Item 1. BUSINESS
(a) General Development of Business
Southern Electronics Corporation, a Delaware corporation (the "Registrant"), through its wholly-owned operating subsidiary, Southern Electronics Distributors, Inc., a Delaware corporation ("SED"), is a distributor of microcomputers, computer peripheral products and cellular telephone products. These products are sold through a centralized telemarketing sales force to an active, nonexclusive, nationwide customer base of over 9,000 value-added resellers ("VARs") and dealers of microcomputer products located primarily in the Southeastern United States and resellers of cellular telephones.
The Registrant distributes from its distribution facilities in Tucker, Georgia and Miami, Florida computer related products of nationally recognized manufacturers such as Acer American Corporation, AOC International (USA) Ltd., Epson America, Inc., Hewlett-Packard Company, Maxtor Corporation, Mitsumi Electronics, Inc., Panasonic Communications & Systems Company, Seagate Technology, Inc., and U.S. Robotics, Inc. The Company also distributes cellular telephone products from these facilities and is a direct distributor of NEC America, Inc. and an indirect distributor of other nationally recognized cellular telephone product manufacturers such as Motorola Cellular Subscriber Group and Nokia Mobile Phones.
The Registrant and SED were organized in June 1986 and acquired substantially all of the assets of Southern Electronics Distributors, Inc., a Georgia corporation (the "Predecessor"), on July 2, 1986. The Registrant, through SED, is conducting the business formerly operated by the Predecessor. The Predecessor originally was engaged in the business of wholesale distribution of consumer electronics products primarily to independent retailers in small-to-medium-sized markets in the Southeastern United States. In response to a perceived consolidation in the retail consumer electronics market resulting from increased competition, the Registrant began shifting its product mix by the end of fiscal 1987 toward microcomputers and computer peripheral products. The Registrant added sales of cellular telephone products during fiscal 1988. The Registrant substantially completed its strategic refocusing by the end of fiscal 1988.
On December 14, 1995, the Registrant acquired substantially all of the assets and assumed certain liabilities of U.S. Computer of North America, Inc. ("USC"), a distributor of, among other things, Hewlett-Packard computer products in Latin America for consideration of approximately $2,640,000 consisting of 275,000 shares of the Registrant's common stock valued at $1,375,000 and cash of $1,265,000. The purpose of making the acquisitio of USC was to allow the Registrant to enhance its ability to service its growing base of customers in Latin America by offering them an expanded range of products.
On January 10, 1996, the Registrant amended the lease of its sales and distribution facility, located in the Beacon Centre Technology Park in Miami, Florida, in order to (i) relocate such facility to another building within the Beacon Centre complex having leased space of approximately 31,200 square feet and (ii) to provide for a lease term of 61 months from March 1, 1996. On July 24, 1996, the Registrant further amended the lease pertaining to its Miami sales and distribution facility in order to expand such facility by approximately 30,000 square feet. See "Item 2, Properties." The Registrant opened this facility in November 1993 and is utilizing it primarily to foster the Registrant's relationships with exporters that ship to the Caribbean and to Central and South America. The Registrant presently has no intention to direct-export its products.
(b) Financial Information about Industry Segments
The Registrant operates in only one business segment.
(c) Narrative Description of Business
1. Principal Products Distributed and Services Rendered
The Registrant offers a broad range of computer related hardware products and cellular telephone products. Computer related hardware products accounted for approximately 91.7% of net sales for fiscal 1996, and included sales of microcomputers, floppy and hard disk drives, dot matrix and non-impact printers, monitors, add-on boards and accessories. Approximately 8.3% of the Registrant's net sales for fiscal 1996 consisted of cellular telephone products, such as sales of mobile, transportable and portable cellular telephones and related products. The Registrant continually evaluates its product mix and inventory levels and maintains flexibility in its product offerings by adding popular profitable items.
As a distributor, the Registrant plays a valued role in linking manufacturers with customers that otherwise could not purchase products directly from the manufacturers because of the inability or unwillingness of manufacturers to deliver rapidly and handle efficiently small orders and to verify smaller customers' creditworthiness. The Registrant's position in the marketplace enables it to take advantage of volume discounts, product promotions and other buying opportunities from its vendors, which allow the Registrant to market a wide variety of product offerings to its customers at attractive prices.
2. Sales, Marketing and Credit Management
The Registrant is sales driven. Knowledgeable, motivated salespeople are a key to the Registrant's success. The Registrant's sales are generated by a centralized telemarketing sales force, which consisted of approximately 133 persons on June 30, 1996. Members of the sales staff are trained through intensive in-house sales training programs, along with manufacturer-sponsored product seminars. This training allows sales personnel to provide customers with product information and to use their marketing expertise to answer customers' questions about important new product considerations, such as compatibility and capability, while offering advice on which products meet specific performance and price criteria. The Registrant's salespeople are able to analyze quickly the Registrant's extensive inventory through a sophisticated management information system and recommend the most appropriate cost-effective systems and hardware for each customer -- whether a full-line retailer or an industry-specific VAR.
Because the Registrant's salespersons' compensation is based primarily on commissions, the salespeople are challenged to increase their product knowledge and to establish long-term relationships with existing and new customers. Customers can telephone their salespersons on a toll-free number provided by the Registrant. Salespeople initiate calls to introduce the Registrant's existing customers to the Registrant's new products and to solicit orders. In addition, salespeople conduct "cold-call" prospecting using mailing lists and telephone directories of various cities to develop new customer relationships.
The telemarketing salespersons are supported by other marketing programs. Representatives of the Registrant generally attend at least one trade show annually where they publicize the Registrant's capabilities. In addition, the Registrant's in-house marketing staff prepares catalogs listing available microcomputer and related products and catalogs listing available cellular telephone products for distribution to the Registrant's customers. It also publishes other direct mail pieces promoting specials and new products.
The Registrant's sales efforts for computer related products are directed principally to its nationwide customer base of VARs and dealers located primarily in the Southeastern United States. The Registrant maintains a separate telemarketing salesforce for the sale of cellular telephone products to retailers and cellular telephone carriers and their authorized agents located throughout the United States.
The Registrant sells its merchandise on a trade credit, COD, prepaid or floor-plan basis. Under floor-plan arrangements, a lender finances a customer's purchase of inventory from the Registrant. The Registrant typically grants trade credit terms to its customers who qualify. The Registrant has a number of systems in place to monitor and manage trade credit extended to its customers, including its participation in a national credit association in which credit rating information on mutual customers is exchanged.
Generally, product orders are processed and shipped from the Registrant's metropolitan Atlanta distribution facility on the same day an order is received or, in the case of orders received after 6:00 p.m., on the next business day. The Registrant generally uses United Parcel Service and Federal Express to deliver its merchandise to its customers. Alternative shippers are, however, readily available. Generally, the Registrant's inventory level of products has been adequate to permit the Registrant to be responsive to its customers' purchase requirements. From time to time, the Registrant experiences temporary shortages with respect to certain products as certain of its vendors experience increased demand or manufacturing with respect to their products, resulting in smaller allocations of such products for the Company.
3. Customers and Customer Support
The Registrant serves an active, nonexclusive, nationwide customer base of over 9,000 VARs and dealers of microcomputer products and resellers of cellular telephones. The Registrant believes the multi-billion dollar microcomputer and cellular telephone wholesale distribution industries are comprised primarily of customers served on a nonexclusive basis, which provides the Registrant with significant growth opportunities. During fiscal 1996, no customer accounted for more than 10% of the net sales of the Registrant. The Registrant believes that most of its customers rely on distributors as their principal source of computer and cellular telephone products.
The Registrant's salespeople are trained to help customers configure microcomputer products and to recommend the most appropriate, cost-effective systems and hardware for each customer. In addition, the Registrant's technical support department provides technical advice by toll-free telephone and configures many of the microcomputer products sold by the Registrant. If authorized by the Registrant, a customer may return to the Registrant a product found defective during the manufacturer's warranty period. Upon receipt of the defective product from the customer, the Registrant generally ships a replacement product to the customer and returns the defective product to the manufacturer for credit or repair.
4. Vendors
Because of the growing number of relatively small VARs that purchase low volumes of product from manufacturers, it is becoming increasingly cost efficient for most manufacturers to rely on distributors, such as the Registrant, rather than to incur the cost of maintaining their own sales staff, warehouses and credit functions to market, distribute, verify creditworthiness and collect receivables from these customers. The Registrant's market position and financial condition have enabled it to purchase large quantities of products from many manufacturers at competitive prices. The Registrant believes that the inability of certain smaller distributors to control costs and finance their operations is causing a consolidation in the microcomputer and cellular distribution channel, making the Registrant an increasingly important resource to its vendors.
The Registrant, like most wholesale microcomputer and cellular telephone distributors, sells products from manufacturers generally on a nonexclusive basis without geographical restrictions. Although most manufacturers seek geographical balance in their distributor network, distributors generally are permitted to sell their products throughout the United States and Canada. Management believes all of the Registrant's vendor agreements are in forms customarily used by its vendors. Except to take advantage of certain volume pricing opportunities, the Registrant's vendor agreements do not contain any minimum purchase requirements. The Registrant purchases goods from more than 120 vendors; however, it has negotiated favorable terms from certain manufacturers by purchasing a substantial portion of its products from them. During fiscal 1996, the Registrant purchased approximately 32% of its inventory from two vendors. No other vendor accounted for more than 10% of the Registrant's purchases in fiscal 1996.
Management continually seeks to expand its list of vendors. While the loss of a major vendor could have a material adverse effect on the Registrant's business, the Registrant believes alternative vendors for similar products are available. There can be no assurance, however, that the addition of these alternative vendors would place the Registrant in the same or as competitive a financial position as it experienced immediately prior to the loss of the major vendor. Generally, management believes that its relationship with its vendors is good.
The Registrant receives vendor price protection for substantially all of its inventory. In the event a vendor reduces its prices for goods covered by this price protection arrangement which have otherwise not been sold, the Registrant generally either receives a credit on account from the vendor for the price differential or returns the goods to the vendor for credit of the purchase price.
5. Employees
As of June 30, 1996, the Registrant had 348 full-time employees, 133 of whom were engaged in telemarketing, and an additional 30 part-time employees. The salespeople are compensated primarily on a commission basis. Management believes the Registrant's relations with its employees are good, and the Registrant has never experienced a strike or work stoppage. There is no collective bargaining agreement covering any of the Registrant's employees.
6. Competition
The microcomputer and cellular telephone products markets are extremely competitive. Competition within the industry is principally based on price, product breadth and availability, delivery terms, trade credit terms and various types of technical support and service. Major competitors include Ingram Micro, Inc., Merisel, Inc., Tech Data Corporation and a variety of other smaller regional competitors. The Registrant also competes with manufacturers that sell directly to retailers and VARs. Although many of the distributors with which the Registrant competes have greater financial resources, the Registrant nevertheless believes that its ability to provide competitive pricing, a broad range of products and available inventory, rapid delivery and technical support are important factors that enable it to compete effectively.
7. Seasonality
The Registrant's sales are not subject to material seasonal fluctuations.
Item 2.
Item 2. PROPERTIES
The Registrant maintains its executive, administrative and sales office and principal distribution facility in the Atlanta metropolitan area. The Registrant leases its executive, administrative and sales office from Royal Park Company, a Georgia general partnership comprised of certain minority stockholders of the Registrant. The lease expires in October 1999 after an 8-year term and supersedes the original 15-year lease entered into in 1984 between the Predecessor and Royal Park Company. The facility consists of approximately 30,000 square feet, with an annual rental of approximately $176,000 through October 1, 1999, subject to increase based upon periodic changes in the Consumer Price Index. The Registrant has a right of first refusal to purchase the facility should it be offered for sale. The Registrant believes that the lease is on terms no less favorable than those available from unaffiliated parties.
The Registrant's distribution facility in Atlanta consists of approximately 100,000 square feet subject to a lease expiring January 31, 1999. The Registrant also leases additional warehouse and sales office space near its executive, administrative and sales office in Atlanta for future growth. The Registrant believes there is available sufficient additional warehouse and sales office space for lease at reasonable prices near its principal facility in the event the Registrant's growth plans so require.
On January 10, 1996, the Registrant amended the lease pertaining to its sales and distribution facility, located in the Beacon Centre Technology Park in Miami, Florida to allow the Registrant to relocate such facility to another building within the Beacon Centre complex having a leased space of approximately 31,200 square feet (the "Relocation Space"). The monthly rent for the Relocation Space is approximately $17,000 and the term of the lease pertaining thereto expires on March 31, 2001. On July 24, 1996, the Registrant further amended the lease of the aforementioned sales and distribution facility. This amendment to the lease allowed the Registrant to further expand the space subject to the lease by approximately 30,000 square feet to bring the total amount of space subject to the lease to approximately 61,200 square feet (the "Expansion Space"). The monthly rent for the Expansion Space is approximately $17,000, making the aggregate monthly rent $34,000. The lease pertaining to the Expansion Space also expires on March 31, 2001.
Item 3.
Item 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Registrant, from time to time, is involved in litigation with certain of its customers and vendors regarding accounts receivable and accounts payable, respectively. With respect to disputes with its vendors, the Registrant typically withholds payment for the goods in controversy until a resolution of the matter has been obtained. Although the Registrant is not currently engaged in or threatened by any material litigation, it is the policy of management to vigorously defend suits brought against the Registrant.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Registrant and SED, their ages and their present positions with the Registrant and SED are as follows:
Name Age Position
Gerald Diamond 58 Chairman of the Board, Chief Executive Officer and Director of the Registrant and SED
Ray D. Risner 51 President, Chief Operating Officer and Director of the Registrant and SED
Larry G.Ayers 50 Vice President-Finance, Chief Financial Officer, Secretary and Treasurer of the Registrant and SED
Mark Diamond 31 Executive Vice President of the Registrant and SED
Jean Diamond 55 Vice President-Credit of SED
Gerald Diamond was elected President and Chairman of the Board of the Registrant and SED in June 1986 and has served in two or more capacities as Chairman of the Board, Chief Executive Officer and President of the Registrant and SED since that date. Mr. Diamond, a founder of the Predecessor, served as its President and Treasurer from July 1980 through July 1986. Mr. Diamond has been in electronics-related businesses for over 30 years. Mr. Diamond is the brother of Barry Diamond and father of Mark Diamond.
Ray D. Risner was elected as a director of the Registrant in November 1994 and was elected President and Chief Operating Officer of the Registrant and SED in May 1995. Mr. Risner served as Vice Chairman of RJM Group, Inc., a private investment advisory firm, from 1989 to 1994. From 1987 to 1989, he served as Vice President, Financial Administration of RJR Nabisco, Inc. Mr. Risner is also a trustee of The National Faculty and a member of the Board of American Red Cross Blood Services, Atlanta, Georgia.
Larry G. Ayers was elected Vice President-Finance and Treasurer of SED in June 1986, Secretary in August 1986 and Chief Financial Officer in November 1989. He was also elected Vice President-Finance, Secretary and Treasurer of the Registrant in August 1986 and Chief Financial Officer in November 1989. Mr. Ayers served as Vice President-Finance of the Predecessor from May 1986 through July 1986.
Mark Diamond has been nominated to stand for election as a director at the 1996 Annual Meeting of Stockholders and has been employed by SED on a full-time basis in the Sales Department since January 1987. In February 1991, Mr. Diamond was elected Vice President-Sales of SED and in May 1993, was elected Executive Vice President-Marketing of SED. In February 1994, Mr. Diamond was elected Executive Vice President-Sales of SED, and in July 1995, he was elected Executive Vice President of the Registrant and in August 1995, he was elected Executive Vice President of SED. Mark Diamond is the son of Gerald Diamond.
Jean Diamond was elected Vice President - Credit of SED in August 1994. From 1986 to August 1994, she served as Manager of Credit of SED. Jean Diamond is the wife of Gerald Diamond and the mother of Mark Diamond.
PART II
Item 5.
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information regarding the range of high and low sales prices for the common stock of the Registrant for each full quarterly period for fiscal 1996 and 1995 as reported by the Nasdaq National Market ("Nasdaq") and the number of holders of common stock of the Registrant (including individual participants in securities position listings) is incorporated by reference to "Price Range of Common Stock" on the inside back cover of the Registrant's 1996 Annual Report to Stockholders.
The Registrant has not paid any cash dividends on its common stock since its inception. The Registrant currently intends to retain earnings to finance the growth and development of its business and does not anticipate paying cash dividends in the foreseeable future. Future policy with respect to payment of dividends on the common stock will be determined by the Board of Directors based on conditions then existing, including the Registrant's earnings and financial condition, capital requirements and other relevant factors. SED, the earnings of which would be the source of any dividend payments, and the Registrant are parties to a revolving credit agreement that contains certain financial covenants that may impact the Registrant's ability to pay dividends, should it choose to do so.
Item 6.
Item 6. SELECTED FINANCIAL DATA
Selected financial information about the Registrant is incorporated herein by reference to "Selected Income Statement Data" and "Selected Balance Sheet Data" on page 1 of the Registrant's 1996 Annual Report to Stockholders.
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information and a discussion regarding the Registrant's financial condition and results of operations are incorporated herein by reference to "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 10 and 11 of the Registrant's 1996 Annual Report to Stockholders.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Registrant, notes thereto, and independent auditors' report thereon are incorporated herein by reference to pages 12 through 20 of the Registrant's 1996 Annual Report to Stockholders.
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the Registrant's directors is incorporated herein by reference to the section of the Registrant's Proxy Statement for the Annual Meeting of Stockholders scheduled for October 31, 1996 (the "Proxy Statement") entitled "Proposal 1 - Election of Directors."
Information regarding the Registrant's executive officers is incorporated herein by reference to Item 4(A) of Part I of this Report.
Item 11.
Item 11. EXECUTIVE COMPENSATION
Information regarding the Registrant's compensation of its executive officers and directors is incorporated herein by reference to the sections of the Proxy Statement entitled "Proposal 1 - Election of Directors" and "Executive Compensation".
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding the security ownership of certain beneficial owners and management of the Registrant is incorporated by reference to the section of the Proxy Statement entitled "Ownership of Shares".
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions is incorporated herein by reference to the section of the Proxy Statement entitled "Compensation Committee Interlocks and Insider Participation."
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
1. Financial Statements. The Registrant's 1996 Annual Report to Stockholders, a copy of which is filed with this Form 10-K, contains the following financial statements and the report of the Registrant's independent auditors thereon, which are incorporated herein by reference:
- Independent Auditors' Report
- Consolidated Balance Sheets at June 30, 1996 and
- Consolidated Statements of Earnings for the years ended June 30, 1996, 1995 and 1994
- Consolidated Statements of Stockholders' Equity for the years ended June 30, 1996, 1995 and 1994
- Consolidated Statements of Cash Flows for the years ended June 30, 1996, 1995 and 1994
- Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
- Independent Auditors' Report
- Schedules:
Schedule Description
II Valuation and Qualifying Accounts
Schedule II and the report thereon appear immediately preceding the signature pages to this Report.
Schedules other than the Schedule presented are omitted because the information required is not applicable or the required information is shown in the consolidated financial statements or notes thereto.
3. Exhibits Incorporated by Reference or Filed with this Report.
Exhibit Number Description
3.1 Certificate of Incorporation, as amended, of the Registrant.
3.2 Amended and Restated By-Laws of the Registrant.(1)
4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation, as amended, and Amended and Restated By-Laws of the Registrant defining rights of holders of Common Stock of the Registrant.
10.1 Form of Lease Agreement dated as of January 1, 1991 between Royal Park Company and Southern Electronics Distributors, Inc. ("SED")(2)
10.2 Consulting and Financial Advisory Agreement dated July 2, 1986 between SED Acquisition Corp. and the ZS Fund L.P.(3), as amended as of July 2, 1991.(2)*
10.3 Letter Agreement dated July 2, 1986 among SED, the shareholders of SED, SED Acquisition Corp. and the Registrant regarding tax liability indemnification and ERISA matters.(4)*
10.4 Lease Agreement dated May 16, 1990 between The Equitable Life Assurance Society of the United States and SED(5), as amended March 20, 1992.(6)
10.5 Lease Agreement dated September 16, 1989 between Industrial Distribution Group, Inc. and SED(7), as amended August 19, 1991.(3)
10.6 Lease Agreement dated January 15, 1992 between SED and RW Building One Associates.(8)
10.7 Revolving Credit Agreement dated as of June 29, 1995 among National City Bank, Columbus ("NCB"), Wachovia Bank of Georgia, N.A. ("Wachovia"), the Registrant and SED.(28)
10.8 First Amendment to Revolving Credit Agreement dated as of December 14, 1995 among NCB, Wachovia, the Registrant, SED and USC Acquisition Corporation ("USC").(33)
10.9 Second Amendment to Revolving Credit Agreement dated as of September 9, 1996 among NCB, Wachovia, the Registrant, SED and USC.
10.10 Southern Electronics Corporation 1986 Stock Option Plan dated September 3, 1986, together with related forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreement.(9)*
10.11 Form of First Amendment dated September 14, 1989 to Southern Electronics Corporation 1986 Stock Option Plan.(10)*
10.12 Second Amendment dated November 7, 1989 to Southern Electronics Corporation 1986 Stock Option Plan.(11)*
10.13 Third Amendment dated July 17, 1992 to Southern Electronics Corporation 1986 Stock Option Plan.(12)*
10.14 Southern Electronics Corporation 1988 Restricted Stock Plan, together with related form of Restricted Stock Agreement.(13)*
10.15 First Amendment dated November 7, 1989 to Southern Electronics Corporation 1988 Restricted Stock Plan.(14)*
10.16 Second Amendment dated July 17, 1992 to Southern Electronics Corporation 1988 Restricted Stock Plan.(15)*
10.17 Form of Southern Electronics Corporation 1991 Stock Option Plan, together with related forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreement.(16)*
10.18 First Amendment dated July 17, 1992 to Southern Electronics Corporation 1991 Stock Option Plan.(17)*
10.19 Second Amendment dated August 30, 1996 to Southern Electronics Corporation 1991 Stock Option Plan.(34)
10.20 Form of Non-Qualified Stock Option Agreement dated as of August 28, 1992 between the Registrant and Cary Rosenthal.(18)*
10.21 Form of Non-Qualified Stock Option Agreement dated as of August 28, 1992 between the Registrant and G. William Speer.(19)*
10.22 Employment Agreements dated November 7, 1989, between the Registrant, SED and each of Gerald Diamond, Jean Diamond, and Larry G. Ayers(20)*, each as amended by form of Amendment No. 1 dated September 24, 1991.(21)*
10.23 Second Amendment to Employment Agreement dated May 8, 1996 between the Registrant and Larry G. Ayers.*
10.24 Form of Employment Agreement dated September 24, 1991, among the Registrant, SED and Mark Diamond.(22)*
10.25 Amendment to Employment Agreement dated May 8, 1996 among the Registrant, SED and Mark Diamond.*
10.26 Form of Employment Agreement dated May 8, 1996 among the Registrant, SED and Ray D. Risner.*
10.27 Southern Electronics Distributors, Inc. Savings Plan effective as of January 1, 1991, together with Savings Plan Trust and Savings Plan Adoption Agreement.(23)*
10.28 Form of Indemnification Agreement entered into with each of the directors and officers of the Registrant and SED.(24)*
10.29 Form of Indemnification Agreement entered into with each of the directors and officers of the Registrant and Southern Electronics Corporation.(29)
10.30 Lease Agreement dated November 1992 between H.G. Pattillo and Elizabeth M. Pattillo and SED.(25)
10.31 Lease Agreement dated August 9, 1993 between New World Partners Joint Venture and SED and Addendum 1 thereto ("NWPJV Lease").(26)
10.32 Second Addendum to NWPJV Lease dated January 10, 1996 among New World Partners Joint Venture, New World Partners Joint Venture Number Two and SED.
10.33 Third Addendum to NWPJV Lease dated July 24, 1996 between New World Partners Joint Venture Number Two and SED.
10.34 Amendment to Lease for 4775 N. Royal Atlanta Drive.(30)
10.35 Form of Non-Qualified Stock Option Agreement dated as of May 21, 1993 between the Registrant and Cary Rosenthal (see form referenced herein as Exhibit 10.17).*
10.36 Form of Non-Qualified Stock Option Agreement dated as of May 21, 1993 between the Registrant and G. William Speer (see form referenced herein as Exhibit 10.18).*
10.37 Form of Non-Qualified Stock Option Agreement for Directors.(31)
10.38 Subscription and Stockholders Agreement dated as of July 2, 1986 by and among the Registrant, ZS SED L.P., ZS Southern L.P. and SED Associates.(32)
10.39 1995 Formula Stock Option Plan, together with related form of Non-Qualified Stock Option Agreement.(35)
10.40 Agreement and Plan of Reorganization dated December 14, 1995, among USC Acquisition Corporation, U.S. Computer of North America, Inc. and David Steiner.(36)
10.41 Adoption Agreement for Swerdlin & Company Regional Prototype Standardized 401(k) Profit Sharing Plan and Trust, as amended.
11.1 Statement regarding computation of per share earnings.
13 Form of Southern Electronics Corporation 1996 Annual Report to Stockholders (only the portions incorporated by reference into this report are deemed "filed" with the Securities and Exchange Commission).
21 Subsidiaries of the Registrant.(27)
23 Independent Auditors' Consent.
24 Power of Attorney. See signature page to this Registration Statement.
27 Financial Data Schedule.
Notes
*Management contract or compensatory plan or arrangement with one or more directors or executive officers.
(1) Incorporated herein by reference to exhibit of same number to Registrant's Registration Statement ("Registration Statement") on Form S-1, filed September 5, 1986 (Reg. No. 33-8494).
(2) Incorporated herein by reference to exhibit of same number to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991 (SEC File No. 0-16345) ("1991 Form 10-K").
(3) Incorporated herein by reference to exhibit 10.6 to Registrant's Registration Statement.
(4) Incorporated herein by reference to exhibit 10.7 to Registrant's Registration Statement.
(5) Incorporated herein by reference to exhibit 10.8 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1990 (SEC File No. 0-16345) ("1990 Form 10-K").
(6) Incorporated herein by reference to exhibit 10.5 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1992 (SEC File No. 0-16345) ("1992 Form 10-K").
(7) Incorporated herein by reference to exhibit 10.9 to Registrant's 1990 Form 10-K.
(8) Incorporated herein by reference to exhibit 10.7 to Registrant's 1992 Form 10-K.
(9) Incorporated herein by reference to exhibit 10.12 to Registrant's Registration Statement.
(10) Incorporated herein by reference to exhibit 10.22 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (SEC File No. 0-16345).
(11) Incorporated herein by reference to exhibit 10.25 to Registrant's 1990 Form 10-K.
(12) Incorporated herein by reference to exhibit 10.12 to Registrant's 1992 Form 10-K.
(13) Incorporated herein by reference to exhibit 10.21 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (SEC File No. 0-16345).
(14) Incorporated herein by reference to exhibit 10.26 to Registrant's 1990 Form 10-K.
(15) Incorporated herein by reference to exhibit 10.15 to Registrant's 1992 Form 10-K.
(16) Incorporated herein by reference to Annex A to Registrant's definitive Supplemental Proxy Statement dated October 18, 1991 (SEC File No. 0-16345).
(17) Incorporated herein by reference to exhibit 10.17 to Registrant's 1992 Form 10-K.
(18) Incorporated herein by reference to exhibit 10.18 to Registrant's 1992 Form 10-K.
(19) Incorporated herein by reference to exhibit 10.19 to Registrant's 1992 Form 10-K.
(20) Incorporated herein by reference to Exhibit 6(a) to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1989 (SEC File No. 0-16345).
(21) Incorporated herein by reference to exhibit 10.13 to Registrant's 1991 Form 10-K.
(22) Incorporated herein by reference to exhibit 10.14 to Registrant's 1991 Form 10-K.
(23) Incorporated herein by reference to exhibit 10.15 to Registrant's 1991 Form 10-K.
(24) Incorporated herein by reference to exhibit 10.16 to Registrant's 1991 Form 10-K.
(25) Incorporated herein by reference to exhibit 10.24 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 (SEC File No. 0-16345) ("1993 Form 10-K").
(26) Incorporated herein by reference to exhibit 10.25 to Registrant's 1993 Form 10-K.
(27) Incorporated herein by reference to exhibit 21 to Registrant's 1993 Form 10-K.
(28) Incorporated herein by reference to exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1994 (SEC File No. 0-16345) ("1995 Form 10-K").
(29) Incorporated herein by reference to exhibit 10.23 to Registrant's 1995 Form 10-K.
(30) Incorporated herein by reference to exhibit 10.26 to Registrant's 1995 Form 10-K.
(31) Incorporated herein by reference to exhibit 10.29 to Registrant's 1995 Form 10-K.
(32) Incorporated herein by reference to exhibit 10.30 to Registrant's 1995 Form 10-K.
(33) Incorporated herein by reference to exhibit 10.31 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1995 (SEC File No. 0-16345).
(34) Incorporated herein by reference to Appendix A to Registrant's Proxy Statement pertaining to Registrant's 1995 Annual Meeting of Stockholders dated October 1, 1995 (SEC File No. 0-16345).
(35) Incorporated herein by reference to Appendix B to Registrant's Proxy Statement pertaining to Registrant's 1995 Annual Meeting of Stockholders dated October 1, 1995 (SEC File No. 0-16345).
(36) Incorporated herein by reference to Exhibit 2 to the Registrant's Current Report on Form 8-K filed with the SEC on December 28, 1995 (SEC File No. 0-16345).
(b) Reports on Form 8-K.
Current Report on Form 8-K filed with the SEC on December 28, 1995, (SEC File No. 0-16345) reporting the acquisition of U.S. Computer of North America, Inc., as amended by Current Report on Form 8-K/A filed with the SEC on February 26, 1996 (SEC File No. 0-16345).
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Southern Electronics Corporation
We have audited the consolidated financial statements of Southern Electronics Corporation and subsidiary as of June 30, 1996 and 1995, and for each of the three years in the period ended June 30, 1996, and have issued our report thereon dated August 9, 1996; such consolidated financial statements and report are included in your 1996 Annual Report to Stockholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Southern Electronics Corporation listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Atlanta, Georgia August 9, 1996
SOUTHERN ELECTRONICS CORPORATION AND SUBSIDIARY
_____________________ (1) Deductions represent actual write-offs of specific accounts receivable charged against the allowance account, net of amounts recovered.
(2) Represents balances of acquired business.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SOUTHERN ELECTRONICS CORPORATION
Date: September __, 1996 By: /s/ Larry G. Ayers Larry G. Ayers, Vice President - Finance
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints Gerald Diamond and Larry G. Ayers and each of them as his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to the Annual Report on Form 10-K of Southern Electronics Corporation, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and other appropriate agencies, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated this ____ day of September, 1996.
/s/ Gerald Diamond Gerald Diamond, Chairman of the Board, Chief Executive Officer and Director (principal executive officer)
/s/ Larry G. Ayers Larry G. Ayers, Vice President - Finance and Treasurer (principal financial and accounting officer)
/s/ Stewart I. Aaron Stewart I. Aaron, Director
/s/ Ray D. Risner Ray D. Risner, Director
/s/ Cary Rosenthal Cary Rosenthal, Director
/s/ G. William Speer G. William Speer, Director
PAGE
EXHIBIT INDEX
Sequentially Exhibit Numbered Number Description Page
3.1 Certificate of Incorporation, as amended, of the Registrant. N/A
3.2 Amended and Restated By-Laws of the Registrant.(1) N/A
4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation, as amended, and Amended and Restated By-Laws of the Registrant defining rights of holders of Common Stock of the Registrant. N/A
10.1 Form of Lease Agreement dated as of January 1, 1991 between Royal Park Company and Southern Electronics Distributors, Inc. ("SED").(2) N/A
10.2 Consulting and Financial Advisory Agreement dated July 2, 1986 between SED Acquisition Corp. and the ZS Fund L.P.(3), as amended as of July 2, 1991.(2)* N/A
10.3 Letter Agreement dated July 2, 1986 among SED, the shareholders of SED, SED Acquisition Corp. and the Registrant regarding tax liability indemnification and ERISA matters.(4)* N/A
10.4 Lease Agreement dated May 16, 1990 between The Equitable Life Assurance Society of the United States and SED(5), as amended March 20, 1992.(6) N/A
10.5 Lease Agreement dated September 16, 1989 between Industrial Distribution Group, Inc. and SED(7), as amended August 19, 1991.(3) N/A
10.6 Lease Agreement dated January 15, 1992 between SED and RW Building One Associates.(8) N/A
10.7 Revolving Credit Agreement dated as of June 29, 1995 among National City Bank, Columbus ("NCB"), Wachovia Bank of Georgia, N.A. ("Wachovia"), the Registrant and SED.(27) N/A
10.8 First Amendment to Revolving Credit Agreement dated as of December 14, 1995 among NCB, Wachovia, the Registrant, SED and USC Acquisition Corporation ("USC").(33) N/A
10.9 Second Amendment to Revolving Credit Agreement dated as of September 9, 1996 among NCB, Wachovia, the Registrant, SED and USC. ___
10.10 Southern Electronics Corporation 1986 Stock Option Plan dated September 3, 1986, together with related forms of Incentive Stock Option Agreement and Non-Qualified Stock Option Agreement.(9)* N/A
10.11 Form of First Amendment dated September 14, 1989 to Southern Electronics Corporation 1986 Stock Option Plan.(10)* N/A
10.12 Second Amendment dated November 7, 1989 to Southern Electronics Corporation 1986 Stock Option Plan.(11)* N/A
10.13 Third Amendment dated July 17, 1992 to Southern Electronics Corporation 1986 Stock Option Plan.(12)* N/A
10.14 Southern Electronics Corporation 1988 Restricted Stock Plan, together with related form of Restricted Stock Agreement.(13)* N/A
10.15 First Amendment dated November 7, 1989 to Southern Electronics Corporation 1988 Restricted Stock Plan.(14)* N/A
10.16 Second Amendment dated July 17, 1992 to Southern Electronics Corporation 1988 Restricted Stock Plan.(15)* N/A
10.17 Form of Southern Electronics Corporation 1991 Stock Option Plan, together with related forms of Incentive Stock Option Agreement and Non- Qualified Stock Option Agreement.(16)* N/A
10.18 First Amendment dated July 17, 1992 to Southern Electronics Corporation 1991 Stock Option Plan.(17)* N/A
10.19 Second Amendment dated August 30, 1996 to Southern Electronics Corporation 1991 Stock Option Plan.(34) N/A
10.20 Form of Non-Qualified Stock Option Agreement dated as of August 28, 1992 between the Registrant and Cary Rosenthal.(18)* N/A
10.21 Form of Non-Qualified Stock Option Agreement dated as of August 28, 1992 between the Registrant and G. William Speer.(19)* N/A
10.22 Employment Agreements dated November 7, 1989, between the Registrant, SED and each of Gerald Diamond, Jean Diamond, Barry Diamond and Larry G. Ayers(20)*, each as amended by form of Amendment No. 1 dated September 24, 1991.(21)* N/A
10.23 Second Amendment to Employment Agreement dated May 8, 1996 between the Registrant and each of Larry G. Ayers.* ___
10.24 Form of Employment Agreement dated September 24, 1991, among the Registrant, SED and Mark Diamond.(22)* N/A
10.25 Amendment to Employment Agreement dated May 8, 1996 among the Registrant, SED and Mark Diamond.* ___
10.26 Form of Employment Agreement dated May 8, 1996 among the Registrant, SED and Ray D. Risner.* ___
10.27 Southern Electronics Distributors, Inc. Savings Plan effective as of January 1, 1991, together with Savings Plan Trust and Savings Plan Adoption Agreement.(23)* N/A
10.28 Form of Indemnification Agreement entered into with each of the directors and officers of the Registrant and SED(24)* N/A
10.29 Form of Indemnification Agreement entered into with each of the directors and officers of the Registrant and Southern Electronics Corporation.(29) N/A
10.30 Lease Agreement dated November 1992 between H.G. Pattillo and Elizabeth M. Pattillo and SED(25) N/A
10.31 Lease Agreement dated August 9, 1993 between New World Partners Joint Venture and SED and Addendum 1 thereto ("NWPJV Lease").(26) N/A
10.32 Second Addendum to NWPJV Lease dated January 10, 1996 among New World Partners Joint Venture, New World Partners Joint Venture Number Two and SED. ___
10.33 Third Addendum to NWPJV Lease dated July 24, 1996 between New World Partners Joint Venture Number Two and SED. ___
10.34 Amendment to Lease for 4775 N. Royal Atlanta Drive.(30) N/A
10.35 Form of Non-Qualified Stock Option Agreement dated as of May 21, 1993 between the Registrant and Cary Rosenthal (see form referenced herein as Exhibit 10.17).* N/A
10.36 Form of Non-Qualified Stock Option Agreement dated as of May 21, 1993 between the Registrant and G. William Speer (see form referenced herein as Exhibit 10.18).* N/A
10.37 Form of Non-Qualified Stock Option Agreement for Directors.(31) N/A
10.38 Subscription and Stockholders Agreement dated as of July 2, 1986 by and among the Registrant, ZS SED L.P., ZS Southern L.P. and SED Associates.(32) N/A
10.39 1995 Formula Stock Option Plan, together with related form of Non-Qualified Stock Option Agreement.(35) N/A
10.40 Agreement and Plan of Reorganization dated December 14, 1995, among USC Acquisition Corporation, U.S. Computer of North America, Inc. and David Steiner (SEC File No. 0-16345).(36) N/A
10.41 Adoption Agreement for Swerdlin & Company Regional Prototype Standardized 401(k) Profit Sharing Plan and Trust, as amended. ___
11.1 Statement regarding computation of per share earnings. ___
13 Form of Southern Electronics Corporation 1996 Annual Report to Stockholders (only the portions incorporated by reference into this report are deemed "filed" with the Securities and Exchange Commission). ___
21 Subsidiaries of the Registrant.(27) N/A
23 Independent Auditors' Consent. ___
24 Power of Attorney. See signature page to this Registration Statement. N/A
27 Financial Data Schedule. ___
__________________
Notes
*Management contract or compensatory plan or arrangement with one or more directors or executive officers.
(1) Incorporated herein by reference to exhibit of same number to Registrant's Registration Statement ("Registration Statement") on Form S-1, filed September 5, 1986 (Reg. No. 33-8494).
(2) Incorporated herein by reference to exhibit of same number to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1991 (SEC File No. 0-16345) ("1991 Form 10-K").
(3) Incorporated herein by reference to exhibit 10.6 to Registrant's Registration Statement.
(4) Incorporated herein by reference to exhibit 10.7 to Registrant's Registration Statement.
(5) Incorporated herein by reference to exhibit 10.8 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1990 (SEC File No. 0-16345) ("1990 Form 10-K").
(6) Incorporated herein by reference to exhibit 10.5 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1992 (SEC File No. 0-16345) ("1992 Form 10-K").
(7) Incorporated herein by reference to exhibit 10.9 to Registrant's 1990 Form 10-K.
(8) Incorporated herein by reference to exhibit 10.7 to Registrant's 1992 Form 10-K.
(9) Incorporated herein by reference to exhibit 10.12 to Registrant's Registration Statement.
(10) Incorporated herein by reference to exhibit 10.22 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (SEC File No. 0-16345).
(11) Incorporated herein by reference to exhibit 10.25 to Registrant's 1990 Form 10-K.
(12) Incorporated herein by reference to exhibit 10.12 to Registrant's 1992 Form 10-K.
(13) Incorporated herein by reference to exhibit 10.21 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1988 (SEC File No. 0-16345).
(14) Incorporated herein by reference to exhibit 10.26 to Registrant's 1990 Form 10-K.
(15) Incorporated herein by reference to exhibit 10.15 to Registrant's 1992 Form 10-K.
(16) Incorporated herein by reference to Annex A to Registrant's definitive Supplemental Proxy Statement dated October 18, 1991 (SEC File No. 0-16345).
(17) Incorporated herein by reference to exhibit 10.17 to Registrant's 1992 Form 10-K.
(18) Incorporated herein by reference to exhibit 10.18 to Registrant's 1992 Form 10-K.
(19) Incorporated herein by reference to exhibit 10.19 to Registrant's 1992 Form 10-K.
(20) Incorporated herein by reference to Exhibit 6(a) to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1989 (SEC File No. 0-16345).
(21) Incorporated herein by reference to exhibit 10.13 to Registrant's 1991 Form 10-K.
(22) Incorporated herein by reference to exhibit 10.14 to Registrant's 1991 Form 10-K.
(23) Incorporated herein by reference to exhibit 10.15 to Registrant's 1991 Form 10-K.
(24) Incorporated herein by reference to exhibit 10.16 to Registrant's 1991 Form 10-K.
(25) Incorporated herein by reference to exhibit 10.24 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 (SEC File No. 0-16345) ("1993 Form 10-K").
(26) Incorporated herein by reference to exhibit 10.25 to Registrant's 1993 Form 10-K.
(27) Incorporated herein by reference to exhibit 21 to Registrant's 1993 Form 10-K.
(28) Incorporated herein by reference to exhibit 10.7 to Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1993 (SEC File No. 0-16345) ("1995 Form 10-K").
(29) Incorporated herein by reference to exhibit 10.23 to Registrant's 1995 Form 10-K.
(30) Incorporated herein by reference to exhibit 10.26 to Registrant's 1995 Form 10-K.
(31) Incorporated herein by reference to exhibit 10.29 to Registrant's 1995 Form 10-K.
(32) Incorporated herein by reference to exhibit 10.30 to Registrant's 1995 Form 10-K.
(33) Incorporated herein by reference to exhibit 10.31 to Registrant's Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1995 (SEC File No. 0-16345).
(34) Incorporated herein by reference to Appendix A to Registrant's Proxy Statement pertaining to Registrant's 1996 Annual Meeting of Stockholders dated October 1, 1996 (SEC File No. 0-16345).
(35) Incorporated herein by reference to Appendix B to Registrant's Proxy Statement pertaining to Registrant's 1996 Annual Meeting of Stockholders dated October 1, 1996 (SEC File No. 0-16345).
(36) Incorporated herein by reference to Exhibit 2 to Registrant's Current Report on Form 8-K filed with the SEC on December 28, 1995 (SEC File No. 0-16345).
(37) Incorporated herein by reference to exhibit 3.1 to Registrant's 1995 Form 10-K.