as
determined by the Committee at the time of the grant of such Option and shall
clearly state whether it is an Incentive Stock Option or Non-Qualified Stock
Option. All Incentive Stock Options shall be granted within 10 years from the
effective date of this Plan.
4. DOLLAR LIMITATION. Options otherwise qualifying as Incentive Stock
Options hereunder will not be treated as Incentive Stock Options to the extent
that the aggregate Fair Market Value (determined at the time the Option is
granted) of the Shares, with respect to which Options meeting the requirements
of Code Section 422(b) are exercisable for the first time by any individual
during any calendar year (under all plans of the Company and any Subsidiary),
exceeds $100,000.
-2-
<PAGE>
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee who are employees and/or
Directors of the Company or any Subsidiary.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made to the success of the Company
or its Subsidiaries and such other factors as the Committee shall determine. The
Committee shall also have the authority to consult with and receive
recommendations from officers and other personnel of the Company and its
Subsidiaries with regard to these matters. The Committee may, from time to time
in granting Options, prescribe such other terms and conditions concerning such
Options as it deems appropriate, including, without limitation, (i) prescribing
the date or dates on which the Option becomes exercisable, (ii) providing that
the Option rights accrue or become exercisable in installments over a period of
years, and/or upon the attainment of stated goals, or (iii) relating an Option
to the continued employment of the Optionee for a specified period of time,
provided that such terms and conditions are not more favorable to an Optionee
than those expressly permitted herein.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither the
Plan nor any Option granted under the Plan shall confer upon any person any
right to employment or continuance of employment by the Company or its
Subsidiaries.
(d) Notwithstanding any other provisions of the Plan to the
contrary, an Incentive Stock Option shall not be granted to any person owning
directly or indirectly (through attribution under Section 424(d) of the Code) at
the date of grant, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company (or of its parent or subsidiary, as
those terms are defined in Section 424 of the Code, at the date of grant) unless
the option price of such Option is at least 110% of the Fair Market Value of the
Shares subject to such Option on the date the Option is granted, and such Option
by its terms is not exercisable after the expiration of five years from the date
such Option is granted.
(e) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, the aggregate number of Shares
with respect to which Options may be granted to any one Optionee may not exceed
450,000, subject to adjustment as provided in Section 10(a) hereof.
(f) Notwithstanding any other provision of this Plan, and in
addition to any other requirements of this Plan, Options may not be granted to a
Covered Employee unless the grant of such Option is authorized by, and all of
the terms of such Options are determined by, a Committee that is appointed in
accordance with Section 13 of this Plan and all of whose members are Outside
Directors.
6. OPTION PRICE. The option price per Share of any Option shall be any
price determined by the Committee, but shall not be less than the par value per
Share; provided, however, that in no event shall the option price per Share of
any Incentive Stock Option be less than the Fair Market Value of the Shares
underlying such Option on the date such Option is granted.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company or the Committee has received written notice of such exercise in
accordance with the terms of the Option, (ii) full payment of the aggregate
option price of the Shares as to which the Option is exercised has been made,
and (iii) arrangements that are satisfactory to the Committee in its sole
discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or Subsidiary employing the Optionee to
withhold in accordance with applicable Federal or state tax withholding
requirements. Unless further limited by the Committee in any Option, the option
price of any Shares purchased shall be paid (1) in cash, (2) by certified or
-3-
<PAGE>
official bank check, (3) by money order, (4) with Shares owned by the Optionee
that have been owned by the Optionee for more than 6 months on the date of
surrender or such other period as may be required to avoid a charge to the
Company's earnings for financial accounting purposes, (5) by authorization for
the Company to withhold Shares issuable upon exercise of the Option, (6) by
arrangement with a broker that is acceptable to the Committee where payment of
the Option price is made pursuant to an irrevocable direction to the broker to
deliver all or part of the proceeds from the sale of the Option Shares to the
Company in payment of the Option price, or (7) any combination of the foregoing.
The Committee in its sole discretion may accept a personal check in full or
partial payment of any Shares. If the exercise price is paid in whole or in part
with Shares, the value of the Shares surrendered shall be their Fair Market
Value on the date the Option is exercised. The Company in its sole discretion
may, on an individual basis or pursuant to a general program established in
connection with this Plan, and subject to applicable law, lend money to an
Optionee, guarantee a loan to an Optionee, or otherwise assist an Optionee to
obtain the cash necessary to exercise all or a portion of an Option granted
hereunder or to pay any tax liability of the Optionee attributable to such
exercise. If the exercise price is paid in whole or part with Optionee's
promissory note, such note shall (i) provide for full recourse to the maker,
(ii) be collateralized by the pledge of the Shares that the Optionee purchases
upon exercise of such Option, (iii) bear interest at a rate no less than the
prime rate of the Company's principal lender, and (iv) contain such other terms
as the Board in its sole discretion shall reasonably require. No Optionee shall
be deemed to be a holder of any Shares subject to an Option unless and until a
stock certificate or certificates for such Shares are issued to such person(s)
under the terms of this Plan. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as expressly provided in Section 10
hereof.
8. EXERCISABILITY OF OPTIONS. Except as otherwise provided in this
Section 8, any Option shall become exercisable in 1/3 increments on each
anniversary of the date of grant thereof.
(a) The expiration date of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of 10 years from the date on which the Option
is granted.
(b) Unless otherwise provided in any Option, each outstanding
Option shall become immediately fully exercisable:
(i) if there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan), that has the result that
shareholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of
the Company or of any entity that results from the
participation of the Company in a reorganization,
consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) if the shareholders of the Company shall approve
a plan of merger, consolidation, reorganization, liquidation
or dissolution in which the Company does not survive (unless
the approved merger, consolidation, reorganization,
liquidation or dissolution is subsequently abandoned); or
(iii) if the shareholders of the Company shall
approve a plan for the sale, lease, exchange or other
disposition of all or substantially all the property and
assets of the Company (unless such plan is subsequently
abandoned).
(c) The Committee may in its sole discretion accelerate the
date on which any Option may be exercised and may accelerate the vesting of any
Shares subject to any Option.
(d) Options held by a Director shall become immediately fully
exercisable in the event such Director is either not reelected to the Board
subsequent to his nomination or is not nominated for such reelection.
-4-
<PAGE>
9. TERMINATION OF OPTION PERIOD.
(a) The unexercised portion of any Option granted to an
Optionee shall automatically and without notice terminate and become null and
void at the time of the earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment with the Company or any Subsidiary, or
service as a Director, is terminated or, in the case of a
Non-Qualified Stock Option and unless the Committee shall
otherwise determine in writing in its sole discretion, the
date on which the Optionee's employment with the Company or
any Subsidiary, or service as a Director, is terminated, in
either case for any reason other than by reason of (A) Cause,
which shall mean "Cause" under such Optionee's employment
agreement, if any, and which, solely for purposes of this
Plan, also shall mean the termination of the Optionee's
employment or the removal of the Optionee as a Director by
reason of the Optionee's willful misconduct or gross
negligence, (B) the Optionee's mental or physical disability
(within the meaning of Code Section 22(e)) as determined by a
medical doctor satisfactory to the Committee, or (C) the
Optionee's death;
(ii) immediately upon the termination of the
Optionee's employment with the Company or any Subsidiary, or
service as a Director, for Cause;
(iii) twelve months after the date on which the
Optionee's employment with the Company or any Subsidiary, or
service as a Director is terminated by reason of mental or
physical disability (within the meaning of Code Section 22(e))
as determined by a medical doctor satisfactory to the
Committee; or
(iv) (A) twelve months after the date of the
Optionee's death or (B) three months after the date of the
Optionee's death if such death shall occur during the twelve
month period specified in Subsection 10(a)(iii) hereof.
(b) The Board or the Committee in its sole discretion may by
giving written notice (the "Cancellation Notice") cancel, effective upon the
date of the consummation of any corporate transaction described in Subsections
8(b)(i), (ii) or (iii) hereof, any Option that remains unexercised on such date.
Such Cancellation Notice shall be given a reasonable period of time prior to the
proposed date of such cancellation and may be given either before or after
approval of such corporate transaction.
10. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan,
and to any one Optionee, so that the same percentage of the
Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then
subject to any outstanding Option, so that the same percentage
of the Company's issued and outstanding Shares shall remain
subject to purchase at the same aggregate exercise price.
-5-
<PAGE>
(b) Unless otherwise provided in any Option, the Committee may
change the terms of Options outstanding under this Plan, including with respect
to the option price or the number of Shares subject to the Options, or both,
when, in the Committee's sole discretion, such adjustments become appropriate by
reason of a corporate transaction described in Subsections 8(b)(i), (ii) or
(iii) hereof.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to the number of or
exercise price of Shares then subject to outstanding Options granted under the
Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise or would otherwise prohibit the registration of the
Common Stock on Form S-8.
11. TRANSFERABILITY OF OPTIONS AND SHARES.
(a) No Incentive Stock Option, and unless the Committee's
prior written consent is obtained and the transaction does not violate the
requirements of Rule 16b-3 promulgated under the Exchange Act or would otherwise
prohibit the registration of the Common Stock on Form S-8, no Non-Qualified
Stock Option, shall be subject to alienation, assignment, pledge, charge or
other transfer other than by the Optionee by will or the laws of descent and
distribution, and any attempt to make any such prohibited transfer shall be
void. Each Option shall be exercisable during the Optionee's lifetime only by
the Optionee, or in the case of a Non-Qualified Stock Option that has been
assigned or otherwise transferred with the Committee's prior written consent,
only by the assignee consented to by the Committee.
(b) Unless the Committee's prior written consent is obtained
and the transaction does not violate the requirements of Rule 16b-3 promulgated
under the Exchange Act, no Shares acquired by an Officer, as that term is
defined under Rule 16b-3, of the Company or Director pursuant to the exercise of
an Option may be sold, assigned, pledged or otherwise transferred prior to the
expiration of the six-month period following the date on which the Option was
granted.
12. ISSUANCE OF SHARES.
(a) Notwithstanding any other provision of this Plan, the
Company shall not be obligated to issue any Shares unless it is advised by
counsel of its selection that it may do so without violation of the applicable
Federal and State laws pertaining to the issuance of securities, and may require
any stock so issued to bear a legend, may give its transfer agent instructions,
and may take such other steps, as in its judgment are reasonably required to
prevent any such violation.
(b) As a condition of any sale or issuance of Shares upon
exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
-6-
<PAGE>
(i) a representation and warranty by the Optionee to
the Company, at the time any Option is exercised, that he is
acquiring the Shares to be issued to him for investment and
not with a view to, or for sale in connection with, the
distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to
be bound by any legends that are, in the opinion of the
Committee, necessary or appropriate to comply with the
provisions of any securities law deemed by the Committee to be
applicable to the issuance of the Shares and are endorsed upon
the Share certificates.
13. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee, which
shall consist of not less than two Directors, each of whom shall be Outside
Directors, or in the absence of such a Committee, the entire Board. The
Committee shall have all of the powers of the Board with respect to the Plan.
Any member of the Committee may be removed at any time, with or without cause,
by resolution of the Board, and any vacancy occurring in the membership of the
Committee may be filled by appointment of the Board.
(b) The Board itself shall have the power to grant Options to
employees or Directors of the Company or any Subsidiary. If and to the extent
that the Board exercises such power, then all references herein to the Committee
shall refer to the Board with respect to the Options granted by the Board.
(c) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of the Plan. The Committee's
determinations and its interpretation and construction of any provision of the
Plan shall be final and conclusive.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the unanimous written approval of the
members of the Committee.
14. WITHHOLDING OR DEDUCTION FOR TAXES. If at any time specified herein
for the making of any issuance or delivery of any Option or Common Stock to any
Optionee, any law or regulation of any governmental authority having
jurisdiction in the premises shall require the Company to withhold, or to make
any deduction for, any taxes or take any other action in connection with the
issuance or delivery then to be made, such issuance or delivery shall be
deferred until such withholding or deduction shall have been provided for by the
Optionee or beneficiary, or other appropriate action shall have been taken.
15. INTERPRETATION.
(a) As it is the intent of the Company that the Plan comply in
all respects with Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3"),
any ambiguities or inconsistencies in construction of the Plan shall be
interpreted to give effect to such intention, and if any provision of the Plan
is found not to be in compliance with Rule 16b-3, such provision shall be deemed
null and void to the extent required to permit the Plan to comply with Rule
16b-3. The Board and the Committee each may from time to time adopt rules and
regulations under, and amend, the Plan in furtherance of the intent of the
foregoing.
(b) The Plan shall be administered and interpreted so that all
Incentive Stock Options granted under the Plan will qualify as Incentive Stock
Options under section 422 of the Code. If any provision of the Plan should be
held invalid for the granting of Incentive Stock Options or illegal for any
reason, such determination shall not affect the remaining provisions hereof, but
instead the Plan shall be construed and enforced as if such provision had never
been included in the Plan.
(c) This Plan shall be governed by the laws of the State of
Florida.
-7-
<PAGE>
(d) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan.
(e) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
16. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Board and the
Committee each may from time to time amend the Plan or any Option in accordance
with the rules and regulations of the applicable United States national
securities exchange or automated quotation system; provided, however, that,
except to the extent provided in Section 10, no such amendment may, without
approval by the shareholders of the Company, (i) increase the number of
securities which may be issued under the Plan pursuant to the exercise of
Incentive Stock Options, (ii) modify the requirements as to eligibility for
participation in the Plan or (iii) increase the aggregate number of Options that
may be granted to any one Optionee; and provided further, that, except to the
extent provided in Section 9, no amendment or suspension of the Plan or any
Option issued hereunder shall substantially impair any Option previously granted
to any Optionee without the consent of such Optionee.
17. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be effective
upon the Effective Date and shall terminate on the 10th anniversary of the
Effective Date.
-8-
<PAGE>
ANNEX C
CHS ELECTRONICS, INC.
-----------------------------------
1996 CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN
------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of CHS
Electronics, Inc., a Florida corporation (the "Company"), by providing an
additional incentive to Claudio Osorio ("Osorio"), the Company's Chief Executive
Officer, to pursue future acquisitions on behalf of the Company.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Company's Board of Directors.
(b) "Common Stock" shall mean the Common Stock, par value
$.001 per share, of the Company.
(c) "Option" (when capitalized) shall mean any option granted
under this Plan.
(d) "Option Agreement" means the agreement between the Company
and Osorio for the grant of an option.
(e) "Plan" shall mean this 1996 Chief Executive Officer Stock
Option Plan for the Company.
(f) "Qualifying Acquisition" shall mean any acquisition by the
Company where greater than 50% of the purchase price is comprised of Common
Stock as calculated by an earn-out formula at the end of the particular earn-out
period.
(g) "Share(s)" shall mean a share or shares of the Common
Stock.
3. SHARES AND OPTIONS. Subject to Section 9 of this Plan, the Company
may grant to Osorio from time to time Options to purchase an aggregate of up to
Five Hundred Thousand (500,000) Shares from authorized and unissued Shares. If
any Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares.
4. GRANTS OF OPTIONS.
(a) The Board shall grant Osorio such number of Options as
provided in item (b) immediately below upon the approval by the Board of each
Qualifying Acquisition.
(b) The number of Options to be granted to Osorio at the time
each Qualifying Acquisition is approved will be determined by multiplying the
prior year net revenue (as indicated in financial statements audited by an
independent accounting firm) of the target company of the Qualifying Acquisition
(the "Acquired Company") by one percent and then dividing such calculated amount
by the Exercise Price (as defined below); provided, however, that the Company's
Compensation Committee may recommend an alternative method for determining the
number of shares in such cases where prior net revenues for any particular
Acquired Company are deemed to be inconsistent with such company's reasonably
expected future results as determined solely by the Company's Compensation
Committee and approved by the Board.
(c) Osorio may be granted Options in connection with
acquisitions made by the Company that are not Qualifying Acquisitions upon the
recommendation of the Company's Compensation Committee and approval by the
Board.
<PAGE>
5. EXERCISE PRICE. The exercise price per Share of any Option (the
"Exercise Price") shall be the closing market price of the Company's Shares as
reported on the Nasdaq National Market on the date of the grant of an Option or
such other price as recommended by the Company's Compensation Committee and
approved by the Board.
6. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate exercise price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Board in its sole discretion have been made for
Osorio's payment to the Company of the amount that is necessary for the Company
to withhold in accordance with applicable Federal or state tax withholding
requirements. The exercise price of any Shares purchased shall be paid in cash,
by certified or official bank check or personal check, by money order, with
Shares or by a combination of the above. If the exercise price is paid in whole
or in part with Shares, the value of the Shares surrendered shall be the closing
reported price on the Nasdaq National Market on the date the Option is
exercised. Osorio shall not be deemed to be a holder of any Shares subject to an
Option unless and until a stock certificate or certificates for such Shares are
issued to him under the terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 9 hereof.
7. EXERCISE SCHEDULE FOR OPTIONS. Each Option granted under the Plan
shall vest at a rate equal to one share for each $5.00 of cumulative pretax
profit (net of any minority interest on a pretax basis) contributed by the
particular Acquired Company subsequent to the date of the acquisition of such
company and included by the Company in its consolidated financial statements.
The cumulative pretax profit and minority interest contributed by an Acquired
Company shall be measured on a quarterly basis consistent with the reporting
practices of the Company.
8. TERMINATION OF OPTION PERIOD. The unexercised portion of any Option
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:
(a) three months after the date on which Osorio ceases to be
Chief Executive Officer of the Company for any reason other than by reason of
(A) "Cause" (which, for purposes of this Plan, shall mean the removal of Osorio
as Chief Executive Officer by reason of any act of (i) fraud or intentional
misrepresentation, or (ii) embezzlement, misappropriation, or conversion of
assets or opportunities of the Company or any Subsidiary), or (B) death;
(b) immediately upon the removal of Osorio as Chief Executive
Officer for Cause;
(c) one year after the date Osorio ceases to be Chief
Executive Officer by reason of his death;
(d) on the fifth anniversary of the issuance of any such
Option.
9. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
2
<PAGE>
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(b) Subject to the specific terms of any Option, the Board may
change the terms of Options outstanding under this Plan, with respect to the
exercise price or the number of Shares subject to the Options, or both, when, in
the Board's sole discretion, such adjustments become appropriate.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of the Shares then subject to outstanding Options granted under
the Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Board may require such agreements or
undertakings, if any, as the Board may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by Osorio to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to
be bound by any legends that are, in the opinion of the Board, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Board to be applicable to the issuance of the Shares and are endorsed upon the
Share certificates.
11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board, which shall have the authority to adopt such rules and regulations and to
make such determinations as are not inconsistent with the Plan and as are
necessary or desirable for the implementation and administration of the Plan.
12. INTERPRETATION. If any provision of the Plan should be held invalid
or illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan. The determinations and the
interpretation and construction of any provision of the Plan by the Board shall
be final and conclusive. This Plan shall be governed by the laws of the State of
Florida. Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan.
13. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
3
<PAGE>
(a) This Plan shall become effective upon its adoption by the
Board, and shall continue in effect until all Options granted hereunder have
expired or have been exercised, unless sooner terminated under the provisions
relating thereto. No Option shall be granted after ten years from the date of
the Board's adoption of this Plan.
(b) The Board may from time to time amend the Plan or any
Option; PROVIDED, HOWEVER, that, no amendment or suspension of the Plan or any
Option issued hereunder shall substantially impair any Option previously granted
to Osorio without his consent.
(c) The Board may at any time terminate or suspend this Plan.
Any such termination or suspension of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if this Plan
had not been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated. The rights and obligations under any Option
granted to Osorio while this Plan is in effect shall not be altered or impaired
by the suspension or termination of this Plan without the consent of Osorio.
14. RESERVATION OF SHARES. The Company, during the term of the Plan,
will at all times reserve and keep available a number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
4
<PAGE>
ANNEX D
CHS ELECTRONICS, INC.
-----------------------------------
1997 CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN
------------------------------------
1. PURPOSE. The purpose of this Plan is to advance the interests of CHS
Electronics, Inc., a Florida corporation (the "Company"), by providing an
additional incentive to Claudio Osorio ("Osorio"), the Company's Chief Executive
Officer, to pursue future acquisitions on behalf of the Company.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Board" shall mean the Company's Board of Directors.
(b) "Common Stock" shall mean the Common Stock, par value
$.001 per share, of the Company.
(c) "Option" (when capitalized) shall mean any option granted
under this Plan.
(d) "Option Agreement" means the agreement between the Company
and Osorio for the grant of an option.
(e) "Plan" shall mean this 1997 Chief Executive Officer Stock
Option Plan for the Company.
(f) "Share(s)" shall mean a share or shares of the Common
Stock.
3. SHARES AND OPTIONS. Subject to Section 9 of this Plan, the Company
may grant to Osorio from time to time Options to purchase an aggregate of up to
Five Hundred Thousand (500,000) Shares from authorized and unissued Shares. If
any Option granted under the Plan shall terminate, expire, or be canceled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares.
4. GRANTS OF OPTIONS.
(a) The Board may grant Osorio such number of Options as
provided in item (b) immediately below upon its approval of any business
acquisition made by the Company.
(b) The number of Options to be granted to Osorio at the time
a business acquisition is approved by the Board will be determined by
multiplying the prior year net revenue (as indicated in financial statements
audited by an independent accounting firm) of the target business entity (the
"Acquired Company") by one percent and then dividing such calculated amount by
the Exercise Price (as defined below); provided, however, that the Company's
Compensation Committee may recommend an alternative method for determining the
number of shares in such cases where prior net revenues for any particular
Acquired Company are deemed to be inconsistent with such company's reasonably
expected future results as determined solely by the Company's Compensation
Committee and approved by the Board.
5. EXERCISE PRICE. The exercise price per Share of any Option (the
"Exercise Price") shall be the closing market price of the Company's Shares as
reported on the Nasdaq National Market on the date of the grant of an Option or
such other price as recommended by the Company's Compensation Committee and
approved by the Board.
<PAGE>
6. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i)
the Company has received written notice of such exercise in accordance with the
terms of the Option, (ii) full payment of the aggregate exercise price of the
Shares as to which the Option is exercised has been made, and (iii) arrangements
that are satisfactory to the Board in its sole discretion have been made for
Osorio's payment to the Company of the amount that is necessary for the Company
to withhold in accordance with applicable Federal or state tax withholding
requirements. The exercise price of any Shares purchased shall be paid in cash,
by certified or official bank check or personal check, by money order, with
Shares or by a combination of the above. If the exercise price is paid in whole
or in part with Shares, the value of the Shares surrendered shall be the closing
reported price on the Nasdaq National Market on the date the Option is
exercised. Osorio shall not be deemed to be a holder of any Shares subject to an
Option unless and until a stock certificate or certificates for such Shares are
issued to him under the terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash, securities or other
property) or distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as expressly provided in
Section 9 hereof.
7. EXERCISE SCHEDULE FOR OPTIONS. Each Option granted under the Plan
shall vest at a rate equal to one share for each $5.00 of cumulative pretax
profit (net of any minority interest on a pretax basis) contributed by the
particular Acquired Company subsequent to the date of the acquisition of such
company and included by the Company in its consolidated financial statements.
The cumulative pretax profit and minority interest contributed by an Acquired
Company shall be measured on a quarterly basis consistent with the reporting
practices of the Company.
8. TERMINATION OF OPTION PERIOD. The unexercised portion of any Option
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:
(a) three months after the date on which Osorio ceases to be
Chief Executive Officer of the Company for any reason other than by reason of
(A) "Cause" (which, for purposes of this Plan, shall mean the removal of Osorio
as Chief Executive Officer by reason of any act of (i) fraud or intentional
misrepresentation, or (ii) embezzlement, misappropriation, or conversion of
assets or opportunities of the Company or any Subsidiary), or (B) death;
(b) immediately upon the removal of Osorio as Chief Executive
Officer for Cause;
(c) one year after the date Osorio ceases to be Chief
Executive Officer by reason of his death;
(d) on the fifth anniversary of the issuance of any such
Option.
9. ADJUSTMENT OF SHARES.
(a) If at any time while the Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split-up, combination or
exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under the Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned; and
2
<PAGE>
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price.
(b) Subject to the specific terms of any Option, the Board may
change the terms of Options outstanding under this Plan, with respect to the
exercise price or the number of Shares subject to the Options, or both, when, in
the Board's sole discretion, such adjustments become appropriate.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale or upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or obligations of the Company
convertible into such shares or other securities, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
exercise price of the Shares then subject to outstanding Options granted under
the Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under the Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Board may require such agreements or
undertakings, if any, as the Board may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by Osorio to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) a representation, warranty and/or agreement to
be bound by any legends that are, in the opinion of the Board, necessary or
appropriate to comply with the provisions of any securities law deemed by the
Board to be applicable to the issuance of the Shares and are endorsed upon the
Share certificates.
11. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Board, which shall have the authority to adopt such rules and regulations and to
make such determinations as are not inconsistent with the Plan and as are
necessary or desirable for the implementation and administration of the Plan.
12. INTERPRETATION. If any provision of the Plan should be held invalid
or illegal for any reason, such determination shall not affect the remaining
provisions hereof, but instead the Plan shall be construed and enforced as if
such provision had never been included in the Plan. The determinations and the
interpretation and construction of any provision of the Plan by the Board shall
be final and conclusive. This Plan shall be governed by the laws of the State of
Florida. Headings contained in this Plan are for convenience only and shall in
no manner be construed as part of this Plan.
13. TERM OF PLAN; AMENDMENT AND TERMINATION OF THE PLAN.
(a) This Plan shall become effective upon its adoption by the
Board, and shall continue in effect until all Options granted hereunder have
expired or have been exercised, unless sooner terminated under the
3
<PAGE>
provisions relating thereto. No Option shall be granted after ten years from
the date of the Board's adoption of this Plan.
(b) The Board may from time to time amend the Plan or any
Option; PROVIDED, HOWEVER, that, no amendment or suspension of the Plan or any
Option issued hereunder shall substantially impair any Option previously granted
to Osorio without his consent.
(c) The Board may at any time terminate or suspend this Plan.
Any such termination or suspension of the Plan shall not affect Options already
granted and such Options shall remain in full force and effect as if this Plan
had not been terminated or suspended. No Option may be granted while the Plan is
suspended or after it is terminated. The rights and obligations under any Option
granted to Osorio while this Plan is in effect shall not be altered or impaired
by the suspension or termination of this Plan without the consent of Osorio.
14. RESERVATION OF SHARES. The Company, during the term of the Plan,
will at all times reserve and keep available a number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
4
<PAGE>
ANNEX E
CHS ELECTRONICS, INC.
1997 CHIEF EXECUTIVE OFFICER CASH BONUS PERFORMANCE PLAN
SECTION 1. PURPOSE OF PLAN
The purpose of the Plan is to promote the success of the Company by
providing Claudio Osorio, the Company's Chief Executive Officer, bonus
incentives that qualify as performance-based compensation within the meaning of
Section 162(m) of the Code.
SECTION 2. DEFINITIONS AND TERMS
2.1. ACCOUNTING TERMS. Except as otherwise expressly provided or the
context otherwise requires, financial and accounting terms are used as defined
for purposes of, and shall be determined in accordance with, generally accepted
accounting principles.
2.2. SPECIFIC TERMS. The following words and phrases as used herein
shall have the following meanings:
"BASE SALARY" with respect to any Performance Period means the
aggregate base annualized salary of the Participant at the time the
Participant is selected to participate for that Performance Period,
exclusive of any commissions or other actual or imputed income from any
Company-provided benefits or perquisites, but prior to any reductions
for salary deferred pursuant to any deferred compensation plan or for
contributions to a plan qualifying under Section 401(k) of the Code or
contributions to a cafeteria plan under Section 125 of the Code.
"BONUS" means a cash payment or payment opportunity as the
context requires.
"BUSINESS CRITERIA" means any one or any combination of
EPS or Debt to Equity Ratio for the Company.
"CHANGE IN CONTROL" shall refer to such corporate event where:
(i) there occurs any transaction (which shall
include a series of transactions occurring within 60 days or
occurring pursuant to a plan), that has the result that
shareholders of the Company immediately before such
transaction cease to own at least 51% of the voting stock of
the Company or of any entity that results from the
participation of the Company in a reorganization,
consolidation, merger, liquidation or any other form of
corporate transaction;
(ii) the shareholders of the Company approve a
plan of merger, consolidation, reorganization, liquidation or
dissolution in which the Company does not survive (unless the
approved merger, consolidation, reorganization, liquidation or
dissolution is subsequently abandoned); or
(iii) the shareholders of the Company approve a
plan for the sale, lease, exchange or other disposition of all
or substantially all the property and assets of the Company
(unless such plan is subsequently abandoned).
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMITTEE" means the Compensation Committee of the Company
which has been established to administer the Plan in accordance with
Section 3.1 and Section 162(m) of the Code.
<PAGE>
"COMPANY" means CHS Electronics, Inc. and any successor
whether by merger, ownership of all or substantially all of its assets
or otherwise.
"DEBT TO EQUITY RATIO" means such ratio derived from the
comparison of the Company's total outstanding debt to the Company's
shareholders' equity, each as reported in the Company's Consolidated
Balance Sheet set forth in the audited consolidated financial statements
of the Company for the Year. Debt shall include long and short term
interest bearing amounts owed to banks or others. Debt shall not include
accruals or trade payables.
"DISABILITY" shall have such meaning attributed thereto in the
Company's long-term disability plan, or, if no such plan exists, shall
mean a "Permanent and Total Disability" as defined in Code Section
22(e).
"EPS" for any Year means fully diluted (or such equivalent
term as currently in use) earnings per share of the Company as reported
in the Company's Consolidated Statement of Income set forth in the
audited consolidated financial statements of the Company for the Year.
"NET INCOME" for any Year means the consolidated net income of
the Company as reported in the audited consolidated financial statements
of the Company for the Year.
"PARTICIPANT" means Claudio Osorio, the Company's Chief
Executive Officer.
"PERFORMANCE PERIOD" means the Year or Years with respect to
which the Performance Targets are set by the Committee.
"PERFORMANCE TARGET(S)" means the specific objective goal or
goals (which may be cumulative and/or alternative) that are timely set
in writing by the Committee for the Participant for the Performance
Period with respect to any one or more of the Business Criteria.
"PLAN" means the Company's 1997 Chief Executive Officer Cash
Bonus Performance Plan as amended from time to time.
"SECTION 162(M)" means Section 162(m) of the Code, and the
regulations promulgated thereunder, all as amended from time to time.
"YEAR" means any one or more fiscal years of the Company
commencing on or after January 1, 1997 that represent(s) the applicable
Performance Period.
SECTION 3. ADMINISTRATION OF THE PLAN
3.1. THE COMMITTEE. The Plan shall be administered by a Committee
consisting solely of at least two members of the Board of Directors of the
Company, duly authorized by the Board of Directors of the Company to administer
the Plan, who (i) are not eligible to participate in the Plan and (ii) are
"outside directors" within the meaning of Section 162(m).
3.2. POWERS OF THE COMMITTEE. The Committee shall have the sole
authority to establish and administer the Performance Target(s) and, subject to
Sections 4 and 5 of the Plan, the amount of any Bonus and shall otherwise be
responsible for the administration of the Plan, in accordance with its terms.
The Committee shall have the authority to construe and interpret the Plan
(except as otherwise provided herein) and any agreement or other document
relating to any Bonus under the Plan, may adopt rules and regulations governing
the administration of the Plan, and shall exercise all other duties and powers
conferred on it by the Plan, or which are incidental or ancillary thereto. For
each Performance Period, the Committee shall determine the Business Criteria and
the Performance Target(s) applicable to the Participant.
2
<PAGE>
3.3. REQUISITE ACTION. A majority (but not fewer than two) of the
members of the Committee shall constitute a quorum. The vote of a majority of
those present at a meeting at which a quorum is present or the unanimous written
consent of the Committee shall constitute action by the Committee.
3.4. EXPRESS AUTHORITY (AND LIMITATIONS ON AUTHORITY) TO CHANGE
TERMS AND CONDITIONS OF BONUS. Without limiting the Committee's authority under
other provisions of the Plan, but subject to any express limitations of the Plan
and Section 5.8, the Committee shall have the authority to accelerate a Bonus
(after the attainment of the applicable Performance Target(s)) and to waive
restrictive conditions for a Bonus (including any forfeiture conditions, but not
Performance Target(s)), in such circumstances as the Committee deems
appropriate. In the case of any acceleration of a Bonus after the attainment of
the applicable Performance Target(s), the amount payable shall be discounted to
its present value using an interest rate equal to Moody's Average Corporate Bond
Yield for the month preceding the month in which such acceleration occurs.
SECTION 4. BONUS PROVISIONS
4.1. PROVISION FOR BONUS. The Participant may receive a Bonus if
and only if the Performance Target(s) established by the Committee, relative to
the applicable Business Criteria, are attained. The applicable Performance
Period and Performance Target(s) shall be determined by the Committee consistent
with the terms of the Plan and Section 162(m). Notwithstanding the fact that the
Performance Target(s) have been attained, the Company may pay a Bonus of less
than the amount determined by the formula or standard established pursuant to
Section 4.2 or may pay no Bonus at all, unless the Committee expressly provides
otherwise by written contract or other written commitment.
4.2. SELECTION OF PERFORMANCE TARGET(S). The specific Performance
Target(s) with respect to the Business Criteria must be established by the
Committee in advance of the deadlines applicable under Section 162(m) and while
the performance relating to the Performance Target(s) remains substantially
uncertain within the meaning of Section 162(m). At the time the Performance
Target(s) are selected, the Committee shall provide, in terms of an objective
formula or standard for each Participant, and for any person who may become a
Participant after the Performance Target(s) are set, the method of computing the
specific amount that will represent the maximum amount of Bonus payable to the
Participant if the Performance Target(s) are attained, subject to Sections 4.1,
4.3, 4.6, 5.1 and 5.8.
4.3. MAXIMUM INDIVIDUAL BONUS. Notwithstanding any other provision
hereof, the Participant shall not receive a Bonus under the Plan for any fiscal
year in excess of $2.5 million.
4.4. TERMINATION OF EMPLOYMENT DURING YEAR. Unless otherwise
determined by the Committee or required by applicable law or pursuant to any
written agreement between the Company and the Participant:
(a) no Bonus shall be payable to the Participant if the
Participant is not employed by the Company or any subsidiary of the
Company on the last day of the Performance Period for which the Bonus
is otherwise payable, unless the Participant's employment with the
Company and its subsidiaries terminates during the Performance Period
by reason of the Participant's death or Disability or following a
Change in Control, and
(b) in the event of the Participant's death or Disability
during the Performance Period, or in the event of the termination of
the Participant's employment for any reason following a Change in
Control that occurs during the Performance Period, the Participant
(or the Participant's legal representative or beneficiary) shall
receive a Bonus equal to the product of (i) the Bonus he would have
received for the entire Performance Period, multiplied by (ii) a
fraction, the numerator of which is the number of days during the
Performance Period in which the Participant was an employee of the
Company or its subsidiaries, and the denominator of which is the
number of days in the Performance Period.
Payment of such Bonus shall be made in accordance with Section 4.8 hereof.
3
<PAGE>
4.5. ACCOUNTING CHANGES. Subject to Section 5.8, if, after the
Performance Target(s) are established for a Performance Period, a change occurs
in the applicable accounting principles or practices, the amount of the Bonuses
paid under this Plan for such Performance Period shall be determined without
regard to such change.
4.6. COMMITTEE DISCRETION TO DETERMINE BONUSES. The Committee has
the sole discretion to determine the standard or formula pursuant to which the
Participant's Bonus shall be calculated (in accordance with Section 4.2),
whether all or any portion of the amount so calculated will be paid, and the
specific amount (if any) to be paid to the Participant, subject in all cases to
the terms, conditions and limits of the Plan and of any other written commitment
authorized by the Committee. To this same extent, the Committee may at any time
establish additional conditions and terms of payment of Bonuses (including but
not limited to the achievement of other financial, strategic or individual
goals, which may be objective or subjective) as it may deem desirable in
carrying out the purposes of the Plan and may take into account such other
factors as it deems appropriate in administering any aspect of the Plan. The
Committee may not, however, increase the maximum amount permitted to be paid to
the Participant under Section 4.2 or 4.3 of the Plan or award a Bonus under this
Plan if the applicable Performance Target(s) have not been satisfied.
4.7. COMMITTEE CERTIFICATION. The Participant shall not receive any
payment under the Plan unless the Committee has certified, by resolution or
other appropriate action in writing, that the amount thereof has been accurately
determined in accordance with the terms, conditions and limits of the Plan and
that the Performance Target(s) and any other material terms previously
established by the Committee or set forth in the Plan were in fact satisfied.
4.8. TIME OF PAYMENT. Any Bonuses granted by the Committee under
the Plan shall be paid as soon as practicable following the Committee's
determinations under this Section 4 and the certification of the Committee's
findings under Section 4.7. Any such payment shall be in cash or cash
equivalents, subject to applicable withholding requirements. If and to the
extent permitted by the Committee, and in accordance with such rules as the
Committee may from time to time adopt, the Participant may, prior to the
beginning of any Performance Period, elect to defer the payout of all or any
portion of a Bonus relating to such Performance Period. In the case of the delay
of a Bonus otherwise payable at or after the attainment and certification of the
applicable Performance Target(s), any additional amount payable shall be based
on Moody's Average Corporate Bond Yield over the deferral period.
SECTION 5. GENERAL PROVISIONS
5.1. NO RIGHT TO BONUS OR CONTINUED EMPLOYMENT. Neither the
establishment of the Plan nor the provision for or payment of any amounts
hereunder nor any action of the Company (including, for purposes of this Section
5.1, any predecessor or subsidiary), the Board of Directors of the Company or
the Committee in respect of the Plan, shall be held or construed to confer upon
the Participant any legal right to receive, or any interest in, a Bonus or any
other benefit under the Plan, or any legal right to be continued in the employ
of the Company. The Company expressly reserves any and all rights to discharge
the Participant in its sole discretion, without liability of any person, entity
or governing body under the Plan or otherwise, except to the extent otherwise
provided in any written employment agreement between the Company and the
Participant. Notwithstanding any other provision hereof and notwithstanding the
fact that the Performance Target(s) have been attained and/or the maximum amount
pursuant to Section 4.2 has been calculated, the Company shall have no
obligation to pay any Bonus hereunder nor to pay the maximum amount so
calculated, unless the Committee otherwise expressly provides by written
contract or other written commitment.
5.2. DISCRETION OF COMPANY, BOARD OF DIRECTORS AND COMMITTEE. Any
decision made or action taken by the Company or by the Board of Directors of the
Company or by the Committee arising out of or in connection with the creation,
amendment, construction, administration, interpretation and effect of the Plan
shall be within the absolute discretion of such entity and shall be conclusive
and binding upon all persons. No member of the Committee shall have any
liability for actions taken or omitted under the Plan by the member or any other
person.
4
<PAGE>
5.3. ABSENCE OF LIABILITY. A member of the Board of Directors of
the Company or a member of the Committee or any officer of the Company shall not
be liable for any act or inaction hereunder, whether of commission or omission.
5.4. NO FUNDING OF PLAN. The Company shall not be required to fund
or otherwise segregate any cash or any other assets which may at any time be
paid to the Participant under the Plan. The Plan shall constitute an "unfunded"
plan of the Company. The Company shall not, by any provisions of the Plan, be
deemed to be a trustee of any property, and any obligations of the Company to
the Participant under the Plan shall be those of a debtor and any rights of the
Participant shall be limited to those of a general unsecured creditor.
5.5. NON-TRANSFERABILITY OF BENEFITS AND INTERESTS. Except as
expressly provided by the Committee, no benefit payable under the Plan shall be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or charge, and any such attempted action shall be void and
no such benefit shall be in any manner liable for or subject to debts,
contracts, liabilities, engagements or torts of the Participant. This Section
5.5 shall not apply to an assignment of a contingency or payment due after the
death of the Participant to the deceased Participant's legal representative or
beneficiary.
5.6. LAW TO GOVERN. All questions pertaining to the construction,
regulation, validity and effect of the provisions of the Plan shall be
determined in accordance with the laws of the State of Florida.
5.7. NON-EXCLUSIVITY. Subject to Section 5.8, the Plan does not limit
the authority of the Company, the Board or the Committee, or any subsidiary of
the Company, to grant awards or authorize any other compensation under any other
plan or authority, including, without limitation, awards or other compensation
based on the same Performance Target(s) used under the Plan. In addition, the
Participant may participate in other benefit plans of the Company.
5.8. SECTION 162(M) CONDITIONS; BIFURCATION OF PLAN. It is the
intent of the Company that the Plan and Bonuses paid hereunder satisfy and be
interpreted in a manner, that, in the case of compensation that is paid to the
Participant that is subject to Section 162(m), satisfies any applicable
requirements as performance-based compensation. Any provision, application or
interpretation of the Plan inconsistent with this intent to satisfy the
standards in Section 162(m) of the Code shall be disregarded. Notwithstanding
anything to the contrary in the Plan, the provisions of the Plan may at any time
be bifurcated by the Board or the Committee in any manner so that certain
provisions of the Plan or any Bonus intended or required in order to satisfy the
applicable requirements of Section 162(m) are only applicable to persons whose
compensation is subject to Section 162(m).
SECTION 6. EFFECTIVE DATE, AMENDMENTS, SUSPENSION OR TERMINATION OF PLAN
The Plan shall be effective as of January 1, 1997, subject to its
approval by shareholders of the Company at the annual meeting of shareholders to
be held July 31, 1997, or any adjournment or postponement thereof. The Board of
Directors or the Committee may from time to time amend, suspend or terminate in
whole or in part, and if suspended or terminated, may reinstate, any or all of
the provisions of the Plan. Notwithstanding the foregoing, no amendment may be
effective without Board of Directors and/or shareholder approval if such
approval is necessary to comply with the applicable rules under Section 162(m)
of the Code. Unless sooner terminated by the Board of Directors or the
Committee, to the extent necessary to ensure that Bonuses paid to Participant
may be deductible under Section 162(m) for federal income tax purposes, the Plan
shall terminate as of the date of the Company's first meeting of the Company's
shareholders occurring during the year 2002, unless the term of the Plan is
extended and reapproved at such shareholders' meeting. No additional Bonuses may
be payable after termination of the Plan. Termination of the Plan shall not
affect any Bonuses due and outstanding on the date of termination and such
Bonuses shall continue to be subject to the terms of the Plan notwithstanding
its termination.
5
<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
the undersigned is entitled to vote at the 1997 Annual Meeting of Shareholders
of the Company, to be held on Thursday, July 31, 1997, at 10:00 a.m., local
time, at the Doral Golf Resort & Spa, 4400 N.W. 87th Avenue, Miami, Florida
33178, and at any adjournment(s) or postponement(s) 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, CARSTEN FRANK, ANTONIO
BOCCALANDRO, ZBYNEK KRAUS, OTTO GERLACH, PIERINO LARDI 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 approve the Company's Directors and Officers 1997 Stock Option
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) PROPOSAL to approve the Company's 1996 Chief Executive Officer Stock Option
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) PROPOSAL to approve the Company's 1997 Chief Executive Officer Stock Option
Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(6) PROPOSAL to approve the Company's 1997 Chief Executive Officer Cash Bonus
Performance Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(7) PROPOSAL to ratify the reappointment of Grant Thornton LLP, as the Company's
independent certified public accountants.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(8) 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 adjournment(s) or postponement(s) 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:______________________, 1997
__________________________________
(Signature)
__________________________________
(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.
