<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
[X] Definitive Proxy Statement Only
[ ] Definitive Additional Materials (as permitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or 240.14a-12
</TABLE>
THE COAST DISTRIBUTION SYSTEM, 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] Fee not required.
[ ] 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, INC.
350 WOODVIEW AVENUE
MORGAN HILL, CALIFORNIA 95037
(408) 782-6686
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 22, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of The
Coast Distribution System, Inc., a Delaware corporation (the "Company"), will be
held at the Executive Offices of the Company, 350 Woodview Avenue, Morgan Hill,
California, on Tuesday, August 22, 2000, at 10:00 A.M., Pacific Time, for the
following purposes, as more fully described in the accompanying Proxy Statement:
(1) To elect the following Class III nominees to serve as directors of the
Company for a term of three years or until their successors are elected
and have qualified:
Thomas R. McGuire
Ben A. Frydman
(2) To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Only stockholders of record at the close of business on July 5, 2000 will
be entitled to vote at the Annual Meeting or any adjournment or postponement
thereof.
By Order of the Board of Directors
Sandra A. Knell
Secretary
July 21, 2000
YOUR VOTE IS IMPORTANT. THEREFORE, WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING YOU SHOULD COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY.
ANY STOCKHOLDER PRESENT AT THE MEETING MAY WITHDRAW HIS OR HER PROXY AND
VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE MEETING. STOCKHOLDERS
ATTENDING THE MEETING WHOSE SHARES ARE HELD IN THE NAME OF A BROKER OR OTHER
NOMINEE WHO DESIRE TO VOTE THEIR SHARES AT THE MEETING SHOULD BRING WITH THEM A
PROXY OR LETTER FROM THAT FIRM CONFIRMING THEIR OWNERSHIP OF SHARES.
<PAGE> 3
THE COAST DISTRIBUTION SYSTEM, INC.
350 WOODVIEW AVENUE
MORGAN HILL, CALIFORNIA 95037
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 22, 2000
------------------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of The Coast Distribution System, Inc., a
Delaware corporation (the "Company"), for use at its 2000 Annual Meeting of
Stockholders to be held on Tuesday, August 22, 2000, at 10:00 A.M., at the
executive offices of the Company, 350 Woodview Avenue, Morgan Hill, California
95037. It is contemplated that this solicitation of proxies will be made
exclusively by mail; however, if it should appear desirable to do so in order to
ensure adequate representation at the meeting, directors, officers and employees
of the Company may communicate with stockholders, brokerage houses and others by
telephone, telegraph or in person to request that proxies be furnished and may
reimburse banks, brokerage houses, custodians, nominees and fiduciaries for
their reasonable expenses in forwarding proxy materials to the beneficial owners
of the shares held by them. All expenses incurred in connection with this
solicitation shall be borne by the Company.
Holders of shares of common stock of the Company ("stockholders") who
execute proxies retain the right to revoke them at any time before they are
voted. Any proxy given by a stockholder may be revoked or superseded by
executing a later dated proxy, by giving notice of revocation to the Secretary
of the Company, 350 Woodview Avenue, Morgan Hill, California 95037, in writing
prior to or at the meeting or by attending the meeting and voting in person. A
proxy, when executed and not so revoked, will be voted in accordance with the
instructions given in the proxy. If a choice is not specified in the proxy, the
proxy will be voted "FOR" the election, as directors, of the nominees named in
this Proxy Statement. This Proxy Statement is first being mailed to stockholders
on or about July 24, 2000.
VOTING SECURITIES
The shares of common stock constitute the only class of outstanding voting
securities of the Company. Only the stockholders of the Company of record as of
the close of business on July 5, 2000 (the "Record Date"), will be entitled to
vote at the meeting or any adjournment or postponement thereof. As of the Record
Date, there were 4,330,654 shares of common stock outstanding and entitled to
vote. Each stockholder is entitled to one vote for each share of common stock
held as of the Record Date. Abstentions and broker non-votes are each included
in the determination of the number of shares present and voting for the purpose
of determining whether a quorum is present. For any matter, other than the
election of directors, that requires the affirmative vote of a majority of the
shares present and voting at the annual meeting, an abstention will have the
same effect as a vote against a proposal and a broker non-vote will not be
counted as having been voted on such matter and, therefore, will have no effect
on the outcome of a proposal.
All stockholders entitled to vote at the Annual Meeting of Stockholders may
cumulate their votes in the election of directors. With cumulative voting, each
stockholder is entitled to a number of votes equal to the number of directors to
be elected multiplied by the number of shares of common stock held by such
stockholder, and those votes may be cast for a single candidate for director or
distributed among as many candidates as such stockholder desires. However, in
accordance with the applicable provisions of the Company's Certificate of
Incorporation, no stockholder may cumulate votes for any candidate for director
unless the name of such candidate is placed in nomination before the voting and
any stockholder gives notice, at the Annual Meeting and before the voting, of
such stockholder's intention to cumulate his or her votes. If such notice is
given by any stockholder entitled to vote at the Annual Meeting, then every
stockholder entitled
<PAGE> 4
to vote at the Annual Meeting will be entitled to cumulate his or her votes in
the election of directors. The proxies solicited by the Board of Directors
confer discretionary authority in the proxy holders to cumulate votes and to
allocate such votes among the nominees of the Board of Directors as such proxy
holders deem appropriate so that, if shares are voted cumulatively in the
election of directors, the maximum number of such nominees will be elected. Such
proxy holders do not intend to cumulate votes at the Annual Meeting, but they
reserve the right to do so if cumulative voting is properly elected by a
stockholder of the Company that is not one of the proxy holders.
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of July 5, 2000, 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 each director and executive officer of the Company and all
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) OF CLASS
------------------- ----------------------- --------
<S> <C> <C>
Thomas R. McGuire.................................... 702,913(2) 16.0%
350 Woodview Avenue
Morgan Hill, CA 95037
Dimensional Fund Advisors Inc........................ 395,500(3) 9.1%
1299 Ocean Avenue
Santa Monica, CA 90401
Ben A. Frydman....................................... 15,000(4) *
Robert S. Throop..................................... 17,000(4) *
John W. Casey........................................ 11,000(4) *
Sandra A. Knell...................................... 103,632(5) 2.4%
Jeffrey R. Wannamaker................................ 93,657(5) 2.1%
David A. Berger...................................... 75,998(5) 1.7%
Dennis A. Castagnola................................. 35,911(5) *
Stephen Bartolotta................................... 37,500(5) *
All directors and officers as a group (9 persons).... 1,092,611(6) 23.3%
</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) Does not include an aggregate of 50,016 shares held by Mr. McGuire's adult
children, as to which Mr. McGuire disclaims beneficial ownership. Includes
58,834 shares subject to outstanding stock options exercisable during the
60-day period ending September 3, 2000.
(3) In a report filed with the Securities and Exchange Commission, Dimensional
Fund Advisors, Inc., a registered investment advisor ("DFA"), has reported
that all 395,500 shares are held in portfolios of DFA Investment Dimensions
Group, Inc., a registered open ended investment company or in series of the
DFA Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans for which DFA serves as investment manager. DFA
disclaims beneficial ownership of all such shares.
(4) Includes shares subject to outstanding stock options, as follows: Mr.
Frydman -- 14,000 shares; Mr. Throop -- 12,000 shares, and Mr.
Casey -- 4,000 shares.
(5) Includes shares subject to outstanding stock options exercisable during the
60-day period ending September 3, 2000 as follows: Mrs. Knell -- 75,667
shares; Mr. Wannamaker -- 75,667 shares; Mr. Berger -- 57,667 shares; Mr.
Castagnola -- 30,167 shares; and Mr. Bartolotta -- 37,5000 shares.
(6) Includes 365,502 shares subject to outstanding stock options exercisable
during the 60-day period ending September 3, 2000.
2
<PAGE> 5
PROPOSAL ONE
ELECTION OF DIRECTORS
The authorized number of directors is, and as of the date of the Annual
Meeting will be, a total of four. The Company's Bylaws provide for a classified
Board of Directors with one class of directors elected each year for a term of
three years. The Directors in Class III, Thomas R. McGuire and Ben A. Frydman,
hold office until the 2000 Annual Stockholders' Meeting; the Director in Class
I, Robert S. Throop, holds office until the 2001 Annual Stockholders' Meeting;
and the Director in Class II, John W. Casey, holds office until the 2002 Annual
Stockholders' Meeting.
Unless authority to vote for the Class III Nominees has been withheld in
the enclosed proxy card, the persons named as proxy holders in the proxy card
intend to vote at the Annual Meeting for the election of Messrs. McGuire and
Frydman, who are incumbent directors, as the Class III Directors of the Company
to serve for a term of three years or until their respective successors are
elected and qualified. Under Delaware law, the nominees receiving the highest
number of votes will be elected as the Class III Directors at the Annual
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.
Messrs. McGuire and Frydman have consented to serve as Directors of the
Company if they are elected at the Annual Meeting. If any nominee becomes
unavailable for any reason before the election, then the votes represented by
the enclosed proxy card 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 the nominee will become unavailable to
serve.
The names and certain information, as of July 5, 2000, concerning the
nominees for election as Class III Directors, and the continuing Directors, are
set forth below. YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE
ELECTION OF THE NOMINEES NAMED BELOW.
NOMINEES AND DIRECTORS
<TABLE>
<CAPTION>
NAME AND AGE POSITION WITH THE COMPANY
------------ -------------------------
<S> <C>
CLASS III NOMINEES
Thomas R. McGuire, 56 Chairman and Chief Executive Officer and Director
Ben A. Frydman, 53 Director and Assistant Secretary
CLASS I DIRECTOR
Robert S. Throop, 62 Director
CLASS II DIRECTOR
John W. Casey, 56 Director
</TABLE>
Thomas R. McGuire is a founder of the Company and has been its Chairman,
Chief Executive Officer and a director since 1977. From 1981 until August 1985
he also served as the Company's Chief Financial Officer and Secretary.
Ben A. Frydman has served as a director since 1988. Mr. Frydman is, and for
more than the past five years has been, engaged in the private practice of law,
as a member and shareholder of Stradling Yocca Carlson & Rauth, a Professional
corporation, which provided legal services to the Company in 1999.
Robert S. Throop has served as a director since 1995. Until his retirement
in late 1996, and for more than five years prior thereto, Mr. Throop was the
Chairman and Chief Executive Officer of Anthem Electronics, Inc. ("Anthem"),
which is a national distributor of semiconductor and computer products. Mr.
Throop is also a director of Arrow Electronics, Inc., the corporate parent of
Anthem, and the Manitowoc Company, both of which are public companies.
3
<PAGE> 6
John W. Casey has served as a director since August 1998. From 1980 and
until his retirement in 1994, Mr. Casey was President and Chief Executive
Officer of Shurflo Pump Manufacturing Company ("Shurflo"), which was engaged in
the manufacture and sale of pumps used in pumping and circulating water or other
liquids in a variety of products and equipment, including recreational vehicles
and soft drink dispensing machines. Mr. Casey also serves as a director of
Shurflo Pump Manufacturing Company, A WICOR Company; the Deschutes Basin Land
Trust and RV/MHI Heritage Foundation, Inc.
There are no family relationships among any of the Company's officers or
directors.
BOARD MEETINGS
The Board of Directors of the Company held four meetings during the fiscal
year ended December 31, 1999 and each Director attended at least 75% of the
number of meetings held by the Board and by each of the Committees on which he
served.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established standing Audit and Compensation
Committees.
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. Robert S. Throop and John W. Casey
were the members of the Audit Committee in the fiscal year ended December 31,
1999, during which the Committee held one meeting.
The Compensation Committee reviews programs in the areas of employee and
incentive compensation plans, administers the Company's Stock Purchase Plans,
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. Robert S. Throop and John W. Casey served as the members of the
Compensation Committee in the fiscal year ended December 31, 1999, during which
the Committee held one meeting.
The Board of Directors does not have a Nominating Committee. Instead, the
Board of Directors, as a whole, identifies and screens candidates for membership
on the Company's Board of Directors.
DIRECTORS' 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. Each non-employee director is automatically
granted, on the date of each annual stockholders' meeting, an option to purchase
2,000 shares of the Company's Common 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, 1999 were satisfied, except that Annual Reports on Form 5 to report stock
option grants to the Named Officers were inadvertently filed late.
4
<PAGE> 7
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation received for the fiscal year
ended December 31, 1999, by the Company's Chief Executive Officer, and the other
executive officers whose aggregate cash compensation for services rendered to
the Company in all capacities exceeded $100,000 for fiscal year 1999
(collectively, the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------------------- UNDERLYING
PRINCIPAL POSITION YEAR SALARY($) BONUS(1) OPTIONS(#)
------------------ ---- --------- -------- --------------------
<S> <C> <C> <C> <C>
Thomas R. McGuire....................... 1999 $256,499 $ -0- 20,000
Chairman of the Board and 1998 248,276 20,000 -0-
Chief Executive Officer 1997 248,303 -0- 47,500
Sandra A. Knell......................... 1999 $160,000 $ -0- 10,000
Chief Financial Officer and 1998 143,366 13,500 50,000
Executive Vice President 1997 134,039 -0- 20,000
Jeffrey R. Wannamaker................... 1999 $160,000 $ -0- 10,000
Executive Vice President and 1998 160,193 16,500 50,000
President of Distribution Division 1997 134,039 -0- 20,000
David A. Berger......................... 1999 $114,039 $ -0- 10,000
Executive Vice President 1998 112,116 10,000 20,000
1997 106,542 -0- 20,000
Dennis A. Castagnola.................... 1999 $114,039 $ -0- 10,000
Executive Vice President and 1998 112,116 10,000 20,000
President of the DTS Division 1997 108,437 -0- 12,500
</TABLE>
---------------
(1) Bonuses were awarded under annual incentive compensation plans.
OPTION GRANTS
<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(1) IN FISCAL YEAR(2) ($/SHARE)(3) DATE 5% 10%
---- ----------- ----------------- ------------ ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thomas R. McGuire............ 20,000 22.0% $2.25 4/20/09 $73,300 $116,720
Sandra A. Knell.............. 10,000 11.0 2.25 4/20/09 36,650 58,360
Jeffrey R. Wannamaker........ 10,000 11.0 2.25 4/20/09 36,650 58,360
David A. Berger.............. 10,000 11.0 2.25 4/20/09 36,650 58,360
Dennis A. Castagnola......... 10,000 11.0 2.25 4/20/09 36,650 58,360
</TABLE>
---------------
(1) These options vest in three approximately equal annual installments of 33.3%
of the shares covered by such options. Each option is subject to termination
in the event of the optionee's cessation of employment with the Company.
(2) Options to purchase an aggregate of 91,000 shares were granted to all
employees in fiscal 1999, including the Named Officers. Each non-employee
director received options to purchase 2,000 shares in 1999.
(3) The exercise price may be paid in cash, in shares of the Company's Common
Stock valued at fair market value on the date of exercise, or through a
cashless exercise procedure.
(4) There is no assurance that the values that may be realized on exercise of
such options will be at or near the values estimated in the table, which
arbitrary compounded rates of growth of the price of the Company's stock of
5% and 10% per year.
5
<PAGE> 8
OPTION EXERCISES AND FISCAL YEAR-END VALUES
There were no option exercises by any of the Named Officers in 1999.
The following table sets forth information concerning the fiscal year-end
value of unexercised options held by the Named Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT YEAR END 1999(#) YEAR END 1999($)(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Thomas R. McGuire.......................... 58,834 21,166 $1,666 $3,334
Sandra A. Knell............................ 75,667 29,333 833 1,666
Jeffrey R. Wannamaker...................... 75,667 29,333 833 1,666
David A. Berger............................ 57,667 17,333 833 1,666
Dennis A. Castagnola....................... 30,167 14,833 833 1,666
</TABLE>
---------------
(1) Value of unexercised in-the-money options is calculated based on the market
share of the underlying securities, minus the exercise price, and assumes
sale of the underlying securities on December 31, 1999, at a price of $2.50
per share, the fair market value of the Company's Common Stock on such date.
COMPENSATION COMMITTEE INTERLOCKS
In fiscal year 1999 the members of the Committee were Robert S. Throop and
John W. Casey, who are non-employee directors of the Company.
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 1999.
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.
- The financial interests of the Company's senior executives should be
aligned with the financial interests of the stockholders, 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
6
<PAGE> 9
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 order to retain qualified management personnel, the Company also 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 they 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
that is initially developed by management, submitted to the Board of Directors
for its review, possible modification and approval. 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, 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.
In certain instances, bonuses under the incentive plan are awarded not only
on the basis of the Company's overall profitability, but also on the achievement
by an executive of specific objectives within his or her area of responsibility.
For example, a bonus may be awarded for an executive's efforts in achieving
greater than anticipated cost savings, or establishing new or expanding existing
markets for the Company's products. Typically, the maximum bonus that may be
awarded for achievement of specific objectives is determined early in the year
to provide the requisite incentive for such performance.
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 to be lower. The Company did not achieve the earnings goal
that had been established for fiscal 1999, and, accordingly, no bonuses were
awarded to any of the executive officers under the incentive compensation
program described above.
7
<PAGE> 10
Stock Options and Equity-Based Programs
In order to align the financial interests of senior executives and other
key employees with those of the stockholders, 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 stockholders. Moreover,
generally options are granted on terms which provide that the options become
exercisable in cumulative annual installments, generally over a
three-to-five-year period. The Compensation Committee believes that these
features of the option grants not only provide 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 1999, the Company granted options to purchase an aggregate of 60,000
shares of its common stock to the Named Officers of the Company. The Company
also 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.
Robert S. Throop
John W. Casey
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 below, shall not be incorporated by reference into any
such filings.
8
<PAGE> 11
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)
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
COAST DISTRIBUTION SYSTEM,
INC. PEER GROUP INDEX AMEX MARKET INDEX
-------------------------- ---------------- -----------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 78.69 131.13 128.50
1996 47.54 149.91 136.01
1997 40.98 192.05 163.66
1998 36.07 167.92 161.44
1999 32.79 137.97 201.27
</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 1994.
The graph above compares the performance of the Company with that of (i)
the AMEX Composite Index and (ii) a Peer Group Index consisting of four
manufacturers of recreational vehicles and boats and one company that sells
boating parts, supplies and accessories both at wholesale and at retail. The
Peer Group consists of Brunswick Corporation, Coachmen Industries Inc.,
Fleetwood Enterprises, Inc., Winnebago Industries, Inc. and West Marine Inc.
INDEPENDENT ACCOUNTANTS
During 1999 Grant Thornton provided audit services to the Company, which
included the examination of the Company's financial statements for the year
ended December 31, 1999. The Company has not yet selected auditors for fiscal
year 2000. A representative of Grant Thornton is expected to be present at the
Annual Meeting to respond to appropriate questions from stockholders, and will
have an opportunity to make a statement if he so desires.
9
<PAGE> 12
ANNUAL REPORT
The 1999 Annual Report to Stockholders of the Company is being sent with
this Proxy Statement to each stockholder of record as of July 5, 2000. The
Annual Report is not to be regarded as proxy solicitation material.
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposal for action at the 2001 Annual
Meeting of Stockholders and presentation in the Company's Proxy Statement with
respect to such Meeting should arrange for such proposal to be delivered to the
Company at its principal place of business no later than March 22, 2001 in order
to be considered for inclusion in the Company's proxy statement relating to that
meeting. Matters pertaining to such proposals, including the number and length
thereof, eligibility of persons entitled to have such proposals included and
other aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
OTHER MATTERS
Management is not aware of any other matters to come before the Annual
Meeting. If any other matter not mentioned in this Proxy Statement is brought
before the Annual Meeting, the proxy holders named in the enclosed Proxy will
have discretionary authority to vote all proxies with respect thereto in
accordance with their judgment.
By Order of the Board of Directors
Sandra A. Knell
Secretary
July 21, 2000
COPIES OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K, AS AMENDED, FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, WILL BE PROVIDED TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO
THE SECRETARY, THE COAST DISTRIBUTION SYSTEM, INC., 350 WOODVIEW AVENUE, MORGAN
HILL, CALIFORNIA 95037.
10
<PAGE> 13
PROXY THE COAST DISTRIBUTION SYSTEM, INC.
2000 ANNUAL MEETING OF STOCKHOLDERS -- AUGUST 22, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Thomas R. McGuire, Robert S. Throop and John
W. Casey, 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, Inc.
(the "Company") which the undersigned is entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at the Company's Executive Offices,
350 Woodview Avenue, Morgan Hill, California, at 10:00 A.M. on Tuesday, August
22, 2000.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS: [ ] FOR The nominees listed below [ ] WITHHOLD AUTHORITY
(to vote for the nominees listed below)
</TABLE>
Thomas R. McGuire; Ben A. Frydman
--------------------------------------------------------------------------------
(To withhold authority for any individual Nominee, please write his name in the
space provided above)
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
<PAGE> 14
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER 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 , 2000
-------------------------
(Signature of
Stockholder)
-------------------------
Please sign your name
exactly as it appears
hereon. Executors,
administrators,
guardians, officers of
corporations, and others
signing in 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.
