SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, For Use
of the Commission
Only (as permitted by Rule
14a-6(e)(12))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CHS ELECTRONICS, INC.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date Filed:
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<PAGE>
CHS ELECTRONICS, INC.
2000 NW 84TH AVENUE, MIAMI, FLORIDA 33122
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 9, 1998
-------------------------
To the Shareholders of CHS Electronics, Inc.
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of CHS Electronics, Inc., a Florida corporation (the
"Company"), will be held at 9:00 a.m., local time, on Tuesday, June 9, 1998, at
the Doral Golf Resort and Spa, 4400 N.W. 87th Avenue, Miami, Florida 33178, for
the following purposes:
(1) The election of nine members to the Company's Board of Directors to
hold office until the Company's 1999 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 an amendment to the Company's Directors and Officers
1997 Stock Option Plan;
(4) The approval of an amendment to the Company's 1997 Chief Executive
Officer Stock Option Plan;
(5) The approval of the Company's 1998 Employee Stock Purchase Plan;
(6) The ratification of the appointment of Grant Thornton LLP, as the
Company's independent certified public accountants; and
(7) The transaction of such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on May 7, 1998 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
May 8, 1998
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
<PAGE>
EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND
VOTE THEIR SHARES IN PERSON.
<PAGE>
1998 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 1998 Annual Meeting of Shareholders
(the "Annual Meeting") of the Company to be held at 9:00 a.m., local time, on
Tuesday, June 9, 1998, 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 1997 Annual Report to Shareholders, which accompanies this
Proxy Statement. The Company's principal executive offices are located at 2000
NW 84th Avenue, Miami, Florida 33122 and its telephone number is (305) 908-7200.
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, and the Company may use the
services of a proxy solicitation firm at a cost of up to $5,000. 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 nine members to the Company's Board to serve until the
Company's 1999 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 an amendment to the Company's Directors and Officers
1997 Stock Option Plan;
(4) The approval of an amendment to the Company's 1997 Chief Executive
Officer Stock Option Plan;
(5) The approval of the Company's 1998 Employee Stock Purchase Plan;
(6) The ratification of the appointment of Grant Thornton LLP, as the
Company's independent certified public accountants; and
(7) The transaction of such other business as may properly come before the
Annual Meeting, including any adjournments or postponements thereof.
<PAGE>
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 May 7, 1998 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
49,910,827 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.
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<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of the Record Date
concerning the beneficial ownership of the Common Stock by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director 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. Except as otherwise indicated,
the Company believes that all beneficial owners named below have sole voting and
investment power with respect to all shares of Common Stock beneficially owned
by them.
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER(1)(2)(3) OWNED OWNED
- ------------------------------------ ------------- ------------
Claudio Osorio(4)(5) 6,225,706 12.5%
Alvin Perlman(6) 83,556 *
Carsten Frank(7) 2,575,000 5.3%
Antonio Boccalandro(5) 18,113 *
Otto Gerlach (8) 15,000 *
Zbynek Kraus(9) 15,000 *
Pierino Lardi - *
Bernd Karre 512,247 1.1
Donald D. Winstead(10) 48,750 *
Craig Toll(11) 123,750 *
Clifford Dyer(12) 20,400 *
All officers and directors as a 9,669,282 19.4%
group (12 persons)
Comtrad(4)(13) 6,225,706 12.5%
- --------------------
* Less than 1%
(1) The address for each of the executive officers and directors is 2000 N.W.
84th Avenue, Miami, Florida 33122, except for Carsten Frank which is 11
Silver Crest Road, House D, Silver Strand, Clearwater Bay, Hong Kong.
(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 as of the Record Date.
(4) Includes 2,141,543 shares held of record by Comtrad, Inc. ("Comtrad"), a
wholly-owned subsidiary of Comtrad Holdings, Inc. ("CHI"), 2,882,000
shares held of record by CHI, 463,660 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 738,503
shares held by Mr. Osorio. Claudio Osorio owns and controls a majority of
the issued and outstanding capital stock of CHI. 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
1,447,500 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 431,250 shares of Company Common Stock held
by CHI or any subsidiary thereof. Based on the foregoing relationships
and agreements, Claudio Osorio, CHI and Comtrad
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<PAGE>
may be deemed to have shared voting and investment control over the
above-indicated aggregate number of shares of Common Stock. Such shares
exclude 150,000 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 17,813
shares of Common Stock. Mr. Boccalandro is a director of CHI, who serves
at the discretion of Mr. Osorio as the controlling shareholder of CHI.
Accordingly, Mr. Boccalandro disclaims any investment or voting control
with respect to the Common Stock owned and controlled by CHI.
(6) Mr. Perlman holds currently exercisable options to purchase 40,000 shares
of Common Stock.
(7) Mr. Frank holds currently exercisable options to purchase 25,000 shares
of Common Stock.
(8) Mr. Gerlach owns approximately 11.8% of the outstanding common stock 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
1,447,500 shares of Common Stock owned by CHI. Mr. Gerlach disclaims
beneficial ownership of the shares of Common Stock held by CHI and
Comtrad. Mr. Gerlach holds currently exercisable options to purchase
15,000 shares of Common Stock.
(9) 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. Mr. Kraus holds currently exercisable options to purchase 15,000
shares of Common Stock.
(10) Mr. Winstead is the holder of currently exercisable options to purchase
48,750 shares of Common Stock.
(11) Mr. Toll is the holder of currently exercisable options to purchase a
total of 73,750 shares of Common Stock.
(12) Mr. Dyer is the holder of currently exercisable options to purchase a
total of 20,400 shares of Common Stock.
(13) 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.
ELECTION OF DIRECTORS
Nine 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.
-4-
<PAGE>
The following table sets forth certain information as to the persons
nominated for election as directors of the Company at the Annual Meeting.
NAME AGE POSITION
Claudio Osorio 39 Chairman of the Board, Chief Executive
Officer and President
Alvin Perlman 70 Executive Vice President - Vendor and
Banking Relations and Director
Carsten Frank 34 Executive Vice President - Asian Region and
Director
Antonio Boccalandro 30 Chief Officer of Mergers and Acquisitions,
Secretary and Director
Zbynek Kraus 44 General Manager of Czech Republic Operations
and Director
Otto Gerlach 70 Director
Bernd Karre 53 Director
Pierino Lardi 49 Director
Donald D. Winstead 60 Director
CLAUDIO OSORIO (full name--Claudio Eleazar Osorio Rodriguez), the founder
of the Company's current business and operations, has served as the Chairman of
the Board, President and Chief Executive Officer 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 of the Company since 1993 and Executive
Vice President--Vendor and Banking Relations since August 1997. From 1994 until
August 1997 he was the Executive Vice President--Latin American Region of the
Company. He has served for the past five years as the Chief Executive Officer of
Zemex Electronics, Inc., d/b/a CHS Promark, and was the sole owner of CHS
Promark prior to its acquisition by the Company in June 1994. Mr. Perlman served
as a director of CHI from November 1994 until October 1997.
CARSTEN FRANK has been a director of the Company since May 1997 and has
been Executive Vice President-Asian Region of the Company since March 1, 1998.
From March 1997 until February 28, 1998, he was the Executive Vice
President--European Region of the Company. Mr. Frank founded Frank & Walter in
1988 and has served as that company's Managing Director since its formation.
Frank & Walter was acquired by the Company in March 1997.
ANTONIO BOCCALANDRO has been the Chief Officer of Mergers and Acquisitions
of the Company since August 1997 and has been a director and the Secretary of
the Company since 1993. He was Treasurer of the Company from December 1993 to
June 1995. He has also been employed in various capacities by Comtrad since
1988. Mr. Boccalandro became a director of Comtrad in 1990 and he has been a
director of CHI since June 1994.
ZBYNEK KRAUS has been a director of the Company since March 1996 and, since
1993, the General Manager of the Company's Czech Republic operation. From
January to December 1996, Mr. Kraus served as Vice President--East European
Region of the Company. From 1990 to 1993, he was an owner and the sales director
of the Czech Republic operation.
OTTO GERLACH has been a director of the Company since August 1994, and is a
principal owner and has served over five years as the President of Larco, C.A.,
a privately-owned wholesale import/export and manufacturing company based in
Caracas, Venezuela.
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<PAGE>
BERND KARRE has been a director of the Company since November 1997. Mr.
Karre has been Chief Executive Officer and President of Karma International AG
("Karma") since October 1995. From 1990 through October 1995, Mr. Karre served
as Managing Director of Karma's United Kingdom and France operations.
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 1993 and,
except for the periods indicated below, was self-employed as a business
consultant from June 1991 through February 1997. Since March 1997, Mr. Winstead
has been Chairman and Chief Executive Officer and Chief Financial Officer of
Puris, Inc., the shares of which are listed on Nasdaq. Mr. Winstead served from
October 1993 through July 1996 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 of
Directors, subject to the terms of any employment agreements with the Company.
Other than Claudio Osorio and Arturo Osorio, the Chief Operating Officer of the
Latin American Region of the Company, who are brothers, there are no family
relationships among any of the Company's executive officers, directors and
significant employees. Comtrad and CHI have agreed to continue to vote their
shares of Common Stock in favor of Mr. Frank's election to the Company's Board
of Directors for so long as Mr. Frank continues to own at least 5% of the
outstanding shares of the Common Stock. Comtrad and CHI have also agreed to vote
their shares of Common Stock in favor of the election to the board of the
Company of two nominees of the former owners of Karma International S.A., which
was acquired by the Company on August 14, 1997, for so long as such owners
continue to own at least 5% of the outstanding shares of the Common Stock. Mr.
Karre has been nominated by the former owners of Karma International S.A. All of
the Company's directors who are not employees of the Company receive $250 for
attendance at each Board of Directors meeting and are reimbursed for travel
expenses incurred to attend such meetings. Directors who are employees of the
Company do not receive separate compensation for their service as directors. No
separate payment is made for attending committee meetings.
The Company has an Audit Committee and a Compensation Committee. The Audit
Committee is responsible for reviewing and making recommendations regarding the
Company's employment of independent auditors, the annual audit of the Company's
financial statements and the Company's internal accounting practices and
policies. The Compensation Committee is responsible for making recommendations
to the Board of Directors regarding compensation arrangements for senior
management, recommendations concerning the adoption of any compensation plans in
which management is eligible to participate and grants of stock options or other
benefits under such plans. The Chairman of the Audit Committee and the
Compensation Committee each receive $25,000 per year. The members of both
committees are Messrs. Gerlach, Lardi and Winstead. Mr. Winstead currently
serves as Chairman of both committees. The Company does not have a Nominating
Committee.
Each director other than Claudio Osorio serving on January 22, 1997 was
granted an option under the Company's Directors and Officers 1997 Stock Option
Plan to purchase 45,000 shares of Common Stock at the market price on that date.
The right to exercise these options vests over three years. In July 1997,
Messrs. Frank and Lardi were each granted options to purchase 45,000 shares
under the same terms at the market price on the date of grant.
During fiscal year 1997, the Board held 12 meetings. No director attended
fewer than 75% of such meetings of the Board or any committee thereof during the
period of such director's service except for Mr. Perlman who attended 58% of the
meetings.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid during the years
indicated to the Company's Chief Executive Officer and to the other four most
highly paid executive officers of the Company who were serving as such as
December 31, 1997 (collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------- ---------------
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS/SARs(#) COMPENSATION($)
- --------------------------- ---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Claudio Osorio, 1997 750,000 1,030,180 1,526,259 63,850
Chief Executive 1996 350,000 324,375 648,741 50,000
Officer and 1995 366,402 -0- -0- 139,240
President
Alvin Perlman,
Executive Vice 1997 500,000 117,805 120,000 -0-
President--Vendor 1996 345,666 150,000 -0- -0-
and Banking 1995 500,000 -0- -0- 1,000
Relations
Craig Toll,
Vice President of 1997 225,000 279,000 60,000 -0-
Financial Officer 1995 110,000 -0- -0-
and Treasurer
Carsten Frank,
Executive Vice 1997 350,000 159,293 120,000 -0-
President--Asian
Region
Clifford Dyer
Executive Vice 1997 391,966 17,500 45,000 -0-
President--Latin 1996 46,154 7,500(1) -0- -0-
American Region
<FN>
- --------------------
(1) Represents compensation received from the Company for the three-month
period commencing October 1, 1996, the date Mr. Dyer became employed by the
Company.
</FN>
</TABLE>
EMPLOYMENT ARRANGEMENTS
The Company has entered into three-year employment agreements with Messrs.
Osorio, Toll and Frank. Mr. Osorio's agreement was effective January 1, 1996,
Mr. Toll's agreement was effective July 1, 1996 and Mr. Frank's agreement was
effective as of January 1, 1997. The agreements for Messrs. Osorio (as amended),
Toll (as amended) and Frank (as amended) provide for annual salaries of
$750,000, $350,000 and $350,000, 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 Messrs. Toll and Frank,
requires them to devote their full time and attention to the business and
affairs of the Company. Mr. Osorio's bonus arrangement provides for a bonus in
1997 of up to $1,250,000 based upon the Company's earnings per share and debt to
equity ratio. Mr. Frank's arrangement in 1997 provides for a bonus up to
$700,000 (with a minimum bonus of $150,000) based upon the results of the
European operations of the Company. 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
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<PAGE>
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."
Under the terms of the Company's employment agreement with Alvin Perlman
(as amended), Mr. Perlman is employed as an Executive Vice President of the
Company through June 30, 1999 at an annual salary of $500,000. Under a program
adopted by the Board of Directors, Mr. Perlman is eligible for a cash bonus of
up to $550,000 based on the results of the Company. Mr. Perlman's employment
agreement includes other benefits commensurate with his position, and Mr.
Perlman is also entitled to participate in any group or employee benefit or
insurance plans offered by the Company. 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 terms of the Company's employment agreement with Cliff Dyer, Mr.
Dyer is employed as Executive Vice President-Latin America of the Company for a
two year period commencing July 1, 1997. Pursuant to the agreement, Mr. Dyer's
salary for the first year is $300,000. His salary for the second year of
employment will be determined by the Compensation Committee. Mr. Dyer's
employment agreement provides for various additional benefits, and entitles him
to participate in all insurance plans offered to executive officers by the
Company. Upon Mr. Dyer's death, his estate will continue to receive his
compensation for the shorter of the balance of the term of the agreement, or six
months. The agreement provides that upon termination of employment by the
Company without cause, or if there is a change of control of the Company, Mr.
Dyer will be entitled to receive compensation for the balance of the term of the
agreement, and any stock options granted to him will vest immediately. The
agreement also provides that Mr. Dyer will not compete with the Company during
his employment and for two years thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 were Donald D.
Winstead, Chairman, Otto Gerlach and Pierino Lardi. None of these persons has
previously served as an officer or employee of the Company or any of its
subsidiaries.
Otto Gerlach holds, indirectly, 11.8% of the outstanding common stock 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 1,447,500
shares of Company stock owned by Comtrad. In the past, the Company has engaged
in numerous transactions with Comtrad. See "Certain Transactions."
OPTION GRANTS DURING 1997
OPTION GRANTS TABLE. The following table sets forth certain information
concerning grants of stock options made during 1997 to each of the Named
Executive Officers. The Company did not grant any stock appreciation rights in
1997.
-8-
<PAGE>
INDIVIDUAL OPTION GRANTS IN 1997
- -----------------------------------------------------------------------
SHARES
OF
COMMON % OF
STOCK TOTAL ALTERNATIVE
UNDERLYING OPTION EXPIRATION GRANTED GRANT
OPTIONS PRICE($) DATE TO DATE
NAME GRANTED EMPLOYEES VALUE(1)($)
- -------------- ----------- ------- ---------- --------- -----------
Claudio Osorio 300,000 12.00 1/22/07 9.4 2,136,000
101,261 15.75 3/07/07 3.2 947,803
375,000 16.67 5/12/07 11.8 3,720,000
30,755 16.59 5/30/07 1.0 303,859
491,427 17.17 6/20/07 15.4 5,002,727
34,465 25.46 7/31/07 1.1 516,630
193,355 24.67 8/20/07 6.1 2,821,049
Alvin Perlman 120,000 12.00 1/22/07 3.8 854,400
Craig Toll 45,000 12.00 1/22/07 1.4 320,400
15,000 25.46 7/31/07 0.5 224,850
Carsten Frank 75,000 12.00 1/22/07 2.4 534,000
45,000 25.46 7/31/07 1.4 674,550
Clifford Dyer 45,000 12.00 1/22/07 1.4 320,400
- -------------------------
(1) Based on the Black-Scholes option pricing model adapted for use in
valuing executive stock options. The estimated values under that model
are based on certain assumptions as to variables such as interest rates,
stock price volatility and future dividend yields. The actual value, if
any, that an executive may realize will depend on the excess of the stock
price over the exercise price on the date the option is exercised, so
that there is no assurance that the value realized by an executive will
be at or near the value estimated by the Black-Scholes model.
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<PAGE>
AGGREGATED OPTION EXERCISES IN 1997 AND YEAR END OPTION VALUES
The following table sets forth information with respect to: (i) the exercise in
1997 of options to purchase Common Stock by the named Executive Officers, (ii)
the number of unexercised options held by the Named Executive Officers as of
December 31, 1997 and (iii) the value as of December 31, 1997 of unexercised
in-the-money options.
<TABLE>
<CAPTION>
VALUE REALIZED
SHARES (MARKET PRICE NUMBER OF SECURITIES
ACQUIRED AND EXERCISE UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ON LESS EXERCISE OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997($)(1)
--------------------------- --------------------------
EXERCISE PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Claudio Osorio 409,169 5,488,308 738,502 1,111,455 1,273,599 2,738,798
Alvin Perlman -- -- -- 120,000 -- 615,000
Craig Toll 80,000 749,002 58,750 82,500 721,669 377,663
Carsten Frank -- -- -- 120,000 -- 384,375
Clifford Dyer -- -- 4,500 45,000 29,408 230,625
<FN>
- --------------------
(1)Based on a December 31, 1997 value of $17.13 per share. Value is calculated
by multiplying: (a) the difference between $17.13 and the option exercise
price by (b) the number of Common Shares underlying the options. Market value
of shares covered by in-the-money options on December 31, 1997, less option
exercise price.
</FN>
</TABLE>
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
Directors and Officers Stock Option 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 cause the compensation
paid to its executive officers to be deductible by the Company.
BASE SALARY
In 1997 the Compensation Committee approved, and ultimately the Board
approved, compensation arrangements for Messrs. Osorio, Frank, Dyer and Toll
defining their base salary. Mr. Perlman's salary was based principally on an
employment agreement extending through June 30, 1999 which was 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
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<PAGE>
by Mr. Perlman and Mr. Dyer, with respect to CHS Latin America, with Mr.
Osorio providing a review of these base salary amounts.
BONUSES
In 1997, Messrs. Osorio, Frank 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 non-employee 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 provide incentives 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. In prior years, option grants were
made to key employees of companies upon their acquisition. The Committee has
modified the policy and in the future, options will be granted based upon
management positions with those employees who are branch managers, those
reporting to branch managers and those employees who are senior to those two
categories being eligible for grants. Other employees will be eligible to
participate in the Company's 1998 Employee Stock Purchase Plan, adoption of
which is proposed at the Company's 1998 Annual Meeting.
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
Donald D. Winstead, Chairman
Otto Gerlach
Pierino Lardi
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<PAGE>
CERTAIN TRANSACTIONS
At December 31, 1997, the Company carried a receivable from Comtrad and
CHI in the amount of $17.4 million. In 1997, this receivable was evidenced by a
promissory note which Comtrad and CHI collateralized with 5,487,203 shares of
CHS Common Stock owned by Comtrad and CHI. The interest rate charged on the
promissory note is the prime rate. The amount is due upon demand. Interest
charged to Comtrad was $684,000 in 1997.
Carsten Frank, a director, officer and shareholder of the Company also
serves as a member of the Board of Directors of a company which supplies
products to the Company. This company also has ownership interests in other
companies which do business with the Company. In 1997, sales to, purchases from,
commissions paid to and rebates received from such parties were $102.7 million,
$57.4 million, $10.1 million and $11.2 million, respectively.
-12-
<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, 1997 with
(i) the NASDAQ Stock Market - US & Foreign Index and (ii) the Company's 1997
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 1997 PEER GROUP
8/15/94 12/94 12/95 12/96 12/97
------- ----- ----- ----- -----
CHS ELECTRONICS, INC. 100 80 90 171 257
PEER GROUP 100 98 90 109 142
NASDAQ STOCK MARKET
(U.S. & FOREIGN) 100 103 144 177 216
* The 1997 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.
-13-
<PAGE>
PROPOSAL TO 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 4,620,500 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 2,620,500 shares
for issuance upon exercise of stock options. Through April 15, 1998, the Company
has granted options under such plan, net of canceled options, to purchase
2,464,583 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 650 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
4,620,500 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.
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.
-14-
<PAGE>
The following table sets forth, as of April 15, 1998, certain information
regarding options granted under the 1994 Plan to the persons and groups
indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
SUBJECT TO VALUE OF
OPTIONS AS EXERCISE PRICE OPTIONS AT
NAME AND POSITION OF APRIL 15, 1998 PER SHARE($) APRIL 15, 1998(1)($)
- -------------------------- ------------------- -------------- --------------------
<S> <C> <C> <C>
Claudio Osorio -- -- --
Chairman of the Board,
Chief Executive Officer
and President
Alvin Perlman -- -- --
Executive Vice
President--Vendor and
Banking Relations and
Director
Craig Toll 96,250 4.00-25.46 1,203,862
Vice President of Finance,
Chief Financial Officer
and Treasurer
Carsten Frank -- -- --
Executive Vice
President-Asian Region and
Director
Clifford Dyer 18,000 10.59 191,880
Executive Vice
President-Latin American
Region
All current executive 119,875 4.00-25.46 1,481,523
officers as a group
All current directors who are 33,750 12.00 312,188
not executive officers as
a group
Non-Executive Officer 1,924,669 4.00-25.46 13,835,303
Employee Group
<FN>
- -----------------------
(1) The closing sale price of the Common Stock on April 15, 1998 was $21.25 per
share. Value is calculated by multiplying (a) the difference between $21.25
and the option exercise price by (b) the number of shares of Common Stock
underlying the option.
</FN>
</TABLE>
STOCK OPTIONS
The Committee may award incentive options, qualified under the Internal
Revenue Code, other statutory stock options, and non-qualified stock options.
These are all contracts allowing the holder to purchase a specified number of
shares of Common Stock during a given period of time at a designated price.
Stock options granted under the 1994 Plan will expire no later than ten years
from the date of grant. Shares not purchased under options which expire or are
terminated unexercised will again be available for purposes of the 1994 Plan.
Under the 1994 Plan, the exercise price of a stock option will be
determined by the Committee, but may not be less than 75% of the fair market
value of the Common Stock (100% for incentive stock options) on the date the
option is granted. The exercise price of a stock option, in the discretion of
the Committee, shall be paid in the manner determined by the Committee, which
may include any one or a combination of the following: (a) paid in U.S. funds
(including check, draft or wire transfer made payable to the order of the
Company); or (b) paid by the delivery of already owned shares of Common Stock.
Optionees who are subject to Section 16(b) of the Exchange Act and, if
determined by the Committee, other optionees, may elect to pay no more than the
required withholding taxes in connection with the exercise of a nonstatutory
option by delivering to the Company already owned shares
-15-
<PAGE>
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, 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 "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
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<PAGE>
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 Internal Revenue 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 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
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<PAGE>
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 1994 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 AMENDMENT TO THE 1994 PLAN.
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<PAGE>
PROPOSAL TO INCREASE THE NUMBER OF SHARES
RESERVED FOR ISSUANCE PURSUANT TO 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 increase to 2,150,000
shares the number of shares in the Company's Directors and Officers 1997 Stock
Option Plan (the "1997 Directors and Officers Plan") that are reserved for
issuance. The 1997 Directors and Officers Plan, which was approved by the
Company's shareholders on July 31, 1997, presently authorizes 1,350,000 shares
for issuance upon evidence of stock options. Through April 15, 1998, the Company
has granted options under the Plan, net of canceled options, to purchase
1,325,000 shares of Common Stock. The current text of the 1997 Directors and
Officers Plan is attached hereto as Exhibit B. The material features of the 1997
Directors and Officers Plan are discussed below, but the description is subject
to, and is qualified in its entirety by, the full text of the 1997 Directors and
Officers Plan.
The purpose of the 1997 Directors and Officers 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 1997 Directors and Officers
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 1997
Directors and Officers Plan.
The 1997 Directors and Officers 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 1997 Directors and Officers Plan)). Options granted under
the 1997 Directors and Officers 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 1997 Directors and
Officers 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 1997 Directors and
Officers 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 amendment to the 1997 Directors and Officers
Plan, an aggregate of 2,150,000 shares of Common Stock (subject to adjustment as
discussed below) will be reserved for sale upon exercise of options granted
under the 1997 Directors and Officers Plan. The Company's shareholders will not
have any preemptive rights to purchase or subscribe for the shares reserved for
issuance under the 1997 Directors and Officers Plan. If any option granted under
the 1997 Directors and Officers 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 1997 Directors and Officers
Plan.
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<PAGE>
The following table sets forth as of April 15, 1998 certain information
regarding options granted under the 1997 Directors and Officers Plan to the
persons and groups 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 675,000 12.00-16.67 4,492,500
Chairman of the Board,
Chief Executive Officer
and President
Alvin Perlman 120,000 12.00 1,110,000
Executive Vice
President--Vendor and
Banking Relations and
Director
Craig Toll 45,000 12.00 416,250
Vice President of Finance,
Chief Financial Officer
and Treasurer
Carsten Frank 120,000 12.00-25.46 693,750
Executive Vice
President--Asian Region and
Director
Clifford Dyer 45,000 12.00 416,250
Executive Vice
President--Latin American
Region
All current executive 1,050,000 12.00-25.46 7,545,000
officers as a group
All current directors who are 180,000 12.00 1,665,000
not executive officers as
a group
Non-Executive Officer 45,000 12.00 416,250
Employee Group
<FN>
- ---------------------
(1) The closing sale price of the Common Stock on April 15, 1998 was $21.25 per
share. Value is calculated by multiplying (a) the difference between $21.25
and the option exercise price by (b) the number of shares of Common Stock
underlying the option.
</FN>
</TABLE>
TERMS AND CONDITIONS
All options granted under the 1997 Directors and Officers 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 1997
Directors and Officers Plan, relating to the grant, the time or times of
exercise and other terms of the options as the Committee prescribes.
Under the 1997 Directors and Officers 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 1997 Directors and
Officers 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
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<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 1997 Directors and Officers 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 1997 Directors and Officers 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
1997 Directors and Officers 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 1997
Directors and Officers 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 1997 Directors and Officers Plan.
TERM OF PLAN; AMENDMENTS
No option may be granted under the 1997 Directors and Officers Plan after
January 21, 2007. The Board and the Committee each may from time to time amend
the 1997 Directors and Officers Plan or any option granted thereunder; provided,
however, that, except to the extent provided in the 1997 Directors and Officers
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 1997 Directors and Officers Plan
pursuant to the exercise of incentive stock options, (ii) modify the
requirements as to eligibility for participation in the 1997 Directors and
Officers Plan or (iii) increase the aggregate number of options that may be
granted to any one optionee under the 1997 Directors and Officers Plan.
-21-
<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 AMENDMENT TO THE 1997 DIRECTORS AND OFFICERS PLAN.
PROPOSAL TO AMEND 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 increase to 1,250,000
the number of shares in the Company's 1997 Chief Executive Officer Stock Option
Plan (the "1997 CEO Option Plan") that are reserved for issuance. The 1997 CEO
Option Plan, which was approved by the Company's shareholders on July 31, 1997,
presently authorizes 750,000 shares for issuance upon exercise of stock options.
The current text of the 1997 CEO Option Plan is attached hereto as Exhibit C.
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 amendment to the 1997 CEO Option Plan, an
aggregate of 1,250,000 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 April 15, 1998, options to purchase
750,000 shares of Common Stock are issued and outstanding under the 1997 CEO
Option Plan. 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.
-22-
<PAGE>
The following table sets forth as of April 15, 1998 certain information
regarding options granted under the Company's 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 750,000 $16.59-$25.46 2,148,340
Chairman of the Board,
Chief Executive Officer and
President
<FN>
- -----------------------
(1) The closing sale price of the Common Stock on April 15, 1998 was $21.25 per
share. Value is calculated by multiplying: (a) the difference between
$21.25 and the option exercise price by (b) the number of shares of Common
Stock underlying the option.
</FN>
</TABLE>
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 Osorio 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.
-23-
<PAGE>
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, 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 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 AMENDMENT TO THE 1997 CEO OPTION PLAN.
PROPOSAL TO ADOPT THE COMPANY'S
1998 EMPLOYEE STOCK PURCHASE PLAN
The Company's Board of Directors has unanimously adopted, subject to the
approval by the Company's shareholders, a resolution to adopt the 1998 Employee
Stock Purchase Plan (the "Plan"). The Plan will become effective July 1, 1998
and is designed to qualify as an employee stock purchase plan under Section 423
of the Internal Revenue Code. Two hundred fifty thousand (250,000) shares of the
Company's Common Stock have been reserved for issuance over the term of the
Plan, subject to periodic adjustment for changes in the outstanding Common Stock
occasioned by stock splits, stock dividends, recapitalizations or other similar
changes. The
-24-
<PAGE>
material features of the Plan are discussed below, but the description is
subject to, and is qualified in its entirety by, the full text of the Plan,
which is attached hereto as Exhibit D.
The purpose of the Plan is to encourage stock ownership in the Company by
employees of the Company and those subsidiaries of the Company designated by the
Company's Board of Directors as eligible to participate, thereby enhancing
employee interest in the continued success and progress of the Company.
GENERAL TERMS AND CONDITIONS
The Plan will initially be administered by the Board; however, under the
Plan's terms, the Board may appoint a Committee to administer the Plan. The Plan
gives broad powers to the Board or the Committee to administer and interpret the
Plan.
The Plan permits employees to purchase stock of the Company at a favorable
price and possibly with favorable tax consequences to the participants. All
employees (including officers, other than certain highly compensated employees)
of the Company or those subsidiaries designated by the Board who are regularly
scheduled to work at least 20 hours per week and more than five months per year
are eligible to participate in any of the purchase periods of the Plan after
completing one year of continuous employment. However, any participant who would
own (as determined under the Internal Revenue Code), immediately after the grant
of an option, stock possessing 5% or more of the total combined voting power or
value of all classes of the stock of the Company will not be granted an option
under the Plan. As of the Record Date, the Company had approximately 4,000
eligible participants.
Under the Plan, employees who are eligible employees as of July 1, 1998 and
as of the first business day in February and August of each succeeding year
(each such date being referred to as an "Offering Date") may elect to
participate in the Plan. On each Offering Date, subject to certain limitations
determined in accordance with calculations set forth in the Plan, an eligible
employee is granted a right to purchase shares of Common Stock (up to an
aggregate maximum of 500 shares) on the last business day of the immediately
succeeding June or December (each such date being referred to as an "Exercise
Date" and each period from the Offering Date to the Exercise Date being
referred to as an "Offering Period"). The participant may make after tax
payments to the Company in an amount of not less than 1% and not more than 10%
of the participant's base salary to purchase such shares. Unless the participant
withdraws from the Plan, the participant's option for the purchase of shares
will be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to such option shall be purchased for the participant at the
applicable exercise price with the accumulated Plan contributions then credited
to the participant's account under the Plan. The option exercise price per share
will be equal to 85% of the market price of the Common Stock on the Offering
Date on which the option to purchase the shares was granted.
As required by tax law, no participant may receive an option during the
Plan for shares which have a fair market value in excess of $25,000 for any
calendar year, determined at the time such option is granted. Any funds not used
to purchase shares will remain credited to the participant's bookkeeping account
and applied to the purchase of shares of Common Stock in the next succeeding
purchase period. No interest will be paid by the Company on funds withheld, and
such funds may be used by the Company for general operating purposes.
No plan contributions or options granted under the Plan are assignable or
transferable, other than by will or by the laws of descent and distribution or
as provided under the Plan. During the lifetime of a participant, an option is
exercisable only by such participant. No participant may, during his lifetime,
transfer or otherwise dispose of any shares acquired pursuant to the Plan for a
period of six months following the end of the Offering Period in which such
shares were purchased. The expiration date of the Plan will be determined by the
Board and may occur any time following the close of any Exercise Date, but shall
occur not later than the last Exercise Date immediately preceding the 10th
anniversary of the Plan's effective date. Under circumstances of dissolution or
liquidation, the offering period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board. In
the event of merger or a sale of all or substantially all of the Company's
assets, each option under the Plan shall be assumed or an equivalent option
substituted by the successor corporation, unless the Board, in its sole
discretion, accelerates the date on which the options may be exercised. No
option may be granted under the Plan after September 1, 2007. The unexercised
portion of any option granted
-25-
<PAGE>
to an employee under the Plan shall be automatically terminated immediately upon
the termination of the employee's employment for any reason, including
retirement or death.
The 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 as a result of one or more
reorganizations, restructurings, recapitalizations, reclassifications, stock
splits, reverse stock splits, or stock dividends.
The Board or the Committee may amend, suspend or terminate the Plan at any
time, provided that such amendment may not change any option which adversely
affects the rights of the holder of the option and the Plan may not be amended
if such amendment would in any way cause rights issued under the Plan to fail to
meet the requirements for employee stock purchase plans as defined in Section
423 of the Internal Revenue Code, or would cause the Plan to fail to comply with
Rule 16b-3 of the Exchange Act.
The Company's shareholders will not have any preemptive rights to purchase
or subscribe for the shares reserved for issuance under the Plan. If any option
granted under the Plan expires or terminates 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 Plan.
The Committee believes that shares granted under the Plan will be awarded
to all employees presently meeting the existing eligibility requirements, except
no one plan participant may be granted an aggregate number of shares with a fair
market value exceeding $25,000 in any calendar year as determined at the
beginning of each purchase period as defined under the Plan.
FEDERAL INCOME TAX EFFECTS
Options granted under the Plan are intended to qualify for favorable tax
treatment to the employees under Sections 421 and 423 of the Internal Revenue
Code. Employee contributions are made on an after-tax basis. A capital gain or
capital loss on Common Stock purchased under the Plan would not be realized
until the participant would sell the shares of Common Stock. If a participant
disposes of shares two years or more after the date of the beginning of the
purchase period when the shares were acquired, and more than one year after the
shares are purchased, the participant would recognize as ordinary income the
lesser of: (i) the excess of the fair market value of the shares on the date of
sale over the price paid or (ii) the discount of the fair market value of the
shares at the beginning of the purchase period(s). Additionally, the participant
would recognize a long-term capital gain or loss (within the meaning of the
Internal Revenue Code) equal to the difference between the amount realized from
the sale of the shares and the basis (the basis would be the purchase price plus
any amount taxed as ordinary compensation income). If a participant disposes of
shares within two years of the date of the beginning of the purchase period when
the shares were acquired, or within one year after the shares are purchased, the
participant would recognize ordinary compensation income equal to the excess of
the fair market value of the shares on the purchase date(s) over the price paid
for the shares. Additionally, the participant would recognize a capital gain or
loss (within the meaning of the Internal Revenue Code) equal to the difference
between the amount realized from the sale of the shares and the basis (the basis
would be the purchase price plus the amount taxed as ordinary compensation
income). If the participant held the shares for more than one year, the capital
gain or loss would be a long-term gain or loss. The Company would not receive an
income tax deduction upon either the grant or exercise of the option by the
participant, but generally would receive a deduction equal to the ordinary
compensation income required to be recognized by the participant as a result of
the disposition of the shares if the shares are disposed of by the participant
within two years of the date of the beginning of the purchase period when the
shares were acquired, or within one year after the shares are purchased.
IMPORTANCE OF CONSULTING TAX ADVISOR.
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 participant in the Plan may depend on his or
her particular situation, each participant should consult his or her tax adviser
as to the Federal, state, local, and other tax consequences of the acquisition
or disposition of Common Stock under the Plan.
-26-
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
PROPOSAL TO APPROVE THE 1998 EMPLOYEE STOCK PURCHASE 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.
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 January
8, 1999. 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
May 8, 1998
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EXHIBIT 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.
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(i) DISABLED OR DISABILITY. Permanent and total disability as
determined under the Company's long-term disability program or, if no such
program has been adopted, the continuous absence of an employee for 187
consecutive days or more due to physical or mental illness or incapacity.
(j) DISINTERESTED PERSON. A person defined as such in Rule 16b-3(c)(i)
under the Exchange Act, or any successor definition adopted by the Securities
and Exchange Commission.
(k) EARLY RETIREMENT. Retirement, with consent of the Committee at the
time of retirement, from active employment with the Company pursuant to the
early retirement provisions of the Company's then applicable standard policies
and procedures.
(l) EXCHANGE ACT. Securities Exchange Act of 1934, as amended, together
with the rules and regulations thereunder.
(m) FAIR MARKET VALUE. The value of a share of Stock on a particular
date, determined as follows: (i) if the Stock is not listed on such date on any
national securities exchange nor included in the National Association of
Securities Dealers, Inc. Automated Quotation System, National Market System
("NASDAQ/NMS"), but is traded in the over-the-counter market, the highest "bid"
quotation of a share of Stock on such date (or if none, on the most recent date
on which there were bid quotations of a share of Stock), as reported on the
National Association of Securities Dealers, inc. Automated Quotation System,
Smallcap Market, or, if 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
4,620,500 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
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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
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
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Award Agreement, which conditions may include, without limitation, achievement
of specific business objectives, increases in specified indices, attainment of
growth rates and other measurements of Company performance.
The Committee may determine to make any or all of the following Awards:
(a) STOCK OPTIONS. A grant of a right to purchase a specified number of
shares of Stock at an exercise price not less than 100% of the Fair Market Value
of the Stock on the date of grant (or, from time to time, under circumstances in
which the Committee deems a lesser exercise price to be appropriate to carry out
the objectives of the Plan and to be consistent with the best interests of the
Company, at an exercise price less than 100%, but not less than 75%, of such
Fair Market Value), during a specified 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.
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At the discretion of the Committee, a Participant may be offered an
election to substitute an Award for another Award or Awards, or for awards made
under any other benefit plan of the company, of the same or different type.
9. STOCK OPTION EXERCISE. The price at which shares of Stock may be
purchased upon exercise of a stock option shall be paid in full at the time of
the exercise, in cash or, if permitted by the Committee, by (a) tendering Stock
or surrendering another Award, including Restricted Stock, or an option or other
award granted under another benefit play of the Company, in each case valued at,
or on the basis of, Fair Market Value on the date of exercise, (b) delivery of a
promissory note issued by a Participant to the Company, containing terms and
conditions determined by the Committee, or (c) any other means acceptable to the
Committee. The Committee shall determine acceptable methods for tendering Stock
or surrendering other Awards or grants and may impose such conditions on the use
of Stock or other Awards or grants to exercise a stock option as it deems
appropriate. If shares of Restricted Stock are tendered as consideration for the
exercise of a stock option, the Committee may require that the number of shares
issued upon exercise of the stock option equal to the number of shares of
Restricted Stock used as consideration therefor be subject to the same
restrictions as the Restricted Stock so surrendered and any other restrictions
as may be imposed by the Committee. The Committee may also permit Participants
to exercise stock options and simultaneously sell some or all of the shares of
Stock so acquired pursuant to a brokerage or similar arrangement which provides
for the payment of the exercise price substantially concurrently with the
delivery of such shares.
10. TAX WITHHOLDING. The Company shall have the right to deduct applicable
taxes from any Award payment or shares of Stock receivable under an Award and to
withhold an appropriate number of shares of Stock for payment of taxes required
by law or to take such other action as may be necessary in the opinion of the
Company 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
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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
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 by, 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.
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14. ADJUSTMENTS; REDUCTION IN NUMBER OF SHARES OF STOCK AVAILABLE FOR
AWARDS. In the event of any change in the outstanding Stock by reason of a stock
split, stock dividend combination or reclassification of shares,
recapitalization, merger or similar event, the Committee shall adjust
proportionally (a) the number of shares of Stock (i) reserved under the Plan,
(ii) available for options or other Awards and (iii) covered by outstanding
Awards denominated in Stock or units of Stock; (b) the prices related to
outstanding Awards; and (c) the appropriate Fair Market Value and other price
determinations for such Awards. In the event of any other change affecting the
Stock or any distribution (other than normal cash dividends) to holders of
Stock, such adjustments as may be deemed equitable by the Committee, including
adjustments to avoid fractional shares, shall be made to give proper effect to
such event. In the event of a corporate merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation, the Committee
shall be authorized to issue or assume stock options or other awards, whether or
not in a transaction to which Section 425(a) of the Code applies, by means of
substitution of new stock options or Awards for previously issued options or
awards or an assumption of previously issued stock options or awards. Except as
expressly provided in this Section 14(a), the 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.
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21. EFFECTIVE AND TERMINATION. The Plan, and any amendment hereof
requiring stockholder approval, shall become effective as of the date of its
adoption by the board, subject to the subsequent approval of the stockholders of
CHS by the affirmative vote of a majority of the votes cast at a stockholders'
meeting at which the approval of the Plan (or any such amendment) is considered,
provided that the total vote cast represents over 50% of all shares entitled to
vote on the proposal. The Plan shall terminate ten years after its initial
effective date, subject to earlier 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.
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EXHIBIT B
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CHS ELECTRONICS, INC.
DIRECTORS AND OFFICERS 1997 STOCK OPTION PLAN, AS AMENDED
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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
<PAGE>
and low asked quotations for the Common Stock as reported by the National
Quotation Bureau, Incorporated if at 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 2,150,000 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
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<PAGE>
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.
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
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<PAGE>
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 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.
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<PAGE>
(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.
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
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<PAGE>
Company's issued and outstanding Shares shall remain subject to
purchase at the same aggregate exercise price.
(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.
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<PAGE>
(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:
(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
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<PAGE>
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.
(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.
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EXHIBIT C
CHS ELECTRONICS, INC.
-----------------------------------
1997 CHIEF EXECUTIVE OFFICER STOCK OPTION PLAN, AS AMENDED
------------------------------------
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 One
Million Two Hundred and Fifty Thousand (1,250,000) 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
(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.
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(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 provisions relating
thereto. No Option shall be granted after ten years from the date of the Board's
adoption of this Plan.
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(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.
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EXHIBIT D
CHS ELECTRONICS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
CHS ELECTRONICS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.................................................................1
2. Definitions.............................................................1
3. Eligibility.............................................................3
4. Offering Periods........................................................3
5. Election to Participate.................................................4
6. Participant Contributions...............................................4
7. Grant of Option.........................................................4
8. Exercise Price..........................................................5
9. Exercise of Options.....................................................5
10. Delivery................................................................5
11. Withdrawal; Termination of Employment...................................5
12. Stock...................................................................6
13. Administration..........................................................6
14. Designation of Beneficiary..............................................7
15. Transferability.........................................................7
16. Participant Accounts....................................................7
17. Adjustments Upon Changes in Capitalization; Corporate Transactions......7
18. Amendment of the Plan...................................................8
19. Termination of the Plan.................................................9
20. Notices.................................................................9
21. Effective Date..........................................................9
22. Conditions Upon Issuance of Shares......................................9
23. Expenses of the Plan....................................................9
24. No Employment Rights...................................................10
25. Applicable Law.........................................................10
26. Additional Restrictions of Rule 16b-3..................................10
<PAGE>
CHS ELECTRONICS, INC.
1998 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code, if and to the extent it applies to the Company and its Designated
Subsidiaries in the United States. Accordingly, the provisions of the Plan shall
be administered, interpreted and construed in a manner consistent with the
requirements of that section of the Code.
2. DEFINITIONS.
(a) "APPLICABLE PERCENTAGE" means the percentage specified in Section
8, subject to adjustment by the Committee as provided in Section 8.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
(d) "COMMITTEE" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.
(e) "COMMON STOCK" means the Company's common stock, par value $0.001
per share.
(f) "COMPANY" means CHS ELECTRONICS, INC, a Florida corporation.
(g) "COMPENSATION" means, with respect to each Participant, the annual
base salary payable to such Participant by the Company or a Designated
Subsidiary. Except as otherwise determined by the Committee, "Compensation" does
not include: (i) overtime, bonuses or commissions; (ii) any amounts contributed
by the Company or a Designated Subsidiary to any pension plan; (iii) any
automobile or relocation allowances (or reimbursement for any such expenses);
(iv) any amounts paid as a starting bonus or finder's fee; (v) any amounts
realized from the exercise of any stock options or incentive awards; (vi) any
amounts paid by the Company or a Designated Subsidiary for other fringe
benefits, such as health and welfare, hospitalization and group life insurance
benefits, or perquisites, or paid in lieu of such benefits, or; (vii) other
similar forms of extraordinary compensation.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company or the
<PAGE>
Designated Subsidiary that employs the Employee, provided that such leave is for
a period of not more than 90 days or reemployment upon the expiration of such
leave is guaranteed by contract or statute.
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(j) "EMPLOYEE" means any person, including an Officer, whose customary
employment with the Company or one of its Designated Subsidiaries is at least
twenty (20) hours per week and more than five (5) months in any calendar year
and who are not "highly-compensated employees" of the Company or any Designated
Subsidiaries, as that term is defined in Section 414(q) of the Code, as amended.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "EXERCISE DATE" means the last Trading Day of each Offering Period.
(m) "EXERCISE PRICE" means the price per share of Common Stock offered
in a given Offering Period determined as provided in Section 8.
(n) "FAIR MARKET VALUE" means, with respect to a share of Common Stock,
the Fair Market Value as determined under Section 7(b).
(o) "FIRST OFFERING DATE" means July 1, 1998.
(p) "OFFERING DATE" means the first Trading Day of each Offering
Period.
(q) "OFFERING PERIOD" means (i) with respect to the first Offering
Period, the period beginning on the First Offering Date and ending on December
31, 1998, and (ii) with respect to each Offering Period thereafter, and subject
to adjustment as provided in Section 4, the period
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beginning on the first Trading Day of the month of February and ending on the
last Trading Day of June and the period beginning on the first Trading Day of
the month of August and ending on the last Trading Day of the month of December.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 under the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "PARTICIPANT" means an Employee who has elected to participate in
the Plan by filing an enrollment agreement with the Company as
provided in Section 5 of the Plan.
(t) "PLAN" shall mean this 1998 Employee Stock Purchase Plan.
(u) "PLAN CONTRIBUTIONS" means, with respect to each Participant, the
after-tax amounts contributed to the Plan for the
Participant in accordance with the terms of the Plan.
(v) "SUBSIDIARY" shall mean any corporation, domestic or foreign, of
which the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock, and that otherwise qualifies as a
"subsidiary corporation" within the meaning of Section 424(f) of the Code.
(w) "TRADING DAY" shall mean a day on which the national stock
exchanges and the Nasdaq system are open for trading.
3. ELIGIBILITY.
(a) Any Employee who has completed at least one year of employment with
the Company or any Subsidiary and who is an Employee as of the Offering Date of
a given Offering Period shall be eligible to become a Participant as of the
Offering Date within that Offering Period under the Plan, subject to the
requirements of Section 5(a) and the limitations imposed by Section 423(b) of
the Code.
(b) Notwithstanding any provision of the Plan to the contrary, no
Participant shall be granted an option under the Plan (i) to the extent that if,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own stock and/or hold outstanding options to purchase stock possessing 5%
or more of the total combined voting power or value of all classes of stock of
the Company or of any Subsidiary of the Company, or (ii) to the extent that his
or her rights to purchase stock under all employee stock purchase plans of the
Company and its Subsidiaries intended to qualify under Section 423 of the Code
to accrue at a rate which exceeds $25,000 of fair market value of stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by a series of
consecutive Offering Periods. The first Offering Period shall commence on the
First Offering Date and succeeding Offering Periods shall commence on the first
Trading Day in February and the first Trading Day of August of each succeeding
calendar year (or at such other
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time or times as may be determined by the Committee). The Committee shall have
the power to change the duration and/or the frequency of Offering Periods with
respect to future offerings if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
5. ELECTION TO PARTICIPATE. An eligible Employee may elect to participate
in the Plan commencing on any Offering Date by completing an enrollment
agreement on the form provided by the Company and filing the enrollment
agreement with the Company at such time or times as shall be set by the
Committee for all eligible Employees with respect to a given offering. The
enrollment agreement shall set forth the amount to be contributed by the
Participant to the Plan for the Offering Period.
6. PARTICIPANT CONTRIBUTIONS.
(a) Subject to the limitations set forth in Section 3(b), Participants may
make after-tax contributions to the Plan at such times and subject to such terms
and conditions as the Committee may in its discretion determine. The after-tax
contributions made by the Participant for any Offering Period may not be less
than 1% and may not exceed 10% of the Participant's Compensation as of the
Offering Date of the Offering Period for which the contributions are being made.
All such contributions shall be made in a manner consistent with the provisions
of Section 423 of the Code or any successor thereto, and shall be held in
Participants' accounts and applied to the purchase of shares of Common Stock
pursuant to options granted under this Plan.
(b) All Plan Contributions made for a Participant shall be deposited in
the Company's general corporate account and shall be credited to the
Participant's account under the Plan. No interest shall accrue or be credited
with respect to a Participant's Plan Contributions. All Plan Contributions
received or held by the Company may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate or otherwise set
apart such Plan Contributions from any other corporate funds.
7. GRANT OF OPTION.
(a) On each Offering Date, subject to the limitations set forth in Sections
3(b) and 12(a), each eligible Employee shall be granted an option to purchase on
the Exercise Date during the Offering Period (at the Exercise Price determined
as provided in Section 8 below) up to a number of shares of Common Stock
determined by dividing such Participant's Plan Contributions accumulated prior
to such Exercise Date and retained in the Participant's account as of such
Exercise Date by the Exercise Price; PROVIDED, that the maximum number of shares
an Employee may purchase during any Offering Period shall be 500 shares. The
Fair Market Value of a share of Common Stock shall be determined as provided in
Section 7(b).
(b) The Fair Market Value of a share of Common Stock on a given date
shall be determined by the Committee in its discretion; PROVIDED, that if there
is a public market for the Common Stock, the Fair Market Value per share shall
be either (i) the closing price of the Common Stock on such date (or, in the
event that the Common Stock is not traded on such date, on the
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<PAGE>
immediately preceding trading date), as reported by the National Association of
Securities Dealers Automated Quotation (Nasdaq) National Market System, (ii) if
such price is not reported, the average of the bid and asked prices for the
Common Stock on such date (or, in the event that the Common Stock is not traded
on such date, on the immediately preceding trading date), as reported by Nasdaq,
(iii) in the event the Common Stock is listed on a stock exchange, the closing
price of the Common Stock on such exchange on such date (or, in the event that
the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported in The Wall Street Journal, or (iv) if no such
quotations are available for a date within a reasonable time prior to the
valuation date, the value of the Common Stock as determined by the Committee
using any reasonable means.
8. EXERCISE PRICE. The Exercise Price per share of Common Stock offered to
each Participant in a given Offering Period shall be equal to the Applicable
Percentage of the Fair Market Value of a share of Common Stock on the Offering
Date. The Applicable Percentage with respect to each Offering Period shall be
85%, unless and until such Applicable Percentage is increased by the Committee,
in its sole discretion, provided that any such increase in the Applicable
Percentage with respect to a given Offering Period must be established not less
than fifteen (15) days prior to the Offering Date thereof.
9. EXERCISE OF OPTIONS. Unless the Participant withdraws from the Plan as
provided in Section 11, the Participant's option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of full
shares subject to such option shall be purchased for the Participant at the
applicable Exercise Price with the accumulated Plan Contributions then credited
the Participant's account under the Plan. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
10. DELIVERY. As promptly as practicable 6 months after each Exercise Date,
the Company shall arrange for the delivery to each Participant (or the
Participant's beneficiary), as appropriate, or to a custodial account for the
benefit of each Participant (or the Participant's beneficiary) as appropriate,
of a certificate representing the shares purchased upon exercise of such
Participant's option on the Exercise Date. Any amount remaining to the credit of
a Participant's account after the purchase of shares by such Participant on an
Exercise Date, or which is insufficient to purchase a full share of Common
Stock, shall be carried over to the next Exercise Period if the Participant
continues to participate in the Plan or, if the Participant does not continue to
participate, shall be returned to the Participant.
11. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
(a) A Participant may withdraw from the Plan at any time by giving
written notice to the Company. All of the Plan Contributions credited to the
Participant's account and not yet invested in Common Stock will be paid to the
Participant as soon as administratively practicable after receipt of the
Participant's notice of withdrawal, and the Participant's option to purchase
shares pursuant to the Plan automatically will be terminated. Participation in
the Plan will not resume for a Participant who has withdrawn from the Plan (a
"Former Participant") unless the Former Participant enrolls in a subsequent
Offering Period in accordance with Section 5(a).
5
<PAGE>
(b) Upon termination of the Participant's Continuous Status as an
Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not yet
invested in Common Stock will be returned to the Participant or, in the case of
death, to the Participant's beneficiary as determined pursuant to Section 14,
and the Participant's option to purchase shares under the Plan will
automatically terminate.
(c) A Participant's withdrawal from an Offering Period will not have
any effect upon the Participant's eligibility to participate in succeeding
Offering Periods or in any similar plan which may hereafter be adopted by the
Company.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock that
shall be made available for sale under the Plan shall be Two Hundred and Fifty
Thousand (250,000) shares, subject to adjustment as provided in Section 17.
Shares of Common Stock subject to the Plan may be newly issued shares or shares
reacquired in private transactions or open market purchases. If and to the
extent that any right to purchase reserved shares shall not be exercised by any
Participant for any reason or if such right to purchase shall terminate as
provided herein, shares that have not been so purchased hereunder shall again
become available for the purpose of the Plan unless the Plan shall have been
terminated, but all shares sold under the Plan, regardless of source, shall be
counted against the limitation set forth above.
(b) A Participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) A Participant may not, during his lifetime, transfer or otherwise
dispose of any shares of Common Stock purchased pursuant to the Plan for a
period of 6 months following the Exercise Date on which such shares were
purchased.
(d) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse, as requested by the Participant.
13. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The Committee
shall have the authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The administration,
interpretation, or application of the Plan by the Committee shall be final,
conclusive and binding upon all persons. The Committee also shall have the
authority to modify the provisions of this Plan if and to the extent it
considers such modification necessary or appropriate to comply with the laws of,
or the customs or ways of doing business in, any foreign country in which any
Designated Subsidiary transacts business, and provided that such modification
does not preclude awards granted under the Plan by the Company and its
Designated Subsidiaries in the United States from satisfying the requirements
under Section 423 of the Code.
6
<PAGE>
(b) Notwithstanding the provisions of Subsection (a) of this Section
13, in the event that Rule 16b-3 promulgated under the Exchange Act or any
successor provision thereto ("Rule 16b-3") provides specific requirements for
the administrators of plans of this type, the Plan shall only be administered by
such body and in such a manner as shall comply with the applicable requirements
of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion concerning
decisions regarding the Plan shall be afforded to any person that is not
"disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of the Participant's death subsequent to an Exercise Date
on which the Participant's option hereunder is exercised but prior to delivery
to the Participant of such shares and cash. In addition, a Participant may file
a written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of the Participant's death
prior to the exercise of the option.
(b) A Participant's beneficiary designation may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. TRANSFERABILITY. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.
16. PARTICIPANT ACCOUNTS. Individual accounts will be maintained for each
Participant in the Plan to account for the balance of his Plan Contributions and
options issued and shares purchased under the Plan. Statements of account will
be given to Participants semi-annually in due course following each Exercise
Date, which statements will set forth the amounts of payroll deductions, the per
share purchase price, the number of shares purchased and the remaining cash
balance, if any.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits, stock
dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be
7
<PAGE>
made in the number and/or kind of shares, and the per-share option price
thereof, which may be issued in the aggregate and to any Participant upon
exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
Company's assets, or the merger of the Company with or into another corporation
(each, a "Sale Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Committee shortens the Offering
Period then in progress in lieu of assumption or substitution in the event of a
Sale Transaction, the Committee shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the exercise date for
such Participant's option has been changed to the New Exercise Date and that
such Participant's option will be exercised automatically on the New Exercise
Date, unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 11. For purposes of this Section 17(b), an option granted
under the Plan shall be deemed to have been assumed if, following the Sale
Transaction, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the Sale Transaction, the
consideration (whether stock, cash or other securities or property) received in
the Sale Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the Sale Transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); PROVIDED, that
if the consideration received in the Sale Transaction was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon exercise
of the option to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by the
holders of Common Stock in the Sale Transaction.
(c) In all cases, the Committee shall have sole discretion to exercise
any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.
18. AMENDMENT OF THE PLAN. The Board or the Committee may at any time, or
from time to time, amend the Plan in any respect; PROVIDED, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act, Section 423 of the Code, or any other applicable law or
regulation), the Company shall obtain shareholder approval of any such
amendment.
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19. TERMINATION OF THE PLAN.
The Plan and all rights of Employees hereunder shall terminate on the
earliest of:
(a) the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining available
for purchase under the Plan;
(b) such date as is determined by the Board in its discretion; or
(c) the last Exercise Date immediately preceding the tenth (10th)
anniversary of the Plan's effective date.
In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a PRO RATA basis.
20. NOTICES. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. EFFECTIVE DATE. Subject to adoption of the Plan by the Board, the Plan
shall become effective on the First Exercise Date. The Board shall submit the
Plan to the shareholders of the Company for approval within twelve months after
the date the Plan is adopted by the Board.
22. CONDITIONS UPON ISSUANCE OF SHARES.
(a) The Plan, the grant and exercise of options to purchase shares
under the Plan, and the Company's obligation to sell and deliver shares upon the
exercise of options to purchase shares shall be subject to compliance with all
applicable federal, state and foreign laws, rules and regulations and the
requirements of any stock exchange on which the shares may then be listed.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state tax laws of such amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
23. EXPENSES OF THE PLAN. All costs and expenses incurred in administering
the Plan shall be paid by the Company, except that any stamp duties or transfer
taxes applicable to participation in the Plan may be charged to the account of
such Participant by the Company.
24. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment
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by the Company, and it shall not be deemed to interfere in any way with the
Company's right to terminate, or otherwise modify, an employee's employment at
any time.
25. APPLICABLE LAW. The laws of the State of Florida shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.
26. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
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CHS ELECTRONICS, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE COMPANY'S BOARD OF DIRECTORS
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 1998 Annual Meeting of Shareholders
of the Company, to be held on Tuesday, June 9, 1998, at 9:00 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, BERND KARRE, 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 amend the Company's Directors and Officers 1997 Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) PROPOSAL to amend the Company's 1997 Chief Executive Officer Stock Option
Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) PROPOSAL to approve the Company's 1998 Employee Stock Purchase Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(6) PROPOSAL to ratify the reappointment of Grant Thornton LLP, as the Company's
independent certified public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(7) 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 _________________________, 1998
_____________________________________
(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.
