SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
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
THE STROBER ORGANIZATION, 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] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
___________________________________________________________________
2) Aggregate number of securities to which transaction applies:
___________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
___________________________________________________________________
4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
5) Total fee paid:
____________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________
3) Filing Party:
________________________________________________________________
4) Date Filed:
________________________________________________________________
<PAGE>
THE STROBER ORGANIZATION, INC.
550 HAMILTON AVENUE
BROOKLYN, NEW YORK 11232
______________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 11, 1996
______________________
The 1996 Annual Meeting of Stockholders of The Strober Organization, Inc.
(the "Company") will be held on July 11, 1996 at 10 o'clock a.m. at the offices
of Sills Cummis Zuckerman Radin Tischman Epstein & Gross, P.A., One Riverfront
Plaza, Newark, New Jersey 07102, for the following purposes:
1. To elect two (2) Class I directors to serve for a term of three
years and until their successors are duly elected and qualified (Proposal 1).
2. To approve the adoption of The Strober Organization, Inc. 1996
Outside Director Stock Option Plan granting options for 75,000 shares of
Company Common Stock to the Company's outside independent directors (Proposal
2).
3. To ratify the appointment of KPMG Peat Marwick LLP as independent
public accountants of the Company for the fiscal year ending December 31, 1996
(Proposal 3).
4. To transact such other business as may properly come before the
meeting, or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only Stockholders of record at the close of business on May 22, 1996
shall be entitled to notice of and to vote at the meeting, or any adjournment
thereof.
We enclose in this mailing the Notice of 1996 Annual Meeting of
Stockholders, Proxy Statement, Proxy and Annual Report of the Company for the
fiscal year ended December 31, 1995.
By Order of the Board of Directors
David J. Polishook
Secretary
June 14, 1996
YOUR VOTE IS IMPORTANT
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED, WHICH DOES NOT
REQUIRE POSTAGE IF MAILED IN THE UNITED STATES. GIVING YOUR PROXY WILL NOT
AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING, BUT WILL HELP TO
ASSURE A QUORUM AND AVOID FURTHER PROXY SOLICITATION COSTS.
<PAGE>
THE STROBER ORGANIZATION, INC.
550 Hamilton Avenue
Brooklyn, New York 11232
___________________
PROXY STATEMENT
___________________
This statement is furnished to the Stockholders (the "Stockholders")
of The Strober Organization, Inc. (the "Company" or "Strober") in connection
with the solicitation by the Board of Directors of the Company (the "Board") of
proxies to be used at the Annual Meeting of Stockholders (the "Meeting") to be
held on July 11, 1996, or at any adjournment or adjournments thereof, for the
purposes set forth in the attached Notice of Meeting. Copies of this Proxy
Statement and the form of proxy are being mailed to all Stockholders on or
about June 14, 1996
Properly executed proxies will be voted in the manner directed by a
Stockholder and, if no direction is given, will be voted for the election of
the nominees named under the caption "Election of Directors" as directors of
the Company and for Proposals 2 and 3. Any proxy may be revoked by a
Stockholder at any time prior to its exercise (such as by giving notice of
revocation in writing to the Secretary of the Company, by delivery of a later
dated proxy, or if the Stockholder attends the Meeting, by oral notice to the
Secretary of the Meeting and by voting the shares in person). Mere attendance
at the Meeting, without giving notice of revocation of the proxy as set forth
above, will not revoke the proxy.
Only Stockholders of record at the close of business on May 22, 1996
will be entitled to notice of and to vote at the Meeting or any adjournment or
adjournments thereof. As of May 22, 1996, there were 5,027,447 outstanding
shares of the Company's common stock ("Common Stock"), which is the only
outstanding class of voting securities of the Company. Each outstanding share
of Common Stock is entitled to one vote on each matter to be voted upon.
Directors will be elected by a plurality of the votes cast at the Meeting. The
Company's By-laws provide that Stockholders holding a majority of the shares of
Common Stock will constitute a quorum at meetings of stockholders.
PRINCIPAL STOCKHOLDERS
The following table, prepared from the records of the Company and from
information furnished to it, sets forth, as of May 22, 1996, the name and
holdings of each person (including any "group" as defined in Section 13(d) of
the Securities Exchange Act of 1934) known by the Company to be the beneficial
owner of more than five percent of its Common Stock. Unless otherwise
indicated, the persons listed below have sole voting and investment power with
respect to all shares of Common Stock shown as beneficially owned by them.
<PAGE>
NAME AND ADDRESS OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
Sue Strober (1)(4) 948,951 18.9%
c/o The Strober Organization, Inc.
550 Hamilton Avenue
Brooklyn, New York 11232
Robert J. Gaites (2)(4) 457,135 9.1%
c/o The Strober Organization, Inc.
550 Hamilton Avenue
Brooklyn, New York 11232
John Yanuklis (3)(4) 453,255 9.0%
c/o The Strober Organization, Inc.
550 Hamilton Avenue
Brooklyn, New York 11232
John T. Guerin (4) 422,250 8.4%
14 Summit Road
Morristown, New Jersey 07960
Gordon Sandler (4) 384,486 7.6%
6468 Via Rosa
Boca Raton, Florida 33433
___________________
(1) Includes an aggregate of 84,650 shares held in trusts of which Ms.
Strober is the trustee for her son and daughter. Ms. Strober disclaims
beneficial ownership of such shares. Includes an aggregate of 2,250 shares
which have previously been transferred to third parties but have not yet been
registered in such parties' names.
(2) Excludes 25,000, 25,000, 37,500 and 25,553 shares of Common Stock
subject to presently exercisable options held by Mr. Gaites at exercise prices
of $1.75, $4.75, $3.625 and $4.50 per share which expire on December 31, 1996,
1997, March 8, 2000 and March 12, 2001, respectively. Includes 2,000 shares
held by Mr. Gaites' spouse as trustee for their son. Mr. Gaites disclaims
beneficial ownership of such shares.
(3) Excludes 9,000, 14,286, 22,737, 23,503 and 27, 378 shares of
Common Stock subject to presently exercisable options held by Mr. Yanuklis at
exercise prices of $1.125, $1.75, $4.75, $3.625 and $4.50 per share of which
23,286 expire on December 31, 1996, 22,737 expire on December 31, 1997, 23,503
expire on March 8, 2000 and 27,378 expire on March 12, 2001.
(4) The above-named beneficial owner is a party to an agreement
providing such beneficial owner with a right of prior notice and first refusal
to purchase shares of the Company's Common Stock which any other party to the
agreement desires to sell. (See "Certain Transactions")
<PAGE>
ELECTION OF DIRECTORS
(Proposal 1)
The By-laws of the Company provide that there shall be not less than 3
nor more than 20 directors. The number of directors of the Company is
presently fixed by resolution of the Board at 7. Messrs. Bernstein, Gaites and
Yanuklis have served as directors of the Company since the Company's initial
public offering in 1986; Mr. Zieky became a director in January 1988; Messrs.
Murstein and Solimine were elected as directors in July 1989 and Mr. Mangino
was elected as a director in May 1992. Pursuant to the amendment to the
Company's Certificate of Incorporation which was approved by the Stockholders
of the Company at the 1995 Annual Meeting of Stockholders, the Board of
Directors consists of three classes of directors serving staggered terms of
office with each class to consist, as nearly as possible, of one-third of the
total number of directors constituting the entire Board of Directors. Upon the
expiration of the term of office for a class of directors, the nominees for
that class are elected for a three year term to serve until the election and
qualification of their successors. Unless otherwise specified, each properly
executed proxy received will be voted for the election of the two Class I
nominees named below as directors to serve until the 1999 Annual Meeting of
Stockholders or until their respective successors shall be elected and shall
qualify. Each of the nominees has consented to be named as a nominee in the
Proxy Statement and to serve as a Class I director if elected.
Should any nominee become unable or unwilling to accept a nomination
or election, the persons named in the enclosed proxy will vote for the election
of a nominee designated by the Board.
The following table, prepared from the records of the Company and from
information furnished to it, sets forth, as of May 22, 1996, the name and
position, age and biographical data of each Class I nominee for director of the
Company.
CLASS I NOMINEES FOR DIRECTOR (TERM TO EXPIRE AT 1999 STOCKHOLDER MEETING)
NAME AND Biographical
POSITION AGE DATA(1)
<TABLE>
<CAPTION>
<S> <C> <C>
EMIL W. SOLIMINE 51 Mr. Solimine is the Chairman
Class I Director of the Company of the Board of Directors and Chief Executive Officer of Emar Group, Inc., an
insurance brokerage concern which he started in 1971 and which has served as
insurance broker for the Company's property and casualty insurance since
1983. Mr. Solimine is also a director of DiGiorgio Corporation, an
independent wholesale food distributor.
ELIOTT ZIEKY 44 Mr. Zieky has been with the
Senior Vice President Company since 1988 as a Senior
and Class I Director of the Company Vice President, and with his cousin, Edward Zieky, manages its Hartford,
Connecticut region. He was an officer of The General Building Supply Company
prior to its acquisition by the Company. He has over 20 years of experience
in the industry.
</TABLE>
The following table, prepared from the records of the Company and from
information furnished to it, sets forth, as of May 22, 1996, the name and
position, age and biographical data of each Class II Director and Class III
Director of the Company.
CLASS II DIRECTORS (TERM TO EXPIRE AT 1997 STOCKHOLDER MEETING)
<TABLE>
<CAPTION>
<S> <C> <C>
ROBERT J. GAITES 54 Mr. Gaites has been with the
Chairman of the Board, Company since 1976. He was
Class II Director, Senior Vice President since
Chief Executive Officer 1986 and CEO since June
and President of the Company 1991. He has 29 years of experience in the industry.
JOSEPH MANGINO, SR. 59 Mr. Mangino has been
Class II Director of the Company the President of Metropolitan Trucking, Inc. a privately held trucking company
since 1980. He is a regional director of Bank of New York, National Community
Division.
</TABLE>
CLASS III DIRECTORS (TERM TO EXPIRE AT 1998 STOCKHOLDER MEETING)
<TABLE>
<CAPTION>
<S> <C> <C>
DAVID W. BERNSTEIN 70 Mr. Bernstein is an attorney
Class III Director of the Company engaged in private practice
and served as general counsel
to the Company from 1953 through 1990.
ALVIN MURSTEIN 61 Mr. Murstein has been
Class III Director of the Company President and Chairman of the Board of Directors of Tri-Magna Corporation, the
parent corporation of Medallion Funding Corp., since 1989 and the President
and Chairman of the Board of Directors of Medallion Funding Corp. since 1979.
JOHN YANUKLIS 59 Mr. Yanuklis has been with
Executive Vice President the Company since 1981 and
and Class III Director of manages its Hudson Valley,
the Company New York region. He was a Senior Vice President since 1986 and an Executive
Vice President since June 1992. He has over 30 years of experience in the
industry.
</TABLE>
________________________
(1) The Strober Organization, Inc. was organized in connection with
the Company's initial public offering in 1986 to act as the parent of the
companies previously conducting the Strober business. References to employment
with the "Company" in the table above, where appropriate, include positions
with Strober's predecessor companies.
The Company's Board held four meetings during the fiscal year ended
December 31, 1995. Each director attended all of the meetings of the Board and
its committees held during such year, except for one director who missed one
Board meeting.
The Expansion Committee, the function of which is to review
management's progress in expanding the Company's product lines, enhancing its
existing building supply center network and expanding that network, did not
hold any meetings in 1995. The members of the Expansion Committee for 1995
were Messrs. Bernstein, Gaites, Mangino and Yanuklis.
The Company has a Compensation Committee, the function of which is to
establish, in conjunction with the Company's Board, salaries, bonuses and other
forms of compensation for senior executives of the Company. The Compensation
Committee held one meeting in 1995 and entered into two written consents
without a meeting during that time. The members of the Compensation Committee
for the fiscal year ended December 31, 1995 were Messrs. Bernstein, Gaites,
Mangino, Solimine and Yanuklis.
The Company has a Facility Leasing Independent Committee, the function
of which is to review and negotiate the Company's related party facility leases
and/or seek to review alternative sites for consideration. The Facility
Leasing Independent Committee did not hold any meetings in 1995. The members
of the Facility Leasing Independent Committee for 1995 were Messrs. Mangino,
Murstein and Solimine.
The Company has a 1986 Stock Option Plan Committee, the function of
which is to grant stock options to key employees of the Company and its
subsidiaries under the Company's Restated 1986 Non-Qualified Stock Option Plan.
The Plan Committee held one meeting in 1995 and entered into one written
consent without a meeting during that time. The members of the Plan Committee
for the fiscal year ended December 31, 1995 were Messrs. Bernstein, Murstein
and Solimine.
The Company's 1993 Outside Director Stock Plan Committee was
established upon the ratification of the 1993 Outside Director Stock Option
Plan by the Stockholders at the 1993 Annual Meeting. For the fiscal year ended
December 31, 1995, Messrs. Gaites, Yanuklis and Zieky served on this Committee
and held one meeting in 1995.
The Company has an Audit Committee, the purposes of which are to
oversee the financial reporting and disclosures of the Company, monitor
compliance with financial reporting requirements and the Company's internal
control and credit policies, review the role of the Company's independent
accountants and pass upon the fairness of transactions between the Company and
its affiliates, officers, directors or employees or any other related party
transactions. The Audit Committee held two meetings in 1995. The members of
the Audit Committee for the fiscal year ended December 31, 1995 were Messrs.
Bernstein, Mangino, Murstein and Solimine.
The Company has no standing Nominating Committee.
Other than Eliott Zieky and his first cousin Edward N. Zieky, Senior
Vice President of the Company, there are no other family relationships between
any executive officers or directors of the Company.
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table, prepared from the records of the Company and from
information furnished to it, sets forth, as of May 22, 1996, the number of
shares of Common Stock beneficially owned by each director and nominee, the
chief executive officer and the four other most highly compensated executive
officers (collectively, the "Named Executive Officers") and all directors and
executive officers of the Company as a group. Unless otherwise indicated, the
persons listed below have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
COMMON STOCK
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
<S> <C> <C>
Robert J. Gaites 457,135 (1)(8) 9.1%
David W. Bernstein 29,100 (2)(3) *
Joseph Mangino, Sr. 10,500 (3) *
Alvin Murstein 15,000 (3) *
Emil W. Solimine 18,500 (3)(4) *
John Yanuklis 453,255 (5)(8) 9.0%
Edward Zieky 0 (6)(8) *
Eliott Zieky 0 (6)(8) *
Richard Schaefer 3,120 (7) *
All Officers and Directors as a group 1,092,779 21.7%
(12 persons) (9)
</TABLE>
________________________
* Less than one percent of the outstanding shares of Common Stock.
(1) Excludes 25,000, 25,000, 37,500 and 25,553 shares of Common Stock
subject to presently exercisable options held by Mr. Gaites at exercise prices
of $1.75, $4.75, $3.625 and $4.50 per share which expire on December 31, 1996,
1997, March 8, 2000 and March 12, 2001, respectively. Includes 2,000 shares
held by Mr. Gaites' spouse as trustee for their son. Mr. Gaites disclaims
beneficial ownership of such shares.
(2) Includes 100 shares owned by Mr. Bernstein's wife. Mr. Bernstein
disclaims beneficial ownership of such shares. Excludes 100,000 shares of
Common Stock subject to a presently exercisable warrant held by Mr. Bernstein
at an exercise price of $12.00 per share which expires on November 7, 1996.
(3) Excludes 12,500 and 18,750 shares subject to presently
exercisable options and 18,750 shares subject to options still requiring
Stockholder ratification each held by the outside directors at an exercise
price of $4.75, $3.625 and $4.50 per share which expire on March 9, 1997, March
8, 2000 and March 12, 2001, respectively.
(4) 1,000 of these shares are owned by Emar, Ltd., of which Mr.
Solimine is the sole shareholder and 17,500 of these shares are owned by Deye
Limited Partnership of which Mr. Solimine is a general partner.
(5) Excludes 9,000, 14,286, 22,737, 23,503 and 27,378 shares of Common
Stock subject to presently exercisable options held by Mr. Yanuklis at exercise
prices of $1.125, $1.75, $4.75,$3.625 and $4.50 per share of which 23,286
expire on December 31, 1996, 22,737 expire on December 31, 1997, 23,503 expire
on March 8, 2000 and 27,378 expire on March 12, 2001.
(6) Excludes 1,684, 10,152 and 9,031 shares of Common Stock subject
to a presently exercisable option held by each of Edward and Eliott Zieky at an
exercise price of $4.75, $3.625 and $4.50 per share which expire on December
31, 1997, March 8, 2000 and March 12, 2001, respectively.
(7) Excludes 22,500, 51,429, 15,789, 27,586 and 22,222 shares of
Common Stock subject to presently exercisable options held by Mr. Schaefer at
exercise prices of $1.125, $1.75, $4.75, $3.625 and $4.50 per share,
respectively. Of these options, 73,929 expire on December 31, 1996, 15,789
expire on December 31, 1997, 27,586 expire on March 8, 2000 and 22,222 expire
on March 12, 2001.
(8) The above-named director or member of management is a party to an
agreement providing such individual with a right of prior notice and first
refusal to purchase shares of Common Stock which any other party to the
agreement desires to sell. (See "Certain Transactions")
(9) Excludes 942,438 shares of Common Stock subject to presently
exercisable options and warrants held by certain directors and executive
officers of the Company at exercise prices ranging from $12.00 to $1.125 per
share. Excludes 150 shares owned by a relative of Mr. Albert Brower. Mr.
Brower disclaims beneficial ownership of such shares..
_______________________________
THE BOARD RECOMMENDS A VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR CLASS I DIRECTOR NAMED ABOVE.
________________________________
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services rendered in all capacities to the Company
by those persons who were, at December 31, 1995, the Named Executive Officers.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
<S> <C> <C> <C> <C> <C> <C>
NAME AND PRINCIPAL POSITION FISCAL SALARY ($) BONUS ($) OTHER ANNUAL STOCK ALL OTHER
YEAR COMPENSATION OPTION COMPENSATION
($)(1) GRANTS(#) ($)(1)(3)
ROBERT J. GAITES 1995 $275,000 $225,000 -- 37,500 $795
Chairman, President, 1994 $250,000 $225,000 -- 25,000 $900
Chief Executive Officer 1993 $250,000 $160,000 -- 25,000 $814
JOHN YANUKLIS 1995 $154,000 $184,905 -- 23,503 $409
Executive Vice President, 1994 $142,000 $136,186 -- 22,737 $505
Director 1993 $135,000 $149,745 -- 14,286 $503
RICHARD SCHAEFER 1995 $125,000 $116,988 -- 27,586 $397
Vice President 1994 $125,000 $136,619 -- 15,789 $450
1993 $125,000 $108,950 -- 51,429 $475
EDWARD ZIEKY 1995 $127,000 $93,214 -- 10,152 $511
Senior Vice President 1994 $115,000 $91,923 -- 1,684 $580
1993 $100,000 $25,268 $18,300(2) -- $546
ELIOTT ZIEKY 1995 $127,000 $93,214 -- 10,152 $511
Senior Vice President, 1994 $115,000 $91,923 -- 1,684 $580
Director 1993 $100,000 $25,268 $18,300(2) -- $546
</TABLE>
(1) Amounts for "Other Annual Compensation" are not shown in the table
as none of these perquisites exceed the lesser of (i) $50,000 or
(ii) 10% of the Named Executive Officer's combined Salary and
Bonus, except for Messrs. Edward and Eliott Zieky in 1993.
(2) Indicates a $10,200 car allowance which accounts for more than 25%
of the perquisites of Messrs. Edward and Eliott Zieky.
(3) Includes only premiums paid by the Company attributable to term
life insurance coverage for the Named Executive Officers.
OPTION GRANTS TABLE
The following table sets forth information on grants of stock options
to the Named Executive Officers pursuant to the Company's Restated 1986 Non-
Qualified Stock Option Plan during the fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
Name Options % of Total Exercise Expiration Potential Realizable Value at Assumed
Granted(#) Options Price ($/Share) Date Annual Rates of Stock Price
Granted to Appreciation for Option Term
Employees
in Fiscal
Year
<S> <C> <C> <C> <C> <C> <C>
5%($) 10%($)
Robert J. Gaites 37,500 20.43% $3.625 03/08/00 $37,560 $82,990
John Yanuklis 23,503 12.81% $3.625 03/08/00 $23,540 $52,014
Richard Schaefer 27,586 15.03% $3.625 03/08/00 $27,630 $61,050
Edward Zieky 10,152 5.53% $3.625 03/08/00 $10,168 $22,467
Eliott Zieky 10,152 5.53% $3.625 03/08/00 $10,168 $22,467
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUE TABLE
The following table sets forth information concerning the aggregate
number and value of unexercised options to purchase Common Stock held by each
of the Named Executive Officers as of December 31, 1995.
<TABLE>
<CAPTION>
SHARES ACQUIRED ON VALUE NUMBER OF VALUE OF
EXERCISE (#) REALIZED ($) UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY
NAME AT FY-END(#) OPTIONS
ALL AT FY-END ($)
EXERCISABLE ALL
EXERCISABLE
<S> <C> <C> <C> <C>
Robert J. Gaites -- -- 87,500 $45,312
John Yanuklis -- -- 69,526 $47,831
Richard Schaefer -- -- 117,304 $148,059
Edward Zieky -- -- 11,836 --
Eliott Zieky -- -- 11,836 --
</TABLE>
<PAGE>
COMPENSATION OF DIRECTORS
During 1995, members of the Board who were not employees of the
Company received an annual retainer of $12,500, plus a fee of $1,000 for each
Board and Board committee meeting attended.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Company's Compensation Committee during the fiscal
year ended December 31, 1995 were Messrs. Bernstein, Gaites, Yanuklis, Mangino
and Solimine. Mr. Gaites also served as President and Chief Executive Officer
during the fiscal year ended December 31, 1995.
Mr. Gaites and Mr. Yanuklis are owners in entities that lease
facilities to the Company in Brooklyn, New York; Congers, New York; Vails Gate,
New York and Hampton, New Jersey. Mr. Gaites' equity interests in these
entities are 10%, 2%, 2% and 2%, respectively. Mr. Yanuklis' equity interests
in these entities are 0%, 16%, 16% and 16%, respectively. The current annual
rent on these facilities is $709,400, $260,900, $69,500 and $328,700,
respectively. The lessors of the Congers, New York and Hampton, New Jersey
facilities have granted the Company a right of first refusal in the event that
either of the lessors desire to sell their respective properties to a third
party. The Facility Leasing Independent Committee is currently negotiating
with related party owners of the Company's Brooklyn, New York and Valley
Stream, New York facilities for new ten year leases beyond December 31, 1996.
With respect to the remaining affiliated party leases, the Company believes
that the leases with such affiliated parties, at the time the leases were
entered into, were on terms no less favorable to the Company than it could have
obtained in arms-length negotiations with unrelated parties for similar
locations in similar geographic areas.
During 1995, the Company paid $1,052,080 in insurance premiums for the
Company's property and casualty insurance to Emar Group, Inc., the insurance
broker of which Mr. Solimine is president. The Company believes that the
insurance premiums it pays to Emar Group, Inc. are on terms no less favorable
to the Company than it could obtain in arms-length negotiations with unrelated
parties for similar property and casualty insurance.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Under a stockholder agreement entered into as part of the 1986 IPO (as
described hereinafter) among the Company, Messrs. Gaites, Yanuklis, Edward
Zieky and Eliott Zieky, two other executive officers and other Company
stockholders and former officers, in the event the Company terminates without
cause the employment of a party to such stockholder agreement, the Company is
obligated to engage the terminated party as a consultant for two years with a
retainer equal to 75% of that individual's then current base salary. During
such period the consultant would be barred from competing against the Company
in its existing markets.
The Company has employment agreements with each of Edward Zieky and
Eliott Zieky, Named Executive Officers, providing for a current base salary of
$127,000. Under their respective employment agreements, Messrs. Edward and
Eliott Zieky are entitled to such group life insurance, pension, medical
insurance, hospitalization, disability and similar employee benefit plans as
may exist for the benefit of the executive officers of the Company generally.
The employment agreements bar solicitation of similar business to that of the
Company during Messrs. Edward and Eliott Zieky's respective employment and for
three years thereafter. They are also barred from directly or indirectly
competing with the business of the Company in a 75 mile radius for a period of
two years after ceasing to be employed by the Company. If either Messrs.
Edward or Eliott Zieky leave the Company for a reason other than termination
for cause, at the option of the Board, they may become a consultant to the
Company for a term of two years. If either or both are terminated without
cause, the Company is obligated to engage them as a consultant for two years
for a retainer equal to 75% of their then current base salary.
Except as set forth above, the Company has no other termination of
employment or change-in-control arrangements for the remaining Named Executive
Officers.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In order to enhance disclosure of the Company's policies towards
executive compensation, the Compensation Committee of the Board has furnished
the following report on executive compensation.
BACKGROUND
Based upon its then existing compensation policies as a network of
privately owned businesses in New York, New Jersey and Connecticut and in
contemplation of the Company's reorganization for its initial public offering
in November 1986 (the "1986 IPO"), the Company's executive compensation levels,
plans and policies were established in consultation with the principal
underwriter for the 1986 IPO. As part of this process, the base salary
component of the Company's compensation package for the chief executive officer
and founder of the Company, Eric D. Strober, was established at $500,000; the
base salary of the operating executive officers, with profit and loss
responsibilities at each of the Company's building supply yards, was
established at $100,000; and the base salary of corporate executive officers,
with centralized Company responsibilities, was established at $75,000. The
cash performance bonus and performance stock option components of the Company's
compensation package were structured to award to the chief executive officer
and each of the operating executive officers (i) a cash performance bonus based
upon a formula equal to 4.5% and 10.5%, respectively, of each applicable yard's
profits, before bonus, acquisition costs and taxes ("net profits") requiring at
least a 9% minimum net profit threshold, and (ii) performance stock options
determined pursuant to a formula based upon a sliding scale percentage of net
profits realized by each yard as applied to the yard managers' qualified base
salary. These initial compensation levels and policies reflected the Board's
evaluation of the performance of the Company's executive officers as compared
to the executive officers of the Company's competitors in the New York, New
Jersey and Connecticut area building materials industry.
In 1988, the Company acquired The General Building Supply Company of
Hartford, Connecticut and hired two of its operating executive officers. Each
operating executive officer received a base salary of $100,000 in accordance
with the then existing base salary component of the Company's compensation
package and was entitled to an incentive cash bonus and stock options pursuant
to the then existing formulae, except that the minimum threshold net profit was
waived for 1988 through 1990.
In 1988, upon the death of Mr. Strober and the subsequent election of
Gary Kulick, President of the Company, as the Company's chief executive
officer, Mr. Kulick's base salary was set at $250,000. The Company's cash
performance bonus formula was revised at that time to provide for the chief
executive officer and the operating executive officers to each be awarded only
2% and 10.5%, respectively, of each applicable yard's net profits and the
minimum net profit threshold was reduced to a sliding scale requiring a minimum
of a 6% net profit.
In 1989, the base salaries of the corporate executive officers
(excluding the chief executive officer) were increased to $100,000 to reflect
management's view of the increased importance of their roles in the Company's
operations on a consolidated basis and to give effect to increases in the cost
of living since 1986. In addition, the Company's cash performance bonus
formula was modified to provide for the chief executive officer and the
operating executive officers to each be awarded 2% and 8% respectively of each
applicable yard's net profits and the minimum net profit threshold was
eliminated.
In 1990, the base salaries of the operating executive officers were
adjusted to establish a new range of base salaries from $100,000 to $112,500 in
recognition of the increases in the cost of living since 1986. The two
operating executive officers of the Hartford, Connecticut region declined any
such base salary increase until business conditions in their region improved.
The base salary of the operating executive officer at the Edison, New Jersey
yard was reduced to $80,000 as part of an expense reduction program instituted
at that yard. In addition, the Company's cash performance bonus formula was
modified to provide for the chief executive officer and the operating executive
officers to each be awarded 2.5% and 10%, respectively of each applicable
yard's net profits without a minimum net profit threshold.
In 1991, the cash performance bonus formula was further revised when
Mr. Gaites was elected as chief executive officer to provide that the operating
executive officers would continue to receive 10% of their respective yard's net
profit, but the chief executive officer's cash performance bonus, if any, would
be based upon the Compensation Committee's overall assessment of his
performance as it affected the entire Company.
In 1992, the base salary of the operating executive officer of the two
Hudson Valley, New York yards, was increased from $112,500 to $125,000 based
upon management's recommendation and the Compensation Committee's recognition
of the superior performance of the yards managed by him. In addition, the
Board determined that his performance warranted a promotion from Senior Vice
President to Executive Vice President.
In March 1993, based upon management's recommendation and the
Compensation Committee's continued recognition of his superior performance, the
same Hudson Valley, New York operating executive officer's 1993 base salary was
increased by $10,000 to $135,000. In addition, the 1993 base salaries of the
operating executive officer of the Valley Stream, Long Island yard and the
Company's chief financial officer were each increased by $12,500 to $125,000.
The 1993 base salaries of the operating executive officers of the Brooklyn, New
York and New Jersey yards (three individuals in all) were increased from
$100,000 to $110,000; in each case because of the Committee's recognition of
their contributions to the Company.
In March 1994, the 1994 base salary of the Hudson Valley, New York
operating executive officer was increased by $7,000 to $142,000 because of the
Compensation Committee's recognition of his continued superior performance.
The authorized 1994 base salaries of the two operating executive officers of
the Hartford, Connecticut yards were increased by $2,500 to $115,000 as a
result of increased operating profits at these yards in 1993.
In March 1995, based upon management's recommendation and the
Committee's assessment of the further improvement achieved in the operating
results in the Hudson Valley and Connecticut yards, the 1995 base salary of
three operating executive officers of these yards was increased by a further
$12,000 to $154,000, $127,000 and $127,000 respectively. In March and April
1995, based upon the Compensation Committee's recognition of the excellent
credit analysis permitting a lower bad debt expense accrual and the extra
efforts put forth in upgrading the Company's management information systems by
the corporate executives, the 1995 base salary of the Chief Financial Officer
and a corporate Senior Vice President was increased by a further $12,000 and
$7,500, respectively, to $137,000 and $120,000, respectively.
Upon consummation of the 1986 IPO, the responsibilities of the
Compensation Committee included determining cash performance bonus and
performance stock option formulae and the initial salary levels and subsequent
salary adjustments for the chief executive officer and the operating executive
officers. For fiscal year 1992, the Compensation Committee's responsibilities
were extended to include determination of the salary levels and salary
adjustments of the corporate executive officers. All decisions by the
Compensation Committee relating to the compensation of the Company's executive
officers are reviewed and approved by the full Board, except for decisions
about awards under the Company's Restated 1986 Non-Qualified Stock Option Plan,
which are made by the Stock Option Plan Committee.
COMPONENTS OF EXECUTIVE COMPENSATION
The goal of the Company's executive compensation policy is to ensure
that an appropriate relationship exists between executive compensation and the
creation of stockholder value, while at the same time motivating and retaining
key employees. To achieve this goal, the primary components of executive
compensation for the prior year consisted of base salary, cash performance
bonus and performance stock options based upon individual yard profitability,
corporate performance and individual initiatives and performance.
As described above, the current base salaries of the executive
officers were derived from those salaries determined during the Company's
reorganization in anticipation of the 1986 IPO. A comparison of the Company's
compensation levels to those of the Company's competitors (generally, building
materials distributors to professional contractors in the New York, New Jersey,
Connecticut and Pennsylvania region) is based on estimates as most of the
Company's competitors are privately owned. In light of such estimations, it is
the Compensation Committee's view that the Company's levels of compensation
comprised of base salary plus cash performance bonus, if any, are in the high
middle range of compensation.
Unlike many of its competitors, the Company, being a public company,
grants to its executive officers and key employees options to purchase Company
Common Stock as an additional incentive. To the extent these options, granted
in accordance with the incentive performance formula, are exercised, the
benefit derived therefrom provides additional compensation to such executives
and key employees. The Stock Option Plan Committee considers such additional
compensation to be justified based upon the value of the executive officers'
and key employees' efforts on behalf of the Company and its stockholders.
Awards of cash performance bonuses and grants of performance stock
options to the operating executive officers follow the same incentive formulae
adopted by the Company at the time of the 1986 IPO. The Compensation Committee
continues to believe that these policies, as subsequently revised, are
appropriate in the current environment.
The Stock Option Plan Committee determines grants of performance stock
options to the corporate executive officers, by considering the respective
scope of accountability, strategic and operational goals, performance
requirements and contributions of each of the corporate executive officers.
During 1994, two subsidiary officers who were not Named Executive
Officers exercised options for an aggregate of 7,704 shares at an exercise
price of $3.375 all of which would have otherwise expired in December 1994.
During 1995, an aggregate of 10,766 options were exercised by two subsidiary
officers at exercise prices of $1.125 and $1.75, all of which would have
otherwise expired in December 1996.
As the construction market in New York, New Jersey, Connecticut and
Pennsylvania stabilized during 1993 and improved in both 1994 and 1995, the
Company's operating and corporate executive officers remained focused on the
performance of the yards, providing superior centralized corporate services and
planned for appropriate expansion. As a consequence, the Company continued to
improve its overall performance, reporting $.59 per share of net income in 1995
compared to $.50 in 1994 and $.33 in 1993, consisting of the third consecutive
year of net income after four years of losses since 1988 (exclusive of 1990 net
income derived from recovery of insurance proceeds from the death of its
founder). During the period ending in 1993, several of the Company's
competitors in the professional contractor building materials market in the New
York, New Jersey, Connecticut and Pennsylvania region, suffered bankruptcies
and/or closed facilities as a result of the difficult and uncertain economic
environment for residential and commercial construction at that time.
Accordingly, in March 1996, the Compensation Committee and Stock
Option Plan Committee determined that the existing incentive performance
formulae remained appropriate for the Company. The Compensation Committee
applied these formulae in awarding to operating executive officers (excluding
the chief executive officer) an aggregate cash bonus of $701,632. Based on the
assessment that the base salary of the Company's operating management was
consistent with their performance in the 1995 fiscal year the 1996 annual base
salary of Company Management was left unchanged at its 1995 levels. The Stock
Option Plan Committee applied the existing incentive performance formula in
granting to these operating executive officers and other key employees five
year options for an aggregate of 120,862 shares at $4.50 per share (the Stock
Option Plan Committee's determination of the fair market value on the date of
grant). In addition, in recognition of their efforts on the Company's behalf,
the Company's chief financial officer and a corporate senior vice president
were granted options for 22,500 and 7,500 shares, respectively, under the same
terms as those options granted to other operating executive officers.
CHIEF EXECUTIVE OFFICER COMPENSATION
In March 1993, the Compensation Committee reviewed the improving 1992
operating results of the Company which, although still at a loss, continued to
have positive cash-flow and indicated dramatic improvement in operations from
the 1991 fiscal year. During 1992, the Company's sales increased by 16%, the
Company had restructured its long-term debt arrangements and improved upon its
already conservative credit policies. It was the Committee's decision, based
upon the base salary history of the preceding chief executive officer as well
as subjective factors, that Mr. Gaites' 1993 base salary be set at $250,000.
As the Company was not profitable on a consolidated basis, the Compensation
Committee determined that Mr. Gaites would not receive a cash performance bonus
even though six of the nine Company reporting yards realized net profit in
1992.
In March 1994, the Compensation Committee reviewed the significant
improvements in the Company's 1993 operating results which revealed that the
Company turned in its best performance over the last five years as eight of the
Company's reporting nine yards realized a net profit. Compared with 1992, 1993
sales were up by 14% or $14.2 million to $118,975,000 while SG&A expenses
increased by only 4% and bad debt reserves were reduced from 1.5% to 1.2% of
sales with the result that 1993 operating income was up by $3.3 million
compared to a 1992 loss of $78,000 and 1993 net income was up by $.48 per share
to $1,650,000 or $.33 per share compared to a net loss of $763,000 or $.15 loss
per share in 1992. Further, from January 1993 through December 1993 the market
value of the Company's outstanding common stock increased from $1.625 per share
to $4.00 per share. Consequently, the Company's market capitalization during
this period (excluding those shares held by Mr. Gaites) increased by
approximately $10.9 million. It was the Compensation Committee's decision,
based upon their subjective assessment of these improvements, that Mr. Gaites
1994 annual base salary remain at $250,000 and that he be awarded a cash
performance bonus of $160,000.
In March 1995, the Compensation Committee considered the continued
improvement in the Company's 1994 operating results as eight of nine of the
Company's reporting yards realized a net profit with sales up by 5% or $6.4
million to an aggregate of $125,378,000. SG&A expenses increased by only 1%
while bad debt reserves were further reduced from 1.2% to 0.8%. Thus, 1994 net
income increased by $.17 per share to $.50 per share for a 52% growth compared
to 1993 net income of $.33 per share. Further, the Company was able to enter
into a two year relationship lending arrangement with The Chase Manhattan Bank
(N.A.) providing significant savings over its prior collateralized loan with
its prior lender. It was the Compensation Committee's decision based on their
subjective assessment of these improvements, that Mr. Gaites' 1995 annual base
salary be increased $25,000 to $275,000 and that he be awarded a cash
performance bonus of $225,000.
In March 1996, the Compensation Committee considered the improvement
in the Company's 1995 operating results as all of the Company's reporting yards
realized a net profit with sales up only 3/10 of one percent (.3%) or $435,000
to an aggregate of $125,813,000 in spite of a reduction in new residential
construction and market price reductions in lumber products. SG&A expenses
decreased slightly while bad debt reserves were further reduced to less than
5/10 of one percent (.5%) resulting in an increase in 1995 net income of $.09
per share to $.59 per share; a 20% growth compared to 1994 net income of $.50
per share. During this time, the Company relocated its Farmingdale yard to
larger facilities with little disruption; opened a new joint venture
Architectural Wall Systems, LLC to sell exterior wall products; and opened a
new 28,500 square foot facility in Bethlehem, Pennsylvania. Based upon their
subject assessment of these results, it was the Compensation Committee's
decision to maintain Mr. Gaites' base salary for 1996 at $275,000 and that he
be awarded the same cash performance bonus of $225,000 as he received in the
prior year.
To provide additional incentive to Mr. Gaites to enhance stockholder
value beyond that provided by his then current options and equity position in
the Company, in March 1996 the Stock Option Plan Committee granted to Mr.
Gaites an immediately exercisable five year option expiring in March 2001 for
an additional 25,553 shares at $4.50 per share (its deemed fair market value on
the date of grant) which the Committee subjectively believed to be appropriate
due to the improved performance and profitability of the Company achieved
during 1995.
COMPENSATION COMMITTEE STOCK OPTION PLAN COMMITTEE
David W. Bernstein David W. Bernstein
Robert J. Gaites Alvin Murstein
Joseph Mangino, Sr. Emil W. Solimine
Emil W. Solimine
John Yanuklis
COMMON STOCK PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder
return on the Common Stock during the past five fiscal years, based on the
market price of the Common Stock and assuming reinvestment of dividends, with
cumulative total return of companies on the NASDAQ Index and a peer group
index.
<PAGE>
COMPARISON OF FIVE YEAR STOCKHOLDER CUMULATIVE RETURN
THE STROBER ORGANIZATION, INC., THE NASDAQ INDEX
AND THE PEER GROUP INDEX (1)(2)
Edgar Representation of Data Points Used in Printed Graph
Nasdaq
Peer Market
Strober Group Index
December 31, 1990 100.00 100.00 100.00
December 31, 1991 112.50 81.86 128.38
December 31, 1992 162.50 94.52 129.64
December 31, 1993 400.00 100.32 155.50
December 31, 1994 350.00 84.63 163.26
December 31, 1995 356.25 81.49 211.77
Assumes $100 invested on January 1, 1991
Assumes Dividend Reinvested
Fiscal year ending December 31, 1995
Year Ended December 31
<TABLE>
<CAPTION>
COMPANY/INDEX BASE YEAR 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
The Strober Organization, $100 $112.50 $162.50 $400.00 $350.00 $356.25
Inc.(3)
Peer Group Index (4)(5) $100 $ 81.86 $ 94.52 $100.32 $ 84.63 $ 81.49
NASDAQ Index(4) $100 $128.38 $129.64 $155.50 $163.26 $211.77
</TABLE>
________________________________
(1) Assumes $100 invested on December 31, 1990, the last trading day before
the beginning of the Company's fifth preceding fiscal year.
(2) Calculations are weighted according to stock market capitalization.
(3) The Company has not paid dividends during this period.
(4) Assumes dividends are reinvested.
(5) The Peer Group Index includes Hughes Supply, Inc. (Orlando, Florida
(NYSE)), Jones Plumbing Systems, Inc. (Birmingham, Alabama (AMEX)), Moore-
Handley, Inc. (Pelham, Alabama (NASDAQ)), Noland Co. (Newport News, Virginia
(NASDAQ)), Standard Brands Paint Corp. (Torrance, California (NYSE)) and
Wolohan Lumber Co. (Saginaw, Michigan (NASDAQ)), all of which are publicly
traded. All of the Companies included in the peer group index have the same
standard industry code ("SIC") as the Company. Further, each company has less
than ten million shares outstanding which is comparable to that of the Company.
The Peer Group Index no longer includes NHD Stores, Inc. ("NHD") (which was
included in the peer group in the 1995 Proxy Statement). In May 1995, NHD was
acquired in a tender offer and is no longer publicly traded.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN THE COMPANY'S
PREVIOUS FILINGS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, THAT MIGHT INCORPORATE FUTURE
FILINGS, INCLUDING THIS PROXY STATEMENT, IN WHOLE OR IN PART, THE FOREGOING
REPORT AND THE PERFORMANCE GRAPH SHALL NOT BE INCORPORATED BY REFERENCE INTO
ANY SUCH FILINGS.
<PAGE>
APPROVAL OF THE ADOPTION OF THE STROBER ORGANIZATION, INC.
1996 OUTSIDE DIRECTOR STOCK OPTION PLAN
(Proposal 2)
INTRODUCTION
On March 12, 1996, the Board adopted, subject to Stockholder approval, The
Strober Organization, Inc. 1996 Outside Director Stock Option Plan (the "1996
Outside Director Plan"). The purposes of the 1996 Outside Director Plan are to
encourage ownership in the Company by non-employee members of the Board in
order to promote long-term Stockholder value and to provide non-employee
members of the Board with an incentive to continue as directors of the Company.
No consideration is to be received by the Company for the granting of options
under the 1996 Outside Director Plan.
As of May 22, 1996, the current market value of the Common Stock underlying
the options is $318,750 and the aggregate exercise price of such option is
$337,500.
The principal features of the 1996 Outside Director Plan are summarized
below. This summary is qualified by reference to the complete text of the 1996
Outside Director Plan, which is attached as Exhibit B.
GENERAL
The 1996 Outside Director Plan is effective, subject to Stockholder
approval, as of March 12, 1996. The 1996 Outside Director Plan authorizes the
grant of an option to purchase 18,750 shares of Common Stock to each of the
four (4) non-employee members of the Board. There are 75,000 shares of Common
Stock reserved for issuance under the Plan. The issuance of shares pursuant to
the exercise of such options would result in a cash contribution to the Company
of $337,500 and an approximate 1.5% dilution of the percentage ownership
interest in the existing Stockholders. Management anticipates that any such
dilution would occur over a number of years. The 1996 Outside Director Plan
will terminate by its terms on March 12, 2001 unless further extended by the
Plan Committee.
ELIGIBILITY
Subject to Stockholder approval, as of March 12, 1996, each of the existing
non-employee director (the "Optionee") received on a one-time basis an option
for 18,750 shares under the 1996 Outside Director Plan.
Options granted under the 1996 Outside Director Plan are immediately
exercisable in full at the fair market value of the underlying Common Stock on
the date of grant. Fair market value means the closing sales price as quoted
by NASDAQ on the date of the grant which was $4.50 per share.
ADMINISTRATION
The 1996 Outside Director Plan will be administered by a Plan Committee to
be composed of two or more of the employee directors of the Board. The
Committee has certain powers vested in it in the terms of the 1996 Outside
Director Plan including, without limitation, the authority (within the
limitations described therein) to prescribe the form of the agreement embodying
the awards of options under the 1996 Outside Director Plan, to construe the
1996 Outside Director Plan, to determine all questions arising under the 1996
Outside Director Plan, and to adopt and amend all rules and regulations for the
administration of the 1996 Outside Director Plan it may deem desirable. Any
decision of the majority of the Plan Committee will be final and conclusive.
TRANSFERABILITY OF OPTIONS
The rights of an Optionee under the 1996 Outside Director Plan may not be
assigned or transferred other than by will or the laws of descent and
distribution and may be exercised during the Optionee's lifetime only by the
Optionee.
TERMINATION OF OPTION
The term of the options granted under the 1996 Outside Director Plan expires
on March 12, 2001. If an Optionee's service as a director ends for any reason,
such Optionee's option will immediately terminate.
AMENDMENT OF THE 1996 OUTSIDE DIRECTOR PLAN
The Committee which administers the 1996 Outside Director Plan can extend
the term of the Plan and make other non-material changes. Any material changes
to the 1996 Outside Director Plan require Stockholder approval.
FEDERAL INCOME TAX CONSEQUENCES
An Optionee will not be subject to federal income taxation as a result of
the grant of an option to purchase Common Stock under the Plan. Upon exercise
of the option, the Optionee will recognize ordinary income equal to the
difference (the "Spread") between the option price and the fair market value of
the Shares on the date of exercise. The Company may claim an income tax
deduction for the amount taxable to the Optionee as ordinary income.
THE BOARD BELIEVES THAT APPROVAL OF THE ADOPTION OF THE 1996
OUTSIDE DIRECTOR STOCK OPTION PLAN IS IN THE BEST INTERESTS OF
ALL STOCKHOLDERS AND RECOMMENDS A VOTE "FOR" THE PROPOSED PLAN.
________________________
<PAGE>
NEW PLAN BENEFITS
The following table sets forth the number of shares of Common Stock subject
to options to be granted to each of the following under the 1996 Outside
Director Plan.
<TABLE>
<CAPTION>
NAME AND POSITION 1996 OUTSIDE DIRECTOR PLAN{1}
<S> <C>
ROBERT J. GAITES, Chairman of the Board, President 0
and Chief Executive Officer of the Company
JOHN YANUKLIS, Director and Executive Vice 0
President of the Company and President of Strober
King Building Supply Centers, Inc.
RICHARD SCHAEFER, Vice President of the Company 0
and Executive Vice President of Strober Long
Island Building Material Centers, Inc.
EDWARD ZIEKY, Senior Vice President of the Company 0
and Senior Vice President of The General Building
Supply Company
ELIOTT ZIEKY, Director and Senior Vice President 0
of the Company and Senior Vice President of The
General Building Supply Company
Executive Group 0
Non-Executive Director Group 75,000
Non-Executive Employee Group 0
</TABLE>
**FOOTNOTES**
{(1)}Employees of the Company are ineligible to participate. A copy of
such plan is included as Exhibit A.
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
(Proposal 3)
The Board and the Audit Committee have approved the selection of KPMG Peat
Marwick LLP as the Company's independent public accountants for the fiscal year
ending December31, 1996. KPMG Peat Marwick LLP has audited the books and
records of the Company since 1986. Representatives of such firm plan to attend
the Meeting and will be available to answer appropriate questions. Such
representatives will also have an opportunity to make a statement at the
Meeting if they so desire. The Company is asking Stockholders to ratify the
selection of KPMG Peat Marwick LLP as the Company's independent public
accountants for the fiscal year ending December 31, 1996. The affirmative vote
of the holders of a majority of the votes cast is required to ratify the
selection of such firm as the Company's independent public accountants. In the
event the Stockholders fail to ratify the appointment, the Board will consider
it as a direction to select other public accountants. Even if the selection is
ratified, the Board in its discretion may direct the appointment of a different
independent accounting firm at any time during the year if the Board feels that
such a change would be in the best interests of the Company and its
Stockholders.
THE BOARD RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY.
______________________________________
<PAGE>
MISCELLANEOUS
CERTAIN TRANSACTIONS
Certain of the Company's building supply centers are leased from
corporations or partnerships wholly-owned by existing and former members of
management, major stockholders and their families, including Messrs. Brower,
Gaites, Guerin, Schaefer, Yanuklis, Young, Edward N. Zieky, Eliott Zieky and
Ms. Sue Strober, as follows: 550 Hamilton Avenue, Brooklyn, New York, (current
annual rental of $709,400); 370 West Merrick Road, Valley Stream, New York
(current annual rental of $262,000); 345 West Merrick Road, Valley Stream, New
York (current annual rental of $137,700); 102 North Route 9W, Congers, New York
(current annual rental of $260,900); 125 Temple Hill Road, Vails Gate, New York
(current annual rental of $69,500); Route 175 West, Hampton, New Jersey
(current annual rental of $328,700); 363, 367, 405 Ellington Road, East
Hartford, Connecticut (current annual rental of $350,400); and 580 Tolland
Street, East Hartford, Connecticut (current annual rental $138,200).
The Facility Leasing Independent Committee is currently negotiating with
related party owners of the Company's Brooklyn, New York and Valley Stream, New
York facilities for new ten year leases beyond December 31, 1996. With respect
to the remaining affiliated party leases, the Company believes that the leases
with such affiliated parties, at the time the leases were entered into, were on
terms no less favorable to the Company than it could have obtained in
arms-length negotiations with unrelated third parties for similar locations in
similar geographic areas. It is contemplated that all future locations of the
Company will either be owned by the Company or leased from unrelated third
parties.
The Company, Sue Strober, certain current executive officers of the Company
and certain former executive officers and directors of the Company (including
the estate of Eric D. Strober) are parties to an agreement entered into in 1986
and subsequently amended providing such parties with prior notice and a right
of first refusal to purchase shares of the Company's Common Stock which any of
the parties desires to sell.
During 1993, the Company refinanced its subordinated debt with the former
owners of The General Building Supply Company which the Company purchased in
1988. This debt had a maturity date of January 15, 1994 in the amount of
$3,500,000. On October 1, 1993, the subordinated noteholders exchanged
$3,500,000 of subordinated notes ("old notes") for new subordinated notes ("new
notes") in the like amount of $3,500,000. The "new notes" are due September 1,
1996 and were to be paid with 36 consecutive monthly payments of $97,222 plus
interest at 8% per annum. Also, on October 1, 1993, the accrued interest on
the "old notes" in the amount of $195,808 was paid and the noteholders
surrendered warrants to acquire 300,000 shares of common stock at an exercise
price of $2.00 per share.
At December 31, 1995 two of the noteholders, Eliott Zieky and Edward Zieky,
were employed by the Company as senior vice presidents. The amounts owed to
Eliott Zieky and Edward Zieky at December 31, 1995 were $81,083 and $91,000,
respectively. Edward Zieky's brother (who is also Eliott Zieky's first cousin)
is a building contractor who purchased $388,000 of building supplies from the
Company in 1995 on terms no less favorable to the Company that it could obtain
in arms-length negotiations with unrelated third parties.
STOCKHOLDER PROPOSALS
Proposals of security holders intended to be presented at the 1997 annual
meeting of Stockholders must be received by the Company by March 17, 1997, in
order to be eligible for inclusion in the proxy statement and form of proxy of
the Company for that meeting.
Stockholders wishing to bring proposals or director nominations before an
annual meeting must comply with certain provisions of the Company's By-laws,
which require certain information to be provided in connection with the
submission of stockholder proposals or director nominations and which set forth
certain timing requirements with respect thereto.
COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company, including
expenses in connection with the preparation and mailing of this Proxy Statement
and all papers which accompany or may hereafter supplement it. The
solicitation will be made by mail. The Company will also supply brokers or
persons holding stock in their names or in the names of their nominees with
such number of proxies, proxy materials and annual reports as they may require
for mailing to beneficial owners, and will reimburse them for their reasonable
expenses in connection therewith. To the extent necessary in order to assure
sufficient representation, officers, directors and employees of the Company may
be engaged to assist in the solicitation of proxies without remuneration
therefor by mail, telephone or personal interview.
FILINGS UNDER SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of such securities with the Securities and
Exchange Commission and the National Association of Securities Dealers, Inc.
Officers, directors and greater than ten percent beneficial owners are required
by applicable regulations to furnish the Company with copies of all Section
16(a) forms they file.
Based solely upon a review of the copies of the forms furnished to the
Company, or written representations from certain reporting persons that no
Forms 5 were required, the Company believes that during the 1995 fiscal year
all of its officers and directors complied with all applicable filing
requirements.
OTHER MATTERS
As of the date of this Proxy Statement, no other matter is known which will
be brought before the Meeting. However, if any other matter properly comes
before the Meeting, or any adjournment thereof, the persons voting the proxies
will vote on these matters in accordance with their best judgment.
VOTE REQUIRED
Each Stockholder is entitled to one vote for each share of stock registered
in the Stockholder's name. Directors are elected by a plurality of the votes
cast by holders of shares entitled to vote in the election. All other
corporate action is authorized by a majority of the votes cast. Under Delaware
law the aggregate number of votes entitled to be cast by all Stockholders
present in person or represented by proxy at the Meeting, whether those
Stockholders vote "for", "against" or abstain from voting, will be counted for
purposes of determining the minimum number of affirmative votes required for
approval of matters to be voted on at the Meeting, and the total number of
votes cast "for" those matters will be counted for purposes of determining
whether sufficient affirmative votes have been cast. An abstention from voting
on a matter by a Stockholder present in person or represented by proxy at the
Meeting has the same legal effect as a vote "against" the matter even though
the Stockholder or interested parties analyzing the results of the voting may
interpret such a vote differently.
UPON WRITTEN REQUEST OF A RECORD HOLDER OR BENEFICIAL OWNER OF COMMON STOCK
ENTITLED TO VOTE AT THE MEETING, THE COMPANY WILL PROVIDE WITHOUT CHARGE, A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1995. REQUESTS SHOULD BE MAILED TO:
CORPORATE TREASURER
THE STROBER ORGANIZATION, INC.
550 HAMILTON AVENUE
BROOKLYN, NEW YORK 11232
THE STROBER ORGANIZATION, INC.
David J. Polishook
Secretary
Brooklyn, New York
June 14, 1996
<PAGE>
EXHIBIT A
THE STROBER ORGANIZATION, INC.
1996 OUTSIDE DIRECTOR STOCK OPTION PLAN
1. PURPOSE
The purpose of the Strober Organization, Inc. 1996 Outside Director
stock Option Plan (the "PLAN") is to provide additional incentive to
exceptional persons to serve as outside directors on the Board of Directors
(the "BOARD") of The Strober Organization, Inc. (the "COMPANY") or its
subsidiaries. The purposes of the Plan are to encourage ownership in the
Company by non-employee members of the Board in order to promote long-term
Stockholder value and to provide non-employee members of the Board with an
incentive to continue as directors of the Company.
2. GRANT OF OPTIONS
(a) As of March 12, 1996, each of the four (4) nonemployee directors
will be granted an option ("OPTION") to purchase 18,750 shares of the Company's
Common Stock, par value $.01 per share ("SHARES").
(b) The maximum number of Shares that may be issued upon the
exercise of Options shall not exceed 75,000 Shares, subject to adjustment as
provided in paragraph 8. Shares issued under this Plan may be authorized but
unissued or held in treasury. If any outstanding Options, or any portion
thereof, expire, lapse, terminate for any reason (other than the exercise
thereof) or are exchanged or substituted, the Shares subject to the unexercised
portion of such Options may again be the subject of Options under this Plan.
In no event will any Options be granted under this Plan after March 12, 2001.
3. TERMS AND CONDITIONS OF OPTIONS
Each Option will be evidenced by an agreement executed by the Company
and the recipient which will include the following terms and conditions:
(a) EXERCISE PRICE
The exercise price of the Option was established at $4.50, the fair
market value determined on the date of grant of the Option as the closing sales
price as quoted by the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") on the date of the grant.
(b) TERM OF OPTIONS
Each Option will be outstanding for a term expiring on March 12, 2001
and will be exercisable in the manner set forth in paragraph 3(e).
(c) NON-TRANSFERABILITY OF OPTIONS
Options will not be transferable by the optionee other than by will or
by the laws of descent and distribution and may be exercised during the
optionee's lifetime only by the optionee.
(d) TERMINATION OF OPTIONS
If an optionee's service as a director ends for any reason, such
optionee's Option will immediately terminate.
(e) EXERCISE OF OPTIONS
Each Option will be fully exercisable on the date of grant. The
optionee, upon written notice to the Company, may exercise an Option in
accordance with any procedure that the Company may establish. Any exercise of
an Option will be effected by payment of the full exercise price, either by
payment in cash, payment by delivery of previously owned Shares or a
combination of payment in cash or delivery of Shares, and any required
withholding tax shall be paid by the optionee in full at the time an Option is
exercised.
4. AMENDMENT OR TERMINATION
The Committee may at any time amend or terminate this Plan, including
extending the term of the Plan; provided that no such amendment or termination
shall adversely affect or impair the rights of optionees. In addition, the
Committee may accept the surrender of outstanding options (up to the extent not
theretofore exercised) and authorize the granting of new options in
substitution therefor (to the extent not theretofore exercised).
5. INDEMNIFICATION OF THE COMMITTEE
In addition to such other rights or indemnification as they may have,
the members of the Committee shall be indemnified by the Company against all
costs and expenses (including legal fees) reasonably incurred by them (or any
of them) in connection with any action, suit or proceeding to which they (or
any of them) may be a party by reason of any action taken or any failure to act
under or in connection with the Plan or any award granted pursuant thereto and
against all amounts paid by them in settlement thereof, provided such
settlement is approved by legal counsel selected by the Company or is paid by
them in satisfaction of a judgment in any action, suit or proceeding. Upon
institution of any such action, suit or proceeding, the person desiring
indemnification will give the Company an opportunity, at its own expense, to
defend the same.
<PAGE>
6. EXPENSES
All expenses and costs in connection with the administration of the
Plan will be paid by the Company.
7. ADJUSTMENTS
In the event of any change in the Shares by reason of a stock
dividend, recapitalization, reclassification, stock split, combination of
shares, corporate transaction, or similar event, the number of Shares covered
by an Option and the exercise price will be adjusted to reflect such change as
the Committee, in its sole discretion, deems appropriate.
8. LIABILITY OF COMPANY
The liability of the Company under this Plan and any sale made
hereunder is limited to the obligations set forth with respect to such transfer
and nothing herein contained shall be construed to impose any liability on the
Company in favor of any optionee with respect to any loss, cost or expense
which an optionee may incur in connection with or arising out of any
transaction in connection therewith.
9. NOTICES
Any notice or other communication required or permitted to be made or
given hereunder shall be sufficiently made or given if sent by certified mail
addressed to an optionee at his address as set forth in the regular books and
records of the Company, or its subsidiaries, and if to the Company, addressed
to it at its principal office.
10. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Shares subject
to Options may be commingled with any other corporate funds and used for any
corporate purpose.
11. GOVERNING LAW
All questions arising with respect to the provisions of the Plan will
be determined by application of the laws of the State of New York, except to
the extent that New York law is preempted by federal statute. The obligation
of the Company to sell and deliver Options or Shares hereunder is subject to
the approval of any governmental authority required in connection with the
authorization, issuance or sale of such Options or Shares and compliance with
all applicable laws, and may be deferred pending such approval and compliance.
<PAGE>
[FORM OF PROXY]
THE STROBER ORGANIZATION, INC.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS JULY 11, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert J. Gaites and David Polishook,
and each or either of them, proxies of the undersigned, with full power of
substitution, in each of them, to appear and vote all shares of common stock of
The Strober Organization, Inc., held of record by the undersigned at the close
of business on May 22, 1996 at the Annual Meeting of Stockholders to be held on
July 11, 1996 and at any adjournment or adjournments thereof, with all powers
the undersigned would possess if present, as indicated below on all matters
mentioned in the Notice and Proxy Statement for said meeting, and at their
discretion on all other matters that may properly come before the meeting.
For Withheld The Election of the following two persons as
Class I
1. Elections of[ ] [ ] directors:
Directors Emil W. Solimine and Eliott Zieky
For, except vote withheld from the following nominee:
_____________________________________________________
For Against Abstain
2. Approval of adoption of the [ ] [ ] [ ]
Company's 1996 Outside Director
Stock Option Plan.
3. Ratification of the appointment of[ ][ ] [ ]
KPMG Peat Marwick LLP as
independent auditors for the
fiscal year ending December 31, 1996.
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR ALL PROPOSALS.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S):__________________________________DATE:___________________
NOTE: Please date and sign exactly as your name appears on your stock
certificate. Give full title when signing as executor, administrator,
trustee, attorney, guardian or custodian for a minor. Signatures for
corporations and partnerships should be in the corporate or firm name
by a duly authorized person. If shares are held by joint tenants,
both should sign.
