<PAGE> 1
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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
DXP ENTERPRISES, INC.
(Name of Registrant as Specified in its Charter)
(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 table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies:
N/A
2. Aggregate number of securities to which transaction applies: N/A
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
4. Proposed maximum aggregate value of transaction: N/A
5. Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] 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: N/A
2. Form, Schedule or Registration Statement No.: N/A
3. Filing Party: N/A
4. Date Filed: N/A
<PAGE> 2
DXP ENTERPRISES, INC.
580 Westlake Park Boulevard, Suite 1100
Houston, Texas 77079
281/531-4214
June 8, 1998
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of DXP Enterprises, Inc. (the "Company") to be held at 9:00 a.m., Central
Daylight Time, on Monday, July 6, 1998, at the offices of the Company's
subsidiary, SEPCO Industries, Inc., 6500 Brittmoore, Houston, Texas 77041.
This year you will be asked to consider two proposals. The first
proposal concerns the election of directors, and the second proposal concerns
the adoption of an amendment to the Company's Restated Articles of Incorporation
that would effect a two-to-one reverse stock split. These matters are explained
more fully in the attached proxy statement, which you are encouraged to read.
The Board of Directors recommends that you approve the proposals and
urges you to return your signed proxy card at your earliest convenience, whether
or not you plan to attend the annual meeting.
Thank you for your cooperation.
Sincerely,
David R. Little
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 3
DXP ENTERPRISES, INC.
580 Westlake Park Boulevard, Suite 1100
Houston, Texas 77079
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JULY 6, 1998
Notice is hereby given that the Annual Meeting of the Shareholders of
DXP Enterprises, Inc., a Texas corporation (the "Company"), will be held on
Monday, July 6, 1998, at 9:00 a.m., Central Daylight Time, at the offices of the
Company's subsidiary, SEPCO Industries, Inc., 6500 Brittmoore, Houston, Texas
77041, for the following purposes:
(1) To elect five directors of the Company to hold office
until the next Annual Meeting of Shareholders or until their respective
successors are duly elected and qualified;
(2) To adopt an amendment (the "Reverse Stock Split
Amendment") to the Company's Restated Articles of Incorporation, as
amended (the "Articles of Incorporation") that would effect a
two-to-one reverse split of the Company's issued and outstanding common
stock, par value $.01 per share (the "Common Stock"); and
(3) To transact such other business as may properly come
before the meeting or any adjournment thereof.
The holders of record of Common Stock, Series A Preferred Stock and
Series B Preferred Stock of the Company at the close of business on May 8, 1998,
will be entitled to vote at the meeting.
By Order of the Board of Directors,
Gary A. Allcorn
Secretary
June 8, 1998
<PAGE> 4
DXP ENTERPRISES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 6, 1998
This Proxy Statement is furnished to the shareholders of DXP
Enterprises, Inc. (the "Company"), 580 Westlake Park Boulevard, Suite 1100,
Houston, Texas 77079 (Tel. No. 281/531-4214), in connection with the
solicitation by the Board of Directors of the Company of proxies to be used at
the annual meeting of shareholders to be held on Monday, July 6, 1998, at 9:00
a.m., Central Daylight Time, at the offices of the Company's subsidiary, SEPCO
Industries, Inc., 6500 Brittmoore, Houston, Texas 77041, or any adjournment
thereof.
Proxies in the form enclosed, properly executed by shareholders and
received in time for the meeting, will be voted as specified therein. If a
shareholder does not specify otherwise, the shares represented by his or her
proxy will be voted for the director nominees listed therein. The giving of a
proxy does not preclude the right to vote in person should the person giving the
proxy so desire, and the proxy may be revoked at any time before it is exercised
by written notice delivered to the Company at or prior to the meeting. This
Proxy Statement and accompanying form of proxy are to be mailed on or about June
8, 1998, to shareholders of record on May 8, 1998 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 8,278,389 shares of Common Stock, 2,805 shares of Series A
Preferred Stock, par value $1.00 per share (the "Series A Preferred Stock"), and
15,000 shares of Series B Preferred Stock, par value $1.00 per share (the
"Series B Preferred Stock"), and only the holders of record on such date are
entitled to vote at the meeting.
The holders of record of Common Stock on the Record Date will be
entitled to one vote per share on each matter presented to such holders at the
meeting. The holders of record of Series A Preferred Stock and Series B
Preferred Stock on the Record Date will be entitled to one-tenth of one vote per
share on each matter presented to such holders at the meeting. The presence at
the meeting, in person or by proxy, of the holders of a majority of the
outstanding shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock is necessary to constitute a quorum for the transaction of
business at the meeting.
<PAGE> 5
MATTERS TO COME BEFORE THE MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
At the meeting, five directors are to be elected, which will leave one
vacancy on the Board of Directors. The Board of Directors is actively reviewing
candidates to fill the vacancy, and, in the event that a qualified individual is
identified, the Board of Directors plans to appoint a director to the vacant
position, the term of which will expire at the 1998 Annual Meeting of
Shareholders. The Board of Directors also is reviewing candidates for the
purpose of appointing one other director to the Board of Directors, and, in the
event that a qualified individual is identified, the Board of Directors plans to
increase the size of the Board to seven directors and appoint a director to the
vacant position created thereby, the term of which also will expire at the 1998
Annual Meeting of Shareholders.
The holders of Common Stock, Series A Preferred Stock and Series B
Preferred Stock, voting together as a single class, are entitled to elect the
five nominees for election to the Board of Directors. All directors of the
Company hold office until the next annual meeting of shareholders or until their
respective successors are duly elected and qualified or their earlier
resignation or removal.
It is the intention of the persons named in the proxies for the holders
of Common Stock, Series A Preferred Stock and Series B Preferred Stock to vote
the proxies for the election of the nominees named below, unless otherwise
specified in any particular proxy. The management of the Company does not
contemplate that any of the nominees will become unavailable for any reason, but
if that should occur before the meeting, proxies will be voted for another
nominee, or other nominees, to be selected by the Board of Directors. In
accordance with the Company's by-laws and Texas law, a shareholder entitled to
vote for the election of directors may withhold authority to vote for certain
nominees for directors or may withhold authority to vote for all nominees for
directors. The director nominees receiving a plurality of the votes of the
holders of shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock, voting together as a single class, present in person or by
proxy at the meeting and entitled to vote on the election of directors will be
elected directors. Abstentions and broker non-votes (i.e., shares held in street
name for which the record holder does not have discretionary authority to vote
under the rules of the New York Stock Exchange) will not be treated as a vote
for or against any particular director nominee and will not affect the outcome
of the election.
The persons listed below have been nominated for election to fill the
six director positions to be elected by the holders of the Common Stock, Series
A Preferred Stock and Series B Preferred Stock, voting together as a single
class.
<TABLE>
<CAPTION>
DIRECTOR
--------
NOMINEE AGE POSITION WITH THE COMPANY SINCE
------- --- ------------------------- -----
<S> <C> <C> <C>
David R. Little 46 Chairman of the Board, President 1996
and Chief Executive Officer
Jerry J. Jones 59 Senior Vice President/Operations 1996
and Director
Cletus Davis 68 Director 1996
Kenneth H. Miller 59 Director 1996
Thomas V. Orr 47 Director 1996
</TABLE>
-2-
<PAGE> 6
INFORMATION REGARDING NOMINEES AND DIRECTORS
Background of Nominees for Director
David R. Little. Mr. Little has served as Chairman of the Board,
President and Chief Executive Officer of the Company since its organization in
1996 and also has held these positions with SEPCO Industries, Inc. ("SEPCO"), a
wholly owned subsidiary of the Company, since 1986. Mr. Little has been employed
by SEPCO since 1975 in various capacities, including Staff Accountant,
Controller, Vice President/Finance and President.
Jerry J. Jones. Mr. Jones has served as a Director since July 1996 and
as Senior Vice President/Operations since September 1997. From August 1996 to
September 1997, Mr. Jones served as Senior Vice President/Corporate Development.
Mr. Jones also has served as a Director of SEPCO since 1986 and as Senior Vice
President/Corporate Marketing of SEPCO since June 1995. From February 1993 to
June 1995, Mr. Jones served as President of T. L. Walker Bearing Company, a
subsidiary of SEPCO. Prior to his employment with SEPCO, Mr. Jones served as
President and Chief Executive Officer of The Energy Partners, Inc./Perry
Oceanographics, a renewable energy development company and offshore underwater
equipment manufacturer, from November 1989 to December 1992.
Cletus Davis. Mr. Davis has served as a Director of the Company since
August 1996. Mr. Davis also has served as a Director of SEPCO since May 1996.
Mr. Davis is an attorney practicing in the areas of commercial real estate,
banking, corporate, estate planning and general litigation and is also a trained
mediator. From May 1988 to February 1992, Mr. Davis was a member of the law firm
of Wood, Lucksinger & Epstein. Since March 1992, Mr. Davis has practiced law
with the law firm of Cletus Davis, P.C.
Kenneth H. Miller. Mr. Miller has served as a Director of the Company
since August 1996. Mr. Miller also has served as a Director of SEPCO since April
1989. Mr. Miller is a Certified Public Accountant and has been a solo
practitioner since 1983.
Thomas V. Orr. Mr. Orr has served as a Director of the Company since
August 1996. Mr. Orr also has served as a Director of SEPCO since May 1996. Mr.
Orr has been Executive Managing Director of Morgan Keegan & Company, Inc.
("Morgan Keegan"), an investment banking firm, since August 1997. From February
1995 to July 1997 he was a Senior Vice President and Divisional Manager of
Morgan Keegan. From June 1990 to January 1995, Mr. Orr was a Divisional Sales
Manager for two years and Branch Office Manager for three years for Paine
Webber, Inc., an investment banking firm.
Committees of the Board of Directors and Meeting Attendance
The Board of Directors has established an Audit Committee and a
Compensation Committee. The Board of Directors has not established a nominating
committee. During the fiscal year ended December 31, 1997, the Board of
Directors met three times, and the Audit Committee and the Compensation
Committee each met once. No director attended less than 75% of the meetings of
the Board of Directors and committees of which he is a member.
The Audit Committee, composed of Messrs. Davis, Miller and Orr, makes
recommendations to the Board of Directors on matters regarding the independent
public accountants of the Company and the annual audit of the Company's
financial statements and accounts. The Compensation Committee, composed of
Messrs. Davis, Miller and Orr, makes recommendations to the Board of Directors
regarding compensation for the Company's
-3-
<PAGE> 7
executive officers, directors, employees, consultants and agents, and acts as
the administrative committee for the Company's stock plans, including the
Company's Long-Term Incentive Plan.
PROPOSAL 2: REVERSE STOCK SPLIT AMENDMENT
Summary and Purpose. The Board of Directors has approved, and directed
that the same be presented to the shareholders of the Company for their
approval, the Reverse Stock Split Amendment, which would effect a two-to-one
reverse stock split. The Reverse Stock Split Amendment would also authorize the
purchase by the Company of fractional shares resulting from the reverse stock
split. The Board of Directors believes that the reverse stock split is in the
best interests of the shareholders. The reverse stock split is intended to place
the market price of the Common Stock at a level more attractive to a wider range
of investors and may result in a broader market and more widespread ownership of
the Common Stock.
The proposed reverse stock split would be effected through the Reverse
Stock Split Amendment, which would become effective upon filing with and
acceptance by the Secretary of State of Texas. The text of the Reverse Stock
Split Amendment and the procedures for settling fractional share interests are
set forth in full in Annex A hereto, which is incorporated by reference herein.
Description and Effect. The Articles of Incorporation currently
authorize the issuance of 110,000,000 shares of capital stock, consisting of
100,000,000 shares of Common Stock, and 10,000,000 shares of preferred stock,
$1.00 par value per share, of which 1,000,000 have been designated Series A
Preferred Stock and 1,000,000 have been designated Series B Preferred Stock. At
May 8, 1998, the Company had outstanding 8,278,389 shares of Common Stock, 2,805
shares of Series A Preferred Stock and 15,000 shares of Series B Preferred
Stock. In addition, as of such date, the Company had reserved 3,766,400 shares
of Common Stock for issuance upon conversion or exercise of various outstanding
securities of the Company and approximately 57,706 shares of Common Stock
reserved for issuance in connection with a reorganization of the Company in
December 1996.
Upon effectiveness of the Reverse Stock Split Amendment, one new share
of Common Stock will be exchanged for every two shares of Common Stock
outstanding as of the date on which the Reverse Stock Split Amendment is filed
with the Secretary of State of Texas (the "Effective Date"). Based on
information as of the Record Date, it is anticipated that the number of shares
of Common Stock that would be outstanding on the Effective Date is approximately
4,139,194. In addition, it is expected that 1,883,200 shares of Common Stock
will be reserved for issuance upon the conversion or exercise of various of the
Company's other outstanding securities (convertible preferred stock and
options), and approximately 28,853 shares of Common Stock will be reserved for
issuance in connection with the Company's reorganization in December 1996,
leaving a total of approximately 93,948,753 shares of Common Stock available for
future issuances.
No fractional shares of new Common Stock will be issued for any
fractional new share interest. Rather, each shareholder who would otherwise
receive a fractional new share of Common Stock as a result of the Reverse Stock
Split Amendment will receive an amount of cash equal to the closing sale price
of a share of Common Stock on the Nasdaq National Market on the Effective Date
multiplied by the number of shares of Common Stock held by such holder that
would otherwise have been exchanged for
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<PAGE> 8
such fractional interest. Because the price of the Common Stock fluctuates, the
amount to be paid for fractional shares cannot be determined until such date and
may be greater or less than the price on the date that any shareholder executes
his proxy or the date of the meeting. It currently is estimated that the cost
to the Company of purchasing fractional shares will be not more than $1,000.
If the Reverse Stock Split Amendment is approved, the Company will
notify shareholders of the filing of the Reverse Stock Split Amendment with the
Secretary of State of Texas and will furnish shareholders of record as of the
close of business on the Effective Date with a Letter of Transmittal for use in
exchanging certificates. The shareholders of the Company, promptly after the
Reverse Stock Split Amendment becomes effective, will be required to mail their
certificates representing their shares of Common Stock to the Exchange Agent
named in the Letter of Transmittal so that a new stock certificate giving
effect to the reverse stock split may be issued and proceeds of the settlement
of fractional interests delivered promptly.
It is not expected that the interests of any shareholders will be
eliminated pursuant to the reverse stock split. Fractional interests settled by
the Company are expected to aggregate approximately 200 shares, or less than one
percent, of those outstanding as of the Record Date. Shares no longer
outstanding as a result of the fractional share settlement procedure will be
returned to authorized but unissued shares of Common Stock.
Certain Considerations. After giving effect to the settlement of
fractional shares of Common Stock, there will be no material differences between
those securities outstanding prior to the Reverse Stock Split Amendment and
those to be outstanding after the Reverse Stock Split Amendment is effected. The
Reverse Stock Split Amendment will, however, result in an adjustment to the
conversion ratio of the Series B Preferred Stock. Specifically, pursuant to the
Restated Articles of Incorporation and as reflected in the Reverse Stock Split
Amendment, the conversion ratio of the Series B Preferred Stock will be adjusted
so that such shares will be convertible into such number of shares of Common
Stock that a holder of such shares of Series B Preferred Stock would have been
entitled to receive in the reclassification if such shares of Series B Preferred
Stock were to have been converted into Common Stock immediately prior to the
reclassification. Pursuant to such adjustment, upon effectiveness of the Reverse
Stock Split Amendment, each share of Series B Preferred Stock will be
convertible into 28 shares of Common Stock. Similar adjustments will be made to
the exercise provisions of the Company's outstanding options.
The Reverse Stock Split Amendment also will have the effect of reducing
the number of shares held by shareholders who currently hold less than 200
shares of Common Stock to a number less than 100. Because selling costs for
shares in lots of less than 100 are typically higher on a per share basis than
for lots of 100 shares or more, the amendment could result in increased selling
costs to such shareholders. In addition, because lots of less than 100 shares
are often required to be bundled with other shares for resale, shareholders who
hold less than 100 shares after the effectiveness of the Reverse Stock Split
Amendment may have a more difficult time in disposing of their shares of Common
Stock.
In the reverse stock split, cash proceeds received from the settlement
of fractional shares may result in a shareholder realizing taxable gain or loss
to the extent of the difference between such proceeds and the cost or other
basis applicable to the fractional shares. No officer, director, associate or
affiliate of the Company is expected to derive any material benefit from the
reverse stock split other than the benefits that might be enjoyed by any other
person holding the same number of shares.
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<PAGE> 9
The affirmative vote of the holders of a majority of the outstanding
shares of Common Stock is required for approval of the Reverse Stock Split
Amendment and the reverse stock split contemplated thereby. Abstentions and
broker non-votes will not be treated as either a vote for or against the
proposal. Because the proposal requires the affirmative vote of a majority of
the outstanding shares, however, abstentions and broker non-votes will have
the same effect as a vote against the proposal.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE REVERSE STOCK SPLIT
AMENDMENT, AND THE REVERSE STOCK SPLIT CONTEMPLATED THEREBY, AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE ADOPTION OF THE REVERSE STOCK SPLIT AMENDMENT AND THE
REVERSE STOCK SPLIT CONTEMPLATED THEREBY.
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<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of May 15, 1998, with
respect to (i) persons known to the Company to be beneficial holders of five
percent or more of either the outstanding shares of Common Stock, Series A
Preferred Stock or Series B Preferred Stock, (ii) named executive officers and
directors of the Company and (iii) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(2)
----------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL SERIES A SERIES B
- ------------------------------ COMMON PREFERRED PREFERRED
OWNER(1) STOCK % STOCK % STOCK %
- ----------------------------------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Gary A. Allcorn(3) 4,494,839 48.9 -- -- 15,000 100.0
580 Westlake Park Blvd.,
Suite 1100
Houston, Texas 77079
David R. Little(4) 2,160,139 21.8 -- -- -- --
580 Westlake Park Blvd.,
Suite 1100
Houston, Texas 77079
Bryan H. Wimberly(5) 837,125 10.0 -- -- -- --
580 Westlake Park Blvd.,
Suite 1100
Houston, Texas 77079
Jerry J. Jones(6) 719,286 8.0 -- -- -- --
580 Westlake Park Blvd.,
Suite 1100
Houston, Texas 77079
DXP Enterprises, Inc. Employee 1,876,042 22.6 1,870 62.5 -- --
Stock Ownership Plan
c/o River Oaks Trust Company,
Trustee
2001 Kirby
Houston, Texas 77210
J. Michael Wappler(7) 440,320 5.3 -- -- -- --
580 Westlake Park Blvd.,
Suite 1100
Houston. Texas 77079
Donald E. Tefertiller(8) 93,298 1.1 374 12.5 -- --
4425 Congressional Drive
Corpus Christi, Texas
78413
Norman O. Schenk(9) 80,225 1.0 374 12.5 -- --
4415 Waynesboro
Houston, Texas 77035
Charles E. Jacob(10 48,034 * 187 6.3 -- --
P. O. Box 57
Maypearl, Texas 76064
Ernest E. Herbert(11) 47,377 * 187 6.3 -- --
57 Coronado Avenue
Kenner, Louisiana
Thomas V. Orr, Director(12) 13,000 * -- -- -- --
Kenneth H. Miller, Director(13) 13,000 * -- -- -- --
Cletus Davis, Director(14) 13,000 * -- -- -- --
All executive officers, directors 8,690,709 74.7 -- -- 15,000 100.0
and nominees as a group
(7 persons)(15)
</TABLE>
- ---------
* Less than 1%.
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<PAGE> 11
(l) Each beneficial owner's percentage ownership is determined by assuming
that options, warrants and other convertible securities that are held by
such person (but not those held by any other person) and that are
exercisable or convertible within 60 days have been exercised or
converted.
(2) Unless otherwise noted, the Company believes that all persons named in
the above table have sole voting and investment power with respect to all
shares of Common Stock, Series A Preferred Stock and Series B Preferred
Stock beneficially owned by them.
(3) Includes 3,425,592 shares of Common Stock and 15,000 shares of Series B
Preferred Stock owned by the Kacey Joyce, Andrea Rae and Nicholas David
Little 1988 Trusts (the "Trusts") for which Mr. Allcorn serves as
trustee. Because of this relationship, Mr. Allcorn may be deemed to be
the beneficial owner of such shares and the 840,000 shares of Common
Stock issuable upon conversion of the 15,000 shares of Series B Preferred
Stock held by the Trusts. Also includes 40,000 shares of Common Stock
issuable upon exercise of an option and 14,847 shares of Common Stock
held of record by the ESOP for Mr. Allcorn's account.
(4) Includes 1,600,000 shares of Common Stock issuable to Mr. Little upon
exercise of an option and 81,689 shares of Common Stock held of record by
the ESOP for Mr. Little's account.
(5) Includes 100,800 shares of Common Stock owned of record by a trust of
which Mr. Wimberly is one-third beneficiary and 97,600 shares of Common
Stock issuable upon exercise of an option granted to Mr. Wimberly. Also
includes 17,925 shares of Common Stock held by the ESOP for Mr.
Wimberly's account.
(6) Includes 718,400 shares of Common Stock issuable upon exercise of an
option granted to Mr. Jones and 866 shares of Common Stock held by the
ESOP for Mr. Jones's account.
(7) Includes 31,239 shares of Common Stock held of record by the ESOP for Mr.
Wappler's account.
(8) Includes 8,000 shares of Common Stock issuable upon exercise of an option
and 46,968 shares of Common Stock held by the ESOP for Mr. Tefertiller's
account.
(9) Includes 18,625 shares of Common Stock held of record by the ESOP for Mr.
Schenk's account.
(10) Includes 16,834 shares of Common Stock held of record by the ESOP for Mr.
Jacob's account.
(11) Includes 23,877 shares of Common Stock held of record by the ESOP for Mr.
Herbert's account.
(12) Includes 13,000 shares of Common Stock issuable upon exercise of options.
(13) Includes 13,000 shares of Common Stock issuable upon exercise of options.
(14) Includes 13,000 shares of Common Stock issuable upon exercise of options.
(15) See notes (3) through (6) and (12) through (14).
-8-
<PAGE> 12
EXECUTIVE OFFICERS AND COMPENSATION
The following section sets forth the names and background of the
Company's executive officers.
BACKGROUND OF EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
DATE OF
-------
FIRST
--------
NAME OFFICES HELD ELECTION AGE
---- ----------- -------- ---
<S> <C> <C> <C>
David R. Little.............. Chairman of the Board, President and July 1996 46
Chief Executive Officer
Jerry J. Jones............... Senior Vice President/Operations August 1996 59
Bryan H. Wimberly............ Senior Vice President/Corporate August 1996 58
Development
Gary A. Allcorn.............. Senior Vice President/Finance, Chief July 1996 45
Financial Officer and Secretary
</TABLE>
For further information regarding the backgrounds of Mr. Little and
Mr. Jones, see "Background of Nominees for Director".
Bryan H. Wimberly. Mr. Wimberly has served as Senior Vice
President/Corporate Development since September 1997. Mr. Wimberly also has
served as a Director of the Company since July 1996. Mr. Wimberly has declined
to stand for re-election to the Board of Directors of the Company. From August
1996 to September 1997, he served as Senior Vice President/Pump, Bearing, Power
Transmission and Valve Automation Group. Mr. Wimberly also has served as a
Director of SEPCO since 1987 and the President and Chief Operating Officer of
SEPCO since October 1995. Mr. Wimberly has been employed by SEPCO since 1987 in
various capacities, including Senior Vice President/Operations.
Gary A. Allcorn. Mr. Allcorn has served as Senior Vice President/Finance
of the Company since August 1996 and was appointed Chief Financial Officer in
November 1997. Mr. Allcorn also has served as Secretary of the Company since
July 1996. Mr. Allcorn also has held these positions with SEPCO since December
1995. Mr. Allcorn has been employed with SEPCO since 1985 in various capacities,
including Vice-President/Finance and Chief Financial Officer.
All officers of the Company hold office until the regular meeting of
directors following the annual meeting of shareholders or until their respective
successors are duly elected and qualified or their earlier resignation or
removal.
COMPENSATION COMMITTEE REPORT
The Board established a Compensation Committee (the "Committee") on
August 12, 1996, which is composed of Cletus Davis, Tommy Orr and Kenneth
Miller, all of whom are outside directors. The purpose of the Committee is to
review, approve and make recommendations to the Board of Directors on matters
regarding the compensation of officers, directors, employees,
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<PAGE> 13
consultants and agents of the Company and act as the administrative committee
for any stock plans of the Company, including its Long-Term Incentive Plan. The
Committee makes its compensation decisions based upon its own research and
analysis. The Company is prepared to engage an outside compensation consultant
if the Committee so requests.
The Committee believes that the Company's past and future success is the
result of a highly qualified and stable management team. The Company believes
that the stability of a management team is important to its success and has
adopted a strategy to (i) compensate its executive officers through a stable
base salary set at a sufficiently high level to retain and motivate such
officers, (ii) link a portion of their compensation to their individual and the
Company's performance and (iii) provide a portion of their compensation in a
manner that aligns the financial interests of the Company's executive officers
with those of the Company's shareholders.
The Company was privately held until December 1996. The compensation
packages of the Company's executive officers was established by SEPCO prior to
the Company becoming public. These compensation packages were assumed by the
Company upon completion of the SEPCO reorganization. The Committee reviewed
these executive compensation packages with its outside advisors and determined
that they were consistent with the long-term strategies of the Company.
The major components of the Company's executive compensation program
consist of base salary, incentive compensation tied to the Company's performance
and equity participation in the form of stock ownership and stock options.
Base Salary
Base salaries for the Company's executives are influenced by both
objective and subjective criteria. Salaries are determined by reviewing the
executive level of responsibility, tenure with the Company, prior year
compensation and effectiveness of the management team. In setting compensation
levels for positions other than the Chief Executive Officer, the Committee
considers recommendations from the Company's Chief Executive Officer. The
Committee believes executive base salaries and incentive compensation for 1997
were reasonable based upon the duties and responsibilities of those executives.
Incentive Compensation
The Committee believes incentive compensation tied to the Company's
performance is a key component of executive compensation. The incentive
compensation for the Company's executive officers ranges from 20% to 40% of the
cash portion of their annual compensation package. The Committee believes this
type of incentive compensation motivates the executive to focus on the Company's
performance. Additionally, poor Company performance results in lower
compensation for the executives.
Stock Options
The Committee believes equity participation is a key component of the
Company's executive compensation program. Stock options are granted to
executives based upon the officer's past and anticipated contribution to the
growth and profitability of the Company. The Committee also believes that the
granting of stock options enhances shareholder value by aligning the financial
interests of the executive with those of the Company's shareholders.
-10-
<PAGE> 14
Chief Executive Officer's 1997 Compensation
The compensation paid to Mr. Little, the Company's Chief Executive
Officer, in 1997 consisted of base salary and incentive compensation and was
established pursuant to his employment agreement with SEPCO. In 1997, Mr. Little
received $279,277 in base pay and $112,849 in incentive compensation pursuant to
his employment agreement.
Cletus Davis
Kenneth H. Miller
Thomas V. Orr
SUMMARY OF COMPENSATION
Set forth in the following table is certain compensation information
concerning the Chief Executive Officer and each of the Company's four other
most highly compensated executive officers as to whom the total annual salary
and bonus for the fiscal year ended December 31, 1997, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
NAME AND PRINCIPAL SALARY BONUS COMPENSATION OPTIONS
POSITION YEAR ($) ($) ($) (#)
- ---------------------------------- ---- ------- -------- ------------ ----------
<S> <C> <C> <C> <C> <C>
David R. Little, 1997 279,277 112,849 -- --
President and Chief Executive 1996 263,714 93,454 -- --
Officer 1995 222,567 131,888 -- 1,600,000
Jerry J. Jones, 1997 131,672 75,035 -- --
Senior Vice President/Operations 1996 116,264 62,516 -- --
1995 113,330 67,503 357,216(1) 718,400
Bryan H. Wimberly, 1997 142,567 94,227 -- --
Senior Vice President/Corporate 1996 136,031 65,620 -- --
Development 1995 121,967 92,589 -- 97,600
Gary A. Allcorn, 1997 123,066 30,023 -- --
Senior Vice President/Finance 1996 114,161 10,741 -- 40,000
and Chief Financial Officer 1995 103,707 9,059 -- --
</TABLE>
- ------------------
(1) Represents payments to Mr. Jones in respect of the repurchase by the
Company of shares acquired by Mr. Jones on exercise of options held by
him.
-11-
<PAGE> 15
The following table sets forth information concerning the value of
unexercised options held by each of the executive officers named in the Summary
Compensation Table at December 31, 1997. None of such executive officers
exercised any stock options during the year ended December 31, 1997.
OPTION VALUES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED OPTIONS VALUE OF UNEXERCISED
AT DECEMBER 31, 1996 IN-THE-MONEY OPTIONS AT
(# SHARES) DECEMBER 31, 1996 ($)(1)
-------------------------------- ---------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
David R. Little 1,600,000 -- 7,760,000 --
Jerry J. Jones 718,400 -- 3,541,712 --
Bryan H. Wimberly 97,600 -- 488,790 --
Gary A. Allcorn 40,000 -- 183,750 --
</TABLE>
- -------------
(1) Based on a price per share of $5.75, the closing sale price of the Common
Stock on December 31, 1997.
-12-
<PAGE> 16
PERFORMANCE PRESENTATION
The following performance graph compares the performance of the Common
Stock to the S&P Midcap Industrials Index and the Nasdaq Composite (US).
Information with respect to the Common Stock, the S&P Midcap Industrials Index
and the Nasdaq Composite (US) is from December 27, 1996, the date on which the
Common Stock first began public trading. The graph assumes that the value of the
investment in the Common Stock in each index was $100 at December 27, 1996, and
that all dividends were reinvested.
[GRAPH]
<TABLE>
<CAPTION>
<S> <C> <C> <C>
TOTAL RETURN ANALYSIS 12/27/96 12/31/96 12/31/97
DXP ENTERPRISES, INC $ 100.00 $ 93.33 $ 76.66
S&P MIDCAP INDUSTRIALS $ 100.00 $ 101.29 $ 125.85
INDEX
NASDAQ COMPOSITE (US) $ 100.00 $ 99.97 $ 122.11
</TABLE>
Source: Carl Thompson Associates www.ctaonline.com (303)494-5472. Data from
Bloomberg Financial Markets
COMPENSATION OF DIRECTORS
The Company's Bylaws provide that directors may be paid their expenses,
if any, and may be paid a fixed sum for attendance of each Board of Directors
meeting. The Company pays each non-employee director $1,000 per committee or
board meeting attended, not to exceed $1,500 in the event two meetings occur on
the same day. In 1997, Messrs. Davis and Miller each received $4,000 and Mr. Orr
received $3,000 for attendance at Board of Directors meetings.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement (the "Little
Employment Agreement"), effective July 1, 1996, as amended, with Mr. Little. The
Little Employment Agreement is for a term of three years, renewable annually for
a term to extend three years from such renewal date. The Little Employment
Agreement provides for compensation in a minimum amount of $260,000 per annum,
to be reviewed at least annually for possible increases, monthly bonuses equal
to 3% of the profit before tax of SEPCO as shown on the books and records of
SEPCO at the end of each month and other perquisites in accordance with SEPCO
policy. In the event Mr. Little terminates his employment for "Good Reason" (as
defined therein), or is terminated by the Company for other than "Good Cause"
(as defined therein), Mr. Little would receive a cash lump sum payment equal to
the sum of (i) the base salary for the remainder of the employment period under
the Little Employment Agreement, (ii) an amount equal to the sum of the most
recent 12 months of bonuses paid to him, (iii) two times the sum of his current
annual base salary plus the total of the most recent 12 months of bonuses, (iv)
all compensation previously deferred and any accrued interest thereon, and any
accrued vacation pay not yet paid by the Company and (v) continuation of
benefits under the Company's benefit plans for the current employment period.
Mr. Little is also entitled under the Little Employment Agreement to certain
gross-up payments if an excise tax is imposed pursuant to Section 4999 of the
Code, which imposes an excise tax on certain severance payments in excess of
three times an annualized compensation amount following certain changes in
control or any payment of distribution made to him. As amended on May 21, 1998,
the Little Employment Agreement will terminate June 30, 2001 if Mr. Little
enters into a new
-13-
<PAGE> 17
agreement with the Company, as approved by the Compensation Committee, and will
not be renewable automatically.
The Company also has entered into employment agreements (each Employment
Agreement hereinafter referred to as "Employment Agreement" and the four
Employment Agreements hereinafter collectively referred to as "Employment
Agreements"), effective as of July 1, 1996, as amended, with Messrs. Jerry J.
Jones, Bryan H. Wimberly and Gary A. Allcorn, (each hereinafter referred to as
"Employee"). Each Employment Agreement is for a term of one year, renewable
automatically for a one-year term. The Employment Agreements provide for (i)
annual salary ("Salary") in the amounts of $130,001 for Mr. Jones, $130,000 for
Mr. Wimberly and $113,100 for Mr. Allcorn, and (ii) other perquisites in
accordance with Company policy. The Employment Agreements provide for bonuses as
follows: (i) Mr. Jones is entitled to a monthly bonus of two percent of the
monthly profit before tax of the Company, excluding sales of fixed assets and
extraordinary items; (ii) Mr. Wimberly is entitled to a monthly bonus of two
percent of the monthly profit before tax of SEPCO, excluding sales of fixed
assets and extraordinary items; and (iii) Mr. Allcorn is entitled to a monthly
bonus of one percent of the monthly profit before tax of the Company, excluding
sales of fixed assets and extraordinary items. The Employment Agreements were
amended on May 21, 1998 to provide that the aggregate of the monthly bonuses in
any one year may not exceed twice the annual base salary paid to the Employee.
The May 1998 amendment also provides that the Employment Agreements will not be
renewed July 1, 1998 if Messrs. Jones, Wimberly and Allcorn have entered into
new employment agreements with the Company, as approved by the Compensation
Committee.
In the event Employee terminates his employment for "Good Reason" (as
defined therein), or is terminated by the Company for other than "Cause" (as
defined therein), each Employee would receive (i) 12 monthly payments each equal
to one month of the Salary, (ii) a termination bonus equal to the previous 12
monthly bonuses and (iii) any other payments due through the date of
termination. In the event Employee dies, become disabled, terminates the
Employment Agreement with notice or the Employment Agreement is terminated by
the Company for Cause, Employee or Employee's estate, as applicable, would
receive all payments then due him under the Employment Agreement through the
date of termination. In March 1998, Mr. Evans resigned from the Company. All
amounts due to Mr. Evans under his Employment Agreement have been paid.
BENEFIT PLANS
Employee Stock Ownership Plan
The Company maintains the ESOP for the benefit of eligible employees
pursuant to which annual contributions may be made. The amount and form of the
annual contribution is within the discretion of the Company's Board of
Directors. Such contributions are limited to a maximum of 15% of the total
compensation paid to all participants eligible to receive an allocation during
the fiscal year. The Company (or its predecessor, SEPCO) contributed $150,000
for each of the years ended December 31, 1996, 1995 and 1994. The ESOP currently
is administered by the Company's Compensation Committee.
Long-Term Incentive Plan
In August 1996, the Company established a Long-Term Incentive Plan (the
"LTIP"). The LTIP provides for the grant of stock options (which may be
non-qualified stock options or incentive stock options for tax purposes), stock
appreciation rights issued independent of or in tandem with such options,
restricted stock awards and performance awards to certain key
-14-
<PAGE> 18
employees of the Company and its subsidiaries. The LTIP is administered by the
Compensation Committee.
At December 31, 1997, 183,000 shares of Common Stock (approximately 5% of
the current outstanding shares of Common Stock) were available for issuance
under LTIP and options granted under the LTIP to purchase 217,000 shares of
Common Stock were outstanding. In addition, as of January 1 of each year the
LTIP is in effect, if the total number of shares of Common Stock issued and
outstanding, not including any shares issued under the LTIP, exceeds the total
number of shares of Common Stock issued and outstanding as of January 1 of the
preceding year, the number of shares available will be increased by an amount
such that the total number of shares available for issuance under the LTIP
equals 5% of the total number of shares of Common Stock outstanding, not
including any shares issued under the LTIP. Lapsed, forfeited or canceled awards
will not count against these limits. Cash exercises of SARs and cash settlement
of other awards will also not be counted against these limits but the total
number of SARs and other awards settled in cash shall not exceed the total
number of shares authorized for issuance under the LTIP (without reduction for
issuances).
TRANSACTIONS
In December 1989, the Company restructured certain loans previously made
by the Company to David R. Little, Chairman of the Board, President and Chief
Executive Officer of the Company, pursuant to which Mr. Little executed two
promissory notes in the amounts of $149,910 and $58,737, respectively, each
bearing interest at 9% per annum. The notes require monthly payments of $1,349
and $528, respectively. The outstanding balances of such loans at December 31,
1997, were $127,814 and $50,080, respectively.
In December 1993, the Company loaned Mr. Little approximately $210,940 to
purchase 59,800 shares of SEPCO's Class A Common Stock. The loan bore interest
at 6% per annum and provided for annual interest payments and one principal
payment upon sale of the stock which secured such loan. The loan was repaid on
August 5, 1996. The Company from time to time also has made non-interest bearing
advances to Mr. Little that as of December 31, 1997 totaled approximately
$340,439. The Company and Mr. Little have agreed that the amount of non-interest
bearing advances made to Mr. Little will not exceed the amount outstanding at
December 31, 1997. The largest aggregate amount of Mr. Little's indebtedness
outstanding to the Company during the year ended December 31, 1997 was
approximately $638,152.
Mr. Allcorn, Senior Vice President/Finance and Chief Financial Officer of
the Company, is the trustee of three trusts for the benefit of Mr. Little's
children, each of which holds 1,141,864 shares of Common Stock and 5,000 shares
of Series B Preferred Stock. Mr. Allcorn exercises sole voting and investment
power over the shares held by such trusts.
Mr. Little has personally guaranteed up to $500,000 of the obligations of
the Company under the loan agreement with its principal lender. In addition, all
of the shares of Common Stock and Series B Preferred Stock held in trust for Mr.
Little's children have been pledged to such lender to secure the obligations of
the Company under the loan agreement.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") served as the Company's principal
independent accountants for the fiscal years ending December 31, 1996 and 1997
and has been recommended by the Audit Committee to serve the current year.
Representatives of Arthur Andersen are expected to be present at the annual
meeting of shareholders, will have the
-15-
<PAGE> 19
opportunity to make a statement if they so desire and will be available to
respond to appropriate questions.
Ernst & Young L.L.P. ("Ernst & Young") served as the Company's auditors
for the fiscal years ending December 31, 1994 and 1995. On December 26, 1996,
the Board of Directors of the Company approved the recommendation of the Audit
Committee of the Company's Board of Directors not to reappoint Ernst & Young as
the Company's auditors for the fiscal year ended December 31, 1996. The Audit
Committee recommended, and the Board of Directors ratified and approved, the
appointment of Arthur Andersen as the Company's auditors for the year ended
December 31, 1996 and 1997. The decision to replace Ernst & Young as the
Company's independent auditors with Arthur Andersen followed a review by the
Company of its accounting needs in light of the recent registration of its
capital stock under the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. The Company's Audit Committee and Board of
Directors also considered proposed fee arrangements by both Ernst & Young and
Arthur Andersen and their respective expertise in the area of industrial
distribution, public company reporting and mergers and acquisitions. In light of
all of these factors, the Company's Audit Committee and Board of Directors
concluded that it would be desirable for the Company to appoint Arthur Andersen
as its independent auditors for the years ending December 31, 1996 and 1997.
The reports of Ernst & Young on the Company's balance sheet as of July
31, 1996 and on the financial statements of SEPCO for the years ended December
31, 1994 and 1995 did not contain an adverse opinion or a disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
There have been no disagreements with Ernst & Young during the two most
recent fiscal years of SEPCO, or any subsequent interim period of SEPCO or the
Company, on any matter of accounting principles or practices, financial
statement disclosure, or audit scope or procedure, which would have caused Ernst
& Young to make reference to the matter in connection with any of its reports on
the Company's financial statements and which were not resolved to the
satisfaction of Ernst & Young.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Section 16(a)"), requires the Company's officers, directors and persons who
own more than 10% of a registered class of the Company's equity securities to
file statements on Form 3, Form 4, and Form 5 of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by the regulation to furnish the
Company with copies of all Section 16(a) reports which they file.
Based solely on a review of reports on Form 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal year, reports on
Form 5 and amendments thereto furnished to the Company with respect to its most
recent fiscal year and written representations from reporting persons that no
report on Form 5 was required, the Company believes that, no person who, at any
time during 1997, was subject to the reporting requirements of Section 16(a)
with respect to the Company failed to meet such requirements on a timely basis.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of shareholders intended to be presented at the annual
meeting of shareholders of the Company to be held in 1999 must be received by
the Company at its
-16-
<PAGE> 20
principal executive offices, 580 Westlake Park Boulevard, Suite 1100, Houston,
Texas 77079, no later than March 8, 1999, in order to be included in the
proxy statement and form of proxy relating to that meeting.
OTHER MATTERS
The management of the Company knows of no other matters that may come
before the meeting. However, if any matters other than those referred to above
should properly come before the meeting, it is the intention of the persons
named in the enclosed proxy to vote such proxy in accordance with their best
judgment.
The cost of solicitation of proxies in the accompanying form will be paid
by the Company. In addition to solicitation by use of the mails, certain
directors, officers or employees of the Company may solicit the return of
proxies by telephone, telegram or personal interview.
-17-
<PAGE> 21
ANNEX A
ARTICLES OF AMENDMENT
TO THE
RESTATED ARTICLES OF INCORPORATION
OF
DXP ENTERPRISES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following Articles of
Amendment to its Restated Articles of Incorporation, as amended:
ARTICLE ONE
The name of the corporation is DXP Enterprises, Inc.
ARTICLE TWO
The following amendments to the Restated Articles of Incorporation, as
amended, were adopted by the shareholders of the corporation on July _____,
1998.
1. The following amendment alters or changes the second paragraph of
Article Four of the Restated Articles of Incorporation, as amended, which
paragraph is amended and restated in its entirety as follows:
"At the effective time of this amendment, each share of Common Stock
issued and outstanding immediately prior to the effective time shall
automatically be changed and converted, without any action on the part of the
holder thereof, into one-half of a share of Common Stock and, in lieu of
fractional interests in shares of Common Stock of the Corporation, each holder
whose aggregate holdings of shares of Common Stock prior to the effective time
of this amendment amounted to a number not evenly divisible by two, shall be
entitled to receive for such fractional interest, and at the effective time of
this amendment any such fractional interest in shares of Common Stock of the
Corporation shall be converted into the right to receive, upon the surrender of
the stock certificates formerly representing shares of Common Stock of the
corporation, an amount in cash equal to the closing price per share for the
shares of the Common Stock on the Nasdaq National Market ("Nasdaq"), as reported
by Nasdaq, on the date on which this amendment becomes effective."
2. The following amendment alters or changes paragraph (B)(3)(d)(i) of
Article Four of the Restated Articles of Incorporation, as amended, which
paragraph is amended and restated in its entirety as follows:
"(i) At any time prior to the redemption of any share of Series B
Preferred Stock, the holder of such shares of Series B Preferred Stock shall
have the right to convert such share into 28 shares of Common Stock. The right
to receive the converted shares requires delivery to the office of the
Corporation or its transfer agent of the shareholder's written notice stating
the number of shares the shareholder is electing to convert. Said notice shall
be accompanied by the surrender of the Series B Preferred Stock certificate or
certificates, duly endorsed to the
-1-
<PAGE> 22
Corporation. The date of conversion shall be the date of receipt by the
Corporation or its transfer agent of the notice and the duly endorsed
certificate or certificates."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was _______________ and the number of shares entitled to vote thereon
was ________________ (representing ______________ votes)
ARTICLE FOUR
The number of shares voted for such amendments was __________
(representing __________ votes), and the number of shares voted against such
amendments was ___________ (representing _________ votes).
Dated: ____________, 1998.
DXP ENTERPRISES, INC.
By:
-----------------------------------
David R. Little
President
-2-
<PAGE> 23
DXP ENTERPRISES, INC.
PROXY - ANNUAL MEETING OF SHAREHOLDERS
July 6, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Preferred Stock of DXP Enterprises, Inc. ("DXP")
hereby appoints David R. Little and Gary A. Allcorn, or either of them, proxies
of the undersigned with full power of substitution, to vote at the Annual
Meeting of Shareholders of DXP to be held on Monday, July 6, 1998, at 9:00 a.m.,
Houston time, at the offices of SEPCO Industries, Inc., 6500 Brittmoore,
Houston, Texas 77041, and at any adjournment or postponement thereof, the number
of votes that the undersigned would be entitled to cast if personally present.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
(continued and to be signed on other side)
<PAGE> 24
<TABLE>
<S> <C>
(1) ELECTION OF DIRECTORS:
FOR all of the nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as indicated to the contrary below) to vote for election of directors
NOMINEES: David R. Little, Jerry J. Jones, Cletus Davis, Kenneth H. Miller and Thomas V. Orr.
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name in the
space provided below.)
- ----------------------------------------------------------------------------------------------------------
(2) Proposal to adopt an amendment to DXP's Restated Articles of Incorporation, as amended,
to effect a two-to-one reverse split of DXP's issued and outstanding Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) In their discretion, the above-named proxies are authorized to vote upon such other business
as may properly come before the meeting or any adjournment thereof and upon matters incident
to the conduct of the meeting.
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 the election of the director
nominees named in Item 1, or if any one or more of the nominees becomes unavailable, FOR another
nominee or other nominees to be selected by the Board of Directors, and FOR the proposal set forth
in Item 2.
-----------------------------------------------
-----------------------------------------------
Signature of Shareholder(s)
Please sign your name exactly as it appears
hereon. Joint owners must each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give your full
title as it appears thereon.
Date , 1998.
</TABLE>
<PAGE> 25
DXP ENTERPRISES, INC.
PROXY - ANNUAL MEETING OF SHAREHOLDERS
July 6, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of DXP Enterprises, Inc. ("DXP")
hereby appoints David R. Little and Gary A. Allcorn, or either of them, proxies
of the undersigned with full power of substitution, to vote at the Annual
Meeting of Shareholders of DXP to be held on Monday, July 6, 1998, at 9:00 a.m.,
Houston time, at the offices of SEPCO Industries, Inc., 6500 Brittmoore,
Houston, Texas 77041, and at any adjournment or postponement thereof, the number
of votes that the undersigned would be entitled to cast if personally present.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES.
(continued and to be signed on other side)
<PAGE> 26
<TABLE>
<S> <C> <C>
(1) ELECTION OF DIRECTORS:
FOR all of the nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as indicated to the contrary to vote for election
below) of directors
NOMINEES: David R. Little, Jerry J. Jones, Cletus Davis, Kenneth H. Miller and Thomas V. Orr.
(Instruction: To withhold authority to vote for any individual nominee, write that nominee's name in the
space provided below.)
- -----------------------------------------------------------------------------------------------------------
(2) Proposal to adopt an amendment to DXP's Restated Articles of Incorporation, as amended, to effect
a two-to-one reverse split of DXP's issued and outstanding Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) In their discretion, the above-named proxies are authorized to vote upon such other business as
may properly come before the meeting or any adjournment thereof and upon matters incident to
the conduct of the meeting.
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 the election of the director
nominees named in Item 1, or if any one or more of the nominees becomes unavailable, FOR another
nominee or other nominees to be selected by the Board of Directors, and FOR the proposal set forth
in Item 2.
---------------------------------------------------
---------------------------------------------------
Signature of Shareholder(s)
Please sign your name exactly as it appears hereon.
Joint owners must each sign. When signing as
attorney, executor, administrator, trustee or
guardian, please give your full title as it
appears thereon.
Date , 1998.
</TABLE>
