<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 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)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] 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:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE> 2
DXP ENTERPRISES, INC.
7272 PINEMONT
HOUSTON, TEXAS 77040
713/996-4700
April 28, 2000
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 Tuesday, June 6, 2000, at the offices of the Company, 7272 Pinemont,
Houston, Texas 77040.
This year you will be asked to consider one proposal concerning the
election of directors. This matter is explained more fully in the attached proxy
statement, which you are encouraged to read.
The Board of Directors recommends that you approve the proposal 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,
/s/ DAVID R. LITTLE
------------------------------------
David R. Little
Chairman of the Board,
President and Chief Executive
Officer
<PAGE> 3
DXP ENTERPRISES, INC.
7272 PINEMONT
HOUSTON, TEXAS 77040
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 6, 2000
Notice is hereby given that the Annual Meeting of the Shareholders of DXP
Enterprises, Inc., a Texas corporation (the "Company"), will be held on Tuesday,
June 6, 2000, at 9:00 a.m., Central Daylight Time, at the offices of the
Company, 7272 Pinemont, Houston, Texas 77040, 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; and
(2) 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 April 20, 1999,
will be entitled to vote at the meeting.
By Order of the Board of Directors,
/s/ GARY A. ALLCORN
------------------------------------
Gary A. Allcorn
Secretary
April 28, 2000
<PAGE> 4
DXP ENTERPRISES, INC.
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 6, 2000
This Proxy Statement is furnished to the shareholders of DXP Enterprises,
Inc. (the "Company"), 7272 Pinemont, Houston, Texas 77040 (Tel. No.
713/996-4700), 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 Tuesday, June 6, 2000, at 9:00 a.m., Central Daylight Time, at the
offices of the Company, 7272 Pinemont, Houston, Texas 77040, 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
April 28, 2000, to shareholders of record on April 20, 2000 (the "Record Date").
At the close of business on the Record Date, there were outstanding and
entitled to vote 4,054,281 shares of Common Stock, 2,992 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 voting together with the holders
of Common Stock as a single class. 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.
MATTERS TO COME BEFORE THE MEETING
PROPOSAL 1: ELECTION OF DIRECTORS
At the meeting, five directors are to be elected for a one year term
expiring at the 2001 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
1
<PAGE> 5
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 five
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.............. 48 Chairman of the Board, President and Chief Executive 1996
Officer
Gary A. Allcorn.............. 47 Senior Vice President/Finance, Chief Financial 1999
Officer, Secretary and Director
Cletus Davis................. 70 Director 1996
Kenneth H. Miller............ 61 Director 1996
Thomas V. Orr................ 49 Director 1996
</TABLE>
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 he acquired a controlling interest in
SEPCO in 1986. Mr. Little has been employed by SEPCO since 1975 in various
capacities, including Staff Accountant, Controller, Vice President/Finance and
President.
Gary A. Allcorn. Mr. Allcorn has served as a Director since June 1999 and
as Senior Vice President/ Finance of the Company since August 1996. Mr. Allcorn
was appointed Chief Financial Officer in November 1997 and 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.
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, 1999, the Board of
Directors met three times, the Compensation Committee met one time and the Audit
Committee met twice. Each director attended all the meetings of the Board of
Directors and committees of which he is a member.
2
<PAGE> 6
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 executive officers, directors,
employees, consultants and agents, and acts as the administrative committee for
the Company's stock plans.
3
<PAGE> 7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 26, 2000, 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)
-------------------------------------------------------
SERIES A SERIES B
COMMON PREFERRED PREFERRED
NAME AND ADDRESS OF BENEFICIAL OWNER(1) STOCK % STOCK % STOCK %
- --------------------------------------- --------- ---- --------- ---- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Gary A. Allcorn(3)......................... 2,247,505 50.0 -- -- 15,000 100.0
7272 Pinemont,
Houston, Texas 77040
David R. Little(4)......................... 1,065,432 21.9 -- -- -- --
7272 Pinemont,
Houston, Texas, 77040
DXP Enterprises, Inc. Employee Stock
Ownership Plan........................... 862,117 21.3 1,870 62.5 -- --
c/o River Oaks Trust Company,
Trustee
2001 Kirby
Houston, Texas 77210
J. Michael Wappler(5)...................... 216,829 5.3 -- -- -- --
7272 Pinemont
Houston, Texas 77040
David C. Vinson(6)......................... 8,279 * -- -- -- --
7272 Pinemont
Houston, Texas 77040
Donald E. Tefertiller(7)................... 46,872 1.2 374 12.5 -- --
4425 Congressional Drive
Corpus Christi, Texas 78413
Norman O. Schenk(8)........................ 9,424 * 374 12.5 -- --
4415 Waynesboro
Houston, Texas 77035
Charles E. Jacob(9)........................ 12,508 * 187 6.3 -- --
P. O. Box 57
Maypearl, Texas 76064
Ernest E. Herbert(10)...................... 12,220 * 187 6.3 -- --
57 Coronado Avenue
Kenner, Louisiana 70065
Thomas V. Orr, Director(11)................ 10,500 * -- -- -- --
Kenneth H. Miller, Director(12)............ 10,500 * -- -- -- --
Cletus Davis, Director(13)................. 10,500 * -- -- -- --
All executive officers, directors and
nominees as a group (7 persons)(14)...... 3,569,545 66.9 -- -- 15,000 100.0
</TABLE>
- ---------------
* Less than 1%.
(1) 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.
4
<PAGE> 8
(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 1,712,796 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 420,000 shares of Common Stock
issuable upon conversion of the 15,000 shares of Series B Preferred Stock
held by the Trusts. Also includes 20,000 shares of Common Stock issuable
upon exercise of an option and 7,709 shares of Common Stock held of record
by the Company's Employee Stock Ownership Plan (the "ESOP") for Mr.
Allcorn's account.
(4) Includes 800,000 shares of Common Stock issuable to Mr. Little upon
exercise of an option and 41,332 shares of Common Stock held of record by
the ESOP for Mr. Little's account.
(5) Includes 8,079 shares of Common Stock held of record by the ESOP for Mr.
Wappler's account.
(6) Includes 4,279 shares of Common Stock held of record by the ESOP for Mr.
Vinson's account.
(7) Includes 4,000 shares of Common Stock issuable upon exercise of an option
and 11,972 shares of Common Stock held by the ESOP for Mr. Tefertiller's
account.
(8) Includes 9,424 shares of Common Stock held of record by the ESOP for Mr.
Schenk's account.
(9) Includes 8,508 shares of Common Stock held of record by the ESOP for Mr.
Jacob's account.
(10) Includes 12,120 shares of Common Stock held of record by the ESOP for Mr.
Herbert's account.
(11) Includes 10,500 shares of Common Stock issuable upon exercise of options.
(12) Includes 10,500 shares of Common Stock issuable upon exercise of options.
(13) Includes 10,500 shares of Common Stock issuable upon exercise of options.
(14) See notes (3) through (6) and (11) through (13).
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 July 1996 48
and Chief Executive Officer
Gary A. Allcorn................. Senior Vice President/Finance, July 1996 47
Chief Financial Officer and
Secretary
J. Michael Wappler.............. Senior Vice President/Operations June 1999 47
David C. Vinson................. Vice President June 1999 49
</TABLE>
For further information regarding the backgrounds of Mr. Little, Mr. Jones
and Mr. Allcorn, see "Background of Nominees for Director".
J. Michael Wappler. Mr. Wappler was elected Senior Vice
President/Operations in June 1999. Mr. Wappler has served in various capacities
with the Company since his employment in 1986.
David C. Vinson. Mr. Vinson was elected Vice President in June 1999. Mr.
Vinson has served in various capacities with the Company since his employment in
1981.
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.
5
<PAGE> 9
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee"), 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, consultants and agents of the Company and act as the administrative
committee for any stock plans of the Company. 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 success depends upon 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 were established prior to the
Company becoming public. 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 1999 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 0% 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.
Chief Executive Officer's 1999 Compensation
The compensation paid to Mr. Little, the Company's Chief Executive Officer,
in 1999 consisted of base salary and incentive compensation and was established
pursuant to his employment agreement which reflects the compensation policies
described above. In 1999, Mr. Little received $280,555 in base pay and $34,584
in incentive compensation pursuant to his employment agreement.
6
<PAGE> 10
SUMMARY OF COMPENSATION
Set forth in the following table is certain compensation information
concerning the Chief Executive Officer and each of the Company's other most
highly compensated executive officers as to whom the total annual salary and
bonus for the fiscal year ended December 31, 1999, exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
---------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING
SALARY(3) BONUS COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- --------------------------- ---- --------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
David R. Little..................... 1999 280,555 34,584 -- --
President and Chief Executive 1998 275,917 151,625 -- --
Officer 1997 279,277 112,849 -- --
Jerry J. Jones(1)................... 1999 147,095 23,056 -- --
Senior Vice President/Operations 1998 139,724 101,083 -- --
1997 131,672 75,035 -- --
Gary A. Allcorn..................... 1999 132,500 11,528 -- --
Senior Vice President/Finance 1998 123,617 50,542 -- --
and Chief Financial Officer 1997 123,066 30,023 -- --
J. Michael Wappler.................. 1999 116,831 8,471 -- --
Senior Vice President/Operations
Jerry L. Owen(1).................... 1999 107,180 45,265 -- --
Vice President/Marketing
David C. Vinson..................... 1999 100,346 19,070 -- --
Vice President/Inventory Control
Richard A. Fortune(1)(2)............ 1999 103,503 30,000 -- --
Vice President/Information 1998 23,577 -- -- --
Technology
</TABLE>
- ---------------
(1) Resigned employment with the Company effective April 26, 2000.
(2) 1998 salary information reflects compensation from October 1998, when Mr.
Fortune joined the company, through the end of the calendar year.
(3) Salary information includes base salary and automobile allowance.
7
<PAGE> 11
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, 1999. None of such executive officers
exercised any stock options during the year ended December 31, 1999.
OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
AT DECEMBER 31, 1999 DECEMBER 31, 1999
(# SHARES) ($)(1)
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C>
David R. Little....................... 800,000 -- $1,950,000 --
Jerry J. Jones........................ 359,200 -- 875,550 --
Gary A. Allcorn....................... 20,000 -- 48,750 --
J. Michael Wappler.................... -- -- -- --
Jerry L. Owen......................... 3,000 -- 7,313 --
David C. Vinson....................... 4,000 -- 9,750 --
Richard A. Fortune.................... 3,000 -- 7,313 --
</TABLE>
- ---------------
(1) Based on a price per share of $2.44, the closing sale price of the Common
Stock on December 31, 1999.
8
<PAGE> 12
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 31, 1996, and
that all dividends were reinvested.
[Perf. Graph]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
12/27/96 12/31/96 12/31/97 12/31/98 12/31/99
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
DXP Enterprises, Inc. $100.00 $ 93.33 $ 76.66 $ 45.00 $ 16.25
S&P Midcap Industrials Index $100.00 $101.29 $125.85 $153.93 $191.56
Nasdaq Composite (US) $100.00 $ 99.97 $122.11 $171.19 $318.62
</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 1999, Messrs. Davis, Miller and Orr each received $4,000 for
attendance at board and committee 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 DXP as shown on the books and records of DXP
at the end of each month and other perquisites in accordance with DXP 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
9
<PAGE> 13
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 on June
30, 1998 if Mr. Little enters into a new agreement with the Company, as approved
by the Compensation Committee, and will not be renewable automatically. If Mr.
Little has not entered into a new employment agreement with the Company by June
30, 1998, the Little Employment Agreement will terminate June 30, 2001.
The Company also has entered into an employment agreement (the "Employment
Agreement"), effective as of July 1, 1996, as amended, with Gary A. Allcorn,
(the "Employee"). The Employment Agreement is for a term of one year, renewable
automatically for a one-year term. The Employment Agreement provides for (i)
annual salary ("Salary") in the amount of $125,000 for Mr. Allcorn, and (ii)
other perquisites in accordance with Company policy. The Employment Agreement
provide for a bonus: 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 Agreement was 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.
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), such 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.
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. The Company (or its predecessor, SEPCO) expensed for the ESOP
$150,000 in 1997, 1998 and 1999. Actual contributions to the Company's ESOP are
made subsequent to fiscal year-end; approval was received by the Company's Board
of Directors and contributions of $150,000 were made for 1997 and 1998. 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 employees of the
Company and its subsidiaries. The LTIP is administered by the Compensation
Committee.
At December 31, 1999, 27,500 shares of Common Stock (approximately 1% of
the current outstanding shares of Common Stock) were available for issuance
under the LTIP and options granted under the LTIP to purchase 172,500 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
10
<PAGE> 14
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).
Employee Stock Option Plan
The Board of Directors adopted the Employee Stock Option Plan on April 19,
1999, which was approved by the shareholders of the Company on June 8, 1999. The
Employee Stock Option Plan authorizes a committee of the Board of Directors to
issue options intended to qualify as incentive stock options ("ISOs"), as
defined in Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), and stock options that are not intended to conform to the requirements
of Section 422 of the Code ("Non-ISOs"). Under the terms of the Employee Stock
Option Plan, the exercise price of each ISO cannot be less than 100% of the fair
market value of the Common Stock at the time of grant, and, in the case of a
grant to a 10% shareholder, the exercise price may not be less than 110% of the
fair market value on the date of grant. The exercise price of each Non-ISO may
not be less than 100% of the fair market value of the Common Stock on the date
of grant. Options granted under the Employee Stock Option Plan may not be
exercised after the tenth anniversary (or the fifth anniversary in the case of
an option granted to a 10% shareholder) of their grant. Payments by option
holders upon exercise of an option may be made by delivering cash. The Employee
Stock Option Plan currently authorizes: (i) options to acquire up to an
aggregate of 500,000 shares of Common Stock to be granted; (ii) grants of ISOs
to eligible employees and grants of Non-ISOs to any individual with substantial
responsibility for the Company's management and growth, as determined by a
committee of the Board of Directors; (iii) adjustments to the number and class
of shares outstanding pursuant to granted options and reserved under the
Employee Stock Option Plan in the event of a capital adjustment; (iv) an
opportunity for outstanding options to be exercised subsequent to a merger or
disposition of all of the Company's assets and for the optionee to receive
shares to which he would have been entitled prior to such merger or disposition;
and (v) grants of options in substitution for options held by employees of other
corporations who are about to become Company employees or whose employer is
about to become a parent or subsidiary of the Company. The Company currently has
approximately 596 full-time employees, including 4 executive officers, each of
whom may be eligible to receive grants under the Employee Stock Option Plan.
Other persons with substantial responsibility for the Company's management and
growth may be eligible to receive grants under the Employee Stock Option Plan at
the discretion of a committee of the Board of Directors.
Director Stock Option Plan
The Board of Directors adopted the Director Stock Option Plan on April 19,
1999, which was approved by the shareholders of the Company on June 8, 1999. The
Director Stock Option Plan provides for the automatic grant of stock options to
non-employee directors. The Company currently has three non-employee directors,
each of whom is eligible to receive grants under the Director Stock Option Plan.
Under the Director Stock Option Plan, an aggregate of 200,000 shares of
Common Stock have been authorized and reserved for issuance to non-employee
directors. The aggregate number of shares of Common Stock for which options may
be granted under the Director Stock Option Plan may be adjusted based on certain
anti-dilution provisions contained in the Director Stock Option Plan. The
Director Stock Option Plan will (i) provide for the grant of options to purchase
1,000 shares of Common Stock to each existing non-employee director who has
served since September 1, 1998, (ii) provide for the grant of options to
purchase 5,000 shares of Common Stock to any new non-employee director on the
date of his or her election and (iii) provide for the grant of options annually
to purchase 1,000 shares of Common Stock to each non-employee director on July 1
of each year, beginning July 1, 1999 ("Automatic Options"). Under the terms of
the Director Stock Option Plan, the exercise price of each option will be the
closing sale price of the Common Stock on the date of the grant. Each stock
option granted to a non-employee director will terminate ten years
11
<PAGE> 15
after the date the option is granted or, if earlier, on the last day of the
three-year period commencing on the date the optionee ceases to be a director
for any reason other than death, retirement (after completing six full terms or
six years of service as a director of the Company) or disability. If an optionee
ceases to be a director of the Company for any reason other than his death,
disability or retirement, his option will not continue to vest after he is no
longer a director of the Company. If an optionee ceases to be a director of the
Company due to his death, disability or retirement, his option will continue to
vest after his cessation of service as a director of the Company until the
option expires ten years after the grant of the option. Automatic Options are
fully vested and exercisable when they are granted. Options other than Automatic
Options vest and are exercisable in one-third annual increments commencing on
the first anniversaries of when they are granted.
For the fiscal year ended December 31, 1999, each board member received
4,000 options: 3,000 were awarded at last year's shareholder meeting and 1,000
options provided in the second half of the year pursuant to the Director Stock
Option Plan.
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,
1999, were $139,317 and $54,587, respectively.
The Company from time to time has made non-interest bearing advances to Mr.
Little that as of December 31, 1999 totaled approximately $473,871. The largest
aggregate amount of Mr. Little's indebtedness outstanding to the Company during
the year ended December 31, 1999 was approximately $473,871.
In November 1998, the Company loaned Gary Allcorn, Senior Vice
President/Finance and Chief Financial Officer, $17,500. This loan bears interest
at an annual rate equal to 8% and matures in November 2000.
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 570,932 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.
12
<PAGE> 16
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP ("Arthur Andersen") served as the Company's principal
independent accountants for the fiscal years ending December 31, 1997, 1998 and
1999 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 opportunity to make a statement if they
so desire and will be available to respond to appropriate questions.
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, except as set forth below, all
filing requirements were met during 1999.
PROPOSALS FOR NEXT ANNUAL MEETING
Any proposals of shareholders intended to be included in the Company's
proxy statement for the 2001 Annual Meeting of Shareholders must be received by
the Company at its principal executive offices, 7272 Pinemont, Houston, Texas
77040, no later than December 30, 2000, in order to be included in the proxy
statement and form of proxy relating to that meeting.
For any proposal of a shareholder intended to be presented at the 2001
Annual Meeting of Shareholders but not included in the Company's proxy statement
for such meeting, the shareholder must provide notice to the Company of the
proposal no later than March 14, 2001. These requirements are separate and apart
from and in addition to the requirements of federal securities laws with which a
shareholder must comply to have a shareholder proposal included in the Company's
Proxy Statement under Rule 14a-8 of the Securities Exchange Act of 1934.
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.
13
<PAGE> 17
DXP ENTERPRISES, INC.
PROXY -- ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 2000
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 Tuesday, June 6, 2000, at 9:00
a.m., Houston time, at the offices of the Company, 7272 Pinemont, Houston,
Texas 77040, and at any adjournment or postponement thereof, the number of
votes that the undersigned would be entitled to cast if personally present.
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 PROPOSALS SET
FORTH IN ITEM 2.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
-----------
SEE REVERSE
SIDE
-----------
(continued and to be signed on other side)
<PAGE> 18
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of Directors:
FOR all of the nominees listed at right (except as indicated
to the contrary below)
[ ]
WITHHOLD AUTHORITY
to vote for election of directors
[ ]
NOMINEES: David R. Little
Gary A. Allcorn
Cletus Davis
Kenneth H. Miller
Thomas V. Orr
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
__________________________________________________________________________
2. 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.
SIGNATURE OF SHAREHOLDER(S) __________________________ DATE ______________, 2000
NOTE: 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 such.
<PAGE> 19
DXP ENTERPRISES, INC.
PROXY -- ANNUAL MEETING OF SHAREHOLDERS
JUNE 6, 2000
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 Tuesday, June 6, 2000, at 9:00
a.m., Houston time, at the offices of the Company, 7272 Pinemont, Houston,
Texas 77040, and at any adjournment or postponement thereof, the number of
votes that the undersigned would be entitled to cast if personally present.
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 PROPOSALS SET
FORTH IN ITEM 2.
PLEASE MARK, SIGN, DATE AND RETURN IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
-----------
SEE REVERSE
SIDE
-----------
(continued and to be signed on other side)
<PAGE> 20
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
1. Election of Directors:
FOR all of the nominees listed at right (except as indicated
to the contrary below)
[ ]
WITHHOLD AUTHORITY
to vote for election of directors
[ ]
NOMINEES: David R. Little
Gary A. Allcorn
Cletus Davis
Kenneth H. Miller
Thomas V. Orr
(Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
__________________________________________________________________________
2. 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.
SIGNATURE OF SHAREHOLDER(S) __________________________ DATE ______________, 2000
NOTE: 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 such.
