<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from________________ to ___________________
Commission file number 0-5228
STRATEGIC DISTRIBUTION, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-1849240
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
12136 W. Bayaud, Suite 320, Lakewood, CO 80228
(Address of principal
executive offices) (Zip Code)
303-234-1419
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Number of shares of Common Shares outstanding at August 8, 1996: 29,454,726.
<PAGE>
TABLE OF CONTENTS
Part I - Financial Information
------------------------------
Page No.
Item 1 --------
- ------
Consolidated Financial Statements:
- Consolidated Balance Sheets -
June 30, 1996 (unaudited)
and December 31, 1995 1
- Consolidated Statements of Operations
(unaudited) - Three and Six Months
Ended June 30, 1996 and 1995 2
- Consolidated Statements of Cash Flows
(unaudited) - Six Months Ended
June 30, 1996 and 1995 3
- Notes to Consolidated Financial Statements
(unaudited) 4
Item 2
- ------
Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
---------------------------
Item 4
- ------
Submission of Matters to a Vote of Security Holders 9
Item 6
- ------
Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>1
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, December 31,
1996 1995
------------- -------------
(unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 49,732,294 $ 640,360
Accounts receivable, net 20,418,574 20,104,270
Inventories 19,667,347 15,422,066
Prepaid expenses and
other current assets 736,684 588,188
Deferred tax asset 1,307,000 1,320,000
--------------- --------------
Total current assets 91,861,899 38,074,884
Property and equipment, net 4,261,876 3,352,948
Excess of cost of over fair value
of net assets acquired, net 5,686,300 5,865,691
Other assets 715,797 757,121
--------------- --------------
Total assets $ 102,525,872 $ 48,050,644
=============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable and accrued
expenses $20,533,251 $14,317,750
Current portion of long-term debt 140,780 158,553
Reserve for restructuring charge 909,479 --
--------------- --------------
Total current liabilities 21,583,510 14,476,303
Long-term debt 1,446,652 1,458,401
Note payable -- 4,445,000
Deferred tax liability 267,000 280,000
--------------- --------------
Total liabilities 23,297,162 20,659,704
--------------- --------------
Stockholders' equity:
Preferred stock, par value $.10
per share. Authorized:
500,000 shares; issued
and outstanding: none -- --
Common stock, par value $.10
per share. Authorized:
50,000,000 shares; issued and
outstanding: 29,426,766
and 21,716,662 shares 2,942,676 2,171,666
Additional paid-in capital 88,555,941 33,861,694
Accumulated deficit (12,219,907) (8,592,420)
Note receivable from sale of stock (50,000) (50,000)
--------------- --------------
Total stockholders' equity 79,228,710 27,390,940
--------------- --------------
Total liabilities and
stockholders' equity $102,525,872 $48,050,644
=============== ==============
See accompanying notes to consolidated financial statements.
<PAGE>2
<TABLE>
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited)
<CAPTION>
Three months ended June 30, Six months ended June 30,
---------------------------- -------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 33,992,200 $ 27,234,501 $ 67,308,572 $ 52,630,591
Cost of sales 26,852,608 21,054,705 53,086,048 40,597,331
---------------- -------------- ---------------- ---------------
Gross profit 7,139,592 6,179,796 14,222,524 12,033,260
Selling, general and
administrative expenses 9,005,706 5,449,118 17,045,261 10,400,003
Restructuring charge -- -- 920,000 --
---------------- -------------- ---------------- --------------
Operating income (loss) (1,866,114) 730,678 (3,742,737) 1,633,257
Interest expense (income):
Interest expense 87,297 35,598 180,182 71,284
Interest (income) (291,616) (31,212) (295,432) (72,006)
---------------- -------------- ---------------- ----------------
Interest (income) expense, net (204,319) 4,386 (115,250) (722)
---------------- -------------- ---------------- ----------------
Income (loss) before income taxes (1,661,795) 726,292 (3,627,487) 1,633,979
Income taxes -- 345,000 -- 713,000
---------------- -------------- ---------------- ----------------
Net income (loss) $ (1,661,795) $ 381,292 $ (3,627,487) $ 920,979
================ ============== ================ ================
Net income (loss) per common share $ (0.07) $ 0.02 $ (0.16) $ 0.04
================ ============== ================ ================
Average number of shares of
common stock outstanding 25,056,757 21,690,748 23,398,791 21,676,068
================ ============== ================ ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>3
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
Six months ended June 30,
----------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ (3,627,487) $ 920,979
Adjustments to reconcile
net income (loss) to net cash
used in operating activities:
Depreciation and amortization 748,816 509,468
Restructuring charge 920,000 --
Deferred taxes -- 565,300
Changes in operating assets
and liabilities:
Accounts receivable (221,539) (3,911,796)
Inventories (4,245,281) 75,199
Prepaid expenses and
other current assets (266,829) (396,105)
Accounts payable and
accrued expenses 6,199,228 1,200,527
Reserve for restructuring charge (10,521) --
Other, net (25,150) 2,740
--------------- --------------
Net cash used
in operating activities (528,763) (1,033,688)
--------------- --------------
Cash flows from
investing activities:
Acquisition of business -- 248,576
Additions of property and
equipment (1,334,038) (380,804)
--------------- --------------
Net cash used in
investing activities (1,334,038) (132,228)
--------------- --------------
Cash flows from financing activities:
Proceeds from sale of stock, net 55,429,257 44,393
Repayment of note payable (4,445,000) --
Repayment of long-term
obligations (29,522) (317,669)
--------------- --------------
Net cash provided by (used in)
financing activities 50,954,735 (273,276)
--------------- --------------
Increase (decrease) in cash
and cash equivalents 49,091,934 (1,439,192)
Cash and cash equivalents,
at beginning of the period 640,360 3,022,428
--------------- --------------
Cash and cash equivalents,
at end of the period $ 49,732,294 $ 1,583,236
=============== ==============
Supplemental cash flow information:
Taxes paid $ 204,099 $ 124,456
Interest paid 186,695 64,903
See accompanying notes to consolidated financial statements.
<PAGE>4
STRATEGIC DISTRIBUTION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. The accompanying unaudited consolidated financial statements include
the accounts of Strategic Distribution, Inc. and subsidiaries (the
"Company"). These financial statements have been prepared in accordance
with the instructions to Form 10-Q. In the opinion of management, all
adjustments (consisting of normal, recurring accruals) considered
necessary for a fair presentation of the results of operations for the
three and six months ended June 30, 1996 and 1995 have been included. The
statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1995.
2. On May 23, 1996, the Company sold 7,630,000 shares of Common Stock in an
underwritten public offering. The net proceeds to the Company were
approximately $55,226,600.
3. Effective April 8, 1996, the Company increased the authorized Common Stock
from 25,000,000 shares to 50,000,000 shares.
<PAGE>5
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
The Company provides proprietary industrial supply procurement solutions to
industrial sites, primarily through its In-Plant Store(R) program. The Company
became a provider of industrial supply services in July 1990. The Company
conducts its operations primarily through three subsidiaries, Strategic
Supply, Inc. (formerly SafetyMaster Corporation), Industrial Systems
Associates, Inc. and American Technical Services Group, Inc. ("ATSG"). On
May 24, 1996 Strategic Supply, Inc. and Lewis Supply (Delaware), Inc. were
merged (the "Merger"). Strategic Supply, Inc. was the surviving
corporation in the Merger. ATSG was acquired by the Company on May 12, 1995.
At June 30, 1996, the Company had 51 operational In-Plant Store(R)
facilities, representing 29 In-Plant Store(R) customers, 24 full-service
branches, and 13 sales and service offices.
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ------------------------
1996 1995 1996 1995
---- ---- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Revenues $33,992 $27,235 $67,309 $52,631
100.0% 100.0% 100.0% 100.0%
Cost of sales 79.0 77.3 78.9 77.1
Gross profit 21.0 22.7 21.1 22.9
Selling, general and
administrative expenses 26.5 20.0 25.3 19.8
Restructuring charge -- -- 1.4 --
Operating income (loss) (5.5) 2.7 (5.6) 3.1
Interest (income) expense, net ( .6) -- ( .2) --
Income (loss) before income taxes (4.9) 2.7 (5.4) 3.1
Income tax expense -- 1.3 -- 1.4
Net income (loss) (4.9) 1.4 (5.4) 1.7
</TABLE>
<PAGE>6
Three Months Ended June 30, 1996 Compared to Three Months
Ended June 30, 1995
Revenues for the three months ended June 30, 1996 increased 24.8% to
$33,992,200 from $27,234,501 for the three months ended June 30, 1995.
During the three months ended June 30, 1996, $19,753,266 of revenues were
from In-Plant Store(R) facilities and $14,238,934 were from branches
(including sales and service locations). During the three months ended
June 30, 1995, $11,463,659 of revenues were from In-Plant Store(R) facilities
and $15,770,842 were from branches (including sales and service locations).
The increase in revenues from In-Plant Store(R) facilities came primarily
from implementation of new facilities. The decrease in branch revenues
resulted primarily from the loss of revenues from key customers and the
effect of the Merger, which was partially offset by the inclusion of the
results of ATSG. One In-Plant Store(R) customer (with which the Company
operates under four separate contracts) represented approximately 11.3% of
revenues for the three months ended June 30, 1996.
Cost of sales as a percentage of revenues increased to 79.0% for the three
months ended June 30, 1996 from 77.3% for the three months ended June 30,
1995. The increase resulted from the higher percentage of sales from
In-Plant Store(R) facilities which have lower margins than the branches.
Selling, general and administrative expenses as a percentage of revenues
increased to 26.5% for the three months ended June 30, 1996 from 20.0% for
the three months ended June 30, 1995. The increase resulted primarily from
expenses incurred by the Company in connection with its expansion of the
In-Plant Store(R) program. In addition, the Company incurred a $210,000 in
charges related to branch closing for employee termination benefits, asset
write-offs and lease payments and, approximately $200,000 of one-time
expenses associated with the Merger.
Interest income, net increased by $208,705 to $204,319 for the three months
ended June 30, 1996 from interest expense, net of $4,386 for the three months
ended June 30, 1995. The increase in interest income, net resulted primarily
from the sale of 7,630,000 shares of the Company's Common Stock on May 23,
1996 and the interest income earned on the remaining net proceeds.
Income tax expense decreased by $345,000 to $0 for the three months ended
June 30, 1996. An income tax benefit was not recorded for the three months
ended June 30, 1996 because the Company does not believe that it is more likely
than not that the benefit will be realized during the current year.
The net loss for the three months ended June 30, 1996 was $1,661,795 compared
to net income of $381,292 for the three months ended June 30, 1995, primarily
as a result of the items previously discussed.
<PAGE>7
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30, 1995
Revenues for the six months ended June 30, 1996 increased 27.9% to $67,308,572
from $52,630,591 for the six months ended June 30, 1995. During the six months
ended June 30, 1996, $36,558,088 of revenues were from In-Plant Store(R)
facilities and $30,750,484 were from branches (including sales and service
locations). During the six months ended June 30, 1995, $22,595,491 of revenues
were from In-Plant Store(R) facilities and $30,035,100 were from branches
(including sales and service locations). The increase in revenues from In-Plant
Store(R) facilities came primarily from implementation of new facilities. The
increase in branch revenues resulted primarily from the inclusion of the
results of ATSG, which were offset by the loss of revenues from key customers
and the effect of the Merger. One In-Plant Store(R) customer (with which the
Company operates under four separate contracts) represented approximately
10.5% of revenues for the six months ended June 30, 1995 but less than 10.0%
of revenues for the six months ended June 30, 1996. Another In-Plant
Store(R) customer (with which the Company operates under four separate
contracts) represented approximately 11.4% of revenues for the six months
ended June 30, 1996.
Cost of sales as a percentage of revenues increased to 78.9% for the six months
ended June 30, 1996 from 77.1% for the six months ended June 30, 1995. The
increase resulted from the higher percentage of sales from In-Plant Store(R)
facilities which have lower margins than the branches.
Selling, general and administrative expenses as a percentage of revenues
increased to 25.3% for the six months ended June 30, 1996 from 19.8% for
the six months ended June 30, 1995. The increase resulted primarily from
expenses incurred by the Company in connection with its expansion of the
In-Plant Store(R) program. In addition, the Company incurred approximately
$230,000 of one-time expenses associated with the Merger and, approximately
$210,000 in charges related to branch closings for employee termination
benefits, asset write-offs and lease payments.
In connection with the Merger and the branch closings, the Company
recorded a restructuring charge aggregating $920,000 for employee
termination benefits, asset write-offs and lease payments. The restructuring
charge was equal to 1.4% of revenues for the six months ended June 30, 1996.
The termination benefits were paid in July 1996, and the lease payments will
be made in accordance with their original terms. The asset write-offs will be
recorded in the third quarter of 1996.
Interest income, net increased by $114,528 to $115,250 for the six months
ended June 30, 1996 from $722 for the six months ended June 30, 1995.
The increase in interest income, net resulted primarily from the sale of
7,630,000 shares of Common Stock on May 23, 1996 and the interest income
earned on the remaining net proceeds.
Income tax expense decreased by $713,000 to $0 for the six months ended
June 30, 1996. An income tax benefit was not recorded for the six months
ended June 30, 1996 because the Company does not believe that it is more
likely than not that the benefit will be realized during the current year.
The net loss for the six months ended June 30, 1996 was $3,627,487 compared
to net income of $920,979 for the six months ended June 30, 1995, primarily
as a result of the items previously discussed.
<PAGE>8
Liquidity and Capital Resources
Effective as of December 31, 1995, the Company entered into a new revolving
bank credit agreement providing maximum outstanding borrowings of
$20,000,000. These borrowings bear interest at the prime rate (8.25% as of
June 30, 1996) and/or a Eurodollar rate, with a 1/4% commitment fee on the
unused portion of the credit available. The credit facility expires on
January 31, 2000. The amount which the Company may borrow under
the credit facility is based upon eligible accounts receivable which were
approximately $19,667,000 at June 30, 1996. The credit facility contains
customary financial and other covenants and is collateralized by
substantially all of the assets, as well as the pledge of the capital stock,
of the Company's subsidiaries. There were no borrowings outstanding under
the credit facility as of June 30, 1996.
On May 23, 1996, the Company sold 7,630,000 shares of Common Stock
in an underwritten public offering. The net proceeds to the Company were
approximately $55,226,600. A portion of the net proceeds were used to repay
the Company's bank indebtedness. The balance of the net proceeds is available
for working capital, including the opening of In-Plant Store(R) facilities,
for general corporate purposes and for the possible acquisition of companies
engaged in the business of providing industrial supply services.
The net cash used in operating activities was $528,763 for the six months
ended June 30, 1996 compared to $1,033,688 for the six months ended
June 30, 1995. The decrease resulted primarily from a decrease in accounts
receivable, and an increase in accounts payable and accrued expenses, which
were partially offset by an increase in inventories and the change from net
income to a net loss.
The Company believes that cash on hand, cash generated from operations and
cash from the Company's bank credit facility will generate sufficient funds to
permit the Company to meet its liquidity needs for the foreseeable future,
including the costs to be incurred by the Company in connection with the
anticipated expansion of the In-Plant Store(R) program.
The Company has stated its intention to seek further acquisition opportunities.
If the Company is able to identify satisfactory acquisitions, the source of
funds for such acquisitions is anticipated to be internally generated cash
and cash from future borrowings or sales of equity securities, although there
is no guarantee that the Company would be successful in raising funds from
such sources.
<PAGE>9
PART II
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1996 Annual Meeting of Stockholders (the "1996 Annual Meeting")
was held on May 24, 1996. At the 1996 Annual Meeting, 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 were elected to the
Company's Board of Directors, to serve until the next annual meeting of
stockholders and until their successors are elected and qualify. At the 1996
Annual Meeting, 15,369,002 shares were voted for Messrs. Berkley, Bursky, Polan
and Quain, 15,368,884 shares were voted for Mr. Donald, 15,368,899 shares were
voted for Ms. James and 15,338,102 shares were voted for Messrs. Krauter and
Rieple. 27,137 shares were voted to withhold authority from Messrs. Berkley,
Bursky, Polan and Quain, 27,240 were voted to withhold authority form Ms.
James, 27,255 shares were voted to withhold authority from Mr. Donald, and
58,307 shares were voted to withhold authority from Messrs. Krauter and Rieple.
At the 1996 Annual Meeting, holders of Common Stock were asked to (i) amend
the Company's Restated Certificate of Incorporation (the "Certificate of
Incorporation") (a) to include provisions relating to 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"); (ii) 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"); (iii) approve the
Company's Executive Compensation Plan ("Proposal IV"); (iv) approve the
Company's 1996 Non-Employee Director Stock Plan ("Proposal V"); and (v) ratify
the appointment of KPMG Peat Marwick LLP as independent auditors of the
Company for the fiscal year ending December 31, 1996 ("Proposal VI").
The following table sets forth the shares of Common Stock voted for, against,
and abstaining with respect to each Proposal.
Proposal For Against Abstaining
- -------- --- ------- ----------
Proposal II 15,095,941 94,211 7,848
Proposal III 14,419,314 833,308 12,089
Proposal IV 14,691,742 586,933 13,712
Proposal V 15,158,794 143,009 14,246
Proposal VI 15,382,716 6,392 7,031
In addition, there were 198,139 broker non-votes with respect to Proposal II,
131,428 broker non-votes with respect to Proposal III, 103,752 broker non-votes
with respect to Proposal IV and 80,090 broker non-votes with respect to
Proposal V.
<PAGE>10
Item 6. EXHIBITS AND REPORTS ON FROM 8-K
(a) 3.1 Amendment to Certificate of Incorporation of the Company filed
June 21, 1996 with the Secretary of State of Delaware.
3.2 Second Restated Certificate of Incorporation of the Company
filed June 21, 1996 with the Secretary of State of Delaware.
3.3 Amended and Restated Bylaws of the Company, as amended
(incorporated by reference to Exhibits 3.2 and 3.2(a) of the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1995).
(b) None
<PAGE>11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STRATEGIC DISTRIBUTION, INC.
Date: August 13, 1996 By: /s/ Andrew M. Bursky
--------------- --------------------
Andrew M. Bursky,
Chairman of the Board
Date: August 13, 1996 By: /s/ Charles J. Martin
--------------- ---------------------
Charles J. Martin,
Vice President, Controller and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000073822
<NAME> STRATEGIC DISTRIBUTION, INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 49,732,294
<SECURITIES> 0
<RECEIVABLES> 20,418,574
<ALLOWANCES> 0
<INVENTORY> 19,667,347
<CURRENT-ASSETS> 91,861,899
<PP&E> 4,261,876
<DEPRECIATION> 0
<TOTAL-ASSETS> 102,525,872
<CURRENT-LIABILITIES> 21,583,510
<BONDS> 1,446,652
<COMMON> 2,942,676
0
0
<OTHER-SE> 76,286,034
<TOTAL-LIABILITY-AND-EQUITY> 102,525,872
<SALES> 67,308,572
<TOTAL-REVENUES> 67,308,572
<CGS> 53,086,048
<TOTAL-COSTS> 53,086,048
<OTHER-EXPENSES> 17,965,261
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (115,250)
<INCOME-PRETAX> (3,627,487)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,627,487)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,627,487)
<EPS-PRIMARY> (.16)
<EPS-DILUTED> (.16)
<PAGE>1
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
STRATEGIC DISTRIBUTION, INC.
Strategic Distribution, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify:
FIRST: Article Eleventh of the Restated Certificate
of Incorporation of the Corporation is hereby deleted in its entirety.
SECOND: Article Ninth of the Restated Certificate
of Incorporation of the Corporation is hereby 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
<PAGE>2
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.
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 Certificate of Incorporation to
authorize corporate action further
<PAGE>3
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."
THIRD: In accordance with the provisions of Section 242 and Section
222 of the General Corporation Law of the State of Delaware, the foregoing
amendment to the Restated Certificate of Incorporation has been duly adopted
by the holders of a majority of the issued and outstanding stock of the
Corporation voting at an annual meeting of stockholders.
IN WITNESS WHEREOF, Strategic Distribution, Inc. has caused this
Certificate to be signed by its President and attested by its Secretary this
21st day of June, 1996, pursuant to Section 103(a) of the General Corporation
Law of the State of Delaware.
STRATEGIC DISTRIBUTION, INC.
By: /s/ Theodore R. Rieple
----------------------
Theodore R. Rieple
President
ATTEST:
By: /s/ William L. Mahone
---------------------
William L. Mahone
Assistant Secretary
<PAGE>1
SECOND RESTATED
CERTIFICATE OF INCORPORATION
OF
STRATEGIC DISTRIBUTION, INC.
---------------------------------
Adopted in accordance with Section 245
of the General Corporation Law
of the State of Delaware
---------------------------------
June 21, 1996
We the undersigned, being, respectively, the President and
Secretary of Strategic Distribution, Inc., a corporation organized on
June 14, 1968 under the name Princeton Time Sharing Services, Inc., under
the laws of the State of Delaware hereby certify as follows:
FIRST: The Restated Certificate of Incorporation of the corporation,
as previously amended ("Existing Certificate of Incorporation"), is hereby
restated ("Second Restated Certificate of Incorporation") to read as follows
in its entirety, thereby superseding in all respects the Existing Certificate
of Incorporation.
--------------------------------
FIRST: The name of the corporation (hereinafter called the
"corporation") is Strategic Distribution, Inc.
SECOND: The address, including street, number, city and county,
of the registered office of the corporation in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, and the name of the registered
agent of the corporation in the State of Delaware at such address is
The Corporation Trust Company.
THIRD: The nature of the business and of the purposes to be
conducted and promoted by the corporation, which shall be in addition
to the authority of the corporation to conduct any lawful business,
to promote any lawful purpose, and to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware, is as follows:
To engage in the business of data processing, indexing and
systematizing, and ancillary to such business to establish, operate,
service, supervise and
<PAGE>2
maintain data processing systems and service bureaus, for all
purposes, including but not limited to, records, management,
auditing, personnel and inventory control, pricing, labeling,
identifying and sorting, rating, product and property sales,
manufacturing processes, distribution, marketing and market
research and market and sales analysis.
To engage in the business of creating, buying, selling,
licensing and in all other respects dealing with, computer
software, programming, instructions, algorithms and the
like and all types of media on which the same are recorded,
embodied or used.
To purchase, sell, lease and otherwise acquire and dispose
of computers and any and all other data processing hardware
of every description, and to operate such equipment for the sale,
lease and other disposition of computer and data processing
time to any persons, firms, corporations and associations.
To purchase, receive, take by grant, gift, devise, bequeath,
or otherwise, lease, or otherwise acquire, own, hold, improve,
employ, use and otherwise deal in and with real or personal
property, or any interest therein, wherever situated, and to sell,
convey, lease, exchange, transfer or otherwise dispose of, or
mortgage or pledge, all or any of its property and assets, or
any interest therein, wherever situated.
To engage generally in the real estate business as principal,
agent, broker, and in any lawful capacity, and generally to take,
lease, purchase, or otherwise acquire, and to own, use, hold,
sell, convey, exchange, lease, mortgage, work, clear, improve,
develop, divide, and otherwise handle, manage, operate, deal
in and dispose of real estate, real property, lands,
multiple-dwelling structures, houses, buildings and other works
and any interest or right therein; to take, lease, purchase or
otherwise acquire,
<PAGE>3
representative, contractor, subcontractor, and in any other
lawful capacity.
To carry on a general mercantile, industrial, investing,
and trading business in all its branches; to devise, invest,
manufacture, fabricate, assemble, install, service, maintain,
alter, buy, sell, import, export, license as licensor or licensee,
lease as lessor or lessee, distribute, job, enter into, negotiate,
execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options,
franchises, and other rights in respect of, and generally deal
in and with, at wholesale and retail, as prinipal, and as sales,
business, special or general agent, representative, broker,
factor, merchant, distributor, jobber, advisor, and in any other
lawful capacity, goods, wares, merchandise, commodities,
and unimproved, improved, finished, processed, and other
real personal, mixed property of any and all kinds, together
with the components, resultants, and by-products thereof.
To apply for, register, obtain, purchase, lease, take licenses
in respect of or otherwise acquire, and to hold, own, use,
operate, develop, enjoy, turn to account, grant licenses
and immunities in respect of, manufacture under and to
introduce, sell, assign, mortgage, pledge or otherwise dispose
of, and, in any manner deal with and contract with reference to:
(a) inventions, devices, formulae, processes and any
improvements and modifications thereof;
(b) letters patent, patent rights, patented processes,
copyrights, designs, and similar rights, trade-marks, trade
names, trade symbols and other indications of origin and
ownership granted by or recognized under the laws of the
United States of America, the District of Columbia, any
state or subdivision thereof, and any commonwealth,
territory, possession, dependency, colony, possession,
agency or instrumentality of the United States of America
and of any foreign country, and all rights connected there
with or appertaining thereunto;
(c) franchises, licenses, grants and concessions.
To guarantee, purchase, take, receive, subscribe for, and
otherwise acquire, own, hold, use, and otherwise employ, sell,
lease, exchange, transfer, and otherwise dispose of, mortgage,
lend, pledge, and otherwise deal in and with, securities (which
term, for
<PAGE>4
the purpose of this Article THIRD, includes, without limitation
of the generality thereof; any shares of stock, bonds, debentures,
notes, mortgages, other obligations, and any certificates, receipts
or other instruments representing rights to receive, purchase or
subscribe for the same, or representing any other rights or
interests therein or in any property or assets) of any persons,
domestic and foreign firms, associations, and corporations, and
by any government or agency or instrumentality thereof; to make
payment therefor in any lawful manner; and, while owner of any
such securities, to exercise any and all rights, powers and privileges
in respect thereof, including the right to vote.
To make, enter into, perform and carry out contracts of every
kind and description with any person, firm, association, corporation
or government or agency or instrumentality thereof.
To acquire by purchase, exchange or otherwise, all, or any part
of, or any interest in, the properties, assets, business and good will
of any one or more persons, firms, associations or corporations
heretofore or hereafter engaged in any business for which a
corporation may now or hereafter be organized under the laws of
the State of Delaware; to pay for the same in cash, property or its
own or other securities; to hold, operate, reorganize, liquidate,
sell or in any manner dispose of the whole or any part thereof;
and in connection therewith, to assume or guarantee performance
of any liabilities, obligations or contracts of such persons, firms,
associations or corporations, and to conduct the whole or any part
of any business thus acquired.
To lend money in furtherance of its corporate purposes and to
invest and reinvest its funds from time to time to such extent, to
such persons, firms, associations, corporations, governments or
agencies or instrumentalities thereof, and on such terms and on
such security, if any, as the Board of Directors of the corporation
may determine.
To make contracts of guaranty and suretyship of all kinds and
endorse or guarantee the payment of principal, interest or dividends
upon, and to guarantee the performance of sinking fund or other
obligations of, any securities, and to guarantee in any way permitted
by the law and performance of any of the contracts or other
undertakings in which the corporation may otherwise be or become
interested, of any persons, firm, association, corporation, government
<PAGE>5
or agency or instrumentality thereof, or of any other combination,
organization or entity whatsoever.
To borrow money without limit as to amount and at such rates of
interest as it may determine; from time to time to issue and sell its
own securities, including its shares of stock, notes, bonds, debentures,
and other obligations, in such amounts, on such terms and conditions,
for such purposes and for such prices, now or hereafter permitted by
the laws of the State of Delaware and by this certificate of
incorporation, as the Board of Directors of the corporation may
determine; and to secure any of its obligations by mortgage, pledge
or other encumbrance of all or any of its property, frnachises and
income.
To be a promoter or manager of other corporations of any type or
kind; and to participate with others in any corporation, partnership,
limited partnership, joint venture, or other association of any kind, or
in any transaction, undertaking or arrangement which the corporation
would have power to conduct by itself, whether or not such
participation involves sharing or delegation of control with or to others.
To draw, make, accept, endorse, discount, execute, and issue
promissory notes, drafts, bills of exchange, warrants, bonds, debentures,
and other negotiable or transferable instruments and evidences of
indebtedness whether secured by mortgage or otherwise, as well as to
secure the same by mortgage or otherwise, so far as may be permitted
by the laws of the State of Delaware.
To purchase, receive, take, reacquire or otherwise acquire, own
and hold, sell, lend, exchange, reissue, transfer or otherwise dispose of,
pledge, use, cancel, and otherwise deal in and with its own shares and its
other securities from time to time to such an extent and in such manner and
upon such terms as the Board of Directors of the corporation shall
determine; provided that the corporation shall not use its funds or property
for the purchase of its own shares of capital stock when its capital is
impaired or when such use would cause any impairement of its capital,
except to the extent permitted by law.
To organize, as an incorporator, or cause to be organized under the
laws of the State of Delaware, or of any other State of the United
States of America, or of the District of Columbia, or of any
commonwealth, territory, dependency, colony, possession, agency,
or instrumentality of the United States of America, or of any
foreign country, a corporation or corporations for the purpose of
conducting and promoting any business or
<PAGE>6
purpose for which corporations may be organized, and to dissolve,
wind up, liquidate, merge or consolidate any such corporation or
corporations or to cause the same to be dissolved, wound up,
liquidated, merged or consolidated.
To conduct its business, promote its purposes, and carry on
its operations in any and all of its branches and maintain offices
both within and without the State of Delaware, in any and all States
of the United States of America, in the District of Columbia, and in
any or all commonwealths, territories, dependencies, colonies,
possessions, agencies, or instrumentalities of the United States of
America and of foreign governments.
To promote and exercise all or any part of the foregoing purposes
and powers in any and all parts of the world, and to conduct its
business in all or any of its branches as principal, agent, broker,
factor, contractor, and in any other lawful capacity, either alone or
through or in conjunction with any corporations, associations,
partnerships, firms, trustees, syndicates, individuals, organizations,
and other entities in any part of the world, and, in conducting its
business and promoting any of its purposes, to maintain offices,
branches and agencies in any part of the world, to make and perform
any contracts and to do any acts and things, and to carry on any
business, and to exercise any powers and privileges suitable,
convenient, or proper for the conduct, promotion, and attainment
of any of the business and purposes herein specified or which at any
time may be incidental thereto or may appear conducive to or expedient
for the accomplishment of any of such business and purposes and
which might be engaged in or carried on by a corporation incorporated
or organized under the General Corporation Law of the State of
Delaware, and to have and exercise all of the powers conferred
by the laws of the State of Delaware upon corporations incorporated
or organized under the General Corporation Law of the State of
Delaware.
The foregoing provisions of this Article THIRD shall be construed
both as purposes and powers and each as an independent purpose and
power. The foregoing enumeration of specific purposes and powers
shall not be held to limit or restrict in any manner the purposes and
powers of the corporation, and the purposes and powers herein specified
shall, except when otherwise provided in this Article THIRD, be in no way
limited or restricted by reference to, or inference from, the terms of any
provision of this or any other Article of this certificate of incorporation;
provided, that the corporation shall not conduct any business, promote
any purpose, or exercise any power or
<PAGE>7
privilege within or without the State of Delaware which, under the laws
thereof, the corporation may not lawfully conduct, promote or exercise.
FOURTH:
A. The total number of shares of all classes of stock which the
corporation shall have the authority to issue is Fifty Million Five
Hundred Thousand Shares, consisting of Fifty Million shares of a
par value of Ten Cents ($.10) each, designated as Common Stock,
and Five Hundred Thousand shares of a par value of Ten Cents
($.10) each, designated as Preferred Stock.
B. Except as herein otherwise provided, express authority is
hereby granted to the Board of Directors of the corporation to fix by
resolution or resolutions any of the powers, preferences and rights,
and the qualifications, limitations and restrictions of the Preferred
Stock, which may be issued in series, the designation of each such
series to be fixed by the Board of Directors of the corporation.
C. No holder of any of the shares of the stock of the corporation,
whether now or hereafter authorized and issued, shall be entitled
as of right to purchase or subscribe for (1) any unissued stock of
any class, or (2) any additional shares of any class to be issued by
reason of any increase of the authorized capital stock of the
corporation of any class, or (3) bonds, certificates of indebtedness,
debentures, or other securities convertible into stock of the
corporation, or carrying any right to purchase stock of any class,
but any such unissued stock or such additional authorized issue
of any stock or of other securities convertible into stock, or
carrying any right to purchase stock, may be issued and disposed
of pursuant to resolution of the Board of Directors to such persons,
firms, corporations or associations and upon such terms as may be
deemed advisable by the Board of Directors in the exercise of its
discretion.
FIFTH: The name and the mailing address of the incorporators
are as follows:
NAME MAILING ADDRESS
--------- ----------------------------
Anne Lichterman 800 Grand Concourse
Bronx, New York 10451
Mildred Adena 205 East 78th Street
New York, New York 10021
Rosita Kruythoff 131-05 224th Street
Laurelton, New York 11413
SIXTH: The corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is
proposed between this corporation and its creditors or any class of
them and/or between this corporation and its stockholders or any
class of them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this corporation
or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution of any receiver or receivers
appointed for this corporation under the provisions of section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, to be summoned in such manner
as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or
of the stockholders or class of stockholders of this corporation, as
the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or
class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH: For the management of the business and for
the conduct of the affairs of the corporation, and in further definition,
limitation and regulation of the powers of the corporation and of its
directors and of its stockholders or any class thereof, as the case
may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors.
The number of directors which shall constitute the whole Board
of Directors shall be fixed by, or in the manner provided in, the
By-Laws. The phrase "whole Board" and the phrase "total
number of directors" shall be deemed to have the same meaning,
to wit, the total number of directors which the corporation
would have if there were no vacancies. No election of directors
need be by written ballot.
<PAGE>9
2. After the original or other By-Laws of the corporation
have been adopted, in accordance with the provisions of Section
109 of the General Corporation Law of the State of Delaware,
and after the corporation has received any payment for any of its
stock, the power to adopt, amend, or repeal the By-Laws of the
corporation may be exercised by the Board of Directors of the
corporation; provided, however, that any provision for the
classification of directors of the corporation for staggered terms
pursuant to the provisions of subsection (d) of Section 141 of the
General Corporation Law of the State of Delaware shall be set forth
in an initial By-Law or in a By-Law adopted by the stockholders
entitled to vote of the corporation unless provisions for such
classification shall be set forth in this certificate of incorporation.
3. Whenever the corporation shall be authorized to issue
only one class of stock, each outstanding share shall entitle the
holder thereof to notice of, and the right to vote at, any meeting of
stockholders. Whenever the corporation shall be authorized to issue
more than one class of stock, no outstanding share of any class of
stock which is denied voting power under the provisions of the
certificate of incorporation shall entitle the holder thereof to the
right to vote at any meeting of stockholders except as the provisions
of paragraph (c)(2) of section 242 of the General Corporation Law of
the State of Delaware shall otherwise require; provided, that no share
of any such class which is otherwise denied voting power shall entitle
the holder thereof to vote upon the increase or decrease in the number
of authorized shares of said class.
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
<PAGE>10
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.
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
<PAGE>11
(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 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.
TENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered or repealed,
and other provisions authorized by the laws of the State of Delaware
at the time in force may be added or inserted in the manner and at
the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the corporation by this
certificate of incorporation are granted subject to the provisions
of this Article TENTH.
----------------------------------
SECOND: The Second Restated Certificate of Incorporation
has been duly adopted in accordance with Section 245 of the General
Corporation Law of the State of Delaware by the Board of Directors
of the corporation.
IN WITNESS WHEREOF, Strategic Distribution, Inc.
has caused this Second Restated Certificate of Incorporation to
be signed by its President and attested by its Secretary this 21st
day of June, 1996, pursuant to Section 103(a) of the General
Corporation Law of the State of Delaware.
By: /s/ Theodore R. Rieple
---------------------------
Theodore R. Rieple
President
ATTEST:
By: /s/ William L. Mahone
---------------------------
William L. Mahone
Assistant Secretary
