<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 [ ]
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))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
STRATEGIC DISTRIBUTION, 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):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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 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
STRATEGIC DISTRIBUTION, INC.
12136 WEST BAYAUD, SUITE 320
LAKEWOOD, COLORADO 80228
-------------------------
NOTICE & PROXY STATEMENT
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 24, 1996
To Strategic Distribution Shareholders:
NOTICE IS HEREBY GIVEN that the annual meeting of
shareholders of Strategic Distribution, Inc. ("SDI" or the "Company"), a
Delaware corporation, will be held on May 24, 1996, at 9:00 a.m., local time,
at the Greenwich Harbor Inn, 500 Steamboat Road, Greenwich, Connecticut, for
the following purposes, as more fully described in the accompanying Proxy
Statement:
1. To elect eight (8) directors to serve for the
ensuing year and until their successors are elected ("Proposal I");
2. To amend the Company's Restated Certificate of
Incorporation (the "Certificate of Incorporation") (a) to provide for the
advance payment by the Company of expenses incurred by a director, officer,
employee or agent of the Company in defending an action, suit or proceeding and
(b) to provide that no subsequent amendment or repeal of the Certificate of
Incorporation shall eliminate or reduce the right of any such director,
officer, employee or agent to indemnification in respect of any matter
occurring before such amendment or repeal ("Proposal II");
3. To amend the Company's 1990 Incentive Stock Option
Plan to make non-employee consultants and advisers to the Company eligible to
receive grants of options ("Proposal III");
4. To approve the Company's Executive Compensation
Plan ("Proposal IV");
5. To approve the Company's 1996 Non-Employee Director
Stock Plan ("Proposal V");
6. To ratify the appointment of KPMG Peat Marwick LLP
as independent auditors of SDI for the fiscal year ending December 31, 1996
("Proposal VI"); and
7. To transact such other business as may properly
come before the meeting or any adjournment or postponement thereof.
<PAGE>3
Only shareholders of record at the close of business on April
17, 1996 are entitled to receive notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting
in person. However, to assure your representation at the meeting, you are
encouraged to complete, date, sign and mail the enclosed proxy card as promptly
as possible in the envelope provided. Shareholders attending the meeting may
vote in person even if they have returned a proxy.
THE BOARD OF DIRECTORS BELIEVES THE PROPOSED ACTIONS ARE IN
THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE NOMINEES AS DIRECTORS AND FOR PROPOSALS II, III, IV,
V and VI.
By order of the Board of Directors
Andrew M. Bursky
Chairman of the Board
April 24, 1996
IMPORTANT: PLEASE COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED TO ASSURE THAT YOUR SHARES ARE REPRESENTED
AT THE MEETING. IF YOU ATTEND THE MEETING, YOU MAY VOTE IN PERSON IF YOU WISH
TO DO SO EVEN THOUGH YOU HAVE SENT IN YOUR PROXY.
<PAGE>4
STRATEGIC DISTRIBUTION, INC.
12136 WEST BAYAUD, SUITE 320
LAKEWOOD, COLORADO 80228
PHONE: (303) 234-1419
-------------------------
PROXY STATEMENT
-------------------------
INTRODUCTION
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Strategic Distribution,
Inc. ("SDI" or the "Company"), for use at the annual meeting of shareholders to
be held on May 24, 1996 at the Greenwich Harbor Inn, 500 Steamboat Road,
Greenwich, Connecticut, and at any adjournment or postponement thereof (the
"Meeting"). The Company's 1995 Annual Report, which accompanies this Proxy
Statement, is being sent, on or about April 24, 1996, to persons who were
shareholders of record on April 17, 1996.
Written communications to the Company should be sent to the
Company's office at 12136 West Bayaud, Suite 320, Lakewood, Colorado 80228. The
Company can be reached by telephone at (303) 234-1419. This Proxy Statement and
a proxy card are being mailed, on or about April 24, 1996, to shareholders
entitled to vote at the Meeting.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, the holders of shares of Common Stock, par
value $.10 per share (the "Common Stock"), of the Company will be asked to
consider and vote upon six proposals described in this Proxy Statement and on
any other matters properly brought before the Meeting.
The following is a brief summary of the six proposals. The
summary is not intended to be a complete statement of all material features of
the proposals and is qualified in its entirety by the more detailed information
contained elsewhere in this Proxy Statement. THE MEMBERS OF THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMEND A VOTE IN FAVOR OF (I) THE NOMINEES AS
DIRECTORS, (II) THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF
INCORPORATION (THE "CERTIFICATE OF INCORPORATION") THAT (A) PROVIDES FOR THE
ADVANCE PAYMENT BY THE COMPANY OF EXPENSES INCURRED BY A DIRECTOR, OFFICER,
EMPLOYEE OR AGENT OF THE COMPANY IN DEFENDING AN ACTION, SUIT OR PROCEEDING AND
(B) PROVIDES THAT NO SUBSEQUENT AMENDMENT OR REPEAL OF THE CERTIFICATE OF
INCORPORATION SHALL ELIMINATE OR REDUCE THE RIGHT OF ANY SUCH DIRECTOR,
OFFICER, EMPLOYEE OR AGENT TO INDEMNIFICATION IN RESPECT OF ANY MATTER
OCCURRING BEFORE SUCH AMENDMENT OR REPEAL, (III) AMENDING THE COMPANY'S 1990
INCENTIVE STOCK OPTION PLAN TO MAKE NON-EMPLOYEE CONSULTANTS AND ADVISERS TO
THE COMPANY ELIGIBLE TO RECEIVE GRANTS OF OPTIONS, (IV) THE ADOPTION OF THE
<PAGE>5
COMPANY'S EXECUTIVE COMPENSATION PLAN, (V) THE ADOPTION OF THE COMPANY'S 1996
NON-EMPLOYEE DIRECTOR STOCK PLAN AND (VI) THE RATIFICATION OF THE APPOINTMENT
OF THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING DECEMBER 31,
1996.
PROPOSAL I
Proposal I concerns the election of a board of eight (8)
directors, all of whom are currently serving as members of the Board of
Directors.
PROPOSAL II
Proposal II concerns amending the Certificate of
Incorporation (a) to provide for the advance payment by the Company of expenses
incurred by a director, officer, employee or agent of the Company in defending
an action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director, officer, employee or agent to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company and (b) to provide that no subsequent amendment or repeal of the
Certificate of Incorporation shall eliminate or reduce the right of any such
director, officer, employee or agent to indemnification in respect of any
matter occurring before such amendment or repeal. The full text of the proposed
amendment to the Certificate of Incorporation is attached hereto as Exhibit A.
PROPOSAL III
Proposal III concerns amending the Company's 1990 Incentive
Stock Option Plan to make non-employee consultants and advisers to the Company
eligible to receive grants of options.
PROPOSAL IV
Proposal IV concerns approving the Company's Executive
Compensation Plan.
PROPOSAL V
Proposal V concerns approving the Company's 1996 Non-Employee
Director Stock Plan.
PROPOSAL VI
Proposal VI concerns the ratification of the appointment of
KPMG Peat Marwick LLP, Certified Public Accountants, as the Company's
independent auditors for the fiscal year ending December 31, 1996.
VOTING AT THE MEETING
The Board of Directors has fixed the close of business on
April 17, 1996 as the record date for the Meeting, and only holders of record
of the Common Stock at the close of business on that date are entitled to
notice of, and to vote at, the Meeting. On that date, there were outstanding
<PAGE>6
and entitled to vote [21,762,050] shares of the Common Stock, held by
approximately 1,500 holders of record.
Proxies will be voted at the Meeting, or at any adjournment
thereof, at which a quorum is present, in accordance with the directions on the
proxy card. The holders of a majority of the Common Stock outstanding and
entitled to vote who are present either in person or represented by proxy will
constitute a quorum for the Meeting. In accordance with Delaware law,
abstentions and broker nonvotes will be treated as present for purposes of
determining the presence or absence of a quorum.
The election of the Board of Directors requires the
affirmative vote of a plurality of the shares of the Common Stock present and
voting at the Meeting. "Plurality" means that the individuals who receive the
largest number of votes cast "for" are elected as directors up to the maximum
number of directors to be chosen at the Meeting. The approval of Proposal II
requires the affirmative vote of a majority of the outstanding shares of the
Common Stock entitled to vote. The approval of each of Proposals III, IV and V
requires the affirmative vote of a majority of the shares of the Common Stock
present, in person or by proxy, and entitled to vote at the Meeting.
Any shares not voted "for" a particular director (whether as
a result of a direction to withhold or a broker nonvote) will not be counted in
such director's favor. Abstentions will be included in the vote totals and,
therefore, will have the same effect as a vote against Proposals III, IV and V.
Broker nonvotes will not be included in the vote totals and, therefore, will
have no effect on the outcome of the vote for Proposals III, IV and V. Because
the approval of Proposal II requires the affirmative vote of a majority of the
outstanding shares of the Common Stock entitled to vote, both abstentions and
broker nonvotes will have the same effect as a vote against Proposal II. A
broker nonvote is a proxy submitted by a broker in which the broker fails to
vote on behalf of a client on a particular matter for lack of instruction when
such instruction is required.
William R. Berkley currently owns approximately [38.37%] of
the outstanding shares of the Common Stock and has advised the Company that he
intends to vote such shares in favor of each of the proposals described herein.
PROXIES
If the enclosed proxy is properly executed and returned in
time for the Meeting, the shares of stock represented thereby will be voted in
accordance with the instructions given thereon. If no instructions are given,
such shares will be voted "for" each nominee as director and "for" Proposals
II, III, IV, V and VI. Proxies will extend to, and be voted at, any adjournment
of the Meeting.
The Board of Directors does not intend to bring before the
Meeting any business other than as set forth in this Proxy Statement and has
not been informed that any other business is to be presented at the Meeting.
However, should any other matter properly come before the Meeting, the proxies
<PAGE>7
confer discretionary authority with respect to acting thereon and it is the
intention of the persons named as proxies in the accompanying proxy or their
duly authorized and constituted substitutes to vote or act thereon in
accordance with their best judgment.
Any shareholder who has executed and returned a proxy and who
for any reason desires to revoke such proxy may do so at any time before the
proxy is exercised by giving written notice to the Secretary of the Company at
the above address, by voting the shares represented by such proxy in person at
the Meeting or by giving a later dated proxy at any time before the voting.
Attendance at the Meeting will not, by itself, revoke a proxy.
EXPENSES OF SOLICITATION
The costs of the solicitation of proxies will be borne by the
Company. Such costs include preparing, printing and mailing the Notice of
Annual Meeting of Shareholders, this Proxy Statement and the enclosed proxy and
the reimbursement of brokerage firms and others for reasonable expenses
incurred by them in connection with the forwarding of proxy solicitation
materials to beneficial owners. The solicitation of proxies will be conducted
primarily by mail, but may include telephone, telegraph or oral communications
by directors, officers or regular employees of the Company acting without
special compensation.
DESCRIPTION OF OUTSTANDING CAPITAL STOCK
The Common Stock is the only class of capital stock of the
Company outstanding and entitled to vote. As of April 17, 1996 there were
issued and outstanding [21,762,050] shares of the Common Stock. In addition, as
of April 17, 1996, (i) Warrants to purchase 38,625 shares of the Common Stock
for $1.46 per share, which Warrants expire in 1999, remained outstanding, (ii)
options issued under the Company's 1990 Incentive Stock Option Plan to purchase
a total of [1,181,514] shares of the Common Stock remained outstanding and
(iii) options issued pursuant to certain Stock Option Agreements to purchase
1,036,708 shares of the Common Stock remained outstanding.
Each share of the Common Stock is entitled to one vote.
<PAGE>8
ELECTION OF DIRECTORS
(PROPOSAL I)
INTRODUCTION
The Board of Directors unanimously recommends that
shareholders vote FOR the election as directors of the nominees referred to in
this section.
The following table sets forth each nominee's name, age and
the year in which such nominee first became a director:
<TABLE>
<S> <C> <C> <C>
Year First
Name Position(s) Age Became Director
William R. Berkley Director of the Company 50 1994
Andrew M. Bursky Director of the Company and Chairman
of the Board of Directors 39 1988
Arnold W. Donald Director of the Company 41 1995
Catherine B. James Director of the Company and Chief
Financial Officer, Executive Vice
President, Secretary
and Treasurer
of the Company 43 1990
George E. Krauter Director of the Company 64 1994
Joshua A. Polan Director of the Company 47 1988
Mitchell I. Quain Director of the Company 44 1995
Theodore R. Rieple Director of the Company and
President of the Company 50 1991
</TABLE>
Directors are elected to serve for one year or until the next
annual meeting of shareholders.
The eight individuals set forth in the above table are all of
the nominees for election as directors at the Meeting. All of the nominees
have consented to being named as such in this Proxy Statement and have agreed
<PAGE>9
to serve if elected. If any nominee should become unavailable, the persons
voting the proxies solicited hereby may in their discretion vote for a
substitute nominee. The Board of Directors has no reason to believe that any
substitute nominee or nominees will be required.
BACKGROUND OF NOMINEES
The following is a brief account of the business experience
of each of the nominees for election as a director. Except as indicated
below, there are no family relationships or special understandings pursuant
to which such persons have been nominated as directors of the Company. None
of the nominees has any substantial interest in any matter to be acted upon.
Mr. Berkley has served as a member of the Board of Directors
since May 1994. Mr. Berkley also serves as Chairman of the Board of several
companies which he controls or founded. These include W.R. Berkley
Corporation, a property and casualty insurance company, Pioneer Companies,
Inc. ("PCI"), a manufacturer and marketer of chlorine and caustic soda and
related products, and Interlaken Capital, Inc. ("Interlaken Capital"), a
private investment firm that is an affiliate of the Company. Mr. Berkley is
Vice-Chairman of the Board of Trustees of the University of Connecticut, a
Director of Georgetown University, a Trustee of New York University and a
member of the Board of Overseers of New York University Stern School of
Business.
Mr. Bursky has served as Chairman of the Board of Directors
since July 1988. He was President of the Company from November 1989 until
December 1990. He has served as an executive officer of Interlaken Capital
since May 1980, and currently is serving as a Managing Director of Interlaken
Capital. Mr. Bursky is a director of PCI.
Mr. Donald has served as a member of the Board of Directors
since 1995. Mr. Donald is President of Monsanto Company's Crop Protection
unit, with responsibility for Monsanto's worldwide agricultural chemicals
business, and has been associated with Monsanto in various capacities for more
than the last five years. Mr. Donald is a past president and serves on the
board of The Leadership Center of Greater St. Louis. He currently serves on
the executive boards of John Burroughs School, British-American Project, Fair
St. Louis and the American Crop Protection Association. Mr. Donald also serves
on the board of the National FFA Organization, National 4-H Council, Lindenwood
College, U.S.-Russia Business Council, Eurasia Foundation, Jackson
Laboratories, Opera Theatre of St. Louis, Carleton College and the Municipal
Theatre Association of St. Louis. Mr. Donald is a member of the advisory
boards of the Junior League of St. Louis and the St. Louis Butterfly House and
serves on the National Advisory Council for Washington University's School of
Engineering.
Ms. James has served as a member of the Board of Directors
since 1990. Ms. James has served as Chief Financial Officer of the Company
since February 1996, has served as Executive Vice President of the Company
since January 1989 and has served as Secretary and Treasurer of the Company
since December 1989. She was Chief Financial Officer of the Company from
<PAGE>10
January 1989 until September 1993. Ms. James has been a Managing Director of
Interlaken Capital since January 1990. From 1982 through 1988, she was
employed by Morgan Stanley & Co. Incorporated, serving as a Managing Director
in the corporate finance area during the last two years of her tenure.
Mr. Krauter has served as a member of the Board of Directors
since January 1994. Mr. Krauter is currently President of Industrial Systems
Associates, Inc. ("ISA"), which was acquired by the Company in January 1994,
and has served as President of ISA since March 1971. Mr. Krauter is being
nominated as a Director in accordance with the terms of the Employment
Agreement, dated January 4, 1994, between Mr. Krauter and ISA.
Mr. Polan has served as a member of the Board of Directors
since 1988. He has served as an executive officer of Interlaken Capital since
June 1988, currently serving as a Managing Director. For more than the five
years prior to June 1998, Mr. Polan was a partner in the accounting firm of
Touche Ross & Co.
Mr. Quain has served as a member of the Board of Directors
since 1995. Mr. Quain has been a Managing Director of Schroder Wertheim &
Company for more than the last five years. Mr. Quain is a director of Allied
Products Corporation, a member of the Board of Governors of the School of
Engineering and Applied Sciences at the University of Pennsylvania where he
also serves on the President's Council, and a member of the Board of Trustees
and the executive committee of St. Luke's Academy, a college preparatory
school in New Canaan, Connecticut.
Mr. Rieple has served as a member of the Board of Directors
since 1991. Mr. Rieple has served as President of the Company since December
1990. From 1984 to November 1990, Mr. Rieple was President, Chief Executive
Officer and a director of Diversey Corp. ("Diversey Corp."), a manufacturer
of specialty chemicals. In this role, he was responsible for the United
States and Canadian operations.
Mr. Bursky, Ms. James and Mr. Polan are executive officers of
Idle Wild Farm, Inc., a privately owned company that was formerly engaged in
the manufacture of frozen foods which, in October 1993, filed a Chapter 11
petition for reorganization under Federal bankruptcy laws. Mr. Bursky is an
executive officer of Blue Lustre Products, Inc., a privately owned company
which is engaged in the sale and leasing of carpet cleaning equipment and
other carpet cleaning products which, in October 1995, filed a Chapter 11
petition for reorganization under Federal bankruptcy laws.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THE ELECTION OF EACH OF THE NOMINEES AS DIRECTORS.
<PAGE>11
PROPOSED AMENDMENT TO CERTIFICATE OF
INCORPORATION TO SUPPLEMENT INDEMNIFICATION PROVISIONS (PROPOSAL II)
GENERAL
The Board of Directors unanimously recommends that
shareholders vote for this Proposal II, which would approve the proposed
amendment of the Certificate of Incorporation (a) to provide for the advance
payment by the Company of expenses incurred by a director, officer, employee
or agent of the Company in defending an action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director, officer, employee
or agent to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Company and (b) to provide
that no subsequent amendment or repeal of the Certificate of Incorporation
shall eliminate or reduce the right of any such director, officer, employee
or agent to indemnification in respect of any matter occurring before such
amendment or repeal. The full text of the proposed amendment to the
Certificate of Incorporation is attached hereto as Exhibit A.
DELAWARE CORPORATE STATUTE
Section 145 of the General Corporation Law of the State of
Delaware (the "DGCL") permits a corporation to indemnify directors, officers,
employees and agents for actions taken in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, which they had no
reasonable cause to believe was unlawful. Section 145(b) of the DGCL provides
that indemnification may not be made in respect of any claim, issue or matter
as to which a person has been adjudged to be liable to the corporation,
unless and only to the extent that a court of competent jurisdiction
determines that the person is entitled to indemnity for such expenses as the
court deems proper. Section 145(e) of the DGCL provides that a corporation
may advance expenses of defense (upon receipt of a written undertaking to
reimburse the corporation if indemnification is not appropriate) and must
reimburse a successful defendant for expenses, including attorney's fees,
actually and reasonably incurred.
EFFECTS OF THE PROPOSED CHANGES
As currently in effect, the Certificate of Incorporation
provides indemnification to directors, officers, employees or agents to the
fullest extent permitted by Section 145 of the DGCL. As a consequence, the
first part of Proposal II, which restates the language of Section 145(e) of
the DGCL, is currently applicable to the Company; however, the Board of
Directors believes it to be desirable to include a fuller statement in the
Certificate of Incorporation of the rights of directors, officers, employees
and agents of the Company to seek advance payments of expenses from the
Company in connection with the defense of an action, suit or proceeding.
<PAGE>12
The second part of Proposal II addresses the concern of
directors, officers, employees and agents of the Company that a subsequent
amendment or repeal of the Certificate of Incorporation should not adversely
affect their right to indemnification in respect of any matter occurring
before such amendment or repeal. Due to the expense of defending lawsuits,
the frequency with which unwarranted litigation is brought against such
persons and the inevitable uncertainties with respect to the application of
the business judgment rule to particular facts and circumstances, adequate
indemnity provisions are often a condition of an individual's willingness to
serve as a director, officer, employee or agent of a Delaware corporation.
The Board of Directors considers it to be in the best interests of the
Company and its shareholders to provide assurance to such persons that no
amendment or repeal of the Certificate of Incorporation could have an adverse
effect on any such person's right to indemnification in respect of matters
occurring before such amendment or repeal.
The Board of Directors believes that the Company should take
every possible step to ensure that the Company will continue to be able to
attract the best possible directors, officers, employees and agents. The
primary purpose of Proposal II is to supplement the existing provisions in
the Certificate of Incorporation to ensure that the Company will continue to
be able to attract individuals of the highest quality and ability to serve as
its directors, officers, employees and agents.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL II.
<PAGE>13
PROPOSED AMENDMENT TO THE
COMPANY'S 1990 INCENTIVE STOCK OPTION PLAN
(PROPOSAL III)
The Board of Directors unanimously recommends that
shareholders vote to approve an amendment to the Company's 1990 Incentive Stock
Option Plan (the "1990 Stock Option Plan") which would allow the Company to
grant options to non-employee consultants and advisers selected by the Stock
Option and Compensation Committee (the "Committee"). The 1990 Stock Option Plan
currently allows for option grants to directors, officers and key employees of
the Company and its subsidiaries. The amendment would expand the eligible group
to include consultants and advisers, including employees of Interlaken Capital
who, in their capacity as employees of Interlaken Capital, act as advisers to
the Company. The Board of Directors believes that the proposed amendment to the
1990 Stock Option Plan will be of material benefit to the Company and will
enable the Company to retain and motivate key consultants and advisers selected
by the Committee.
The following is a summary of the provisions of the 1990
Stock Option Plan:
The 1990 Stock Option Plan is administered by the Committee.
The Committee has full authority, subject to the terms of the 1990 Stock Option
Plan, to make all determinations thereunder. An aggregate of 2,060,000 shares
of the Common Stock are reserved for issuance under the 1990 Stock Option Plan.
The Committee may grant incentive stock options under the
1990 Stock Option Plan and options which do not qualify as incentive stock
options ("non-qualified stock options"); provided that no director of the
Company shall be eligible to receive incentive stock options. Subject to the
provisions of the 1990 Stock Option Plan, the Committee shall have sole
authority, in its absolute discretion; (a) to determine which of the eligible
participants shall be granted options; (b) to authorize the granting of both
incentive stock options and non-qualified stock options; (c) to determine the
times when options shall be granted and the number of shares to be subject to
options; (d) to determine the option price of the shares subject to each
option, which price shall be not less than the minimum specified in the 1990
Stock Option Plan; (e) to determine the time or times when each option becomes
exercisable, the duration of the exercise period and any other restrictions on
the exercise of options granted under the 1990 Stock Option Plan; (f) to
prescribe the form or forms of the option agreements under the 1990 Stock
Option Plan (which forms shall be consistent with the terms of the 1990 Stock
Option Plan but need not be identical and may contain such terms as the
Committee may deem appropriate to carry out the purposes of the 1990 Stock
Option Plan); (g) to adopt, amend and rescind such rules and regulations as, in
the Committee's opinion, may be advisable in the administration of the 1990
Stock Option Plan; and (h) to construe and interpret the 1990 Stock Option
Plan, the rules and regulations and option agreements under the 1990 Stock
Option Plan and to make all other determinations deemed necessary or advisable
for the administration of the 1990 Stock Option Plan. All decisions,
determinations and interpretations of the Committee shall be final and binding
on all optionees.
<PAGE>14
The option price of each option granted under the 1990 Stock
Option Plan shall be determined by the Committee; provided, however, that in
the case of each incentive stock option granted under the 1990 Stock Option
Plan, the option price shall not be less than the fair market value of the
Common Stock at the time the option was granted. In no event shall the option
price of any option be less than the par value per share on the date an option
is granted. On April 17, 1996, the fair market value of the Common Stock was
$______ per share.
The 1990 Stock Option Plan provides that, if the Common Stock
is quoted on the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), the fair market value shall be deemed to be the mean between
the last quoted bid and asked prices on NASDAQ on the date immediately
preceding the date on which the option is granted, or if not quoted that day,
then on the last preceding date on which such stock is quoted. If the Common
Stock is listed on one or more national securities exchanges, the fair market
value shall be deemed to be the mean between the highest and the lowest sale
prices reported on the principal national securities exchange on which such
stock is listed and traded on the date immediately preceding the date on which
the option is granted, or, if there is no such sale on that date, then on the
last preceding date on which such a sale was reported. If the Common Stock is
not quoted on NASDAQ or listed on an exchange, or representative quotes are not
otherwise available, the fair market value of the Common Stock shall mean the
amount determined by the Committee to be the fair market value based upon a
good faith attempt to value the Common Stock accurately and computed in
accordance with applicable regulations of the Internal Revenue Service.
The purchase price of an option is to be paid in cash, or if
authorized by the Committee, in shares of the Common Stock or a combination of
cash and shares.
The term of each option shall be fixed by the Committee,
provided that no option will be exercisable later than ten years from the date
of grant of the option, and options will be exercisable in such number of
shares and at such time or times, including in periodic installments, as may be
determined by the Committee at the time of grant.
The 1990 Stock Option Plan generally provides that options
granted thereunder are not transferable except by will or by the laws of
descent and distribution. In addition, options granted under the 1990 Stock
Option Plan may provide that, if the employment of an optionee terminates other
than by reason of death, disability or for cause, such options shall remain
exercisable for a period of up to three months. Options granted under the 1990
Stock Option Plan may also provide that if the employment of an optionee shall
terminate by reason of death or disability, such options shall remain
exercisable by the optionee (or the person or persons to whom such options pass
by will or the applicable laws of descent and distribution) for a period of up
to one year. Options granted under the 1990 Stock Option Plan may also provide
that such options shall terminate immediately upon the termination of the
employment of the optionee for cause. Notwithstanding the foregoing, in no
<PAGE>15
event is an option exercisable after the termination date specified in the
option.
The number, kind and price of the shares of the Common Stock
subject to each outstanding option and the number of shares reserved for
issuance pursuant to options granted under the 1990 Stock Option Plan shall be
appropriately adjusted in the event of stock splits, stock dividends or other
changes in the Company's outstanding securities. If the Company shall be the
surviving corporation in any merger or reorganization or other business
combination, any option shall cover the securities or other property to which a
holder of the number of shares of the Common Stock covered by the unexercised
portion of the option would have been entitled pursuant to the terms of the
merger. Upon any merger or reorganization or other business combination in
which the Company shall not be the surviving corporation, or a dissolution or
liquidation of the Company, or a sale of all or substantially all of its
assets, all outstanding options shall terminate, subject to the right of the
surviving or resulting corporation to grant substitute options to purchase its
shares on such terms and conditions as it shall deem appropriate. Such
adjustments shall be determined by the Committee in its sole discretion. Any
such adjustment may provide for the elimination of any fractional share which
might otherwise become subject to an option.
The 1990 Stock Option Plan will terminate on the tenth
anniversary of the date the 1990 Stock Option Plan was adopted by the Board of
Directors. The Board of Directors may terminate or amend the 1990 Stock Option
Plan provided that no amendment without shareholder approval shall increase the
number of shares as to which options may be granted or change the class of
employees eligible to receive options under the 1990 Stock Option Plan.
At present, approximately six directors, nine officers and
690 other key employees are eligible to receive options under the 1990 Stock
Option Plan. Subject to approval of the proposed amendment, the Committee
granted options to purchase 1,236 shares of the Common Stock to each of the
following advisers to the Company: William L. Mahone, Charles J. Martin and
Martin B. O'Connell. Messrs. Mahone and O'Connell are employees of Interlaken
Capital. Mr. Martin was an employee of Interlaken Capital at the time the
options were granted, and is now an employee of the Company. The options were
granted on November 16, 1995 at an exercise price of $5.94 per share, which was
the fair market value of the Common Stock on the date of grant. These option
grants will be null and void if the Company's shareholders do not approve the
proposed amendment.
The following is a general summary of the Company's
understanding of the federal income tax consequences of the 1990 Stock Option
Plan.
<PAGE>16
INCENTIVE STOCK OPTIONS
No taxable income is realized by the optionee upon the grant
or exercise of an incentive stock option. If the Common Stock is issued to an
optionee pursuant to the exercise of an incentive stock option, and if no
disqualifying disposition of such shares is made by such optionee within two
years after the date of grant or within one year after the transfer of such
shares to such optionee, then (1) upon sale of such shares, any amount realized
in excess of the option price will be taxed to such optionee as a long-term
capital gain and any loss sustained will be a long-term capital loss, and (2)
no deduction will be allowed to the optionee's employer for federal income tax
purposes.
If the Common Stock acquired upon the exercise of an
incentive stock option is disposed of prior to the expiration of either holding
period described above, generally (1) the optionee will realize ordinary income
in the year of disposition in an amount equal to the excess (if any) of the
fair market value of such shares at exercise (or, if less, the amount realized
on the disposition of such shares) and (2) the optionee's employer will be
entitled to deduct such amount for federal income tax purposes if the amount
represents an ordinary and necessary business expense. Any further gain (or
loss) realized by the optionee will be taxed as short-term or long-term capital
gain (or loss), as the case may be, and will not result in any deduction by the
employer.
Subject to certain exceptions for disability or death, if an
incentive stock option is exercised more than three months following
termination of employment, the exercise of the option will generally be taxed
as the exercise of a non-qualified stock option.
For purposes of determining whether an optionee is subject to
any alternative minimum tax liability, an optionee who exercises an incentive
stock option generally would be required to increase his or her alternative
minimum taxable income, and compute the tax basis in the stock so acquired, in
the same manner as if the optionee had exercised a non-qualified stock option.
Each optionee is potentially subject to the alternative minimum tax. In
substance, a taxpayer is required to pay the higher of his/her alternative
minimum tax liability or his/her "regular" income tax liability. As a result, a
taxpayer has to determine his/her potential liability under the alternative
minimum tax.
NON-QUALIFIED STOCK OPTIONS
With respect to non-qualified stock options: (a) no income is
realized by the optionee at the time the option is granted; (b) generally, at
exercise, ordinary income is realized by the optionee in an amount equal to the
difference between the option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise, and the
optionee's employer is generally entitled to a
<PAGE>17
tax deduction in the same amount subject to applicable tax
withholding requirements; and (c) at sale, appreciation (or depreciation) after
the date of exercise is treated as either short-term or long-term capital gain
(or loss) depending on how long the shares have been held.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL III.
<PAGE>18
APPROVAL OF THE COMPANY'S
EXECUTIVE COMPENSATION PLAN
(PROPOSAL IV)
The Board of Directors unanimously recommends that
shareholders vote to approve the adoption of the Company's Executive
Compensation Plan (the "Executive Plan"). The Board of Directors has adopted
the Executive Plan in order to provide the Company with the means to give
management employees additional long-term incentives to maximize the equity
value of the Company.
All management employees of the Company and its subsidiaries
are eligible to participate in the Executive Plan. At present, this group
includes approximately eight officers and approximately seven other key
employees. Participants are selected for participation by the Committee. The
Committee has full power to administer and interpret the Executive Plan.
Under the Executive Plan, the Committee will annually approve
performance goals and create "bonus pools" for the Company and each
participating subsidiary. The Committee will also establish formulas and
criteria for calculating bonus awards for each participant based on the
achievement of performance goals and such other criteria as the Committee may
designate.
Payment of bonus awards may be made in cash or in shares of
the Common Stock, as determined by the Committee. The cash portion of any bonus
award will be vested upon payment. The portion of any bonus award payable in
the Common Stock may be deferred and subject to vesting conditions, or issued
as restricted stock. An aggregate of 500,000 shares of the Common Stock are
reserved for issuance under the Executive Plan.
The Committee may amend the Executive Plan at any time,
except that it may not increase the total number of shares of the Common Stock
which may be issued under the Executive Plan without shareholder approval.
The Committee has the right to impose conditions and
restrictions on awards made under the Executive Plan as it deems appropriate.
Without limitation, the Committee may provide that bonus awards will be made
only to eligible persons who have entered into appropriate agreements relating
to non-competition, non-solicitation of customers and/or employees, and
protection of confidential information. Such agreements may provide that
participants who violate these restrictions will be required to repay the
Company the value of all or a portion of any awards previously paid to the
participant under the Executive Plan.
<PAGE>19
As of the date of this Proxy Statement, the Committee had not
established performance goals or bonus pools for the Company or any subsidiary,
and had not granted any bonus awards to eligible participants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL IV.
<PAGE>20
APPROVAL OF THE COMPANY'S
1996 NON-EMPLOYEE DIRECTOR STOCK PLAN
(PROPOSAL V)
The Board of Directors unanimously recommends that
shareholders vote to approve the adoption of the Company's 1996 Non-Employee
Director Stock Plan (the "Director Plan"). The purpose of the Director Plan is
to align the interests of the non-employee members of the Board of Directors
("Non-Employee Directors") with those of the Company's shareholders by
promoting their ownership of the Common Stock.
Under the Director Plan, the Company's Non-Employee Directors
will receive their retainer fee for each calendar year in shares of the Common
Stock. The number of shares to be granted each year will be equal to the annual
retainer fee divided by the fair market value of a share of the Common Stock on
the last day of such year. The amount of the annual retainer fee will be set
periodically by the full Board of Directors. These shares of the Common Stock
will be granted to Non-Employee Directors in lieu of cash retainer fees.
In addition, each person who is a Non-Employee Director
immediately following the Meeting shall be granted, not later than June 30,
1996, a number of shares of the Common Stock determined by dividing (1) $20,000
by (2) the fair market value of a share of the Common Stock on May 31, 1996.
These shares will be granted to Non-Employee Directors in addition to any cash
retainer fees they received for services rendered during 1995.
At present, six persons are eligible to participate in the
Director Plan (including Mr. Bursky and Ms. James).
The Board of Directors may at any time amend or terminate the
Director Plan, provided that (1) the Board may not increase the maximum number
of shares of the Common Stock that may be issued under the Director Plan
without the approval of shareholders and (2) the provisions of the Director
Plan relating to the amount, pricing and timing of grants may not be amended
more than once in any six month period except to comply with certain regulatory
changes. An aggregate of 150,000 shares of the Common Stock are presently
reserved for issuance under the Director Plan.
The Director Plan is intended to qualify as a "formula plan"
for purposes of Rule 16b-3 under the Securities Exchange Act of 1934.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL V.
<PAGE>21
APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL VI)
KPMG Peat Marwick LLP has been appointed by the Board of
Directors as independent certified public accountants to audit the financial
statements of the Company for the fiscal year ending December 31, 1996. The
Board of Directors is submitting this matter to a vote of shareholders in
order to ascertain their views. If the appointment of KPMG Peat Marwick LLP
is not ratified at the Meeting, the Board of Directors will reconsider its
action and will appoint auditors for the 1996 fiscal year without further
shareholder action. Further, even if the appointment of auditors is ratified
by shareholder action, the Board of Directors may at any time in the future
in its discretion reconsider the appointment of auditors without submitting
the matter to a vote of shareholders. The Company's audit for fiscal 1995 was
conducted by KPMG Peat Marwick LLP.
A representative of KPMG Peat Marwick LLP is expected to
attend the Meeting and will have the opportunity to make a statement and/or
respond to appropriate questions from shareholders present at the Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR THIS PROPOSAL VI.
COMMITTEES AND BOARD MEETINGS
During the fiscal year ended December 31, 1995, the Board of
Directors held four meetings and acted by unanimous written consent eight
times. Each of the Directors attended more than 75% of the total number of
meetings of the Board of Directors and meetings of the Committees of which
the Director was a member.
Nominees for Directors are selected by the entire Board of
Directors rather than any committee of the Board. The Board of Directors now
has one standing Stock Option and Compensation Committee, which was formed by
the Board of Directors on December 6, 1995 to replace both the Stock Option
Committee and the Compensation Committee. The Board of Directors also has a
standing Audit Committee.
The Stock Option and Compensation Committee, composed of Mr.
Bursky and Mr. Polan, administers the Company's 1990 Stock Option Plan and
establishes the level of compensation to be paid to the executive officers of
the Company and reviews the levels of compensation of senior officers of the
Company's subsidiaries. In addition, if Proposals IV and V are approved by
shareholders, the Stock Option and Compensation Committee will administer the
Company's Executive Compensation Plan and the Company's 1996 Non-Employee
Director Stock Plan. The Stock Option and Compensation Committee was formed
in December 1995 and did not meet in 1995. The former Stock Option Committee
held one meeting in 1995 and the former Compensation Committee held one
meeting in 1995.
<PAGE>22
The Audit Committee, composed of William R. Berkley, Joshua
A. Polan and Mitchell I. Quain, all of whom are independent Directors, makes
recommendations concerning the engagement of independent public accountants,
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, considers audit and non-audit
fees, and reviews the adequacy of the Company's internal accounting controls.
The Audit Committee held one meeting in 1995.
During the fiscal year ended December 31, 1995, members of
the Board of Directors who were not employees of the Company received
directors' fees in the amount of $1,000 for each meeting of the Board of
Directors that they attended. The Company was obligated to reimburse its
Board members for all reasonable expenses incurred in connection with their
attendance at Directors' meetings, but no Director made any claim for
reimbursement.
In the event that Proposal V is approved by the shareholders,
each person who is a Non-Employee Director immediately following the Meeting
shall be granted, not later than June 30, 1996, a number of shares of the
Common Stock determined by dividing (1) $20,000, by (2) the fair market value
of a share of the Common Stock on May 31, 1996. These shares will be granted to
Non-Employee Directors in addition to the cash retainer fees they received for
services rendered during 1995.
IDENTIFICATION OF EXECUTIVE OFFICERS
<TABLE>
<S> <C> <C> <C> <C>
Executive
Position and Officer Term
Name Offices Held Since Expires Age
Andrew M. Bursky Chairman of 1988 1997 39
Board of
Directors
Theodore R. Rieple President 1990 1997 50
Catherine B. James Chief Financial 1989 1997 43
Officer, Executive
Vice President,
Secretary and
Treasurer
Charles J. Martin Vice President, 1990 1997 50
Controller and
Chief Accounting
Officer
BACKGROUND OF EXECUTIVE OFFICERS
The following is a brief account of the business experience
of each of the persons listed in the foregoing table. There are no family
relationships or special understandings pursuant to which such persons have
been elected as officers of the Company. None of the officers have any
<PAGE>23
substantial interest in any matter to be acted upon, other than the election
of Directors in the case of Mr. Bursky, Mr. Rieple and Ms. James.
Mr. Bursky has served as Chairman of the Board of Directors
since July 1988. He was President of the Company from November 1989 to
December 1990. He has served as an executive officer of Interlaken Capital
since May 1980, and is currently serving as a Managing Director of Interlaken
Capital. Mr. Bursky is a director of PCI.
Mr. Rieple has served as President of the Company since
December 1990. From 1984 to November 1990, Mr. Rieple was President, Chief
Executive Officer and a director of Diversey Corp.
Ms. James has served as Chief Financial Officer of the
Company since February 1996, has served as Executive Vice President of the
Company since January 1989 and has served as Secretary and Treasurer of the
Company since December 1989. She was Chief Financial Officer of the Company
from January 1989 until September 1993. Ms. James has been a Managing
Director of Interlaken Capital since January 1990. From 1982 through 1988,
she was employed by Morgan Stanley & Co. Incorporated, serving as a Managing
Director in the corporate finance area during the last two years of her
tenure.
Mr. Martin has served as Vice President, Controller of the
Company since July 1990. He was employed by Interlaken Capital from August
1986 to January 1996, during the last six years of which he served as Vice
President, Finance. In this role, he was responsible for accounting and
general financial administrative functions.
REPORT OF THE STOCK OPTION AND COMPENSATION
COMMITTEE ON EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee of the Board of
Directors establishes the general compensation policies of the Company and
the specific compensation level for the Company's President and the Company's
Chief Financial Officer. The Stock Option and Compensation Committee also
reviews the levels of compensation of senior officers of the Company's
subsidiaries. During 1995, the Stock Option and Compensation Committee was
composed of Andrew M. Bursky, Catherine B. James and Joshua A. Polan.
The Stock Option and Compensation Committee believes that the
compensation of the President of the Company should be heavily influenced by
Company performance, as measured by operating, financial and strategic
objectives. It further believes that Company performance should be viewed
both from a short-term and a long-term perspective. The Committee establishes
the President's salary by considering the salaries of CEO's of
comparably-sized companies and the Company's performance relative to other
distribution businesses as measured by data obtained by the Committee from
publicly available sources, including data with respect to the businesses'
asset utilization, profitability and return on invested capital. The
compensation levels of senior officers of the Company's subsidiaries are set
with a view to aligning compensation with the Company's business objectives
and performance. The Company has not entered into an employment agreement
<PAGE>24
with its President or with most of the executives employed by the Company's
subsidiaries. The Stock Option and Compensation Committee believes it is
especially important, therefore, to use compensation to enable the Company to
attract and reward officers who contribute to the Company's long-term success
by demonstrated, sustained performance. To this end, the Company relies on
cash and individual bonus awards and on equity-based compensation through the
Company's 1990 Stock Option Plan. For 1995, the Committee generally sought to
increase executive salaries to remain competitive with comparable companies.
Stock options are granted to the President, and to other
executives, based on an evaluation of the executives' ability to influence
the Company's long-term growth and profitability. In the case of executives
employed by subsidiaries, the subsidiary's financial performance and
potential future contributions to overall corporate profitability are also
taken into account. During 1995, the Company's President received options to
purchase 51,500 shares of the Common Stock.
STOCK OPTION AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Mr. Bursky, Ms. James and Mr. Polan served on
the Company's Stock Option and Compensation Committee. Mr. Bursky has served
as Chairman of the Board of Directors since 1988 and was President of the
Company from November 1989 to December 1990. Ms. James has served as an
executive officer of the Company since January 1989. During 1995, Mr. Bursky
served on the compensation committee of Fine Host Corporation. William R.
Berkley, the Chairman of the Board of Fine Host Corporation, is a member of
the Company's Board of Directors. See "Transactions with Affiliates" for a
description of certain transactions between the Company and certain other
companies of which Mr. Bursky, Ms. James, Mr. Polan and Mr. Berkley are
officers, directors and/or shareholders.
STOCK OPTION AND COMPENSATION COMMITTEE
Andrew M. Bursky
Catherine B. James
Joshua A. Polan
March 22, 1996
The above report of the Stock Option and Compensation Committee shall not be
deemed incorporated by reference by any general statement incorporating by
reference this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that
the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
<PAGE>25
EXECUTIVE COMPENSATION
The following table sets forth all the cash and non-cash
compensation for each of the last three fiscal years ended December 31, 1995
awarded to or earned by the President of the Company. No other executive
officer of the Company earned more than $100,000 in salary and bonus in any
of the three fiscal years ended December 31, 1995. Mr. Bursky and Ms. James
do not receive any compensation from the Company but are executive officers
of and are compensated by Interlaken Capital, which is party to a services
agreement with the Company pursuant to which Interlaken Capital will receive
a fee of $500,000 during 1996. See "Transactions with Affiliates."
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Awards Compensation
---------------------------------- ------------
Number
of
Securities
Name and Underlying
Principal Position Options All Other
of Executive Officer Year Salary Bonus Granted(#) Compensation
- ---------------------------------------------------------------------------------------------------------------------------------
Theodore R. Rieple, 1995 $213,617 $40,000 51,500 $1,394(1)
President
1994 204,038 10,000 -- 1,534(1)
1993 180,000 5,000 309,000 2,630(1)
------------------------
(1) These amounts represent contributions to the Company's Retirement Savings Plan.
</TABLE>
Mr. Rieple did not receive any other annual compensation,
restricted stock awards, stock appreciation rights, long-term incentive plan
payouts or other compensation for the three fiscal years ended December 31,
1995.
<PAGE>26
The following table sets forth options granted to Mr. Rieple
during 1995:
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION FOR
SECURITIES % OF TOTAL EXERCISE OPTION TERM
UNDERLYING OPTIONS GRANTED OR BASE -----------------------------
NAME OPTIONS GRANTED TO EMPLOYEES PRICE EXPIRATION 5% ($) 10% ($)
---- --------------- --------- ($/SH) DATE ------ -------
------ ----
Theodore R. Rieple 51,500(1) 14.8% $3.45 05/25/2005 $111,755 $283,250
--------------------
(1) These options vest in equal installments on the first three annual anniversaries of the date of grant.
</TABLE>
The following table sets forth the option exercises and the
value of in-the-money unexercised options held by Mr. Rieple at December 31,
1995:
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARS AT IN-THE-MONEY
FY-END(#) OPTIONS/SARS AT FY-END($)
-------------------------------------------------------------------------
---------------- --------------- ------------------ ---------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
- ------------------ ---------------- ------------ ---------------- --------------- ------------------ ---------------------
- ------------------ ---------------- ---------------- --------------- ------------------
Theodore R. Rieple 0 0 257,500 103,000 $1,779,325 $584,010
----------------
(1) Mr. Rieple has been granted options to purchase a total of 309,000 shares of the Common Stock at an exercise price of
$0.97 per share and 51,500 shares of the Common Stock at an exercise price of $3.45. The fiscal year-end closing price of
the Common Stock was $7.88 per share. The amounts in these columns were calculated using the difference between the
exercise price and the fiscal year-end closing price.
</TABLE>
<PAGE>27
COMPANY STOCK PERFORMANCE GRAPH
The graph below compares the cumulative total return on the
Common Stock for the last five years with the yearly cumulative total
shareholder return of the NASDAQ Market Index and the peer group index selected
by the Company. The comparison assumes an investment of $100 each in the Common
Stock, the NASDAQ Market Index and the peer group on December 31, 1990 with
dividends reinvested when they are paid. The companies included in the peer
group are Lawson Products, Inc., Noland Company, Premier Industrial Corporation
and Arden Industrial Products Inc. ("Arden"). The Company has added Arden to
the peer group this year in place of RB&W Corporation, which is no longer a
publicly traded company and for which information regarding shareholder returns
is no longer available to the Company. Arden is a national distributor of
specialty and standard fasteners to the industrial market. The Company has
included Arden because the Company believes that a peer group consisting of
four companies as opposed to three is a better representative sample for
comparative purposes. The Company is not included in the peer group. In the
calculation of the annual cumulative shareholder return of the peer group
index, the shareholder returns of the companies included in the peer group are
weighted according to their stock market capitalizations.
[GRAPHIC OMITTED]
[SEE BELOW FOR TABULAR PRESENTATION OF GRAPHIC]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
Strategic Distribution, Inc. 100.0 100.0 100.0 100.0 512.8 836.9
NASDAQ 100.0 128.4 129.6 155.5 163.3 211.8
Peer Group 100.0 114.3 146.9 161.7 141.3 146.2
</TABLE>
From December 31, 1990 through December 31, 1993, there was
no active market for the Common Stock, and the Common Stock was not regularly
quoted on any national market quotation system. Therefore, the prices of the
Common Stock for 1990 through 1993, as set forth in the Performance Graph,
are based on (i) prices at which the Company issued Common Stock in private
<PAGE>28
sales and (ii) exercise prices of options to purchase the Common Stock
granted by the Company (which exercise prices were deemed to be greater than
or equal to the fair market value of the Common Stock on the date of grant).
Persons controlling the Company were among those purchasing the Common Stock
in many of the private sales. The Common Stock began trading on the Nasdaq
SmallCap Market on March 16, 1994 and began trading on the Nasdaq National
Market on October 6, 1994. The price of the Common Stock on December 31,
1995, as set forth in the Performance Graph, represents the last reported
sale price of the Common Stock on the Nasdaq National Market on December 29,
1995, the last trading date in 1995.
<PAGE>29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information, as of
April 17, 1996, concerning beneficial ownership of the Common Stock
(calculated based on [21,762,050] shares outstanding) by (i) each person
known by the Company to own beneficially more than five percent of the
outstanding shares of the Common Stock, (ii) each director of the Company and
each nominee to become a director, (iii) the executive officer named in the
Summary Compensation Table and (iv) all directors and executive officers of
the Company as a group. Unless otherwise indicated, all amounts reflected in
the table represent shares the beneficial owners of which have sole voting
and investment power.
<TABLE>
<S> <C> <C> <C>
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner(a) Ownership of Class
Common Stock William R. Berkley
Director 9,282,898(b) 40.93%(b)
Common Stock Andrew M. Bursky
Director, Chairman of
the Board 1,090,863(c) 4.92%(c)
Common Stock Arnold W. Donald
Director 1,030 *
Common Stock Catherine B. James
Chief Financial Officer,
Executive Vice
President and
Director 720,820(d) 3.29%(d)
Common Stock George E. Krauter
Director 206,000 *
Common Stock Joshua A. Polan
Director 165,781 *
Common Stock Theodore R. Rieple
President, Director 413,030(e) 1.87%(e)
Common Stock The Soros Group(f) 2,472,000 11.37%
Common Stock Wellington Management
Company(g) 1,288,360(h) 5.93%
Common Stock All executive officers
and directors as a
group (9 persons) 11,464,476(i) 49.48%(i)
* Owns less than 1% of the outstanding shares of Common Stock.
</TABLE>
<PAGE>30
(a) The business address of William R. Berkley and all executive
officers and directors of the Company is 165 Mason Street,
Greenwich, Connecticut 06830. The business addresses of the members
of the Soros Group are set forth in footnote (f) below and the
business address of Wellington Management Company is set forth in
footnote (g).
(b) Includes (i) 417,182 shares of the Common Stock as to which Mr.
Berkley has granted a call option to Mr. Bursky, (ii) 19,649 shares
of the Common Stock which are subject to currently exercisable stock
options held by The Berkley Family Limited Partnership, and (iii)
919,600 shares of the Common Stock which are subject to currently
exercisable stock options held by Interlaken Investment Partners,
L.P. Mr. Berkley is a general partner of The Berkley Family Limited
Partnership and is the sole owner of a company that indirectly
controls Interlaken Investment Partners, L.P.; as such, he may be
deemed to be the beneficial owner of shares of the Common Stock
and/or options to purchase the Common Stock held by those entities.
The number of outstanding shares used for calculating percent of
class is 22,682,203.
(c) Includes (i) 417,182 shares of the Common Stock which Mr. Bursky may
acquire from Mr. Berkley upon exercise of a call option and (ii)
28,295 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Bursky. The number of
outstanding shares used for calculating percent of class is
22,188,431.
(d) Includes 147,800 shares of the Common Stock which are subject to
currently exercisable stock options held by Ms. James. The number
of outstanding shares used for calculating percent of class is
21,890,754.
(e) Includes (i) 257,500 shares of the Common Stock which are subject to
currently exercisable stock options held by Mr. Rieple and (ii)
51,500 shares of the Common Stock which are subject to stock options
held by Mr. Rieple that will become exercisable within 60 days. The
number of outstanding shares used for calculating percent of class
is 22,051,954.
(f) The Soros Group is comprised of George Soros (doing business as Soros
Fund Management), Brahman Partners II, L.P., B-Y Partners, L.P.,
Brahman Capital Corp., Brahman Partners, Peter A. Hochfelder, Robert
J. Sobel and Mitchell A. Kuflik. The business address of Mr. Soros is
888 Seventh Avenue, New York, New York 10106. The business address of
all other members of the Soros Group is 630 Fifth Avenue, New York,
<PAGE>31
New York 10111. Information regarding the Soros Group has been
obtained by the Company from a Schedule 13D filed by the Soros Group
with the Securities and Exchange Commission on or about January 12,
1994.
(g) The business address of Wellington Management Company is 75 State
Street, Boston Massachusetts 02109. Information regarding Wellington
Management Company has been obtained by the Company from a Schedule
13G filed by Wellington Management Company with the Securities and
Exchange Commission on or about January 31, 1996.
(h) Wellington Management Company has shared investment power over
1,288,360 shares of the Common Stock and shared voting power over
629,160 shares of the Common Stock. Wellington Management Company
does not have sole voting power over any shares of the Common Stock.
(i) Includes 1,425,580 shares of the Common Stock which are subject to
options held by executive officers and directors of the Company that
are currently exercisable or will become exercisable within 60 days.
The number of outstanding shares used for calculating percent of
class is 23,168,534.
<PAGE>32
TRANSACTIONS WITH AFFILIATES
The Company has entered into an agreement (the "Services
Agreement") with Interlaken Capital pursuant to which Interlaken Capital will
provide the Company with certain corporate and administrative services during
1996, including but not limited to services relating to accounting and other
financial matters, tax return preparation and internal legal advice. Mr.
Berkley is the sole shareholder of Interlaken Capital. Messrs. Berkley and
Bursky are the sole directors of Interlaken Capital. Mr. Bursky, Ms. James
and Mr. Polan are all employees and executive officers of Interlaken Capital.
The fee to be paid by the Company pursuant to the Services Agreement is
$500,000 plus expenses incurred by Interlaken Capital. Besides providing
services to the Company, Interlaken Capital provides legal, accounting and
other services to companies engaged in such businesses as fire protection,
contract food services, infants' clothing manufacturing and chemical
manufacturing. Ms. James will devote her full attention to the Company in
her capacity as Executive Vice President and Chief Financial Officer. Mr.
Bursky will devote a significant portion of his time to the Company in his
capacity as Chairman. However, the percentage of time Mr. Bursky devotes to
the Company will vary, and will depend upon the demands and growth of the
Company and other business enterprises with which he is involved. Mr. Berkley
and Mr. Polan, as directors of the Company, will devote such time as a
director ordinarily devotes to his duties as a director. The Services
Agreement is effective from March 1, 1996 through December 31, 1996 unless
terminated by either party on 30 days' prior written notice. The terms of the
Services Agreement were approved by the Company's disinterested directors.
On May 12, 1995, the Company acquired all of the outstanding
common stock of American Technical Services Group, Inc. ("ATSG") in exchange
for options to purchase an aggregate of 1,036,708 shares of the Common Stock
at a purchase price of $5.82 per share. The options became exercisable in
whole or in part on November 13, 1995 and terminate on May 12, 2000. The
selling stockholders of ATSG included (i) Interlaken Investment Partners,
L.P., which received options to purchase 919,600 shares of the Common Stock,
(ii) The Berkley Family Limited Partnership, which received options to
purchase 19,649 shares of the Common Stock, (iii) Andrew M. Bursky, who
received options to purchase 28,295 shares of the Common Stock, and (iv)
Catherine B. James, who received options to purchase 44,800 shares of the
Common Stock. Ms. James was Chairman of ATSG and Mr. Bursky was a director of
ATSG at the time of the transaction. Mr. Berkley is the sole owner of a
company that indirectly controls Interlaken Investment Partners, L.P. and is
a general partner of The Berkley Family Limited Partnership. The Company
obtained an opinion from an independent investment bank as to the fairness of
the transaction to the Company's shareholders from a financial point of view.
<PAGE>33
The Company's SafetyMaster subsidiary currently leases space
to Master Protection Corporation ("Master Protection") in offices located in
Billings, Montana and Bismarck, North Dakota. During 1995, SafetyMaster
leased space to Master Protection under the foregoing leases for an aggregate
annual rental of approximately $15,851. It is anticipated that the Company
will pay an aggregate annual rent of $15,839 in 1996. Messrs. Berkley,
Bursky and Polan and Ms. James are shareholders of Master Protection
Holdings, Inc. ("Master Protection Holdings"), the parent of Master
Protection. The Company's current directors own, in the aggregate,
approximately 78% of Master Protection Holdings' outstanding common stock.
Ms. James is the Chairman of Master Protection Holdings and Master Protection
and Messrs. Berkley, Bursky and Polan are directors of Master Protection
Holdings and Master Protection.
In accordance with the agreement pursuant to which the
Company purchased its original safety products distribution business from
Master Protection in 1990, Master Protection is the distributor of record for
all products manufactured by Ansul Fire Protection ("Ansul") and sold by
SafetyMaster in those markets in which SafetyMaster operated at the time of
the purchase. Master Protection has had a long standing relationship with
Ansul and is responsible for negotiating the terms under which SafetyMaster
buys Ansul products and resolving any distribution problems that arise
between the Company and Ansul. During 1995, the Company paid an annual
commission to Master Protection of approximately $65,043 in connection with
the sale of Ansul products, and it is anticipated that the Company will
continue to pay such an annual commission to Master Protection of
approximately $65,000.
The Company has issued a subordinated note due 1998 to Mr.
Krauter in the principal amount of $500,000, bearing interest at the rate of
6% per annum. The Company issued this note on January 4, 1994 in connection
with its acquisition from Mr. Krauter of all of the issued and outstanding
stock of ISA.
The Company believes that the foregoing transactions were on
terms no less favorable to the Company than those available from unaffiliated
parties. In the future, the Company will engage in transactions with
affiliated parties only if they satisfy the foregoing criteria.
<PAGE>34
SHAREHOLDER PROPOSALS
Securities and Exchange Commission regulations permit
shareholders to submit proposals for consideration at annual meetings of
shareholders. Any such proposals for SDI's Annual Meeting of Shareholders to
be held in 1997 must be submitted to SDI on or before December 23, 1996, and
must comply with applicable regulations of the Securities and Exchange
Commission in order to be included in proxy materials relating to that
meeting. Proposals should be sent to: Strategic Distribution, Inc., c/o
Theodore R. Rieple, President, 12136 West Bayaud, Suite 320, Lakewood,
Colorado 80228.
MISCELLANEOUS
A copy of the Company's Annual Report for the year ended
December 31, 1995, as filed with the Securities and Exchange Commission, has
been delivered free of charge to shareholders with this solicitation. A copy
of the Company's Annual Report on Form 10-K, including exhibits if requested,
will be furnished upon the payment of a reasonable fee to cover the Company's
expense in reproducing and mailing same, to each shareholder who mails a
written request therefor, to: Strategic Distribution, Inc., 12136 West
Bayaud, Suite 320, Lakewood, Colorado 80228.
---------------------------
Please complete, date, sign and mail promptly the
accompanying proxy in the postage-paid envelope enclosed for your
convenience. The signing of the proxy will not prevent your attending the
Meeting and voting in person.
Greenwich, Connecticut April 24, 1996
<PAGE>1
Exhibit A
RESOLUTIONS OF THE BOARD OF DIRECTORS
TO AMEND THE COMPANY'S RESTATED CERTIFICATE
OF INCORPORATION
BE IT RESOLVED, that Article Eleventh of the Restated
Certificate of Incorporation of the Corporation be deleted in its
entirety; and be it
FURTHER RESOLVED, that Article Ninth of the Restated
Certificate of Incorporation of the Corporation be amended so as to
read in its entirety as follows:
"NINTH: The Corporation shall indemnify to
the fullest extent permitted under and in accordance with the
laws of the State of Delaware any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of
the fact that he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, trustee, employee
or agent of or in any other capacity with another
corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action,
suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
Expenses incurred in defending a civil or
criminal action, suit or proceeding shall (in the case of any
action, suit or proceeding against a director or officer of
the Corporation) or may (in the case of any action, suit or
proceeding against a trustee, employee or agent) be paid by
the Corporation in advance of the final disposition of such
action, suit or proceeding as authorized by the Board upon
receipt of an undertaking by or on behalf of the indemnified
person to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article.
<PAGE>2
The indemnification and other rights set
forth in this Article shall not be exclusive of any
provisions with respect thereto in the by-laws or any other
contract or agreement between the Corporation and any
officer, director, employee or agent of the Corporation.
Neither the amendment nor repeal of this
Article nor the adoption of any provision of this Certificate
of Incorporation inconsistent with this Article shall
eliminate or reduce the effect of this Article in respect of
any matter occurring before such amendment, repeal or
adoption of an inconsistent provision or in respect of any
cause of action, suit or claim relating to any such matter
which would have given rise to a right of indemnification or
right to receive expenses pursuant to this Article if such
provision had not been so amended or repealed or if a
provision inconsistent therewith had not been so adopted.
No director shall be personally liable to
the Corporation or any stockholder for monetary damages for
breach of fiduciary duty as a director, except for any matter
in respect of which such director (A) shall be liable under
Section 174 of the General Corporation Law of the State of
Delaware or any amendment thereto or successor provision
thereto, or (B) shall be liable by reason that, in addition
to any and all other requirements for liability, he:
(i) shall have breached his duty of
loyalty to the Corporation or its stockholders;
(ii) shall not have acted in good
faith or, in failing to act, shall not have acted in good
faith;
(iii) shall have acted in a manner
involving intentional misconduct or a knowing
violation of law or, in failing to act, shall have
acted in a manner involving intentional misconduct
or a knowing violation of law; or
(iv) shall have derived an
improper personal benefit.
If the General Corporation Law of the State
of Delaware is amended after the date of the filing of this
<PAGE>3
Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of
directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest
extent permitted by the General Corporation Law of the State
of Delaware, as so amended."
<PAGE>1
APPENDIX I
STRATEGIC DISTRIBUTION, INC.
AMENDED AND RESTATED
1990 INCENTIVE STOCK OPTION PLAN
* * *
ARTICLE I
Purpose
The Strategic Distribution, Inc. 1990 Incentive Stock Option
Plan (the "Plan") is intended as an incentive to improve the performance,
encourage the continued employment, and increase the proprietary interest of
certain directors, officers and key employees of Strategic Distribution, Inc.
(the "Company") participating in the Plan. The Plan is designed to grant such
directors, officers and key employees the opportunity to share in the Company's
long-term success through stock ownership and to afford them the opportunity for
additional compensation related to the value of the Company's stock.
The word "Company", when used in the Plan with reference to
employment, shall include subsidiaries of the Company. The word "subsidiary",
when used in the Plan, shall mean any subsidiary corporation of the Company
within the meaning of Section 424(f) of the Internal Revenue Code of 1986, as
amended (the "Code").
It is intended that certain options granted under the Plan and
designated as incentive stock options in the option agreements qualify as
"incentive stock options" under Section 422A of the Code.
For purposes of the Plan, the term "Effective Date" shall mean
September 7, 1990.
<PAGE>2
ARTICLE II
Administration
The Plan shall be administered by a committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board")
from among its members and shall consist of not less than two members thereof,
who at all times have been with respect to the Plan and who are (and shall
remain Committee members only so long as they continue to be) "disinterested
persons" within the meaning of Rule 16b-3 (or any successor rule or regulation)
under the Securities and Exchange Act of 1934.
Subject to the provisions of the Plan, the Committee shall
have sole authority, in its absolute discretion: (a) to determine, subject to
approval of the Board as provided in ARTICLE IV and ARTICLE VI, which of the
eligible Participants (as hereinafter defined) shall be granted options; (b) to
authorize the granting of both incentive stock options and non-qualified stock
options; (c) to determine the times when options shall be granted and the number
of shares to be subject to options; (d) to determine the option price of the
shares subject to each option, which price shall be not less than the minimum
specified in ARTICLE V; (e) to determine the time or times when each option
becomes exercisable, the duration of the exercise period and any other
restrictions on the exercise of options issued hereunder; (f) to prescribe the
form or forms of the option agreements under the Plan (which forms shall be
consistent with the terms of the Plan but need not be identical and may contain
such terms as the Committee may deem appropriate to carry out the purposes of
the
<PAGE>3
Plan); (g) to determine the nature of any rights and restrictions to be
imposed on shares subject to options issued hereunder; (h) to adopt, amend and
rescind such rules and regulations as, in its opinion, may be advisable in the
administration of the Plan; (i) to construe and interpret the Plan, the option
agreements under the Plan and the rules and regulations adopted from time to
time, if any; and (j) to make all other determinations deemed necessary or
advisable for the administration of the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on all
optionees.
ARTICLE III
Stock
The stock to be subject to options granted under the Plan
shall be shares of authorized but unissued common stock, par value $0.10 (the
"Stock"), of the Company, or previously issued shares of such Stock reacquired
by the Company and held in its treasury, as determined by the Board. Under the
Plan, the total number of shares of Stock which may be purchased pursuant to
options hereunder shall not exceed, in the aggregate, 2,000,000 shares, except
as such number of shares shall be adjusted in accordance with the provisions
of ARTICLE X hereof. Options for no more than 100,000 shares of Stock may be
granted to any individual optionee during any calendar year that the Plan is
in effect, except as such number shall be adjusted in accordance with the
provisions of ARTICLE X hereof.
Each option granted under the Plan shall be evidenced by an
option agreement between the Company and the optionee
<PAGE>4
containing such provisions as may be determined by the Committee, but shall be
subject to the following terms and conditions:
(a) Each share of Stock purchased through the exercise
of an option shall be paid for in full at the time of the exercise; and
(b) Each option shall become exercisable by the optionee in
accordance with any vesting schedule established by the Committee pursuant to
ARTICLE VI of the Plan.
The number of shares of Stock available for grant of options
under the Plan shall be decreased by the sum of the number of shares with
respect to which options have been issued and are then outstanding and the
number of shares issued upon exercise of options. In the event that any
outstanding option for any reason expires, lapses, or is cancelled prior to the
end of the period during which options may be granted, the shares of Stock
called for by the unexercised portion of such option may again be subject to an
option under the Plan.
ARTICLE IV
Eligibility of Participants
Subject to ARTICLE VII, directors, officers and employees of
the Company, together with consultants and advisers to the Company, who have
been selected by the Committee as participants (collectively referred to as
"Participants" and individually as a "Participant") shall be eligible to receive
grants of options under the Plan; provided, however, that notwithstanding any
other provision of the Plan to the contrary, no director of the Company, and no
person who is not an officer
<PAGE>5
or employee of the Company, shall be eligible to receive incentive stock
options. Participation in the Plan shall be limited to eligible Participants
who have entered into option have a right to be selected for participation in
the Plan. agreements with the Company. No Participant, however, shall at any
time have a right to be selected for participation in the Plan.
ARTICLE V
Option Price
The option price of each option granted under the Plan shall
be determined by the Committee; provided, however, that in the case of each
incentive stock option granted under the Plan, the option price shall not be
less than the fair market value at the time the option is granted. In no event
shall the option price of any option be less than the par value per share of
Stock on the date an option is granted.
At any time when the Stock is quoted on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ"), the
fair market value shall be deemed to be the mean between the last quoted bid and
asked prices on NASDAQ on the date immediately preceding the date on which the
option is granted, or, if not quoted on that day, then on the last preceding
date on which such stock is quoted. If the Stock is listed on one or more
national securities exchanges, the fair market value shall be deemed to be the
mean between the highest and lowest sale prices reported on the principal
national securities exchange on which such stock is listed and traded on
<PAGE>6
the date immediately preceding the date on which the option is granted, or, if
there is no such sale on that date, then on the last preceding date on which
such a sale was reported. If the Stock is not quoted on NASDAQ or listed on an
exchange, or representative quotes are not otherwise available, the fair
market value of the Stock shall mean the amount determined by the Committee to
be the fair market value based upon a good faith attempt to value the Stock
accurately and computed in accordance with applicable regulations of the
Internal Revenue Service.
ARTICLE VI
Terms and Conditions of Options
The Committee shall determine the dates after which options
may be exercised, in whole or in part. If an option is exercisable in
installments, installments or portions thereof which are exercisable and not
exercised shall remain exercisable.
Any other provision of the Plan notwithstanding and subject to
ARTICLE VII, no option shall be granted after the date which is ten years from
the Effective Date (the "Termination Date") nor shall any option, if granted, be
exercised after the date which is ten years after the option is granted.
Options granted hereunder may provide that if prior to the
Termination Date an optionee shall cease to be employed by the Company for any
reason other than death, disability or for cause, the option will remain
exercisable by the optionee for a period not extending beyond three months after
the date of cessation of employment, but in no event later than the Termination
Date, to the extent it was exercisable at the time of
<PAGE>7
cessation of employment. Options granted hereunder may provide that if prior
to the Termination Date an optionee shall cease to be employed by the Company
for reasons of death or disability, the option will remain exercisable by the
optionee or, in the event of his death, by the person or persons to whom the
optionee's rights under the option would pass by will or the applicable laws
of descent and distribution for a period not extending beyond one year after
the date of death or disability, but in no event later than the Termination
Date, to the extent it was exercisable at the time of death or disability.
Options granted hereunder may provide that if prior to the Termination Date an
optionee shall cease to be employed by the Company by reason of termination of
employment by the Company for cause, or by voluntary termination at a time
when the Company is entitled to terminate such optionee's employment for
cause, the option shall terminate immediately. For purposes of the Plan, the
Company shall have "cause" to terminate an optionee's employment hereunder
upon (i) the commission by the optionee of a proven act of fraud or
embezzlement against the Company, (ii) the engaging by the optionee in willful
misconduct or gross negligence which is demonstrably and materially injurious
to the Company, monetarily or otherwise, (iii) failure of the optionee to
render services to the Company in accordance with such optionee's duties as an
employee of the Company or (iv) the optionee being convicted of a misdemeanor
involving an act of moral turpitude or a felony.
<PAGE>8
For purposes of the Plan, in the case of a Participant who is
a director, references to employment herein shall be deemed to refer to such
director's service to the Company in such capacity.
Notwithstanding the foregoing, stock options granted hereunder
shall provide that no option shall be exercisable after the optionee's cessation
of employment with the Company if at the time of exercise the By-Laws of the
Company limit the ownership of common stock of the Company to selected persons,
including employees of the Company.
ARTICLE VII
Special Provisions Applicable
Only to Incentive Stock Options
To the extent the aggregate fair market value (determined at
the time the option is granted) of the Stock with respect to which incentive
stock options may be exercisable for the first time by an optionee during any
calendar year (under this Plan and any other stock option plan of the Company
and any parent or subsidiary thereof) exceeds $100,000, such incentive stock
options shall be treated as options which are non-qualified stock options.
No incentive stock option may be granted to an individual who,
at the time the option is granted, owns directly, or indirectly within the
meaning of Section 424(d) of the Code, stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or of any
parent or subsidiary thereof, unless such option (i) has an option price of at
least 110% of the fair market value of the Stock on the date
<PAGE>9
of the grant of such option; and (ii) such option by its terms cannot be
exercised more than five years after the date it is granted.
Each optionee who receives an incentive stock option must
agree to notify the Company in writing immediately after the optionee makes a
disqualifying disposition of any Stock acquired pursuant to the exercise of an
incentive stock option. A disqualifying disposition is any disposition
(including any sale) of such Stock before the later of (a) two years after the
date the optionee was granted the incentive stock option or (b) one year after
the date the optionee acquired Stock by exercising the incentive stock option.
ARTICLE VIII
Payment for Shares
Payment for shares of Stock acquired pursuant to an option
granted hereunder shall be made in full, upon exercise of the options (i) in
immediately available funds in United States dollars, by certified or bank
cashier's check, (ii) by surrender to the Company of shares of Stock, or (iii)
by a combination of cash and shares of Stock. For purposes of this ARTICLE VIII,
the shares of Stock surrendered in payment of the option price shall be valued
as of the exercise date of the option. The Company in its discretion, and
subject to any reasonable procedures required by its registrars and transfer
agents, may credit or apply shares of Stock held by the optionee and identified
to the Company toward payment of the applicable option exercise price without
actual surrender of the certificate representing such shares and
<PAGE>10
may cause to be issued to the optionee certificates for shares representing
the balance of the shares to be issued upon exercise of the option. Payment
in full shall include payment of any amounts required under paragraph (b) of
ARTICLE XIX.
ARTICLE IX
Non-Transferability of Option Rights and Stock
During the lifetime of the optionee, the option shall be
exercisable only by the optionee. No option shall be transferable, except by
will or the laws of descent and distribution.
ARTICLE X
Adjustment for Recapitalization, Merger, Etc.
The aggregate number of shares of Stock which may be purchased
or acquired pursuant to options granted hereunder, the maximum number of shares
of Stock for which Options may be granted to any individual optionee during any
calendar year, the number of shares of Stock covered by each outstanding option
and the price per share thereof in each such option shall be appropriately
adjusted for any increase or decrease in the number of outstanding shares of
Stock resulting from a stock split or other subdivision or consolidation of
shares of Stock or for other capital adjustments or payments of stock dividends
or distributions or other increases or decreases in the outstanding shares of
Stock effected without receipt of consideration by the Company. Any adjustment
shall be conclusively determined by the Committee.
<PAGE>11
If the Company shall be the surviving corporation in any
merger or reorganization or other business combination, any option granted
hereunder shall cover the securities or other property to which a holder of the
number of shares of Stock covered by the unexercised portion of the option would
have been entitled pursuant to the terms of the merger. Upon any merger or
reorganization or other business combination in which the Company shall not be
the surviving corporation, or a dissolution or liquidation of the Company, or a
sale of all or substantially all of the Company's assets, all outstanding
options shall terminate, subject to the right of the surviving or resulting
corporation to grant the Company substitute options to purchase its shares on
such terms and conditions, both as to the number of shares and otherwise, which
the Committee shall deem appropriate.
Stock option agreements under the Plan may, at the discretion
of the Committee, provide that upon stockholder approval of a merger,
reorganization or other business combination, whether or not the Company is the
surviving corporation, or a sale of all or substantially all of the Company's
assets, all unmatured installments of the stock option shall vest and become
immediately exercisable in full.
The foregoing adjustments and the manner of application of the
foregoing provisions, including the issuance of any substitute options, shall be
determined by the Committee in its sole discretion. Any such adjustment may
provide for the elimination of any fractional share which might otherwise become
subject to an option.
<PAGE>12
ARTICLE XI
No Obligation to Exercise Option
Granting of an option shall impose no obligation on the
recipient to exercise such option.
ARTICLE XII
Use of Proceeds
The proceeds received from the sale of Stock pursuant to the
Plan shall be used for general corporate purposes.
ARTICLE XIII
Rights as a Stockholder
An optionee shall have no rights as a stockholder with respect
to any share covered by his option until such person shall have become the
holder of record of such share, and such person shall not be entitled to any
dividends or distributions or other rights in respect of such share for which
the record date is prior to the date on which such person shall have become the
holder of record thereof, except as otherwise provided in ARTICLE X.
ARTICLE XIV
Employment Rights
No provision in the Plan or in any option granted hereunder
shall confer on any optionee any right to continue in the employ of the Company,
or to interfere in any way with the right of the Company to terminate the
optionee's employment at any time.
<PAGE>13
ARTICLE XV
Compliance with Law
The Company is relieved from any liability for the
non-issuance or non-transfer or any delay in the issuance or transfer of any
shares of Stock subject to options under the Plan which results from the
inability of the Company to obtain, or from any delay in obtaining, from any
regulatory body having jurisdiction or authority, any requisite approval to
issue or transfer any such shares if counsel for the Company deems such approval
necessary for lawful issuance or transfer thereof.
Each option granted under the Plan is subject to the
requirement that if at any time the Board determines, in its discretion, that
the listing, registration or qualification of shares of Stock issuable upon
exercise of options is required by any securities exchange or under any state or
Federal law, or that the consent or approval of any governmental regulatory body
is necessary or desirable as a condition of, or in connection with, the grant of
options or the issuance of shares of Stock, no shares of Stock shall be issued,
in whole or in part, unless such listing, registration, qualification, consent
or approval has been effected or obtained free of any conditions or with such
conditions as are acceptable to the Board.
In the event the disposition of shares of Stock acquired
pursuant to the Plan is not covered by a then-current registration statement
under the Securities Act of 1933, as amended, the shares of Stock shall be
restricted against transfer to the extent required by the Securities Act of
1933, as amended,
<PAGE>14
or regulations thereunder, and the Board may require the optionee (or
transferee pursuant to ARTICLE IX), as a condition precedent to receipt of
such shares of Stock, to represent in writing that the shares of Stock
acquired by such person are acquired for investment only and not with a view
to distribution. Appropriate legends may be placed on the stock certificates
evidencing shares issued upon exercise of options to reflect any transfer
restrictions.
ARTICLE XVI
Cancellation of Options
The Committee, in its discretion, may, with the consent of any
optionee, cancel any outstanding option hereunder.
ARTICLE XVII
Effective Date; Expiration Date of Plan
The Plan shall become effective upon adoption by the Board.
The expiration date of the Plan, after which no option may be granted hereunder,
shall be the tenth (10th) anniversary of the adoption of the Plan by the Board.
ARTICLE XVIII
Amendment or Discontinuance of Plan
The Board may terminate, amend or modify the Plan in its sole
discretion at any time or from time to time after the Effective Date.
Notwithstanding the preceding provisions of this ARTICLE XVIII, no such action
shall, without shareholder approval, increase the number of shares as to which
options may be granted or change the class of employees eligible to receive
options under the new Plan.
<PAGE>15
ARTICLE XIX
Miscellaneous
(a) Options shall be evidenced by option agreements (which
need not be identical) in such forms as the Committee may from time to time
approve. Such agreements shall conform to the terms and conditions of the Plan
and may provide that the grant of any option under the Plan and Stock acquired
pursuant to the Plan shall also be subject to such other conditions (whether or
not applicable to the option or Stock received by any other optionee) as the
Committee determines appropriate, including, without limitation, provisions to
assist the optionee in financing the purchase of Stock through the exercise of
options, provisions for the forfeiture of, or restrictions on, resale or other
disposition of shares under the Plan, provisions giving the Company the right to
repurchase shares acquired under the Plan in the event the participant elects to
dispose of such shares, and provisions to comply with Federal and state
securities laws and Federal and state income tax withholding requirements.
(b) The Company may, in its discretion, require that an
optionee pay to the Company, at the time of exercise, such amount as the Company
deems necessary to satisfy its obligations to withhold Federal, state, or local
income or other taxes incurred by reason of the exercise or the transfer of
shares thereupon.
(c) Each optionee shall file with the Committee a written
designation of one or more persons as beneficiary, who shall be entitled to
exercise options which are exercisable, if
<PAGE>16
any, or to receive shares of Stock distributable, if any, under the Plan upon
the optionee's death. An optionee may, from time to time, revoke or change his
beneficiary designation without the consent of any prior beneficiary by filing
a new designation with the Committee. The last such designation received by
the Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the optionee's death, and in no event shall it be effective
as of a date prior to such receipt.
(d) If the Committee shall find that any person to whom any
amount is payable under the Plan is unable to care for his affairs because of
illness or accident, or is a minor, or has died, then any payment due to such
person or his estate (unless a prior claim therefor has been made by a duly
appointed legal representative), may, if the Committee so directs the Company,
be paid to his spouse, child, relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee to be a
proper recipient on behalf of such person otherwise entitled to payment. Any
such payment shall be a complete discharge of the liability of the Committee and
the Company therefor.
(e) No member of the Committee shall be personally liable by
reason of any contract or other instrument executed by such member or on his
behalf in his capacity as a member of the Committee nor for any mistake of
judgment made in good faith, and the Company shall indemnify and hold harmless
each member of the
<PAGE>17
Committee and each other employee, officer or director of the Company to whom
any duty or power relating to the administration or interpretation of the Plan
may be allocated or delegated, against any cost or expense (including counsel
fees) or liability (including any sum paid in settlement of a claim) arising
out of any act or omission to act in connection with the Plan unless arising
out of such person's own fraud or bad faith; provided, however, that approval
of the Board shall be required for the payment of any amount in settlement of
a claim against any such person. The foregoing right of indemnification shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Company's Certificate of Incorporation or By-Laws,
as a matter of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
(f) The Plan shall be governed by and construed in accordance
with the internal laws of the State of Delaware without reference to the
principles of conflicts of law thereof.
(g) No provision of the Plan shall require the Company, for
the purpose of satisfying any obligations under the Plan, to purchase assets or
place any assets in a trust or other entity to which contributions are made or
otherwise to segregate any assets, nor shall the Company maintain separate bank
accounts, books, records or other evidence of the existence of a segregated or
separately maintained or administered fund for such purposes. Optionees shall
have no rights under the Plan other than as unsecured general creditors of the
Company, except that
<PAGE>18
insofar as they may have become entitled to payment of additional compensation
by performance of services, they shall have the same rights as other employees
under general law.
(h) Each member of the Committee and each member of the Board
shall be fully justified in relying, acting or failing to act, and shall not be
liable for having so relied, acted or failed to act in good faith, upon any
report made by the independent public accountant of the Company and upon any
other information furnished in connection with the Plan by any person or persons
other than such member.
(i) Except as otherwise specifically provided in the relevant
plan document, no payment under the Plan shall be taken into account in
determining any benefits under any pension, retirement, profit-sharing, group
insurance or other benefit plan of the Company.
(j) The expenses of administering the Plan shall be borne by
the Company.
(k) Masculine pronouns and other words of masculine gender
shall refer to both men and women.
<PAGE>1
APPENDIX II
STRATEGIC DISTRIBUTION, INC.
EXECUTIVE COMPENSATION PLAN
(As proposed to be adopted)
I. PURPOSE
The purpose of the Plan is to provide management employees of the Company and
its Subsidiaries with long-term, equity-based incentives to maximize the equity
value of the Company.
II. DEFINITIONS
"Bonus Award" means the bonus award granted to a Participant, as determined by
the Committee.
"Bonus Pool" means the aggregate amount of Bonus Awards payable to employees of
a Participating Employer in respect of a Plan Year.
"Committee" means the committee selected by the Board of Directors of the
Company to administer the Plan, consisting of at least three individuals, each
of whom is a "disinterested person" within the meaning of Rule 16b-3
promulgated under the Exchange Act.
"Common Stock" means common stock, $0.10 par value per share, of Strategic
Distribution, Inc.
"Company" means Strategic Distribution, Inc., a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Long-Term Disability" means the inability of the Participant to substantially
perform his or her duties to the Company by reason of physical or mental
disability, as determined by the Committee in its reasonable discretion.
"Participant" means any management employee of a Participating Employer
selected by the Committee to participate in the Plan.
"Participating Employers" means the Company and the Subsidiaries.
"Performance Goals" means the performance goals set for each Participating
Employer and/or each Participant by the Committee.
"Plan" means the Strategic Distribution, Inc. Executive Compensation Plan.
<PAGE>2
"Plan Year" means a calendar year during which the Plan is in effect.
"Subsidiary" means each subsidiary corporation of the Company designated by the
Committee to participate in the Plan.
III. ELIGIBILITY; SELECTION OF PARTICIPANTS
All management employees of the Participating Employers shall be eligible to
participate in the Plan. Participants for each Plan Year shall be selected by
the Committee from among the eligible employees. No employee shall at any time
have the right to be selected as a Participant nor, having been selected as a
Participant for one Plan Year, to be selected as a Participant in any other
Plan Year.
IV. ADMINISTRATION
Except as otherwise provided herein, full power and authority to construe,
interpret, and administer the Plan shall be vested in the Committee. The
Committee may at any time adopt such rules, regulations, policies, or practices
which it determines to be necessary or appropriate for the administration of,
or the performance of its responsibilities under, the Plan. The Committee may
at any time amend, modify, suspend, or terminate such rules, regulations,
policies, or practices.
V. DETERMINATION OF BONUS AWARDS
The Committee will annually approve Performance Goals and Bonus Pools for each
Participating Employer. The Committee will also establish formulas and criteria
for calculating Bonus Awards for each Participant based on achievement of
Performance Goals. The Committee shall determine the level of attainment of
Performance Goals for each Participant and the Bonus Awards to be paid to each
Participant for each Plan Year.
VI. PAYMENT OF BONUS AWARDS; VESTING
Payment of Bonus Awards may be made in the form of cash or shares of Common
Stock, as determined by the Committee. The date of payment, as well as the
per-share price at which the portion of a Bonus Award payable in Common Stock
shall be converted into Common Stock, shall be determined by the Committee.
Such per share price shall be the mean between the last quoted bid and ask
prices reported for the Common Stock on the NASDAQ National Market System on
the date immediately preceding the date on which such Bonus Award is made or,
if prices for the Common Stock are not quoted on such date, then on the last
preceding date on which such prices were quoted.
The cash portion of any Bonus Awards shall be vested upon payment. The portion
of any Bonus Awards payable in Common Stock may be deferred and subject to
vesting conditions and/or issued and subject to transfer restrictions and
<PAGE>3
forfeiture, as determined by the Committee.
Except as described in Article VIII below, in order to be eligible for payment
of a Bonus Award for any year, a Participant must be actively employed by a
Participating Employer on the date such payment is scheduled to be made.
VII. SHAREHOLDER APPROVAL; REGULATORY RESTRICTIONS
The Plan is subject to shareholder approval at the Company's annual meeting of
shareholders in May, 1996.
No more than 500,000 shares of Common Stock may be issued under the Plan.
Any Participant subject to the restrictions of Section 16(b) of the Exchange
Act may not sell those shares of Common Stock constituting a portion of his or
her Bonus Award for at least six months following the final determination by
the Committee of the amount of such Bonus Award, and the number of such shares
of Common Stock.
VIII. TERMINATION OF EMPLOYMENT
In the event of termination of a Participant's employment with a Participating
Employer by reason of death or Long-Term Disability after the end of a Plan
Year and before the payment of a Bonus Award with respect to such Plan Year,
such Bonus Award shall be paid to the Participant on the date specified by the
Committee. In the event of a Participant's death, such payment shall be made to
the Participant's designated beneficiary, or if there is none living, to the
estate of the Participant.
In the event of a Participant's termination of employment with a Participating
Employer for any reason other than death or Long-Term Disability, such
Participant shall have no right to any unpaid Bonus Awards, unless the
Committee specifically determines that such amounts are to be paid.
The portion of any Bonus Awards payable in shares of Common Stock which either
have not been issued or have not vested as of the date of any termination of a
Participant's employment shall be forfeited upon such termination, unless the
Committee specifically provides otherwise.
<PAGE>4
IX. REORGANIZATION OR DISCONTINUANCE
The obligations of the Company under the Plan shall be binding upon any
successor corporation or organization resulting from merger, consolidation or
other reorganization of the Company, or upon any successor corporation or
organization succeeding to substantially all of the assets and business of the
Company. The Company will make appropriate provision for the preservation of
Participants' rights under the Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.
X. NON-ALIENATION OF BENEFITS
A Participant may not assign, sell, encumber, transfer or otherwise dispose of
any rights or interests under the Plan except by will or the laws of descent
and distribution. Any attempted disposition in contravention of the preceding
sentence shall be null and void.
XI. NO CLAIM OF RIGHT UNDER THE PLAN
No employee or other person shall have any claim or right to be selected as a
Participant under the Plan. Neither the Plan nor any action taken pursuant to
the Plan shall be construed as giving any employee any right to be retained in
the employ of any Participating Employer.
XII. TAXES
The Company shall deduct from all amounts paid under the Plan all federal,
state, local and other taxes required by law to be withheld with respect to
such payments.
XIII. PAYMENTS TO PERSONS OTHER THAN THE PARTICIPANT
If the Committee shall find that any person to whom any amount is payable under
the Plan is unable to care for his or her affairs because of illness or
accident, or is a minor, or has died, then any payment due to such person or
his or her estate (unless a prior claim therefore has been made by a duly
appointed legal representative) may, if the Committee so directs, be paid to
his or her spouse, a child, a relative, an institution maintaining or having
custody of such person, or any other person deemed by the Committee, in its
sole discretion, to be a proper recipient on behalf of such person otherwise
entitled to payment. Any such payment shall be a complete discharge of the
liability of the Company therefor.
<PAGE>5
XIV. NO LIABILITY OF COMMITTEE MEMBERS
No member of the Committee shall be personally liable by reason of any contract
or other instrument related to the Plan executed by such member or on his or
her behalf in his or her capacity as a member of the Committee, nor for any
mistake made in good faith, and the Company shall indemnify and hold harmless
each employee, officer, or director of the Company to whom any duty or power
relating to the administration or interpretation of the Plan may be allocated
or delegated, against any cost or expense (including legal fees) or liability
(including any sum paid in settlement of a claim with the approval of the Board
of Directors) arising out of any act or omission to act in connection with the
Plan unless arising out of such person's own fraud or bad faith.
XV. TERMINATION OR AMENDMENT OF THE BONUS PLAN
The Committee may amend, suspend or terminate the Bonus Plan at any time,
provided that no such action may increase the total number of shares of Common
Stock which may be granted under the Bonus Plan without the approval of the
Company's shareholders.
XVI. UNFUNDED PLAN
Participants shall have no right, title, or interest whatsoever in or to any
investments which the Company may make to aid it in meeting its obligations
under the Plan. Notwithstanding anything contained herein to the contrary, to
the extent that any person acquires a right to receive payments from the
Company under the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
The Plan is not intended to be subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). To the extent the Plan is
determined to be so subject, it is intended to constitute a "plan which is
unfunded and is maintained by the employer primarily for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees," as such phrase is used in ERISA, and the terms of the
Plan shall be interpreted consistent with such intent.
XVII. RESTRICTIONS
The Committee shall have the right to impose such conditions and restrictions
on grants of Bonus Awards as it deems appropriate. Without limitation, the
Committee may provide that Bonus Awards will be granted only to eligible
persons who have entered into appropriate agreements, approved by the
Committee, relating to non-competition, non-solicitation of customers and/or
employees, protection of confidential information, and other matters that the
<PAGE>6
Committee deems appropriate. Such agreements need not be identical in scope,
duration or content, and may provide that Participants who violate such
restrictions will be required to pay back to the Company the value of all or a
portion of any Bonus Awards previously paid to the Participant under the Plan.
XVIII. GOVERNING LAW
The terms of the Plan and all rights thereunder shall be governed by and
construed in accordance with the laws of the state of Delaware, without
reference to principles of conflict of laws.
XIX. EFFECTIVE DATE
The effective date of the Plan is January __, 1996.
<PAGE>1
APPENDIX III
Strategic Distribution, Inc.
1996 Non-Employee Director Stock Plan
(As proposed to be adopted)
1. PURPOSE. This 1996 Non-Employee Director Stock Plan (the "Plan") is
intended to promote the interests of Strategic Distribution, Inc. (the
"Company") by promoting ownership of Company stock by the non-employee members
of the Company's Board of Directors (the "Board").
2. SHARES TO BE GRANTED. Under the Plan, shares of Common Stock, par
value $.10, of the Company ("Common Stock") are granted to non-employee members
of the Board ("Non-Employee Directors") on an annual basis. The number of
shares of Common Stock granted is determined in each instance in accordance
with the terms of the Plan.
3. AVAILABLE SHARES. The total number of shares of Common Stock to be
granted shall not exceed __________, subject to adjustment in accordance with
Section 10 hereof. Shares subject to the Plan are authorized but unissued
shares or shares that were once issued and subsequently reacquired by the
Company.
4. ADMINISTRATION. The Plan shall be administered by the Compensation
and Stock Option Committee of the Board (the "Committee"). The Committee shall,
subject to the provisions of the Plan and Section 13 hereof in particular, have
the power to construe the Plan and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem desirable.
5. ELIGIBILITY AND LIMITATIONS. Shares of Common Stock shall be
granted pursuant to the Plan only to Non-Employee Directors. Participation in
the Plan is mandatory.
6. FAIR MARKET VALUE. For purposes of the Plan, the Fair Market Value
of a share of Common Stock on any date shall be the mean of the closing bid and
asked questions in the over-the-counter market on such date, as reported by the
National Association of Securities Dealers, through NASDAQ. In the event the
shares are listed on any exchange or on the NASDAQ National Market System, the
Fair Market Value shall be the closing price on such exchange or in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. through NASDAQ, on such date or, if there are no sales on such
date, the mean of the bid and asked price for the shares on such exchange or in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc., through NASDAQ, at the close of business on such
date.
<PAGE>2
7. GRANT OF SHARES. (a) Not later than June 30, 1996, each Non-Employee
Director shall be granted without further action by the Board a number of
shares of Common Stock determined by dividing (i) $20,000, by (ii) the Fair
Market Value of a share of Common Stock on May 31, 1996. Such shares shall be
granted in addition to any cash retainer fees which were paid to Non-Employee
Directors for services rendered during 1995.
(b) Not later than 30 days after the last day of each
calendar year commencing with calendar year 1996, each Non-Employee Director
shall be granted without further action by the Board a number of shares of
Common Stock determined by dividing (i) the Non-Employee Director's retainer
fee for such calendar year (as set periodically by the Board), net of all
federal, state and local withholding taxes, if any, and any other applicable
payroll deductions, by (ii) the Fair Market Value of a share of Common Stock on
the last day of such calendar year. Only whole shares shall be issued; any
fractional amounts shall be paid in cash. The grant of shares and cash made
pursuant to this Section 7(b) shall be in lieu of any cash retainer fees to
which Non-Employee Directors would otherwise be entitled for such calendar
year.
8. SHAREHOLDER APPROVAL. Anything in the Plan to the contrary
notwithstanding, the effectiveness of the Plan and of the grant of any shares
hereunder is in all respects subject to, and the Plan and any grant of shares
under it shall be of no force and effect unless and until, the approval of the
Plan by an affirmative vote of a majority of the Company's shares present in
person or by proxy and entitled to vote at a meeting of stockholders at which
the Plan is presented for approval. In the event that such approval is not
received at such meeting, then the Plan and any grants of shares shall be null
and void.
9. LEGENDS. The certificates representing shares granted under the
Plan shall carry such appropriate legends, and such written instructions shall
be given to the Company's Transfer Agent, as may be deemed necessary or
advisable by counsel to the Company in order to comply with the requirements of
the Securities Act of 1933 or any state securities laws.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER MATTERS. In
the event that the outstanding shares of Common Stock are changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, recapitalization or reclassification, or in the event of a stock
split, combination of shares or dividends payable in capital stock, automatic
adjustment shall be made in the number and kind of available shares set forth
in Section 3 hereof.
11. RESTRICTIONS ON ISSUANCE OF SHARES. Any other provision of this
Plan notwithstanding, the Company shall have no obligation to deliver any
certificate or certificates for shares until the following conditions have been
satisfied:
(i) The shares to be granted are at the time of the issuance of
such shares effectively registered under applicable Federal
and state securities acts as now in force or hereafter
amended; or
(ii) Counsel for the Company shall have determined that such
shares are exempt from registration under Federal and state
securities acts as now in force or hereafter amended;
and the Company has complied with all applicable laws and regulations,
including without limitation all regulations required by any
stock exchange upon which the Common Stock is then listed.
The Company shall use its best efforts to bring about compliance with
the above conditions within a reasonable time, except that the Company shall be
under no obligation to cause a registration statement or a post-effective
amendment to any registration statement to be prepared at its expense solely
for the purpose of covering the issuance of shares under the Plan.
12. REPRESENTATIONS. The Company may require any Non-Employee Director
to deliver written warranties and representations upon delivery of shares that
are necessary to show compliance with Federal and state securities laws
including to the effect that an acquisition of shares under the Plan is made
for investment and not with a view to distribution (as that term is used in the
Securities Act of 1933).
13. TERMINATION AND AMENDMENT OF PLAN. The Board may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable, provided, however, that (i) the Board may not, without approval by
the affirmative vote of the holders of a majority of the shares present in
person or by proxy and entitled to vote at a meeting of stockholders, increase
the maximum number of shares that may be granted under the Plan, and (ii) the
provisions of Sections 5 and 7 of the Plan shall in no event be amended more
than once every six months other than to comport with changes in the Internal
Revenue Code, the Employee Retirement Income Security Act of 1974, or the rules
thereunder.
<PAGE>3
STRATEGIC DISTRIBUTION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS, MAY 24, 1996
The undersigned stockholder(s) of Strategic Distribution, Inc. (the
"Company") hereby appoints Andrew M. Bursky, Catherine B. James and William L.
Mahone (collectively, the "Proxies"), and each or either of them, the true and
lawful agents and attorneys-in-fact for the undersigned, with power of
substitution, to attend the meeting and to vote the stock owned by or
registered in the name of the undersigned, as instructed below, at the Special
Meeting of Stockholders to be held at the Greenwich Harbor Inn, 500 Steamboat
Road, Greenwich, Connecticut on May 24, 1996 at 9:00 a.m. local time, and at
any adjournments thereof, for the transaction of the following business:
[ X ] PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL PROPOSALS
PROPOSAL I. Please indicate your vote for the election of Directors.
The nominees are William R. Berkley, Andrew M. Bursky, Arnold
W. Donald, Catherine B. James, George E. Krauter, Joshua A.
Polan, Mitchell I. Quain and Theodore R. Rieple.
Election of Directors FOR [ ] WITHHELD [ ]
For all nominees, except those entered below:
-------------------------------------------------------
PROPOSAL II. To approve the proposed amendment to the Restated
Certificate of Incorporation (the "Certificate of
Incorporation") that (A) provides for the advance payment
by the Company of expenses incurred by a director,
officer, employee or agent of the Company in defending an
action, suit or proceeding and (B) provides that no
subsequent amendment or repeal of the Certificate of
Incorporation shall eliminate or reduce the right of any
such director, officer, employee or agent to
indemnification in respect of any matter occurring before
such amendment or repeal.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL III. To approve the proposed amendment to the Company's
1990 Incentive Stock Option Plan that makes non-employee
consultants and advisers to the Company eligible to
receive grants of options.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL IV. To approve the adoption of the Company's Executive
Compensation Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE>4
PROPOSAL V. To approve the adoption of the Company's 1996
Non-Employee Director Stock Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
PROPOSAL VI. To ratify the appointment of KPMG Peat Marwick LLP,
Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending December 31, 1996.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
WHEN PROPERLY EXECUTED, THE PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED. IF YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS, JUST SIGN BELOW. YOU NEED NOT MARK ANY BOXES. IF NO
SPECIFICATION IS MADE, THE PROXIES INTEND TO VOTE "FOR" EACH PROPOSAL AND IN
THEIR DISCRETION FOR ANY OTHER MATTERS COMING BEFORE THE MEETING. THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH PROPOSAL.
The undersigned acknowledges receipt of the Notice of Special Meeting of
Stockholders to be held on May 24, 1996 and the Proxy Statement dated April 24,
1996.
Please sign exactly as your name
appears hereon. Joint owners should
each sign. When signing as attorney,
executor, trustee or guardian, please
give full title as such.
Signature: ________________________________ Date: ___________
Signature: ________________________________ Date: ___________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCOLSED
ENVELOPE.
