<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:
<TABLE>
<S> <C>
/ / 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
</TABLE>
THE COAST DISTRIBUTION SYSTEM
- - --------------------------------------------------------------------------------
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
THE COAST DISTRIBUTION SYSTEM
1982 ZANKER ROAD
SAN JOSE, CALIFORNIA 95112
(408) 436-8611
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 1995
NOTICE IS HEREBY GIVEN that the 1995 Annual Meeting of Shareholders of The
Coast Distribution System (the "Company"), will be held at the Hyatt Hotel, 1740
North First Street, San Jose, California, on Thursday, May 25, 1995, at 2:00
P.M. Pacific Time, for the following purposes:
1. To elect six (6) persons to the Board of Directors to serve until the
next Annual Meeting and until their successors are elected.
2. To transact such other business as may properly come before the Annual
Meeting and any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on April 11, 1995,
as the record date for determination of the shareholders entitled to notice of
and to vote at the Annual Meeting.
By Order of the Board of Directors
Sandra A. Knell, Secretary
San Jose, California
Dated: April 26, 1995
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. The Proxy is
revocable and will not affect your right to vote in person if you attend the
Annual Meeting.
<PAGE> 3
THE COAST DISTRIBUTION SYSTEM
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MAY 25, 1995
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Shareholders (the "Meeting") of The
Coast Distribution System, a California corporation (the "Company"), to be held
at the Hyatt Hotel, 1740 North First Street, San Jose, California, at 2:00 P.M.
Pacific Time, on Thursday, May 25, 1995, and at any and all adjournments or
postponements thereof.
This Proxy Statement is being mailed to shareholders on or about April 27,
1995.
REVOCABILITY OF PROXIES
A form of proxy for voting your shares at the Meeting is enclosed. Any
shareholder who executes and delivers a proxy has the right to revoke it at any
time before it is exercised by (i) filing an instrument revoking the proxy with
the Secretary of the Company, (ii) executing and returning a proxy bearing a
later date, or (iii) appearing and voting in person at the Meeting. Subject to
such revocation, shares represented by a properly executed proxy received by the
Company in time for the Meeting will be voted in accordance with the
instructions on the proxy. If no instruction is specified, the shares
represented by the proxy will be voted FOR the election as directors of the
nominees listed on the proxy. If any other business is properly presented at the
Meeting, the proxy will be voted in accordance with the recommendations of the
Board of Directors.
PERSONS MAKING THE SOLICITATION
This solicitation of proxies is being made by the Board of Directors of the
Company. The expense of preparing, assembling, printing and mailing this Proxy
Statement and any other materials used in the solicitation of proxies for the
Meeting will be borne by the Company. It is contemplated that proxies will be
solicited through the mail, but officers and regular employees of the Company
may solicit proxies personally or by telephone, without receiving special
compensation therefor. Although there is no formal agreement to do so, the
Company may reimburse banks, brokerage houses and other custodians, nominees and
fiduciaries for their reasonable expenses in forwarding these proxy materials to
the beneficial owners of the shares held of record by such entities. In
addition, the Company may use the services of individuals or companies it does
not regularly employ in connection with the solicitation of proxies, if
management determines that it is advisable.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The shares of Common Stock constitute the only outstanding class of voting
securities of the Company. A total of 5,098,338 shares of the Company's Common
Stock were outstanding on April 11, 1995, which has been fixed as the record
date (the "Record Date") for the purpose of determining the shareholders
entitled to notice of and to vote at the Meeting. Shareholders who abstain on
any proposal or withhold authority to vote on the election of directors will be
counted in determining the presence of a quorum, whereas broker non-votes will
not be counted. Each shareholder will be entitled to one vote, in person or by
proxy, for each share of Common Stock held of record on the Record Date, except
that in the election of directors all shareholders will be entitled to cumulate
their votes, if any shareholder gives notice at the Meeting, prior to the
voting, of an intention to cumulate his or her votes for the election of
directors. Cumulative voting means that a shareholder has the right to give any
one candidate whose name has been properly placed in nomination a number of
votes equal to the number of directors to be elected, multiplied by the number
of shares such shareholder would
<PAGE> 4
otherwise be entitled to vote, or to distribute such votes on the same principle
among as many nominees (up to the number of persons to be elected) as the
shareholder may wish.
The following table sets forth, as of April 11, 1995, information regarding
the ownership of the Company's outstanding Common Stock by each person known to
management to own, beneficially or of record, more than five percent (5%) of the
Common Stock and by certain executive officers of the Company and all officers
and directors of the Company as a group. Information regarding the beneficial
ownership of the Company's Common Stock by each of the nominees for election as
directors is set forth below under the caption "Election of Directors."
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
------------------------------------------------- ----------------------- --------
<S> <C> <C>
Thomas R. McGuire................................ 764,836(2) 14.7%
1982 Zanker Road
San Jose, CA 95112
Furman Selz Incorporated and Brian P. Friedman... 556,475(3) 10.9%
230 Park Avenue
New York, NY 10169
Massachusetts Mutual Life Insurance Company...... 299,110(4) 5.7%
1295 State Street
Springfield, MA 01111
Dimensional Fund Advisors Inc.................... 269,500(5) 5.3%
1299 Ocean Avenue
Santa Monica, CA 90401
Sandra A. Knell.................................. 47,965(6) *
David A. Berger.................................. 29,144(6) *
Jeffrey R. Wannamaker............................ 18,540(6) *
Dennis A. Castagnola............................. 5,056(6) *
All directors and officers as a group (12 1,766,107(7) 33.4%
persons).......................................
</TABLE>
- - ---------------
* Less than 1%.
(1) Except as otherwise noted below, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, subject to community property laws where applicable.
(2) Includes an aggregate of 50,016 shares held in trust for the benefit of Mr.
McGuire's children, as to which Mr. McGuire disclaims beneficial ownership,
and 90,000 shares subject to outstanding stock options exercisable during
the 60-day period ending June 10, 1995.
(3) Includes 444,200 shares of Common Stock owned by Furman Selz Merchant
Partners LP ("FSMP"), a limited partnership of which a wholly-owned
subsidiary of Furman Selz Incorporated ("Furman Selz") is the general
partner; and 11,886 shares owned by the Furman Selz Profit Sharing Plan.
Does not include, and Furman Selz disclaims beneficial ownership of, shares
of Company Common Stock owned by officers and directors of Furman Selz,
including Brian P. Friedman, a director of the Company. Also includes 65,889
shares held directly by Mr. Friedman, 10,000 shares held by a family
foundation established by Mr. Friedman, 500 shares held by his wife as
custodian for a minor child, and 24,000 shares of Common Stock which he may
purchase during the 60 day period ending June 10, 1995 by exercise of stock
options. Mr. Friedman may be deemed to share beneficial ownership of the
444,200 shares owned by FSMP as a result of his position as president of the
general partner of FSMP. Mr. Friedman disclaims beneficial ownership of the
shares owned by Furman Selz and the Furman Selz Profit Sharing Plan and the
shares owned by each other officer and director of Furman Selz.
(4) Includes 192,860 shares directly owned and 106,250 shares that may be
acquired on conversion of $850,000 of outstanding convertible subordinated
notes of the Company. Does not include, and Massachusetts Mutual Life
Insurance Company ("MassMutual"), disclaims beneficial ownership of, 159,110
shares of Common Stock beneficially owned by MassMutual Corporate Investors
(of which 6,250 shares may be acquired on conversion of outstanding
convertible notes of the Company), and
2
<PAGE> 5
12,500 shares of Common Stock which may be acquired on exercise of
outstanding convertible notes by MassMutual Participation Investors.
MassMutual is the investment advisor for MassMutual Corporate Investors and
MassMutual Participation Investors.
(5) In a report filed with the Securities and Exchange Commission, Dimensional
Fund Advisors Inc., a registered investment advisor ("DFA"), has reported
that all 269,500 shares are owned by advisory clients of DFA and that DFA
holds sole dispositive power with respect to all 269,500 of such shares and
sole voting power with respect to 205,100 of such shares. With respect to
the 64,400 shares as to which DFA disclaims voting power, DFA has reported
that 42,100 and 22,300 shares, respectively, are held in the portfolios of
DFA Investment Dimensions Group Inc. and DFA Investment Trust Company, each
of which is a registered open-end investment company, and the voting power
with respect to such shares is exercised by officers of Dimensional in their
capacities as officers of those investment companies.
(6) Includes shares subject to outstanding stock options exercisable during the
60-day period ending June 10, 1995 as follows: Ms. Knell -- 23,000 shares;
Mr. Berger -- 18,000 shares; Mr. Wannamaker -- 11,300 shares and Mr.
Castagnola -- 3,200 shares.
(7) Includes 184,325 shares subject to outstanding stock options exercisable
during the 60-day period ending June 10, 1995. Does not include shares as to
which Mr. Friedman, a director of the Company, disclaims beneficial
ownership. See Note 3 above.
ELECTION OF DIRECTORS
Directors are elected at each annual shareholders' meeting to serve until
the next annual meeting or until their successors are elected. The Board of
Directors proposes the election of six (6) directors at the Meeting. Unless
authority to vote for directors has been withheld in the proxy, the persons
named in the enclosed proxy intend to vote at the Meeting for the election of
the nominees presented below. However, discretionary authority to cumulate votes
represented by proxies and to cast such votes for any or all of the nominees
named below is solicited by the Board of Directors because, in the event
nominations are made in opposition to the nominees of the Board of Directors, it
is the intention of the persons named in the enclosed proxy to cumulate votes
represented by proxies in accordance with their best judgment for individual
nominees in order to assure the election of as many of the nominees to the Board
of Directors as possible. Under California law, the six nominees receiving the
highest number of votes will be elected as directors at the Meeting. As a
result, proxies voted to "Withhold Authority," which will be counted, and broker
non-votes, which will not be counted, will have no practical effect.
Each of the nominees is an incumbent director elected at the last annual
meeting of shareholders, except for Robert S. Throop who was recently appointed
as a member of the Board by vote of the other directors. Each of the nominees
has consented to serve as a director for the ensuing year. If any nominee
becomes unavailable for any reason before the election, then the enclosed proxy
will be voted for the election of such substitute nominees, if any, as shall be
designated by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees will become unavailable to serve.
The names and certain information concerning the persons to be nominated
for election as directors are set forth below. YOUR BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES NAMED BELOW.
3
<PAGE> 6
NOMINEES
The following table sets forth the names and certain share ownership
information as of April 11, 1995, regarding the persons to be nominated for
election as directors of the Company:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
NAME, AGE DIRECTOR BENEFICIAL OF
AND POSITION SINCE OWNERSHIP(1) CLASS BUSINESS EXPERIENCE DURING PAST 5 YEARS
- - ------------------------- -------- ------------ ------ -----------------------------------------
<S> <C> <C> <C> <C>
Thomas R. McGuire, 51, 1977 764,836(2) 14.7% Mr. McGuire is, and for more than five
Chairman of the Board, years has been, Chairman of the Board and
Chief Executive Officer Chief Executive Officer of the Company
and Director and served as its Chief Financial Officer
and Secretary from October 1981 to August
1985.
Louis B. Sullivan, 69, 1977 131,470(3) 2.6% Mr. Sullivan has been a rancher and
Director private investor since March 1984.
John E. Turco, 64, 1977 209,492(3) 4.1% Since 1988, Mr. Turco has been a private
Director investor, investing primarily in
agricultural businesses.
Brian P. Friedman, 39 1985 544,589(4) 10.6% Mr. Friedman is an Executive Vice
Director President of Furman Selz Incorporated
("Furman Selz"), an investment banking
firm at which he has been employed as an
officer since 1984. Mr. Friedman is also
a director of BT Shipping, Ltd., which is
engaged in international shipping.
Ben A. Frydman, 48, 1988 5,000(3) * Mr. Frydman is and for more than the past
Director five years has been engaged in the
private practice of law, as a member and
shareholder of the law firm of Stradling,
Yocca, Carlson & Rauth, which provided
legal services to the Company in 1994.
Robert S. Throop, 57 1995 5,000 * Mr. Throop is, and for more than five
Director years has been, the Chairman and Chief
Executive Officer of Anthem Electronics,
Inc., which is a national distributor of
semiconductor and computer products. Mr.
Throop also is a director of Arrow
Electronics, Inc., and the Manitowoc
Company, both of which are public
companies.
</TABLE>
- - ---------------
* Less than 1%.
(1) Except as otherwise noted below, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, subject to community property laws where applicable.
(2) Includes an aggregate of 50,016 shares held in trust for the benefit of Mr.
McGuire's children, as to which he disclaims beneficial ownership, and
90,000 shares subject to outstanding stock options exercisable during the
60-day period ending June 10, 1995.
(3) Includes shares subject to outstanding stock options, as follows: Mr.
Sullivan -- 4,000 shares; Mr. Turco -- 4,000 shares; and Mr.
Frydman -- 4,000 shares.
(4) Includes 65,889 shares owned directly by Mr. Friedman, 10,000 shares owned
by a family foundation, 500 shares held by his wife as custodian for a minor
child, and 24,000 shares which may be purchased by exercise of stock options
during the 60 day period ending June 10, 1995. Also includes 444,200 shares
as to which Mr. Friedman may be deemed to share voting power. Mr. Friedman
disclaims beneficial ownership of shares owned by the Furman Selz Profit
Sharing Plan and shares owned by other officers and directors of Furman Selz
in their individual capacities. See Note 3 to the beneficial ownership table
on page 2 of this Proxy Statement.
The Board of Directors of the Company held four meetings during the fiscal
year ended December 31, 1994. The Board of Directors has established a standing
Compensation Committee, which held two meetings
4
<PAGE> 7
in 1994, and an Audit Committee, which held one meeting in 1994. Each director
attended at least 75% of the aggregate number of meetings of the Board and of
the Committees of which he was a member in 1994.
The Compensation Committee reviews programs in the areas of employee and
incentive compensation plans, administers the Company's Stock Purchase Plan, and
reviews and makes recommendations to the Board of Directors with respect to base
salary adjustments and bonuses for all officers and other key personnel of the
Company. Louis B. Sullivan, John E. Turco and Robert S. Throop are currently the
members of the Compensation Committee.
The Audit Committee was established to meet with the independent public
accountants to review planned audit procedures and to review with the
independent public accountants and management the results of audits, including
any recommendations of the independent public accountants for improvements in
accounting procedures and internal controls. Brian P. Friedman, John E. Turco
and Robert S. Throop are currently the members of the Audit Committee.
The Board of Directors also has established a Stock Option Committee that
is responsible for administering the Company's Stock Option Plans. The Stock
Option Committee currently consists of Brian P. Friedman and Louis B. Sullivan.
The Board of Directors has not established a Nominating Committee.
There are no family relationships among any of the Company's officers or
directors.
DIRECTOR'S COMPENSATION
Directors who also are Company employees receive no compensation for
serving as directors. Non-employee directors are paid a retainer of $6,000 per
year and receive $1,500 for each Board of Directors' meeting attended and are
reimbursed for the out-of-pocket expenses incurred in attending those meetings.
No compensation is paid for attending meetings of Committees of the Board of
Directors on which directors serve. Pursuant to the Company's 1993 Employee
Stock Option Plan, each year each non-employee director is automatically granted
an option to purchase 2,000 shares of Company stock at an exercise price that is
equal to the fair market value of the shares on the date of grant. These options
become fully exercisable six months after the date of grant. Upon joining the
Board, each new non-employee director receives an option to purchase 2,000
shares, which becomes exercisable in full one year after the date of grant.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Based on its review of copies of reporting forms and certifications of the
Company's directors and executive officers, the Company believes that all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934
applicable to its directors and executive officers in the year ended December
31, 1994 were satisfied, except that a report relating to a purchase of 200
shares by John E. Turco was filed three days passed its due date.
5
<PAGE> 8
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the three fiscal
years ended December 31, 1994 by the Company's Chief Executive Officer and the
four most highly-paid executives whose aggregate cash compensation for 1994 for
services rendered to the Company in all capacities exceeded $100,000 (the "Named
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
SECURITIES
ANNUAL COMPENSATION UNDERLYING
NAME AND PRINCIPAL --------------------------------------- OPTIONS
POSITION YEAR SALARY BONUS (#)
- - ------------------------------- ----- --------- -------- ------------
<S> <C> <C> <C> <C>
Thomas R. McGuire 1994 $ 254,175 $130,038 50,000
Chairman of the Board and 1993 242,680 121,300 -0-
Chief Executive Officer 1992 224,700 47,100 50,000
Sandra A. Knell 1994 90,830 62,000 26,000
Chief Financial Officer and 1993 82,500 57,500 6,000
Executive Vice President 1992 77,400 39,100 15,000
David A. Berger 1994 90,830 62,000 26,000
Executive Vice President 1993 82,500 55,500 6,000
1992 78,500 36,500 10,000
Jeffrey A. Wannamaker 1994 89,690 62,000 26,000
Senior Vice President 1993 77,500 48,000 6,000
1992 75,900 23,700 2,400
Dennis A. Castagnola 1994 71,940 49,000 6,000
Senior Vice President 1993 64,360 23,000 2,400
1992 49,590 29,500 -0-
</TABLE>
- - ---------------
(1) Bonuses paid for 1994, 1993 and 1992 were awarded under annual incentive
compensation plans which are described in more detail in the Report of the
Compensation Committee beginning on page 7 of this Proxy Statement.
OPTION GRANTS
The following table provides information on option grants in fiscal year
1994 to the Named Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF OPTIONS AT
ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS ALL EMPLOYEES PRICE EXPIRATION ---------------------
NAME GRANTED IN FISCAL YEAR(2) ($/SHARE)(3) DATE 5% 10%
- - ---------------------- --------- ----------------- ------------ ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas R. McGuire..... 50,000(1) 23.5% $ 7.75 2/15/04 $243,500 $617,500
Sandra A. Knell....... 6,000(1) 2.8% $ 7.75 2/15/04 $ 29,220 $ 74,100
20,000 9.4% $ 7.75 8/4/04 $ 97,400 $247,000
David A. Berger....... 6,000(1) 2.8% $ 7.75 2/15/04 $ 29,220 $ 74,100
20,000 9.4% $ 7.75 8/4/04 $ 97,400 $247,000
Jeffrey R.
Wannamaker.......... 6,000(1) 2.8% $ 7.75 2/15/04 $ 29,220 $ 74,100
20,000 9.4% $ 7.75 8/4/04 $ 97,400 $247,000
Dennis A.
Castagnola.......... 6,000(1) 2.8% $ 7.75 2/15/04 $ 29,220 $ 74,100
</TABLE>
- - ---------------
(1) These options vest immediately upon achievement of certain short and
long-term financial objectives. The other options granted to the Named
Officers in 1994 vest in five equal annual installments of 20% of the shares
subject to the options. Each option is subject to termination in the event
of the optionee's cessation of employment with the Company.
6
<PAGE> 9
(2) Options to purchase an aggregate of 213,100 shares were granted to all
employees in fiscal 1994, including the Named Officers. Each non-employee
director received options to purchase 2,000 shares in 1994.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the date of exercise, or through a
cashless exercise procedure.
(4) There is no assurance that the values that may be realized on exercise of
such options will be at or near the values estimated in the table, which
utilizes arbitrary compounded rates of growth of the price of the Company's
Common Stock of 5% and 10% per year.
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides information on option exercises in fiscal year
1994 by the Named Officers and the value of unexercised in-the-money options
held by the Named Officers as of December 31, 1994.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
UNEXERCISED OPTIONS AT AT DECEMBER 31, 1994($)(1)
DECEMBER 31, 1994(#)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas R. McGuire........ -0- -0- 80,000 60,000 $ 301,250 $40,000
Sandra A. Knell.......... -0- -0- 21,500 31,500 $ 88,375 $18,000
David A. Berger.......... -0- -0- 19,000 31,500 $ 74,310 $18,000
Jeffrey R. Wannamaker.... -0- -0- 10,550 31,450 $ 44,325 $18,500
Dennis A. Castagnola..... 1,800 $ 7,650 2,825 7,975 $ 11,965 $ 6,300
</TABLE>
- - ---------------
(1) The closing price of the Company's Common Stock on December 31, 1994 on the
American Stock Exchange was $7.625.
COMPENSATION COMMITTEE INTERLOCKS
In fiscal year 1994 the members of the Compensation Committee were Louis B.
Sullivan, John E. Turco and Ben A. Frydman, who are non-employee directors of
the Company. Mr. Frydman is a member of a law firm that provided legal services
to the Company in 1994.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee is a standing committee of the Board of
Directors of the Company. The Compensation Committee is responsible for adopting
and evaluating the effectiveness of compensation policies and programs for the
Company and for making determinations regarding the compensation of the
Company's executive officers, subject to review by the full Board of Directors.
The following report is submitted by the members of the Compensation
Committee with respect to the executive compensation policies established by the
Compensation Committee and compensation paid or awarded to executive officers
for fiscal year 1994.
Compensation Policies and Objectives
In adopting compensation programs for executive officers, as well as other
employees of the Company, the Compensation Committee is guided by three basic
principles:
- The Company must offer competitive salaries to be able to attract and
retain highly-qualified and experienced executives and other management
personnel.
- Annual executive compensation in excess of base salaries should be tied
primarily to the Company's performance.
7
<PAGE> 10
- The financial interests of the Company's senior executives should be
aligned with the financial interests of the shareholders, primarily
through stock option grants and other equity-based compensation programs
which reward executives for improvements in the market performance of the
Company's Common Stock.
Salaries and Employee Benefits Programs. In order to retain executives and
other key employees, and to be able to attract additional well-qualified
executives when the need arises, the Company strives to offer salaries, and
health care and other employee benefit programs to its executives and other key
employees which are comparable to those offered by competing businesses.
In establishing salaries for executive officers, the Compensation Committee
reviews (i) the historical performance of the executives; and (ii) available
information regarding prevailing salaries and compensation programs offered by
competing businesses. Another factor which is considered in establishing
salaries of executive officers is the cost of living in Northern California
where the Company is headquartered, as such cost generally is higher than in
other parts of the country.
In 1990 and 1991, the Company's executive officers agreed to accept salary
reductions as part of cost-cutting programs implemented by the Company in
response to a decline in sales that resulted from the combined effects of the
economic recession and the Persian Gulf War, both of which severely impacted the
travel and recreation industries. In 1993, with a return to profitability,
salaries were increased to levels approximately comparable to those in effect
prior to 1990.
In 1994 the Named Officers received cost-of-living increases in their
salaries averaging 3% and, in addition, the Compensation Committee approved 12%
increases in the salaries of Ms. Knell and Messrs. Berger and Wannamaker to
bring their salaries in line with prevailing executive salaries at comparable
companies. Salary increases in future years are expected to be limited for the
most part to cost-of-living increases.
However, in order to retain qualified management personnel, the Company has
followed the practice of seeking to promote executives from within the Company
whenever that is practicable. The Board of Directors believes that this policy
enhances employee morale and provides continuity of management. Typically,
modest salary increases are made in conjunction with such promotions.
Performance-Based Compensation. The Compensation Committee believes that,
as a general rule, annual compensation in excess of base salaries should be made
dependent primarily on the Company's performance. Accordingly, at the beginning
of each fiscal year, the Compensation Committee establishes an incentive
compensation program for executive officers and other key management personnel
under which executive officers and other key management personnel may earn
bonuses, in amounts ranging from 5% to 100% of their annual salaries, provided
the Company achieves or exceeds the earnings goal established for the year.
The earnings goal is established on the basis of the annual operating plan
developed by management and approved by the Board of Directors. The annual
operating plan, which is designed to maximize profitability, within the
constraints of prevailing economic and competitive conditions, some of which are
outside the control of the Company, is developed on the basis of (i) the
Company's performance in the prior year; (ii) estimates of sales revenue for the
plan year based upon recent market conditions and trends and other factors
which, based on historical experience, are expected to affect the level of sales
that can be achieved; (iii) historical operating costs and cost savings that
management believes can be realized; and (iv) competitive conditions faced by
the Company. By taking all of these factors into account, including market
conditions, the earnings goal in the annual operating plan, which is also the
basis on which bonus awards are determined under the incentive plan, is fixed at
what is believed to be a realistic level so as to make the incentives meaningful
to executives and to avoid penalizing executives and other key management
personnel for conditions outside of their control.
As a result of this performance-based bonus program, executive compensation
generally increases in those years in which the Company's profitability
increases. On the other hand, in years in which the Company experiences less
than anticipated profit growth, bonuses, and therefore also total executive
compensation, tend
8
<PAGE> 11
to be lower. For example, the Company's net income increased in 1994 as compared
to 1993 and, as a result, bonuses awarded to the Company's Chief Executive
Officer and the other Named Officers for 1994 were greater than the bonuses
awarded to them for 1993.
Stock Options and Equity-Based Programs. In order to align the financial
interests of senior executives and other key employees with those of the
shareholders, the Company grants stock options to its senior executives and
other key employees on a periodic basis and makes contributions to an employee
stock purchase plan under which officers and employees may elect to have a
portion of their salaries withheld and used, together with the Company's
contributions, to purchase Common Stock of the Company. Stock option grants, in
particular, reward senior executives and other key employees for performance
that results in increases in the market price of the Company's Common Stock,
which directly benefits all shareholders. Moreover, the Compensation Committee
generally has followed the practice of granting options on terms which provide
that the options become exercisable in cumulative annual installments, generally
over a three-to five-year period, and in the case of executive officers,
sometimes conditions exercisability on the satisfaction of a specified earnings
or other performance goals. The Compensation Committee believes that these
features of the option grants not only provides an incentive for senior
executives to remain in the employ of the Company, but also makes the Company's
earnings performance and longer term growth in share prices important for the
executives who receive stock options.
During fiscal year 1994, the Company also granted options to certain senior
executives, as well as to other key employees, and made contributions to the
Company's Employee Stock Purchase Plan, which were designed to increase
management ownership of the Company's Common Stock and provide them with a
continuing interest in the Company's share performance.
Louis B. Sullivan
John E. Turco
Ben A. Frydman
Notwithstanding anything to the contrary set forth in the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the foregoing Report, and
the performance graph on page 10, shall not be incorporated by reference into
any such filings.
9
<PAGE> 12
COMPANY PERFORMANCE
The following graph shows a five-year comparison of cumulative total
returns for the Company, the American Stock Exchange composite index (the "AMEX
Composite"), and an index of peer group companies (the "Peer Group") selected by
the Company as described below.
COMPARISON OF CUMULATIVE TOTAL RETURN
(COMPANY, AMEX COMPOSITE, PEER GROUP)
<TABLE>
<CAPTION>
THE COAST
MEASUREMENT PERIOD DISTRIBUTION
(FISCAL YEAR COVERED) SYSTEM PEER GROUP BROAD MARKET
<S> <C> <C> <C>
1989 100 100 100
1990 33.33 69.30 84.80
1991 39.92 110.03 104.45
1992 82.35 151.09 105.88
1993 96.08 161.92 125.79
1994 119.61 153.93 111.12
</TABLE>
The total cumulative return on investment (change in the period-end stock
price plus reinvested dividends) for each of the periods for the Company, the
AMEX Composite and the Peer Group is based on the stock price or index at the
end of fiscal 1989.
The graph above compares the performance of the Company with that of (i)
the AMEX Composite index and (ii) a Peer Group consisting of six original
equipment manufacturers that compete in the same markets as the Company. The
Company is the only publicly-traded company whose primary activity is the
wholesale distribution of recreational vehicle and boating parts and
accessories. The Peer Group consists of Brunswick Corporation, Coachmen
Industries Inc., Fleetwood Enterprises, Inc., Outboard Marine Corporation, Thor
Industries, Inc. and Winnebago Industries, Inc.
INDEPENDENT ACCOUNTANTS
During 1994, Grant Thornton provided audit services to the Company which
included the examination of the Company's financial statements for the year
ended December 31, 1994. The Company has not yet selected auditors for 1995. A
representative of Grant Thornton is expected to be present at the Meeting to
respond to appropriate questions from shareholders, and will have an opportunity
to make a statement if he so desires.
10
<PAGE> 13
ANNUAL REPORT
The 1994 Annual Report to Shareholders of the Company is being sent to each
shareholder of record as of April 11, 1994 with this Proxy Statement. The Annual
Report is not to be regarded as proxy solicitation material.
SHAREHOLDER PROPOSALS
Shareholder proposals for presentation at the Annual Meeting to be held in
1996 must be received in writing at the Company's principal executive offices,
at the address set forth on the Notice of Annual Meeting which accompanies this
Proxy Statement, Attention--Corporate Secretary, on or before December 26, 1995,
for inclusion in next year's proxy materials.
OTHER MATTERS
The Board of Directors does not know of any matters to be presented at the
Meeting other than those set forth above. However, if other matters come before
the Meeting, it is the intention of the persons named in the accompanying proxy
to vote the proxy in accordance with the recommendations of the Board of
Directors on such matters, and discretionary authority to do so is included in
the proxy.
Dated: April 26, 1995
Sandra A. Knell, Secretary
COPIES OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1994, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WILL BE PROVIDED TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
SECRETARY, THE COAST DISTRIBUTION SYSTEM, 1982 ZANKER ROAD, SAN JOSE, CALIFORNIA
95112.
11
<PAGE> 14
PROXY THE COAST DISTRIBUTION SYSTEM
1995 ANNUAL MEETING OF SHAREHOLDERS -- MAY 25, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas R. McGuire, Louis B. Sullivan and
John E. Turco, and each of them, individually, as attorneys and Proxies, with
full power of substitution, to represent the undersigned and to vote, as
designated below, all the shares of Common Stock of The Coast Distribution
System which the undersigned is entitled to vote at the Annual Meeting of
Shareholders of The Coast Distribution System to be held at the Hyatt Hotel,
1740 North First Street, San Jose, California, on Thursday, May 25, 1995, at
2:00 P.M. Pacific Time, or at any adjournment thereof.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: / / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary below) (to vote for the nominees listed
below)
</TABLE>
Thomas R. McGuire, Louis B. Sullivan, John E. Turco, Brian P. Friedman, Ben A.
Frydman and Robert S. Throop
(INSTRUCTION: To withhold authority to vote for any nominee, write that
nominee's name in the space provided below.)
- - --------------------------------------------------------------------------------
2. IN THEIR DISCRETION, UPON OTHER BUSINESS WHICH PROPERLY COMES BEFORE THE
MEETING OR ANY ADJOURNMENT THEREOF.
IMPORTANT -- PLEASE SIGN AND DATE ON OTHER SIDE AND RETURN PROMPTLY.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER ON THE REVERSE SIDE OF THIS PROXY. WHERE NO DIRECTION IS GIVEN, SUCH
SHARES WILL BE VOTED "FOR" THE ELECTION AS DIRECTORS OF THE NOMINEES NAMED ON
THE REVERSE SIDE OF THIS PROXY. THIS PROXY CONFERS DISCRETIONARY AUTHORITY TO
CUMULATE VOTES FOR ANY OR ALL OF THE NOMINEES FOR ELECTION OF DIRECTORS FOR
WHICH AUTHORITY TO VOTE HAS NOT BEEN WITHHELD.
Date _____________, 1995
(Signature of
shareholder)
-----------------------
Please sign your name
exactly as it appears
hereon. Executors,
administrators,
guardians, officers of
corporations, and others
signing in a fiduciary
capacity should state
their full titles as
such.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO SIGN AND
RETURN THIS PROXY, WHICH MAY BE REVOKED AT ANY TIME PRIOR TO ITS USE.
