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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Strategic Distribution, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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STRATEGIC DISTRIBUTION, INC.
1635-D BUSTLETON PIKE
FEASTERVILLE, PENNSYLVANIA 19053
-------------------------
NOTICE & PROXY STATEMENT
-------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1997
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 20, 1997, at 10:00 a.m., local time, at the
Company's headquarters, 1635-D Bustleton Pike, Feasterville, Pennsylvania,
for the following purposes, as more fully described in the accompanying Proxy
Statement:
1. To elect ten (10) directors to serve for the ensuing year and
until their successors are elected ("Proposal I");
2. To increase to 3,000,000 the number of shares of Common Stock
of the Company which may be subject to options granted under the Company's
Amended and Restated 1990 Incentive Stock Option Plan ("Proposal II");
3. To ratify the appointment of KPMG Peat Marwick LLP as
independent auditors of SDI for the fiscal year ending December 31, 1997
("Proposal III"); and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 10,
1997 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.
<PAGE>
THE BOARD OF DIRECTORS OF THE COMPANY 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 AND
--- ---
III.
By order of the Board of Directors
/s/ Andrew M. Bursky
Andrew M. Bursky
Chairman of the Board
April 11, 1997
--------------------------
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.
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STRATEGIC DISTRIBUTION, INC.
1635-D BUSTLETON PIKE
FEASTERVILLE, PENNSYLVANIA 19053
PHONE: (215) 396-3088
----------------------
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 20, 1997 at the Company's headquarters, 1635-D Bustleton
Pike, Feasterville, Pennsylvania and at any adjournment or postponement
thereof (the "Meeting"). The Company's 1996 Annual Report, which accompanies
this Proxy Statement, is being sent, on or about April 18, 1997, to persons
who were shareholders of record on April 10, 1997.
Written communications to the Company should be sent to the
Company's office at 1635-D Bustleton Pike, Feasterville, Pennsylvania 19053.
The Company can be reached by telephone at (215) 396-3088.
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 three proposals described in this Proxy Statement and on any
other matters properly brought before the Meeting.
The following is a brief summary of the three 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 THE NOMINEES AS
DIRECTORS, IN FAVOR OF THE INCREASE IN SHARES OF COMMON STOCK WHICH MAY BE
SUBJECT TO OPTIONS GRANTED UNDER THE COMPANY'S AMENDED AND RESTATED 1990
INCENTIVE STOCK OPTION PLAN AND IN FAVOR OF THE RATIFICATION OF THE COMPANY'S
INDEPENDENT AUDITORS.
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PROPOSAL I
Proposal I concerns the election of a board of ten (10) directors,
all of whom are currently serving as members of the Board of Directors.
PROPOSAL II
Proposal II concerns increasing to 3,000,000 the number of shares of
Common Stock which may be subject to options granted under the Company's
Amended and Restated 1990 Incentive Stock Option Plan.
PROPOSAL III
Proposal III concerns the ratification of the appointment of KPMG
Peat Marwick LLP, Certified Public Accountants, as the Company's independent
auditors.
VOTING AT THE MEETING
The Board of Directors has fixed the close of business on April 10,
1997 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 and
entitled to vote 30,213,499 shares of the Common Stock, held by approximately
1,500 holders of record. The holders of a majority of the Common Stock
outstanding and entitled to vote who are present either in person or
represented by proxy constitute a quorum for the Meeting.
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 each of Proposals
II and III 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. In accordance with Delaware law, abstentions will, while broker
nonvotes will not, be treated as present for purposes of the preceding
sentence. 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 23.77% of the outstanding shares of the Common Stock and
has advised the Company that he intends to vote such shares in favor of the
proposals described herein.
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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 and III. 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 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 preparation, printing and mailing of 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 or other
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 10, 1997 there were issued and
outstanding 30,213,499 shares of the Common Stock. Warrants to purchase
38,625 shares of the Common Stock for $1.46 per share, which Warrants expire
in 1999, remain outstanding. As of April 10, 1997, there were outstanding
options issued under the Company's Amended and Restated 1990 Incentive Stock
Option Plan to purchase a total of 1,503,348 shares of the Common Stock at
prices ranging from $.97 to $6.94 per share, and options issued under the
Company's Amended and Restated 1996 Non-Employee Director Stock Plan to
purchase a total of 28,000 shares of the Common Stock for $8.00 per share.
In addition, options issued pursuant to certain Stock Option Agreements to
purchase 1,036,708 shares of the Common Stock for $5.82 per share remained
outstanding.
Each share of the Common Stock is entitled to one vote.
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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:
Year First
Name Position(s) Age Became Director
- ---- ----------- --- ---------------
Jeffery O. Beauchamp Director of the
Company and Executive
Vice President of the
Company 54 1997
William R. Berkley Director of the
Company 51 1994
Andrew M. Bursky Director of the
Company and Chairman
of the Board of
Directors 40 1988
Arnold W. Donald Director of the
Company 42 1995
Catherine B. James Director of the
Company 44 1990
George E. Krauter Director of the
Company and Executive
Vice President of the
Company 65 1994
Jack H. Nusbaum Director of the
Company 56 1996
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Joshua A. Polan Director of the
Company 49 1988
Mitchell I. Quain Director of the
Company 45 1995
John M. Sergey Director of the
Company and President
and Chief Executive Officer
of the Company 54 1997
Directors are elected to serve for one year or until the next annual
meeting of shareholders.
The ten 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 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. Beauchamp has been a member of the Board of Directors of the
Company since February 1997. He serves as Executive Vice President of the
Company and Chairman Emeritus of INTERMAT, International Materials
Management, Inc. (formerly INTERMAT International Materials Management
Engineers, Inc.) ("INTERMAT"), which was founded by Mr. Beauchamp in 1978 and
was acquired by the Company in January 1997. From November 1978 until
January 1997 Mr. Beauchamp served as Chairman of INTERMAT. Mr. Beauchamp is
also the President and Chief Executive Officer of the Utility Supply
Management Alliance, a nonprofit educational industry association. Mr.
Beauchamp is being nominated as a Director in accordance with the terms of
the Agreement and Plan of Merger, dated as of January 28, 1997, by and among
the Company, Mr. Beauchamp, INTERMAT and the other parties thereto.
Mr. Berkley has been a member of the Board of Directors of the
Company since 1994. He 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. which,
through its indirect wholly owned subsidiaries is engaged in the business of
manufacturing and distributing chlorine and caustic soda and related
products, and Interlaken Capital, Inc., a private investment firm that is an
affiliate of the Company ("Interlaken Capital"). Mr. Berkley is
Vice-Chairman of the Board of Trustees of the University of Connecticut, a
Director of Georgetown University, a
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Trustee of New York University and a member of the Board of Overseers of New
York University Stern School of Business.
Mr. Bursky has been a member of the Board of Directors and Chairman
of the Company since July 1988. He was President of the Company from
November 1989 to December 1990. He has been an executive officer of
Interlaken Capital since May 1980, currently serving as a Managing Director.
Mr. Bursky is a director of Pioneer Companies, Inc.
Mr. Donald has served as a member of the Board of Directors of the
Company since 1995. Mr. Donald is Co-President, Agricultural Sector, of
Monsanto Company, 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 currently serves on
the executive boards of John Burroughs School, Fair St. Louis and the
American Crop Protection Association. Mr. Donald also serves on the boards
of the National FFA Organization, National 4-H Council, Lindenwood College,
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 board of the Junior League of St. Louis and serves on the National
Advisory Council for Washington University's School of Engineering.
Ms. James has been a member of the Board of Directors of the Company
since 1990. Ms. James served as Chief Financial Officer of the Company from
February 1996 to April 1997, served as Executive Vice President of the
Company from January 1989 to April 1997, and served as Secretary and
Treasurer of the Company from December 1989 to April 1997. She was Chief
Financial Officer of the Company from January 1989 to September 1993. Ms.
James has been a Managing Director of Interlaken Capital since January 1990.
From 1982 through 1988, Ms. James 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. Ms. James is a director of Fine
Host Corporation, a contract food service management company.
Mr. Krauter has been a member of the Board of Directors of the
Company since 1994. Mr. Krauter is currently Executive Vice President of the
Company and Chairman Emeritus of Industrial Systems Associates, Inc. ("ISA"),
which was acquired by the Company in January 1994. He was President of ISA
from March 1971 to January 1997. 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. See "Executive
Compensation-Employment Contracts, Termination of Employment and Change in
Control Agreements."
Mr. Nusbaum has been a member of the Board of Directors since 1996.
He is Chairman of the New York law firm of Willkie Farr & Gallagher where he
has been a partner for more than the last five years. He also is a director
of W.R. Berkley Corporation, Fine Host Corporation, Pioneer Companies, Inc.,
Prime Hospitality Corp. and The Topps Company, Inc.
Mr. Polan has been a member of the Board of Directors of the Company
since 1988. He has been an executive officer of Interlaken Capital since
June 1988, currently serving as a Managing
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Director. For more than the five years prior to June 1988, Mr. Polan was a
partner in the accounting firm of Touche Ross & Co. Mr. Polan is a director
of Fine Host Corporation.
Mr. Quain has served as a member of the Board of Directors of the
Company 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 and a director of Mechanical
Dynamics, Inc., a member of the Board of Overseers of the School of
Engineering and Applied Sciences at the University of Pennsylvania where he
also serves on the President's Council, and is 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. Sergey has entered into an Employment Agreement with the
Company dated April 11, 1997, pursuant to which he will serve as President
and Chief Executive Officer of the Company beginning on May 1, 1997. From
May 1996 until May 1997, Mr. Sergey operated his own consulting business.
From 1989 to May 1996, he was the President and Chief Executive Officer of
GAF Materials Corporation, a manufacturer and marketer of roofing and other
building materials products. During the same period, Mr. Sergey was
Executive Vice President and a member of the Board of Directors of GAF
Corporation, the parent of GAF Materials Corporation. Mr. Sergey is a
director of GAF Materials Corporation. Mr. Sergey is being nominated as a
Director in accordance with the terms of the Employment Agreement, dated
April 11, 1997, between Mr. Sergey and the Company. See "Executive
Compensation-Employment Contracts, Termination of Employment and Change in
Control Agreements."
Mr. Bursky, Ms. James and Mr. Polan were 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 was an
executive officer of Blue Lustre Products, Inc., a privately owned company
which was 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 RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
ELECTION OF EACH OF THE NOMINEES AS DIRECTORS. ---
COMMITTEES AND MEETINGS
During the fiscal year ended December 31, 1996, the Board of
Directors of the Company held four meetings and acted by unanimous written
consent four times. Each of the Directors attended at least 75% of the total
number of meetings of the Board 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 has two standing
committees: the Stock Option and Compensation Committee and the Audit
Committee.
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The Stock Option and Compensation Committee, composed of Mr. Bursky
and Mr. Polan, administers the 1990 Stock Option Plan, the Company's
Executive Compensation Plan and the Company's Amended and Restated 1996
Non-Employee Director Stock Plan (the "Non-Employee Director Stock Plan").
The Stock Option and Compensation Committee held one meeting in 1996 and
acted by unanimous written consent three times.
The Audit Committee, composed of William R. Berkley, Joshua A.
Polan and Mitchell I. Quain, 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 two
meetings in 1996.
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1996, non-employee
members of the Board of Directors received, under the Non-Employee Director
Stock Plan (1) 2,388 shares of the Common Stock in consideration of services
rendered during 1995, and (2) non-qualified options to purchase 4,000 shares
of the Common Stock and $12,000 in cash (paid in January 1997) in
consideration of services rendered during 1996. In the future, on December 31
of each year, under the Non-Employee Director Stock Plan, each of the
Company's Directors who is not an employee of the Company will be granted an
option to purchase 4,000 shares of the Common Stock. All options are granted
at a price equal to the fair market value of the Common Stock on the date of
grant, and have a maximum term of five years. During the fiscal year ended
December 31, 1996, 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.
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PROPOSED INCREASE IN NUMBER OF SHARES
SUBJECT TO STOCK OPTION PLAN
(PROPOSAL II)
GENERAL
The Board of Directors unanimously recommends that the shareholders
vote for this Proposal II, which would approve the proposed increase, to
3,000,000 shares, of the number of shares of the Common Stock which may be
subject to options granted under the Company's Amended and Restated 1990
Incentive Stock Option Plan for directors, officers, key employees,
consultants and advisors of the Company and its subsidiaries (the "1990 Stock
Option Plan").
The 1990 Stock Option Plan was adopted by the Company's shareholders
at the Company's annual meeting of shareholders held on November 8, 1990. At
that time, 500,000 shares of the Common Stock were authorized to be subject
to options granted under the 1990 Stock Option Plan. At the Company's annual
meeting of shareholders held on May 25,1995, the Company's shareholders
authorized an increase, to 2,000,000, in the number of shares of the Common
Stock which may be subject to options granted under the 1990 Stock Option
Plan. As a result of the Company's three percent stock dividend declared in
December 1995, the number of shares which may be subject to options granted
under the 1990 Stock Option Plan increased to 2,060,000. The Board of
Directors is now seeking the approval of the Company's shareholders to
increase by 940,000, to a total of 3,000,000 shares, the number of shares of
the Common Stock which may be subject to options under the 1990 Stock Option
Plan.
Shares subject to options under the 1990 Stock Option Plan may be
either authorized but unissued shares or shares acquired by the Company,
including shares purchased in the open market, as shall be determined by the
Board of Directors. Shares subject to options which are no longer
exercisable shall then become available for issuance pursuant to other
options.
The Board of Directors believes that the increase in the number of
shares available under the 1990 Stock Option Plan will be of material benefit
to the Company and enable the Company to attract, retain and motivate key
employees of proven ability. The increase in shares is also intended to
improve the performance and encourage the continued employment of directors,
officers, key employees, consultants and advisors of the Company and its
subsidiaries. For these reasons, the Board of Directors has unanimously
recommended approval by the shareholders of the Company of the increase in
shares subject to options granted under the 1990 Stock Option Plan.
The approval of the increase in shares requires a favorable vote by
the holders of a majority of the shares of the Common Stock present and
voting at the Meeting.
The following summary of the provisions of the 1990 Stock Option
Plan does not purport to be complete and is qualified in its entirety by
reference to the complete text thereof.
The 1990 Stock Option Plan is administered by the Stock Option and
Compensation Committee (the "Committee") which is composed of at least two
directors appointed by the Board of
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Directors. The Committee has full authority, subject to the terms of the
1990 Stock Option Plan, to make all determinations thereunder. However, all
stock options granted under the 1990 Stock Option Plan are presented to the
full Board of Directors for ratification and approval.
The Committee may grant "incentive stock options" (as defined in
Section 422 of the Internal Revenue Code of 1986, as amended) 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 of the Company and its subsidiaries 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 issued 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 its 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.
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 the option is
granted. The 1990 Stock Option Plan also provides that Options for no more
than 100,000 shares of the Common Stock may be granted to any individual
participant during any calendar year. As of April 10, 1997, the fair market
value of the Common Stock was $5.125.
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
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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 shall be 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 then 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 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.
11
<PAGE>
At present, approximately eight directors, five officers and 600
other key employees are eligible to receive options under the 1990 Stock
Option Plan.
The following is a general summary of the Company's understanding of
the federal income tax consequences of the 1990 Stock Option Plan.
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) over the exercise price 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 or her
alternative minimum tax liability or his or her "regular" income tax
liability. As a result, a taxpayer has to determine his potential liability
under the alternative minimum tax.
NON-QUALIFIED STOCK OPTIONS
With respect to non-qualified stock options, generally: (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 tax
deduction in the same amount subject to applicable tax withholding
12
<PAGE>
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.
NEW PLAN BENEFITS
The grant of options under the 1990 Stock Option Plan is entirely
within the discretion of the Committee. The Company cannot forecast the
extent of option grants that will be made in the future and no options have
been granted subject to shareholder approval of this Proposal II.
APPROVAL OF INDEPENDENT AUDITORS
(PROPOSAL III)
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THIS PROPOSAL III.
- ---
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, 1997. 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 1997 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 audit for the Company for fiscal
1996 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 RECOMMENDS THAT SHAREHOLDERS VOTE FOR THIS
---
PROPOSAL III.
13
<PAGE>
IDENTIFICATION OF EXECUTIVE OFFICERS
Executive
Position and Officer Term
Name Offices Held Since Expires Age
- ---- ------------ ------- ------- ---
Andrew M. Bursky Chairman of 1988 1997 40
Board of
Directors
John M. Sergey President and Chief 1997 1997 54
Executive Officer
Jeffery O. Beauchamp Executive Vice 1997 1997 54
President
Michael F. Devine III Chief Financial 1997 1997 38
Officer, Secretary
and Treasurer
George E. Krauter Executive Vice 1997 1997 65
President
Charles J. Martin Vice President, 1990 1997 52
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 except as described below. None of
the officers have any substantial interest in any matter to be acted upon,
other than the election of Directors in the case of Mr. Bursky, Mr. Sergey,
Mr. Beauchamp and Mr. Krauter.
Mr. Bursky has been Chairman of the Board of Directors of the
Company since July 1988. He was President of the Company from November 1989
to December 1990. He has been an executive officer of Interlaken Capital
since May 1980, currently serving as a Managing Director. Mr. Bursky is a
director of Pioneer Companies, Inc.
Mr. Sergey has entered into an Employment Agreement with the
Company dated April 11, 1997, pursuant to which he will serve as President
and Chief Executive Officer of the Company beginning on May 1, 1997. From
May 1996 until May 1997, Mr. Sergey operated his own consulting business.
From 1989 to May 1996, he was the President and Chief Executive Officer of
GAF Materials
14
<PAGE>
Corporation, a manufacturer and marketer of roofing and other building
materials products. During the same period, Mr. Sergey was Executive Vice
President and a member of the Board of Directors of GAF Corporation, the
parent of GAF Materials Corporation. Mr. Sergey is a director of GAF
Materials Corporation.
Mr. Beauchamp is currently Executive Vice President of the Company
and Chairman Emeritus of INTERMAT, which was founded by Mr. Beauchamp in 1978
and was acquired by the Company in January 1997. From November 1978 until
January 1997 Mr. Beauchamp served as Chairman of INTERMAT. Mr. Beauchamp is
also the President and Chief Executive Officer of the Utility Supply
Management Alliance, a nonprofit educational industry association.
Mr. Devine has been Chief Financial Officer, Secretary and
Treasurer of the Company since April 1997. He has been Chief Financial
Officer of ISA since July 1995. From 1989 to 1993 he served as Director of
Finance and from 1993 to July 1995 served as Director of Operations at
McMaster-Carr Supply Company, a distributor of industrial supplies.
Mr. Krauter has served as Executive Vice President of the Company
since April 1997. Mr. Krauter is also Chairman Emeritus of ISA, which was
acquired by the Company in January 1994. He was President of ISA from March
1971 to January 1997.
Mr. Martin has been Vice President, Controller of the Company since
July 1990 and has been employed by the Company since January, 1996. From
August 1986 through December 1995, he was employed by Interlaken Capital as
Vice President, Finance.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE ON
EXECUTIVE COMPENSATION
The Stock Option and Compensation Committee of the Board of
Directors (the "Committee") establishes the general compensation policies of
the Company and the specific compensation level for the Company's executive
officers. The Committee also reviews the levels of compensation of senior
officers of the Company's subsidiaries. The Committee is composed of Andrew
M. Bursky and Joshua A. Polan.
The Committee believes that the compensation of executive officers 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 the Company's other
executive officers and of the 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 employment
agreements with its executive officers except as set forth under "Executive
Compensation - Employment Contracts,
15
<PAGE>
Termination of Employment and Change in Control Agreements." 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 made in accordance with the Company's Executive
Compensation Plan. For 1996, the Committee generally raised salaries only in
an amount comparable to the general rate of inflation. Bonuses for 1996 were
awarded to executive officers of the Company, and to senior officers of the
Company's subsidiaries, based on the achievement of performance goals
established by the Committee.
In line with the Committee's general approach to 1996 compensation,
Mr. Rieple, the Company's President during 1996, received an increase in his
base salary only modestly in excess of the general rate of inflation. Because
Mr. Rieple, in late 1996, announced his intention to resign as an officer and
director of the Company in 1997, Mr. Rieple did not receive a bonus or a
stock option award in 1996.
Stock options are granted to executive officers based on an
evaluation of the executives' ability to influence the Company's long-term
growth and profitability. In the case of senior officers employed by
subsidiaries, the subsidiary's financial performance and potential future
contributions to overall corporate profitability are also taken into account.
During 1996, Ms. James received options to purchase 50,000 shares of the
Common Stock and Mr. Martin received options to purchase 40,000 shares of the
Common Stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Andrew M. Bursky is Chairman of the Company's Board of Directors and
Joshua A. Polan is a Director of the Company. 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. During 1995, Mr. Bursky served
on the compensation committee of Fine Host Corporation and 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, Mr. Polan and Mr. Berkley are officers,
directors and/or shareholders.
STOCK OPTION AND COMPENSATION COMMITTEE
Andrew M. Bursky
Joshua A. Polan
April 10, 1997
The previous reports of the 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.
16
<PAGE>
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, 1996
awarded to or earned by the President and the Vice President, Controller and
Chief Accounting Officer 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, 1996. Mr. Bursky and Ms. James (who was
Executive Vice President, Chief Financial Officer, Secretary and Treasurer of
the Company in 1996) did not receive any compensation from the Company but
were executive officers of and were compensated by Interlaken Capital, which
is party to a services agreement with the Company pursuant to which
Interlaken Capital received fees of $400,000 in 1996 and will receive fees of
up to $480,000 during 1997. See "Transactions with Affiliates." Mr. Rieple,
shown as the President of the Company in the tables below, resigned as an
officer and director of the Company in April 1997.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
AWARDS
------
NUMBER OF
ANNUAL SECURITIES
NAME AND COMPENSATION AWARDS UNDERLYING
PRINCIPAL POSITION --------------------- OPTIONS ALL OTHER
OF EXECUTIVE OFFICER YEAR SALARY BONUS GRANTED (#) COMPENSATION
-------------------- ---- ------ ----- ----------- ------------
Theodore R. Rieple............. 1996 $227,692 - - $1,703 (1)
President 1995 213,617 40,000 51,500 1,366 (1)
1994 204,038 10,000 - 1,534 (1)
Charles J. Martin.............. 1996 142,097 43,250 40,000 1,066 (1)
Vice President, 1,236
Controller and Chief
Accounting Officer
(1) These amounts represent contributions to the Company's Retirement Savings
Plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth all options granted during 1996 to
the persons named in the Summary Compensation Table.
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF % OF TOTAL RATES OF STOCK
SECURITIES OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED OR BASE FOR OPTION TERM
OPTIONS TO PRICE EXPIRATION --------------------
NAME GRANTED (#) EMPLOYEES ($/SH) DATE 5% ($) 10% ($)
---- ----------- --------- ------ ---- ------ -------
Charles J. Martin 40,000 (1) 10.64% $6.94 4/29/06 $174,581 $442,423
(1) These options vest in four equal installments; 10,000
options vested on the grant date, the remainder vest on the
third, fourth and fifth anniversary of the grant date.
17
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
The following table describes, for all persons named in the Summary
Compensation Table, option exercises in 1996 and the value of in-the-money
unexercised options at December 31, 1996.
<TABLE>
NUMBER OF
SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY
ACQUIRED AT FY-END (#) OPTIONS/SARS AT FY-END ($)
ON VALUE ------------------------- ---------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE (1) UNEXERCISABLE (1)
---- ------------ ------------ ----------- ------------- --------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Theodore R. Rieple 0 0 326,165 34,335 $2,209,600 $151,932
Charles J. Martin 0 0 11,236 30,000 11,742 28,050
</TABLE>
(1) The fiscal year-end closing price of the Common Stock was $7.8750.
The amounts in these columns were calculated using the difference
between the exercise price and fiscal year-end closing price.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
AGREEMENTS
On April 11, 1997, the Company entered into a three year Executive
Employment Agreement with Mr. Sergey, pursuant to which, beginning on May 1,
1997, Mr. Sergey will serve as President and Chief Executive Officer of the
Company for base compensation of not less than $360,000 per year. Mr. Sergey
will be eligible for bonus compensation based upon the achievement of goals
established by the Committee, which bonus will not be less than $180,000 in
1997. In addition, as an inducement to enter into the Executive Employment
Agreement, Mr. Sergey was granted non-qualified options to purchase up to
400,000 shares of the Common Stock at an exercise price of $5.12 per share
(which the Committee determined to be the fair market value of the Common
Stock on the date of grant) and, upon commencement of his employment with the
Company, Mr. Sergey will be granted incentive stock options under the 1990
Stock Option Plan to purchase up to 100,000 shares of the Common Stock at an
exercise price equal to the fair market value of the Common Stock on the date
of grant. In addition, the Company agreed to sell Mr. Sergey 400,000 shares
of the Common Stock (the "Purchased Shares") for an aggregate amount of
$2,050,000 (an amount which the Committee determined to be the fair market
value of the Common Stock on the date the agreement of purchase was
executed). The purchase price for the Purchased Shares will be paid $700,000
in cash and the remainder will be evidenced by a five year promissory note
from Mr. Sergey to the Company that is secured by the Purchased Shares and
recourse only to the Purchased Shares. In addition, Mr. Sergey will receive
certain life insurance benefits, disability benefits, car allowance and
moving expenses. If Mr. Sergey's employment is terminated by the Company
without "Cause" (as defined in the Executive Employment Agreement), or by Mr.
Sergey for "Good Reason" (which, as defined in the Executive Employment
Agreement, includes a change in control of the Company), Mr. Sergey will
continue to receive his salary and reimbursement for the cost of health
benefits until the balance of the employment term or one year, if longer,
subject to setoff by amounts earned by Mr. Sergey from subsequent
18
<PAGE>
employment during such period. Upon a change in control of the Company, all
of Mr. Sergey's outstanding options will become exercisable in full.
Mr. Beauchamp was appointed an Executive Vice President of the
Company in accordance with the terms of an Employment Agreement, dated as of
January 28, 1997, by and among the Company, INTERMAT and Mr. Beauchamp. The
term of the Employment Agreement is three years, and Mr. Beauchamp is
entitled to receive a salary of not less than $150,000 per annum.
Mr. Krauter is party to an Employment Agreement, dated as of
January 4, 1994, by and between Mr. Krauter and ISA. The term of the
Employment Agreement is five years, and Mr. Krauter is entitled to receive a
salary of not less than $100,000 per annum.
COMPANY STOCK PERFORMANCE GRAPH
Set forth below is a graph comparing, for a period of five years
ended December 31, 1996, the yearly cumulative total shareholder return on
the Company's Common Stock with the yearly cumulative total shareholder
return of the NASDAQ Market Index and an index of a group of peer companies
selected by the Company. The comparison of total shareholder returns assumes
that $100 was invested on December 31, 1991 in each of the Company, the
NASDAQ Market Index and the peer group index, and that dividends were
reinvested when and as paid. The companies in the peer group are Lawson
Products, Inc. ("Lawson"), Noland Company ("Noland"), Arden Industrial
Products Inc. ("Arden") and MSC Industrial Direct Co., Inc. ("MSC"). The
Company has added MSC to the peer group this year in place of Premier
Industrial Corporation, which is no longer a publicly traded company and for
which information regarding shareholder returns is no longer available to the
Company. MSC is a direct marketer of industrial products to small and
mid-sized industrial customers throughout the United States. The Company has
included MSC 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
calculating the yearly cumulative total shareholder return of the peer group
index, the shareholder returns of the companies included in the peer group
are weighted according to the stock market capitalizations of such companies
at the beginning of each period for which a return is indicated. Of the
companies included in the peer group, the stock of Lawson and Noland has been
publicly traded for the entire five-year period covered by the performance
graph, the stock of Arden has been publicly traded since February 1994, and
the stock of MSC has been publicly traded since December 1995. The
shareholder returns of Arden and MSC are first included in the calculation of
cumulative total shareholder return of the peer group index for the years
1995 and 1996, respectively.
19
<PAGE>
<TABLE>
1991 1992 1993 1994 1995 1996
---- ------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Strategic Distribution, Inc. 100 100 100 512.844 950.2698 950.2698
NASDAQ 100 100.98 121.13 127.17 164.96 204.98
Peer Group 100 100.26 115.8 109.99 103.72 123.9
</TABLE>
From December 31, 1991 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 1991 through 1993, as set forth in the Performance Graph,
are based on (i) prices at which the Company issued the Common Stock in
private 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 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, 1996, as set forth in the Performance Graph, represents the last
reported sale price of the Common Stock on the Nasdaq National Market on
December 31, 1996, the last trading date in 1996.
20
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information, as of April 10,
1997, concerning beneficial ownership of the Company's Common Stock
(calculated based on 30,213,499 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) each executive officer of the Company
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.
Amount and
Nature of
Title of Name and Address of Beneficial Percent
Class Beneficial Owner(a) Ownership of Class
- -------- -------------------- ---------- --------
Common Stock Jeffery O. Beauchamp 218,750 *
Director, Executive
Vice President
Common Stock William R. Berkley
Director 8,125,996 (b) 26.08% (b)
Common Stock Andrew M. Bursky
Director, Chairman of
the Board 1,097,251 (c) 3.63% (c)
Common Stock Arnold W. Donald
Director 12,418 (d) *
Common Stock Catherine B. James
Director 743,874 (e) 2.45% (e)
Common Stock George E. Krauter
Director, Executive 206,000 *
Vice President
Common Stock Jack H. Nusbaum
Director 14,000 (f) *
Common Stock Joshua A. Polan
Director 172,169 (g) *
21
<PAGE>
Common Stock Mitchell I. Quain
Director 26,488 (h) *
Common Stock John M. Sergey 400,000 (i) 1.31% (i)
Director, President and
Chief Executive Officer
Common Stock Theodore R. Rieple
Former President 439,862 (j) 1.44% (j)
Common Stock Charles J. Martin
Vice President, Controller
and Chief Accounting
Officer 11,236 (k) *
Common Stock The Capital
Group Companies, Inc. 1,890,000 (l) 6.26%
Common Stock The Kaufmann Fund, Inc. 1,732,000 (m) 5.73%
Common Stock T. Rowe Price Associates,
Inc./T. Rowe Price New
Horizons Fund, Inc. 2,361,000 (n) 7.81%
Common Stock Wellington
Management Company 1,632,660 (o) 5.40%
Common Stock All executive officers
and directors as a
group (12 persons) 11,036,764 (p) 34.78% (p)
- --------------------
* Owns less than 1% of the outstanding shares of the Common Stock.
(a) The business address of William R. Berkley is 165 Mason Street,
Greenwich, Connecticut 06830. The business address of The Capital
Group Companies, Inc. is set forth in footnote (l). The business
address of The Kaufmann Fund, Inc. is set forth in footnote (m). The
business address of T. Rowe Price Associates, Inc. and T. Rowe Price
New Horizons Fund, Inc. is set forth in footnote (n). The business
address of the Wellington Management Company is set forth in footnote
(o).
(b) Includes (i) 4,000 shares of the Common Stock which are subject to
currently exercisable stock options held by Mr. Berkley, (ii) 19,649
shares of the Common Stock which are subject to currently exercisable
stock options
22
<PAGE>
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 31,156,748.
(c) Includes 32,295 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 30,245,794.
(d) Includes 4,000 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Donald.
(e) Includes (i) 151,800 shares of the Common Stock which are subject to
currently exercisable stock options and (ii) 16,666 shares of the Common
Stock which are subject to stock options held by Ms. James that will
become exercisable within 60 days. The number of outstanding shares used
for calculating percent of class is 30,381,965.
(f) Includes 4,000 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Nusbaum.
(g) Includes 4,000 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Polan.
(h) Includes 4,000 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Quain.
(i) Includes 400,000 shares of the Common Stock that Mr. Sergey is obligated
to acquire on or before May 26, 1997 pursuant to a Stock Purchase Agreement
between Mr. Sergey and the Company. The number of outstanding shares used
for calculating percent of class is 30,613,499.
(j) Includes (i) 326,165 shares of the Common Stock which are subject to
currently exercisable stock options held by Mr. Rieple and (ii) 17,167
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 30,556,831.
(k) Includes 11,236 shares of the Common Stock which are subject to currently
exercisable stock options held by Mr. Martin.
(l) The business address of The Capital Group Companies, Inc. ("Capital Group")
is 333 South Hope Street, Los Angeles, California 90071. Information
regarding Capital Group has been obtained by the Company from a Schedule 13G
filed by Capital Group with the Securities and Exchange Commission on or
about February 12, 1997. Capital Research and Management Company ("Capital
Research"), a registered investment adviser that is a subsidiary of Capital
23
<PAGE>
Group, has sole dispositive power with respect to these shares. SMALLCAP
World Fund, Inc., a registered investment company, has sole voting power
with respect to these shares. Capital Group and Capital Research disclaim
beneficial ownership of these shares.
(m) The business address of The Kaufmann Fund, Inc. is 140 E. 45th Street,
43rd Floor, New York, NY 10017. Information regarding The Kaufmann Fund,
Inc. has been obtained by the Company from a Schedule 13G filed by The
Kaufmann Fund, Inc. with the Securities and Exchange Commission on or
about December 31, 1996.
(n) The business address of T. Rowe Price Associates, Inc. and T. Rowe Price
New Horizons Fund, Inc. is 100 E. Pratt Street, Baltimore, Maryland 21202.
Information regarding T. Rowe Price Associates, Inc. and T. Rowe Price New
Horizons Fund, Inc. has been obtained by the Company from a Schedule 13G
filed by T. Rowe Price Associates, Inc. and T. Rowe Price New Horizons Fund,
Inc. with the Securities and Exchange Commission on or about February 14,
1997. The securities are owned by various individual and institutional
investors (including T. Rowe Price New Horizons Fund, Inc. ("Horizons Fund")
which owns 1,761,000 shares) which T. Rowe Price Associates, Inc. ("Price
Associates") serves as investment adviser with power to direct investments
and/or sole power to vote the securities. Price Associates has sole
dispositive power over 2,361,000 shares and sole voting power over 600,000
shares. Horizons Fund beneficially owns and has sole voting power over
1,761,000 shares. For purposes of reporting requirements of the Securities
Exchange Act of 1934, Price Associates is deemed to be a beneficial owner
of all such securities; however, Price Associates, Inc. expressly disclaims
that it is, in fact, the beneficial owner of all such securities.
(o) 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 24, 1997. Wellington Management Company has shared
investment power over 1,632,660 shares of the Common Stock and shared voting
power over 802,660 shares of the Common Stock. Wellington Management
Company does not have sole voting or investment power over any shares of
Common Stock.
(p) Does not include shares owned by Theodore R. Rieple. Includes 1,523,160
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, and 400,000 shares of the Common
Stock which will be purchased from the Company within 60 days by an
executive officer and director of the Company. The number of outstanding
shares used for calculating percent of class is 31,736,659.
24
<PAGE>
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 1997,
including but not limited to services relating to accounting 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 $40,000 per month 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.. The Services Agreement is
effective from January 1, 1997 through December 31, 1997 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. The
Company entered into a similar Services Agreement with Interlaken Capital
during March through December 1996, pursuant to which the Company paid an
aggregate of $400,000 to Interlaken Capital.
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 issued $1,400,000 aggregate principal amount of
subordinated notes to the former shareholders of INTERMAT in connection with
the Company's acquisition of INTERMAT in January 1997. Subsequent to the
acquisition, all of the subordinated notes, which are due in the year 2000
and bear interest at the rate of 9% per annum, were acquired by Mr. Beauchamp
and his wife, who continue to hold all of the subordinated notes.
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.
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
1998 must be submitted to SDI on or before December 22, 1997, 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, 1635-D Bustleton Pike, Feasterville, Pennsylvania 19053.
25
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, each person who at any time during 1996
was a director, officer or beneficial owner of more than ten percent of the
Common Stock (and each other person who, to the Company's knowledge, was
subject to Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), because of the requirements of Section 30 of the Investment
Company Act or Section 17 of the Public Utility Holding Company Act) filed on
a timely basis all reports required by Section 16(a) of the Exchange Act,
except that Mr. Donald failed to report on a timely basis his acquisition of
5,000 shares of Common Stock in July 1996.
MISCELLANEOUS
A copy of the Company's Annual Report for the year ended December
31, 1996, 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., 1635-D Bustleton
Pike, Feasterville, Pennsylvania 19053.
--------------------
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 11, 1997
26
<PAGE>
AMENDMENT NO. 1
TO THE
STRATEGIC DISTRIBUTION, INC.
AMENDED AND RESTATED
1990 INCENTIVE STOCK OPTION PLAN
Pursuant to the resolutions of the Board of Directors of
Strategic Distribution, Inc. (the "Company") dated March 12, 1997,
the second sentence of Article III of the Company's Amended and
Restated 1990 Incentive Stock Option Plan (the "Plan") is hereby
amended to read as follows:
"Under the Plan, the total number of shares
of Stock which may be purchased pursuant to
options hereunder shall not exceed, in the
aggregate, 3,000,000 shares, except as such
number of shares shall be adjusted in
accordance with the provisions of ARTICLE X
hereof."
This Amendment is subject to approval at the Company's
annual meeting of shareholders to be held on May 20, 1997, and shall
become effective upon the date of such approval. If such approval
is not obtained, this Amendment shall be null and void and shall
have no effect.
STRATEGIC DISTRIBUTION. INC.
<PAGE>
STRATEGIC DISTRIBUTION, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF SHAREHOLDERS, MAY 20, 1997
The undersigned stockholder(s) of Strategic Distribution, Inc. (the
"Company") hereby appoints Andrew M. Bursky, Charles J. Martin 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 Annual Meeting of
Shareholders to be held at the Company's headquarters, 1635-D Bustleton Pike,
Feasterville, Pennsylvania on May 20, 1997 at 10:00 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 Jeffery O. Beauchamp, William R. Berkley, Andrew M.
Bursky, Arnold W. Donald, Catherine B. James, George E. Krauter,
Jack H. Nusbaum, Joshua A. Polan, Mitchell I. Quain and John M.
Sergey.
Election of Directors FOR / / WITHHELD / /
For all nominees, except those entered below:
____________________________________________________________________________
PROPOSAL II. To approve the proposed increase, to 3,000,000, of the number of
shares of Common Stock which may be subject to options granted
under the Company's Amended and Restated 1990 Incentive Stock
Option Plan.
FOR / / AGAINST / / ABSTAIN / /
PROPOSAL III. 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, 1997.
FOR / / AGAINST / / ABSTAIN / /
(CONTINUED ON OTHER SIDE)
<PAGE>
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 Annual Meeting of
Shareholders to be held on May 20, 1997 and the Proxy Statement dated April 11,
1997.
Date: _____________________________
Signature: ________________________
Date: _____________________________
Signature: ________________________
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.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED
ENVELOPE.
