SOTHERN ELECTRONICS CORPORATION
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October 31, 1996
Dear Stockholders:
On October 31, 1996, your Board of Directors unanimously
approved the adoption of a share Rights Agreement (the "Plan").
The Plan provides for a dividend distribution, payable to
stockholders of record as of the close of business on November
12, 1996, of one Right ("Right") for each outstanding share of
Company Common Stock. Each right entitles you to purchase from
the Company eight shares of Common Stock. The ability to
exercise the Right is triggered by the acquisition of 12% or more
of the Company's Common Stock by a single person or group (an
"Acquiring Person") or announcement of a tender offer for 12% or
more of the Company's Common Stock (a "Triggering Event"). The
purchase price per share will be 20% of Current Market Value,
measured as of the date of announcement of a Triggering Event.
Upon the occurrence of a Triggering Event, the Rights are not
exercisable by the Acquiring Person. In the event of a merger or
other business combination in which the Company did not survive,
or its shares were exchanged, the Rights would become exercisable
for shares of the acquiring corporation on the same basis.
We are enclosing a summary description outlining the
principal features of the Plan, which we urge you to read
carefully. This letter furnishes our reasons for adopting the
Plan.
The Plan is designed to protect stockholders from
unsolicited attempts to try to acquire part or all of the
Company's stock, whether through accumulation of shares in the
open market or by a tender offer, at a price below fair value.
The Plan is also intended to protect your interest against
coercive or unfair tactics that are designed to force a sale at
low prices. These tactics may be used to put the Company "in
play" to allow the bidder to sell out at a quick profit, or to
threaten to disrupt the Company's operations in an attempt to
obtain greenmail from the Company.
The Plan contains provisions to protect you and the Company
from these threats. In adopting the Plan, the Board of Directors
was concerned with protecting stockholders against being forced
to sell their shares of Common Stock at less than fair value
following an unsolicited takeover attempt as well as preventing
an acquiror from obtaining a significant block of shares at a
unfair price, or under circumstances that would threaten the
long-term welfare of the Company or its stockholders. We believe
the plan will induce an acquiror to negotiate for a purchase at a
fair price rather than coerce stockholders to sell at a lower
price. We consider the Plan to be a valuable protection of your
right to retain your investment in the Company and the full value
of the investment while not foreclosing a fair acquisition bid
for the Company.
The Plan is not intended to prevent an acquisition of the
Company on terms that are favorable and fair to all stockholders
and will not be used for that purpose. The Plan is designed to
deal with the very serious problem of unilateral actions by
hostile acquirors that are calculated to deprive a company's
board and its stockholders of their ability to determine the
destiny of the company. The Company is among the leaders in its
field, and we believe in the future of the Company and that
stockholders should be afforded the opportunity to participate in
the value of the Company based on its potential.
The Plan will allow the Board to serve and protect the
interests of the Company's stockholders in today's takeover
environment. In addition, the Plan will help avoid the threat
that a third party could unilaterally put the Company up for sale
to serve its own financial interests at your expense. Let me
assure you that we are working very hard to achieve the positive
results that will prevent that from happening by increasing the
value of the Company's shares.
Neither adoption of the Plan nor issuance of the Rights will
weaken the financial strength of the Company or interfere with
its business plans. The issuance of the Rights has no dilutive
effect, will not affect reported earnings per share, will not be
taxable to you or to the Company and will not change the way in
which you currently can trade shares of the Common Stock of the
Company. The Rights will be exercisable only if and when a
takeover ensues without prior negotiations with the Board that
leads to a fair price, or under circumstances where the Board
determines that the acquiror's goals are inconsistent with the
long-term welfare of the Company or its stockholders. The Rights
will then operate to protect you against being deprived of the
right to share in the full measure of your Company's long-term
potential.
Sincerely,
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Chairman of the Board
and Chief Executive Officer
