SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, For Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
CHS ELECTRONICS, INC.
(Name of Registrant as Specified in Its Charter)
CHS ELECTRONICS, INC.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on the table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
CHS ELECTRONICS, INC.
2000 NW 84TH AVENUE, MIAMI, FLORIDA 33122
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1999
-------------------------
To the Shareholders of CHS Electronics, Inc.
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of CHS Electronics, Inc., a Florida corporation (the
"Company"), will be held at 10:00 a.m., local time, on Thursday, May 20, 1999,
at the Miami Airport Hilton, 5101 Blue Lagoon Drive, Miami, Florida 33126, for
the following purposes:
(1) To elect a board of eight directors;
(2) The approval of amendments to the Company's Articles of
Incorporation to create three classes of directors to serve
for staggered terms and to increase the maximum number of
directors to thirteen;
(3) The approval of an amendment to the Company's Articles of
Incorporation that provides that directors of the Company may
be removed from office only for cause and only upon the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Company entitled to
vote for the election of directors;
(4) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants; and
(5) 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 March 18,
1999 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
April 16, 1999
THIS IS AN IMPORTANT MEETING AND ALL SHAREHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. ALL SHAREHOLDERS ARE RESPECTFULLY URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE. SHAREHOLDERS WHO EXECUTE A
PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING, REVOKE THEIR PROXY AND VOTE
THEIR SHARES IN PERSON.
<PAGE>
1999 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 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of the Company to be held at 10:00 a.m., local time, on
May 20, 1999, at the Miami Airport Hilton, 5101 Blue Lagoon Drive, Miami,
Florida 33126, 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 1998 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 $50,000. 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) To elect a board of eight directors;
(2) The approval of amendments to the Company's Articles of
Incorporation to create three classes of directors to serve
for staggered terms and to increase the maximum number of
directors to thirteen;
(3) The approval of an amendment to the Company's Articles of
Incorporation that provides that directors of the Company may
be removed from office only for cause and only upon the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Company entitled to
vote for the election of directors;
1
<PAGE>
(4) The ratification of the appointment of Grant Thornton LLP as
the Company's independent certified public accountants; and
(5) The transaction of such other business as may properly come
before the Annual Meeting, including any adjournments or
postponements thereof.
Unless contrary instructions are indicated on the enclosed proxy, all
shares represented by valid proxies received pursuant to this solicitation (and
which have not been revoked in accordance with the procedures set forth above)
will be voted for the election of the nominees for director named below and in
favor of the other matters presented. In the event a shareholder specifies a
different choice by means of the enclosed proxy, his shares will be voted in
accordance with the specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board has set the close of business on March 18, 1999 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
56,171,934 shares of Common Stock outstanding. Only the holders of issued and
outstanding shares of Common Stock are entitled to vote at the Annual Meeting.
Shareholders do not have the right to cumulate their votes, and are entitled to
one vote for each share held.
The Company's bylaws provide that a majority of shares entitled to vote
and represented in person or by proxy at a meeting of the shareholders
constitutes a quorum. If less than a majority of outstanding shares entitled to
vote are represented at the Annual Meeting, a majority of the shares so
represented may adjourn the Annual Meeting to another date, time or place, and
notice need not be given of the new date, time, or place if the new date, time,
or place is announced at the meeting before an adjournment is taken. Prior to
the Annual Meeting, the Company will select one or more inspectors of election
for the meeting. Such inspector(s) shall determine the number of shares of
Common Stock represented at the meeting, the existence of a quorum and the
validity and effect of proxies, and shall receive, count and tabulate ballots
and votes and determine the results thereof.
Under the Florida Business Corporation Act (the "Act"), directors are
elected by a plurality of the votes cast by the shares entitled to vote in the
election at a meeting at which a quorum is present. Other matters are approved
if affirmative votes cast by the holders of the shares represented at a meeting
at which a quorum is present exceed votes opposing the action, unless a greater
number of affirmative votes or voting by classes is required by the Act or the
Company's Amended and Restated Articles of Incorporation. Therefore, abstentions
and broker non-votes have no effect under Florida law. A broker non-vote
generally occurs when a broker who holds shares in street name for a customer
does not have authority to vote on certain non-routine matters because its
customer has not provided any voting instructions on the matter.
2
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information as of the Record
Date concerning the beneficial ownership of the Common Stock by: (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director and nominee for director of the
Company, (iii) each of the Named Executive Officers, and (iv) all executive
officers and directors of the Company as a group. 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.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE
BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER(1)(2)(3) OWNED OWNED
--------------------------------- ------------- ------------
<S> <C> <C>
Claudio Osorio(4)(5) 7,516,915 13.1%
Carsten Frank(6) 4,355,789 7.8%
Antonio Boccalandro(5) 23,269 *
Otto Gerlach (7) 30,000 *
Bernd Karre 512,247 *
Zbynek Kraus(8) 30,000 *
Pierino Lardi(9) 15,000 *
Donald D. Winstead(10) 30,000 *
Jean-Pierre Robinot 0 *
Craig Toll(11) 143,750 *
All officers and directors as a group (12 persons) 12,767,884 22.2%
Comtrad(4)(12) 7,516,915 13.0%
Mellon Bank Corporation(13) 4,030,956 7.2%
</TABLE>
- --------------------
* 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 1,902,255 shares held of record by Comtrad, Inc. ("Comtrad"), a
wholly-owned subsidiary of Comtrad Holdings, Inc. ("CHI"), 3,531,787 shares
held of record by CHI, 459,910 shares held of record by Penrose Trading Co.
S.A. (a shareholder of CHI and of which Mr. Osorio has effective control),
15,000 shares of Company Common Stock owned by Mr. Osorio and currently
exercisable options to purchase 1,607,963 shares held by Mr. Osorio.
Claudio Osorio owns and controls a majority of the issued and outstanding
capital stock of CHI. Based on the foregoing relationships and agreements,
Claudio Osorio, CHI and Comtrad may be deemed to have shared voting and
investment control over the above-indicated aggregate number of shares of
Common Stock.
3
<PAGE>
(5) Mr. Boccalandro holds currently exercisable options to purchase 22,969
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. Frank holds currently exercisable options to purchase 65,000 shares of
Common Stock.
(7) Mr. Gerlach owns approximately 17% of the outstanding common stock of CHI
and 17% of the shares of Class A common stock of 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 30,000 shares
of Common Stock.
(8) Mr. Kraus is a shareholder of Penrose Trading Co. S.A. which is a
shareholder of CHI and the Company. Mr. Kraus disclaims beneficial
ownership of the shares of the Company held by Penrose Trading Co. S.A. and
CHI. Mr. Kraus holds currently exercisable options to purchase 30,000
shares of Common Stock.
(9) Mr. Lardi is the holder of currently exercisable options to purchase 15,000
shares of Common Stock.
(10) Mr. Winstead is the holder of currently exercisable options to purchase
30,000 shares of Common Stock.
(11) Mr. Toll is the holder of currently exercisable options to purchase a total
of 88,750 shares of Common Stock.
(12) The address for Comtrad and CHI is P.O. Box 660708, Miami Springs, Florida
33266.
(13) The address for Mellon Bank Corporation is One Mellon Bank Center,
Pittsburgh, Pennsylvania 15258. The information is based on a Schedule 13G
dated January 29, 1999.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of the Company's outstanding Common Stock, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock. Such persons are required by SEC
regulation to furnish the Company with copies of all such reports they file.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, all Section 16(a) filing requirements applicable to its
officers, directors and greater than ten percent beneficial owners have been
met, except for Mr. Don Winstead, who filed a late report documenting certain
transactions.
4
<PAGE>
ELECTION OF DIRECTORS
Eight persons are nominated for election as directors. Although the
Company anticipates that all of the nominees will be able to serve, if any
nominee is unable or unwilling to serve at the time of the Annual Meeting, the
proxy will be voted for a substitute nominee chosen by Management, or the number
of directors to be elected may be reduced in accordance with the Company's
Bylaws.
The following table sets forth certain information as to the persons
nominated for election as directors of the Company at the Annual Meeting and the
classes for which they are being nominated if the proposal creating three
classes of directors is approved. If the proposal is not approved, then each
director listed below is nominated to serve until the next Annual Meeting of
Shareholders and until the director's successor is duly elected and qualified.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
---- --- ------------------------- --------
<S> <C> <C> <C>
NOMINEES FOR ELECTION TO CLASS I OF THE BOARD
FOR TERM TO EXPIRE IN 2000
Bernd Karre 54 Chief Operating Officer of Karma 1997
Operations and Director
Pierino Lardi 50 Director 1997
Jean-Pierre Robinot 52 Chief Operating Officer-European Region n/a
and Director Nominee
NOMINEES FOR ELECTION TO CLASS II OF THE BOARD
FOR TERM TO EXPIRE IN 2001
Carsten Frank 35 Executive Vice President - Worldwide 1997
Logistics and Director
Zbynek Kraus 45 General Manager of Czech Republic 1996
Operations and Director
NOMINEES FOR ELECTION TO CLASS III OF THE BOARD
FOR TERM TO EXPIRE IN 2002
Antonio Boccalandro 31 Chief Officer of Mergers and Acquisitions, 1993
Secretary and Director
Claudio Osorio 40 Chairman of the Board, Chief Executive 1993
Officer and President
Donald D. Winstead 62 Director 1993
</TABLE>
CLASS I DIRECTORS
BERND KARRE has been a director of the Company since November 1997 and
Chief Operating Officer of Karma Operations since July 1998. Mr. Karre served as
Chief Executive Officer and President of Karma
5
<PAGE>
International AG ("Karma") from October 1995 through August 1997. 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.
JEAN-PIERRE ROBINOT is a director nominee and became the Chief
Operating Officer - European Region in April 1999. Mr. Robinot served as
Senior Vice President - Seagate Corporation Sales and Operations from 1995
through July 1998 and as Vice President - Sales and Operations from 1988 through
1994.
CLASS II DIRECTORS
CARSTEN FRANK has been a director of the Company since May 1997 and has
been Executive Vice President - Worldwide Logistics since January 1, 1999. From
March 1, 1998 until December 31, 1998, Mr. Frank was Executive Vice
President--Asian Region of the Company. 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 served as that company's Managing Director
from its formation until it was acquired by the Company effective January 1997.
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 Company's Czech Republic operation.
CLASS III DIRECTORS
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.
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.
DONALD D. WINSTEAD has been a director of the Company since 1993 and
has been self-employed as a business consultant since June 1991. From March 1997
to March 1998, Mr. Winstead served as Chairman, Chief Executive Officer and
Chief Financial Officer of Purus, Inc. and from October 1993 through July 1996
he served as the Chief Executive Officer and a director of Medical Resource
Group Inc.
6
<PAGE>
If the proposal to create three classes of directors is not adopted,
the term of office of each director of the Company will end at the next annual
meeting of the Company's shareholders or when his successor is elected and
qualified.
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
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 $7,500 per year for each committee served and are reimbursed for travel
expenses incurred to attend such meetings. Directors who are not employees of
the Company and serve as chairman of any committee receive $25,000 per year.
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.
During fiscal year 1998, the Board held 13 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. Frank, who attended
69% of the meetings, and Mr. Gerlach, who attended 62% of the meetings.
PROPOSALS TO APPROVE AMENDMENTS TO ARTICLE V OF THE
COMPANY'S ARTICLES OF INCORPORATION TO CREATE THREE CLASSES
OF DIRECTORS TO SERVE FOR STAGGERED TERMS AND
ONLY FOR CAUSE REMOVAL OF DIRECTORS
A. Number and Terms of Directors
The Board of Directors proposes the adoption of an amendment and
restatement of Article V of the Company's Articles of Incorporation as set forth
in Exhibit A to this Proxy Statement. The following summary is qualified in its
entirety by reference to the complete text of such Article V, which is included
in Exhibit A to this Proxy Statement.
The present Article V provides that the number of directors
constituting the whole Board of Directors is to be not less than two nor more
than nine, the exact number to be fixed from time to time by the Board of
Directors. Article V, as amended, would provide for a Board of Directors,
divided into three classes of directors serving staggered three-year terms with
a minimum of three directors and a maximum of thirteen directors. Under proposed
Article V, one of the three classes, having approximately one-third of the
directors, would be elected each year. The total number of directors and the
number of directors constituting each class of directors (with each of the three
classes being required to be as nearly equal as possible) would be fixed or
changed, from time to time, by the Board
7
<PAGE>
of Directors within such authorized limits. Initially, however, members of all
three classes would be elected at the 1999 Annual Meeting. If the proposed
Article V is adopted, the slate of eight directors proposed for election at the
1999 Annual Meeting would be elected for three separate classes as follows:
three directors, constituting the "Class I Directors," would be elected to a
term expiring at the 2000 Annual Meeting; two directors, constituting the
"Class II Directors," would be elected for a term expiring at the 2001 Annual
Meeting; and three directors, constituting the "Class III Directors," would be
elected for a term expiring at the 2002 Annual Meeting. At each Annual Meeting
beginning with the 2000 Annual Meeting, directors would be elected to succeed
those whose terms expire, with each newly elected director to serve for a
three-year term.
Notwithstanding the maximum number of directors, which would be
thirteen, proposed Article V further provides that when holders of any class of
stock (other than Common Stock) have the right to elect a specified number of
directors (such as is often required by the terms of preferred stock in the
event dividend payments are in arrears for a period of time), then the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of the Articles of Incorporation applicable
thereto, and such directors shall not be classified pursuant to Article V unless
so provided. The Company's authorized capital presently consists of a class of
Common Stock, par value $.001 per share, and a class of Preferred Stock, $.001
per share, of which Series A has been reserved for issuance pursuant to the
Company's Amended and Restated Preferred Stock Purchase Rights Agreement.
B. Removal of Directors
The Board of Directors proposes the adoption of an amendment to Article
V of the Company's Articles of Incorporation to include a provision providing
for the removal of directors only on a for cause basis as set forth in Exhibit A
to this Proxy Statement. The following summary is qualified in its entirety by
reference to the complete text of such section, which is included in Exhibit A
to this Proxy Statement.
The Company's current Articles of Incorporation do not provide for
specific procedures or conditions for the removal of directors. Accordingly,
under the Florida Business Corporation Act, directors may be removed, with or
without cause, by a majority vote of the shareholders. The proposed amendment
provides for removal of directors for cause only and defines the term therein.
REASONS AND EFFECTS
The Board of Directors believes that the adoption of the
above-described amendments to Article V of the Company's Articles of
Incorporation is advantageous to the Company and its shareholders because, by
providing that directors will serve three-year terms rather than one-year terms,
and that directors may only be removed from service for cause, the continuity
and stability of the composition of the Company's Board of Directors and of the
policies formulated by the Board will be enhanced. The Board believes that the
assurance of continuity and stability are important to the success of the
Company. The Board also believes that this, in turn, will permit it more
effectively to represent the interests of all shareholders, including responding
to circumstances created by demands or actions of a particular shareholder or
group of shareholders.
There have been a number of attempts by various individuals and
entities to acquire significant minority positions in companies with the intent
of obtaining actual control of the companies by electing their own slate of
directors, or of achieving some other goal, such as the repurchase of their
shares at a premium, by threatening to obtain such control. These insurgents
often can elect a company's entire board of directors through a proxy contest or
otherwise, even though they do not own a majority of the company's outstanding
shares entitled to vote. Proposed Article V may discourage such purchases
because its provisions would operate to delay the purchaser's ability to obtain
control of the Board in a relatively short period of time. The delay arises
because under proposed Article V it will generally take a purchaser two annual
meetings of shareholders to elect a majority of the Board and directors may only
be removed from office for cause prior to reelection. However, the Board
believes that an imminent threat of removal of the Company's management is
likely to curtail the Board's ability to negotiate effectively with such
insurgents. Moreover, management may also be deprived of the time and
information necessary to evaluate any takeover proposal, to seek and study
alternative proposals and to help ensure that the best price is obtained in any
transaction which may ultimately be undertaken involving the Company.
8
<PAGE>
Since neither Florida law nor the Company's Articles of Incorporation
or Bylaws requires cumulative voting, a holder of a block of stock of the
Company constituting less than a majority of the outstanding shares will have no
assurance of proportional representation on the Board.
The adoption of proposed Article V may also deter certain mergers,
tender offers or other future takeover attempts which some or a majority of
holders of Common Stock may deem to be in their best interests. In addition,
proposed Article V would delay shareholders who do not like the policies of the
Board of Directors from removing a majority of the Board for two years, unless
they can establish cause and obtain the requisite vote.
The Board has no knowledge of any present effort to gain control of the
Company or to organize a proxy contest. Moreover, there has been no problem in
the past or at the present time with management's continuity or stability. The
Board believes that it is prudent and in the interests of shareholders generally
to provide the advantage of greater assurance of continuity of Board composition
and policies which will result from the adoption of proposed Article V. The
Board believes such advantages outweigh any disadvantages relating to
discouraging potential acquirers from making an effort to obtain control of the
Company.
Under Florida law, the proposed amendments of the Articles of
Incorporation require that the number of shares voting in favor of the amendment
exceed those cast opposing the action.
THE COMPANY RECOMMENDS A VOTE FOR THE ABOVE DESCRIBED PROPOSALS.
EXECUTIVE OFFICERS
The executive officers of the Company, as of March 19, 1999, are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Claudio Osorio(1)................ 40 Chairman of the Board, Chief Executive Officer and President
Carsten Frank(1)................. 35 Executive Vice President--Worldwide Logistics and Director
Clifford Dyer(2)................. 60 Executive Vice President--Latin American Region
Craig Toll....................... 50 Executive Vice President - Finance, Chief Financial Officer and
Treasurer
Antonio Boccalandro(1)........... 31 Chief Officer of Mergers and Acquisitions, Secretary and Director
</TABLE>
- -----------------
(1) Reference is made to the description of the business experience of such
individual set forth above under "Election of Directors," which is
incorporated herein by reference.
(2) Mr. Dyer is a key employee, but not an executive officer of the Company.
CLIFFORD DYER has been the Executive Vice President--Latin American
Region of the Company since August 1997. From January 1997 until July 1997 he
was the Chief Operating Officer--Latin American Region. From February 1987 until
it was acquired by the Company in October 1996, Mr. Dyer was President of
Merisel Latin America, Inc. and was responsible for all Latin American
operations. He was the founder in 1982 of the predecessor company to Merisel
Latin America, Inc. Prior to 1982, Mr. Dyer was President of GTE Venezuela and
held directorships in various companies.
CRAIG TOLL has been the Executive Vice President-Finance of the Company
since August 1997 and has been the Chief Financial Officer of the Company since
July 1994 and its Treasurer since June 1995. Mr. Toll was self-employed as a
consultant to CHS Promark from April 1994 to June 1994. For over five years
prior to April 1994, Mr. Toll was a partner in the accounting firm of Deloitte &
Touche.
Officers of the Company serve at the discretion of the Board of
Directors, subject to the terms of any employment agreements with the Company.
There are no family relationships among any of the Company's executive officers,
directors and significant employees.
9
<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 of
December 31, 1998 (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, 1998 750,000 0 500,000 13,000
Chief Executive Officer and 1997 750,000 1,030,180 1,526,259 63,850
President 1996 350,000 324,375 648,741 50,000
Craig Toll,
Executive Vice President of 1998 346,925 0 30,000 -0-
Finance, Chief Financial 1997 225,000 279,000 60,000 -0-
Officer and Treasurer 1996 191,567 75,000 30,000 -0-
Carsten Frank,
Executive Vice President - 1998 350,000 150,000 30,000 -0-
Worldwide Logistics 1997 350,000 159,293 120,000 -0-
Clifford Dyer,
Executive Vice President -Latin 1998 300,000 0 30,000 -0-
American Region 1997 391,966 17,500 45,000 -0-
1996 46,154(1) 7,500(1) -0- -0-
Pasquale Giordano,
Executive Vice President 1998 350,000 57,077 30,000 31,900
-European, Middle Eastern and
Asian Region(2)
</TABLE>
- --------------------
(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.
(2) Mr. Giordano resigned effective March 19, 1999
EMPLOYMENT ARRANGEMENTS
The Company has entered into employment agreements with Messrs.
Osorio, Toll and Frank. Mr. Osorio's and Mr. Frank's agreements expire on
January 1, 2000, Mr. Toll's agreement expires July 1, 1999. The agreements
provide for automatic extensions of one year each unless either the Company or
the employee provides written notice 60 days prior to the renewal date. 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. In
1998, Mr. Osorio's bonus arrangement provided for a bonus of up to $1,250,000
based upon the Company's earnings to sales and earnings per share ratios, of
which he received $0. Mr. Frank's arrangement provides for a bonus up to
$700,000 (with a minimum bonus of $150,000) based upon
10
<PAGE>
the results of the operations of the Company which he supervises. The agreements
also provide that upon termination of employment without "cause" or termination
by the executive for "good reason" (which includes a change of control of the
Company), the executive is entitled to receive, in addition to all accrued or
earned but unpaid salary, bonus or benefits, an amount equal to two and one-half
times base salary paid to the executive during the last full year prior to
termination of employment, together with an amount equal to the bonus paid to
the executive in the prior year multiplied by a fraction, the numerator of which
is the number of days elapsed in the then current year through termination and
the denominator of which is 365. The agreements also provide that the executive
will not compete with the Company during his employment and for two years
thereafter unless the Company terminates the executive without "cause" or the
executive terminates his employment for "good reason."
Under the terms of the Company's employment agreement with Cliff Dyer,
Mr. Dyer is employed as Executive Vice President-Latin American Region of the
Company for a two year period commencing July 1, 1997. Pursuant to the
agreement, Mr. Dyer's salary is $300,000. Mr. Dyer's employment agreement
provides for various additional benefits, and entitles him to participate in all
insurance plans offered to executive officers by the Company. Upon Mr. Dyer's
death, his estate will continue to receive his compensation for the shorter of
the balance of the term of the agreement, or six months. The agreement provides
that upon termination of employment by the Company without cause, or if there is
a change of control of the Company, Mr. Dyer will be entitled to receive
compensation for the balance of the term of the agreement, and any stock options
granted to him will vest immediately. The agreement also provides that Mr. Dyer
will not compete with the Company during his employment and for two years
thereafter.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1998 were Donald D.
Winstead, Chairman, Otto Gerlach and Pierino Lardi. None of these persons has
previously served as an officer or employee of the Company or any of its
subsidiaries.
Otto Gerlach holds, indirectly, 16.7% of the outstanding common stock
of CHI and 16.7% of the shares of Class A common stock of CHI. In the past, the
Company has engaged in numerous transactions with Comtrad. See "Certain
Transactions."
11
<PAGE>
OPTION GRANTS DURING 1998
OPTION GRANTS TABLE. The following table sets forth certain information
concerning grants of stock options made during 1998 to each of the Named
Executive Officers. The Company did not grant any stock appreciation rights in
1998.
<TABLE>
<CAPTION>
INDIVIDUAL OPTION GRANTS IN 1998
- ---------------------------------------------------------------------------------------------------------
SHARES OF
COMMON STOCK % OF TOTAL
UNDERLYING GRANTED ALTERNATIVE
OPTIONS OPTION EXPIRATION TO GRANT DATE
NAME GRANTED PRICE($) DATE EMPLOYEES VALUE(1)($)
---- ------------ -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Claudio Osorio 500,000 21.69 6/9/08 31.9% 6,310,000
Craig Toll 30,000 21.69 6/9/08 1.9% 378,600
Carsten Frank 30,000 21.69 6/9/08 1.9% 378,600
Clifford Dyer 30,000 21.69 6/9/08 1.9% 378,600
Pasquale Giordano 30,000 21.69 6/9/08 1.9% 378,600
</TABLE>
- -------------------------
(1) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The estimated values under that model are based on
certain assumptions as to variables such as interest rates, stock price
volatility and future dividend yields. The actual value, if any, that an
executive may realize will depend on the excess of the stock price over the
exercise price on the date the option is exercised, so that there is no
assurance that the value realized by an executive will be at or near the
value estimated by the Black-Scholes model.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR END OPTION VALUES
The following table sets forth information with respect to: (i) the
exercise in 1998 of options to purchase Common Stock by the named Executive
Officers; (ii) the number of unexercised options held by the Named Executive
Officers as of December 31, 1998; and (iii) the value as of December 31, 1998 of
unexercised in-the-money options.
12
<PAGE>
<TABLE>
<CAPTION>
VALUE
REALIZED
(MARKET NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES PRICE AND UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED EXERCISE AT DECEMBER 31, 1998 AT DECEMBER 31, 1998($)(1)
ON LESS EXERCISE ------------------------------ -----------------------------
EXERCISE PRICE)($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---------- ------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Claudio Osorio -0- -0- 1,607,963 741,994 2,424,515 1,375,874
Craig Toll 15,000 277,500 73,750 82,500 638,259 243,838
Carsten Frank -0- -0- 40,000 110,000 123,438 246,875
Clifford Dyer -0- -0- 24,000 69,000 131,190 205,253
Pasquale Giordano -0- -0- 56,014 67,500 507,650 148,125
</TABLE>
- --------------------
(1) Based on a December 31, 1998 value of $16.94 per share. Value is calculated
by multiplying: (a) the difference between $16.94 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, 1998, less
option exercise price.
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 1998, the Compensation Committee approved, and ultimately the Board
approved, compensation arrangements for Messrs. Osorio, Frank, Dyer,
Boccalandro, Giordano and Toll defining their base salary. The base salaries of
other senior officers were determined by Mr. Giordano, with respect to the
Company's subsidiaries in Europe, by Mr. Frank, with respect to Asia, and by Mr.
Dyer, with respect to Latin America, with Mr. Osorio providing a review of
these base salary amounts.
13
<PAGE>
BONUSES
In 1998, Messrs. Osorio, Frank, Giordano and Dyer were subject to bonus
compensation pursuant to a Company bonus plan and Mr. Toll and Mr. Boccalandro
were 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 options are 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 are eligible to participate in the Company's 1998
Employee Stock Purchase Plan.
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
CERTAIN TRANSACTIONS
At December 31, 1998, the Company carried a receivable from Comtrad and
CHI in the amount of $20.7 million. In 1998, this receivable was evidenced by a
promissory note which Comtrad and CHI collateralized with all of their net
assets. The principal asset of Comtrad and CHI is shares of CHS Common Stock.
The interest rate charged on the promissory note is the prime rate. The amount
is due upon demand. Interest charged to Comtrad was $1,393,000 in 1998. At
December 31, 1998, the collateral was sufficient to liquidate the indebtedness
due the Company. On March 19, 1999, the market value of the CHS shares was
computed to be insufficient and in the event market conditions do not improve,
the Company will have to arrange for additional collateral or establish a
valuation reserve up to the full amount of the receivable.
In January 1999, the Company made an advance on the 1998 bonus of
$450,000 to the President of the Company. As the final bonus calculation
indicated no bonus was earned, the advance has been converted to a prepayment of
his 1999 salary and will be reduced to zero during 1999.
14
<PAGE>
Carsten Frank, a director, officer and shareholder of the Company, has
ownership interests and control over other companies that do business with the
Company. The following table summarizes the transactions and balances which
relate to Mr. Frank or his related entities (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales to such related parties $57,034 $102,724
Purchases from such related parties 5,004 57,376
Commissions paid to such related parties 2,054 10,116
Rebates received from such related parties 4,000 11,163
Due from the individual above 2,178 --
Net amount due the Company 8,088 12,193
</TABLE>
The rebates received pertain to vendor rebates passed from such related
parties to the Company.
In an agreement dated December 1998 and subsequently amended in March
1999, CHS acquired certain of these companies for the net of 1.7 million shares
of common stock and $4.0 million in cash. In connection with the acquisitions,
the Company recorded goodwill of $32.7 million. In January 1999, the Company
acquired for $5.4 million the remaining entity which had transactions with the
Company. The Company expects a significant reduction in such transactions in the
future.
During 1998, the Company sold two companies and rights to entities in
which Mr. Frank has a minority ownership interest. The companies and rights sold
were ancillary operations acquired as part of the acquisition of Frank & Walter
in January 1997. The companies were sold for cash of $6.7 million, all of which
was collected during 1999. The gain of $6.9 million was included in operating
expenses in the consolidated statement of earnings of the Company. The after tax
profit on the sales was $3.8 million.
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, 1998 with
(i) the Company's 1998 peer group* and (ii) the S&P 500. The Company did not pay
any dividends on its Common Stock during this period.
COMPARISON OF CUMULATIVE TOTAL RETURN
AMONG CHS ELECTRONICS, INC.,
A 1998 PEER GROUP AND THE S&P 500
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.
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
------------------------------------------
8/15/94 12/94 12/95 12/96 12/97 12/98
<S> <C> <C> <C> <C> <C> <C>
CHS ELECTRONICS, INC. 100 80 90 171 257 254
PEER GROUP 100 98 100 120 157 171
S&P 500 100 101 138 170 227 292
</TABLE>
- --------------------
* The 1998 Peer Group is comprised of the following companies: Ingram Micro,
Inc., Savoir Technologies, Inc., Liuski Int'l. Inc., Tech Data Corp.,
Marshall Industries, Inc., Merisel, Inc., SED International Holdings, Inc.,
Ameriquest Technologies, Inc., United Stationers, Inc. and Bell
Microproducts, Inc. Western Micro Tech, 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.
15
<PAGE>
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.
SHAREHOLDER PROPOSALS. Any shareholder who intends to present a
proposal at the Company's 2000 Annual Meeting of Shareholders and who wishes to
have their proposal included in the Company's Proxy Statement for that meeting,
must deliver the proposal, not exceeding 500 words in length, to the Secretary
of the Company in writing not later than December 17, 1999.
Under the Company's Amended and Restated Bylaws, nominations for
director may be made only by the Board or a Board committee, or by a shareowner
entitled to vote who delivers notice to the Company not less than 120 days nor
more than 180 days prior to the first anniversary of the date of the notice of
the preceding year's annual meeting. For the Company's meeting in the year 2000,
the Company must receive this notice on or after October 19, 1999, and on or
before December 17, 1999. Nominations which are timely received will be
considered by the Board of Directors.
The Amended and Restated Bylaws also provide that no business may be
brought before an annual meeting except as specified in the notice of meeting or
as otherwise brought before the meeting by or at the direction of the board or
by a shareowner entitled to vote who has delivered notice to the Company
(containing certain information specified in the Amended and Restated Bylaws)
within the time limits described above for delivering notice of a nomination for
the election of a director. Therefore, any shareholder proposal submitted other
than for inclusion in the Company's proxy materials must be received within the
time limits or will be considered untimely.
A copy of the full text of the Amended and Restated Bylaws provisions
discussed above may be obtained by writing to the Corporate Secretary at 2000
N.W. 84th Avenue, Miami, Florida 33122.
By Order of the Board of Directors,
CLAUDIO OSORIO
CHAIRMAN OF THE BOARD
Miami, Florida
April 16, 1999
16
<PAGE>
EXHIBIT A
PROPOSED ARTICLE V OF THE
ARTICLES OF INCORPORATION OF
CHS ELECTRONICS, INC.
CLASSIFIED BOARD OF DIRECTORS AND RELATED MATTERS
Article V of the Articles of Incorporation is proposed to be amended to
read in its entirety as follows:
"For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and
regulation of the powers of the Corporation and of its directors and of
its shareholders or any class thereof, as the case may be, it is
further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board of
Directors shall be not fewer than three or more than thirteen
directors, the exact number of directors to be determined from time to
time by resolution adopted by the affirmative vote of a majority of the
entire Board of Directors. The directors shall be divided into three
classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number
of directors constituting the entire Board of Directors. At the 1999
Annual Meeting of Shareholders, Class I directors shall be elected for
a one-year term, Class II directors for a two-year term and Class III
directors for a three-year term. At each succeeding Annual Meeting of
Shareholders beginning at the 2000 Annual Meeting, successors to the
class of directors whose term expires at the Annual Meeting shall be
elected for a three-year term. A director shall hold office until the
Annual Meeting for the year in which his term expires and until his
successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from
office. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible.
2. Newly created directorships resulting from any increase in
the authorized number of directors or vacancies on the Board of
Directors resulting from death, resignation, retirement,
disqualifications, removal from office or any other cause shall be
filled only by a majority of the remaining directors then in office,
even if less than a quorum or by the sole remaining director.
3. The directors of any class of directors of the Corporation
may be removed from office by the shareholders only for cause and only
in the manner provided in this Section. At any annual meeting or
special meeting of stockholders, the notice of which states that the
removal of a director or directors is among the purposes of the
meeting, the affirmative vote of at least 75% of the votes of the
shares at the time entitled to vote in the election of any directors,
voting together as a single class, may remove such director or
directors for cause. Except as may be provided by applicable law, cause
for removal will be deemed to exist only if the director whose removal
is proposed has been adjudged by a court of competent jurisdiction to
be liable to the Company or its shareholders for misconduct as a result
of (a) a breach of such director's duty of loyalty to the Company, (b)
any act or omission by such director not in good faith or which
involves a knowing violation of law, or (c) any transaction from which
such director derived an improper personal benefit, and such
adjudication is no longer subject to direct appeal.
4. Whenever the holders of any one or more classes or series
of preferred stock issued by the Corporation shall have the right to
vote separately by class or series to elect directors at an annual or
special meeting of shareholders, the election, term of office, filling
of vacancies and other features of such directorships shall be governed
by the terms of these Articles of Incorporation applicable thereto and
such directors so elected shall not be divided into classes pursuant to
this Article V unless expressly provided by such terms.
A-1
<PAGE>
5. Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of this Corporation (and notwithstanding
the fact that a lesser percentage or separate class vote may be
specified by law, these Articles, the Bylaws of the Corporation or
otherwise), the affirmative vote of the holders of at least
seventy-five percent (75%) of the voting power of all outstanding
voting stock of the Corporation shall be required to adopt any
provision inconsistent with, or to amend or repeal this Article V.
A-2
<PAGE>
CHS ELECTRONICS, INC.
THIS PROXY IS SOLICITED ON BEHALF
OF THE COMPANY'S BOARD OF DIRECTORS
COMMON STOCK
The undersigned, a holder of Common Stock of CHS Electronics, Inc., a Florida
Carolina corporation (the "Company"), hereby appoints Claudio Osorio and Craig
Toll, as proxy for the undersigned, 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 1999 Annual Meeting of Shareholders of the Company,
to be held on Thursday, May 20, 1999, at 10:00 a.m., local time, at the Miami
Airport Hilton, 5101 Blue Lagoon Drive, Miami, Florida 33126 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 ANTONIO BOCCALANDRO, CARSTEN FRANK, BERND KARRE,
ZBYNEK KRAUS PIERINO LARDI, CLAUDIO OSORIO, JEAN-PIERRE
ROBINOT, 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) The approval of amendments to the Company's Articles of
Incorporation to create three classes of directors to serve
for staggered terms and to increase the maximum number of
directors to thirteen.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(3) The approval of an amendment to the Company's Articles of
Incorporation that provides that directors of the Company may
be removed from office only for cause and only upon the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Company entitled to
vote for the election of directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(4) The ratification of the appointment of Grant Thornton LLP, as
the Company's independent certified public accountants.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(5) The transaction of such other business as may properly come
before the Annual Meeting and any adjournments or
postponements thereof.
(see reverse side)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED 'FOR' ALL OF THE PROPOSALS.
Dated _________________________ , 1999
__________________________________
(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.
