1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 Rule 14a-12
INDUSTRIAL DISTRIBUTION GROUP, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] 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:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
2
(IDG LOGO)
INDUSTRIAL DISTRIBUTION GROUP, INC.
April 16, 2001
To Our Stockholders:
On behalf of the Board of Directors and management of Industrial
Distribution Group, Inc., I cordially invite you to the Annual Meeting of
Stockholders to be held on Wednesday, May 16, 2001, at 4:00 p.m., Eastern Time,
at 2500 Royal Place, Tucker, Georgia.
At the Annual Meeting, stockholders will be asked to consider and approve
an amendment to the Company's Amended and Restated Employee Stock Purchase Plan
to increase the number of shares of Common Stock, from 500,000 to 1,000,000,
that may be purchased pursuant to the plan, to approve an amendment to the
Company's certificate of incorporation and bylaws relating to the classification
of the Board of Directors, and to elect eight directors of the Company, all of
the nominees for which are currently directors of the Company. Information about
the proposals, the nominees and certain other matters is contained in the
accompanying Proxy Statement. A copy of the Company's 2000 Annual Report to
Stockholders, which contains financial statements and other important
information about the Company's business, is also enclosed.
It is important that your shares of stock be represented at the meeting,
regardless of the number of shares you hold. You are encouraged to specify your
voting preferences by marking and dating the enclosed proxy card. However, if
you wish to vote in favor of all of the proposals, including the re-election of
the directors, all you need to do is sign and date the proxy card.
Please complete and return the proxy card in the enclosed envelope, whether
or not you plan to attend the meeting. If you do attend and wish to vote in
person, you may revoke your proxy at that time.
I hope you are able to attend, and look forward to seeing you.
Sincerely,
/s/ PATRICK S. O'KEEFE
Patrick S. O'Keefe
President and Chief Executive Officer
3
INDUSTRIAL DISTRIBUTION GROUP, INC.
950 EAST PACES FERRY ROAD
SUITE 1575
ATLANTA, GEORGIA 30326
------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2001
------------------------------------
To the Stockholders of
Industrial Distribution Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
Industrial Distribution Group, Inc. will be held at 4:00 p.m., Eastern Time,
Wednesday, May 16, 2001, at 2500 Royal Place, Tucker, Georgia for the following
purposes:
1. To approve an amendment to the Company's Amended and Restated
Employee Stock Purchase Plan to increase the number of shares of Common
Stock, from 500,000 to 1,000,000, that may be purchased pursuant to the
plan;
2. To approve an amendment to the Company's certificate of
incorporation and bylaws relating to the classification of the Board of
Directors;
3. To elect eight directors to constitute the Board of Directors
to serve until their term has expired and until their successors, if there
are to be any, are elected and qualified; and
4. To consider such other matters as may properly come before the
meeting and any adjournment or postponement thereof.
Only stockholders of record on April 12, 2001, are entitled to notice of
and to vote at the Annual Meeting and any adjournment or postponement thereof.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ JACK P. HEALEY
Jack P. Healey
Secretary
APRIL 16, 2001
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN,
DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED BUSINESS
REPLY ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE
PROXY MAY BE REVOKED AT ANY TIME PRIOR TO EXERCISE, AND IF YOU ARE PRESENT AT
THE ANNUAL MEETING, YOU MAY, IF YOU WISH, REVOKE YOUR PROXY AT THAT TIME AND
EXERCISE THE RIGHT TO VOTE YOUR SHARES PERSONALLY.
4
(IDG LOGO)
INDUSTRIAL DISTRIBUTION GROUP, INC.
---------------------------------------------------------
PROXY STATEMENT
DATED APRIL 16, 2001
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 16, 2001
---------------------------------------------------------
This Proxy Statement is furnished to stockholders in connection with the
solicitation of proxies by the Board of Directors of Industrial Distribution
Group, Inc. ("IDG" or the "Company") for use at IDG's 2001 Annual Meeting of
Stockholders ("Annual Meeting") to be held on Wednesday, May 16, 2001, including
any postponement, adjournment, or adjournments thereof, for the purposes set
forth in the accompanying Notice of Annual Meeting. Management intends to mail
this Proxy Statement and the accompanying form of proxy to stockholders on or
about April 16, 2001.
Only stockholders of record at the close of business on April 12, 2001 (the
"Record Date"), are entitled to notice of and to vote in person or by proxy at
the Annual Meeting. As of the Record Date, there were 8,878,891 shares of common
stock, $.01 par value per share ("Common Stock"), of IDG outstanding and
entitled to vote at the Annual Meeting. The presence of a majority of such
shares is required, in person or by proxy, to constitute a quorum for the
conduct of business at the Annual Meeting. Each share is entitled to one vote on
any matter submitted for vote by the stockholders. The vote required for
approval of each matter submitted to the stockholders is described with the
discussion of that matter in this Proxy Statement.
Proxies in the accompanying form, duly executed and returned to the
management of the Company, and not revoked, will be voted at the Annual Meeting.
Any proxy given pursuant to this solicitation may be revoked by the stockholder
at any time prior to the voting of the proxy by delivery of a subsequently dated
proxy, by written notification to the Secretary of the Company, or by personally
withdrawing the proxy at the Annual Meeting and voting in person.
Proxies that are executed, but that do not contain any specific
instructions, will be voted for approval of the amendment to the Company's
Amended and Restated Employee Stock Purchase Plan, for approval of the amendment
to IDG's certificate of incorporation and bylaws classifying the Board of
Directors, for the election of all the nominees for directors specified herein,
and, in the discretion of the persons appointed as proxies, on any other matter
that may properly come before the Annual Meeting or any postponement,
adjournment, or adjournments thereof, including any vote to postpone or adjourn
the Annual Meeting.
A copy of the Company's 2000 Annual Report to Stockholders (including
substantive excerpts from the Company's Annual Report on Form 10-K) is being
furnished herewith to each stockholder of record as of the close of business on
the Record Date. Additional copies of the 2000 Annual Report to Stockholders
will be provided free of charge upon written request to:
INDUSTRIAL DISTRIBUTION GROUP, INC.
950 EAST PACES FERRY ROAD
SUITE 1575
ATLANTA, GEORGIA 30326
ATTN.: INVESTOR RELATIONS DEPARTMENT
If the person requesting the Annual Report was not a stockholder of record
on the Record Date, the request must include a representation that the person
was a beneficial owner of Common Stock on that date. Copies of any exhibits to
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
2000 will also be furnished on request and upon payment of the Company's
expenses in furnishing the exhibits.
1
5
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS
The following table sets forth the information concerning the beneficial
ownership of Common Stock, which is the only class of voting stock of the
Company, at February 28, 2001, by (1) each person known to the Company to
beneficially own more than 5% of the Common Stock, (2) each director, nominee
for director, and designated highly compensated executive officer, and (3) all
directors and executive officers of the Company as a group. Unless otherwise
indicated below, the persons named below had sole voting and investment power
with respect to all shares of the Common Stock shown as beneficially owned by
them.
SHARES BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED PERCENT(1)
------------------------ ------------------- ----------
Edmundson International, Inc.
Consolidated Electrical Distributors, Inc.
Portshire Corp.
Lincolnshire Associates Ltd. 1,232,700 14.0%
Employees' Retirement Plan of
Consolidated Electrical Distributors,
Inc.
Dimensional Fund Advisors, Ind.(3).......................... 642,300 7.3%
Andrew B. Shearer(4)........................................ 541,500 6.1%
William J. Burkland(5)...................................... 161,777 1.8%
George L. Sachs, Jr.(6)..................................... 86,171 1.0%
Patrick S. O'Keefe(7)....................................... 252,171 2.8%
Jack P. Healey(8)........................................... 47,678 *
Thomas W. Aldridge, Jr.(9).................................. 14,456 *
David K. Barth(10).......................................... 37,066 *
William T. Parr(11)......................................... 12,200 *
William R. Fenoglio(12)..................................... 13,000 *
Richard M. Seigel(13)....................................... 58,667 *
All Directors and Executive Officers as a Group (10
persons)(14).............................................. 1,224,686 13.5%
------------------------
* Denotes less than 1%.
(1) The percentages shown are based on 8,820,204 shares of Common Stock
outstanding on February 28, 2001 plus, as to each person and group listed,
the number of shares of Common Stock deemed owned by such holder pursuant to
Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), assuming the exercise of options held by such holder that
are exercisable within 60 days of February 28, 2001.
(2) The address of Edmundson International, Inc. ("Edmundson") and Consolidated
Electrical Distributors, Inc. ("CED") is 31356 Via Colinas, Westlake
Village, California 91362. The address of Portshire Corp. ("Portshire") and
Lincolnshire Associates, Ltd. ("Lincolnshire") is 2550 Midway Road, Suite
220, Carrollton, Texas 75006. The address of Employees' Retirement Plan of
Consolidated Electrical Distributors, Inc. (the "Retirement Plan") is 700 S.
Flower Street (c/o BNY Western Trust Co.), Los Angeles, California 90071.
The listed owners are affiliated with each other and therefore the aggregate
number of shares listed above could be voted together. Specifically, CED is
the sponsor of the Retirement Plan and is the sole shareholder of Edmundson;
Edmundson is the sole shareholder of Portshire; and Portshire is the general
partner of Lincolnshire. The listed owners have filed a Schedule 13D with
the Securities and Exchange Commission (the "Commission") as members of a
group.
(3) The address of Dimensional Fund Advisors, Inc. is 1229 Ocean Avenue, 11th
Floor, Santa Monica, California 90401. The listed owner has filed a Schedule
13G with the Commission and claims voting and investment power with respect
to all 642,300 shares.
(4) Includes 16,667 shares subject to exercisable options. The address for Mr.
Shearer is 3100 Farmtrail Road, York, PA 17402.
(5) Includes an aggregate of 300 shares held by Mr. Burkland as custodian for
his three minor children and 16,667 shares subject to exercisable options.
Does not include an aggregate of 28,966 shares owned by Mr. Burkland's wife,
with respect to which Mr. Burkland disclaims beneficial ownership.
2
6
(6) Includes 16,667 shares subject to exercisable options.
(7) Includes 100,000 shares that are restricted. Includes 125,000 shares
subject to exercisable options.
(8) Includes 6,667 shares subject to exercisable options.
(9) Includes 7,500 shares subject to exercisable options.
(10) Includes 10,000 shares subject to exercisable options. Does not include an
aggregate of 9,000 shares owned by Mr. Barth's adult children, with respect
to which Mr. Barth disclaims beneficial ownership.
(11) Includes 10,000 shares subject to exercisable options. Does not include an
aggregate of 1,200 shares owned by Mr. Parr's wife, with respect to which
Mr. Parr disclaims beneficial ownership.
(12) Includes 10,000 shares subject to exercisable options.
(13) Includes 26,667 shares subject to exercisable options.
(14) Includes an aggregate of 245,835 shares subject to exercisable options that
are held by the persons in the group.
APPROVAL OF THE AMENDMENT TO THE AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
(ITEM NUMBER 1 ON THE PROXY CARD)
SUMMARY AND PURPOSE OF AMENDMENT
The Board of Directors approved an amendment to the Amended and Restated
Employee Stock Purchase Plan (the "Plan") on March 23, 2001 to increase the
shares of Common Stock authorized for issuance under the Plan from 500,000 to
1,000,000 shares, subject to stockholder approval. The amendment, if approved by
the stockholders, will be effective as of such date. In all other respects, the
terms of the Plan are not changed.
The Board of Directors believes that the Plan plays an integral role in the
ability of the Company to attract and retain key employees and to provide
incentives for such persons to promote the financial success of the Company.
Because almost all shares available for purchase under the Plan have been
purchased, the number of shares authorized for purchase pursuant to the Plan
must be increased to allow qualified employees of the Company to purchase
additional shares under the Plan. In the opinion of the Board of Directors, an
increase in the number of shares to 1,000,000 is necessary to give the Company a
sufficient amount of shares to meet anticipated needs for purchases under the
Plan to be able to attract, retain, and motivate key employees.
The following description of the material features of the Plan is a summary
and is qualified in its entirety by reference to the Plan, a copy of which will
be provided to any stockholder upon written request to the Company.
DESCRIPTION OF PLAN
The Company adopted the Plan under which qualified employees of the Company
and its subsidiaries have the right to purchase shares of Common Stock on a
quarterly basis through payroll deductions by the employee. A qualified employee
is an employee of the Company or a subsidiary (as defined in Section 424(f) of
the Internal Revenue Code of 1986, as amended (the "Code")) that has adopted the
Plan (a) whose customary employment is for more than five months in any calendar
year; (b) has completed at least ninety (90) days of continuous service; and (c)
is not deemed for purposes of Section 423 of the Code to own Stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company.
After the amendment, a total of 1,000,000 shares of Common Stock, which may
be unissued shares or shares of Common Stock acquired in the market or directly
from stockholders, will be available for purchase under the Plan, subject to
appropriate adjustment for stock dividends, stock splits or combination of
shares, recapitalization or other changes in the Company's capitalization. The
Plan is administered by the Compensation Committee of the Company's Board of
Directors. The price to be paid for a share of Common Stock under the Plan is
85% of the fair market value (as defined in the Plan) of a share of Common Stock
at the
3
7
beginning or the end of each quarterly purchase period, whichever is lower. The
amount of any participant's payroll deductions or cash contributions made
pursuant to the Plan may not exceed 10% of such participant's total annual
compensation and may not exceed $25,000 per year. The Plan may be terminated or
amended by the Company's Board of Directors; provided, however, that no
amendment may (1) disqualify the Plan under Section 423 of the Code or (2) be
made without the consent of a participant with respect to any shares of Common
Stock previously purchased for him or her under the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Plan is intended to qualify as an "Employee Stock Purchase Plan" within
the meaning of Section 423 of the Code. Under the Code, a participant will not
realize income at the time the offering commences or when the shares purchased
under the Plan are transferred to him or her. If a participant disposes of such
shares after two years from the offering date, and after one year from the date
of the transfer of such shares to him or her, the participant will be required
to include in income, as compensation for the year in which such disposition
occurs, an amount equal to the lesser of (a) the excess of the fair market value
of such shares at the time of disposition over the purchase price, or (b) 15% of
the fair market value of such shares at the time the offering commenced. The
participant's basis in such shares will be increased by the amount so includable
as income, and any gain or loss computed with reference to such adjusted basis
will be a capital gain or loss, either short-term, mid-term, or long-term,
depending on the holding period for such shares. The Company will not be
entitled to any tax deduction if the participant satisfies these holding period
requirements.
If a participant disposes of shares purchased under the Plan within the
above two-year or one-year periods, the participant will be required to include
in income, as compensation for the year in which such disposition occurs, an
amount equal to the excess of the fair market value of such shares on the
purchase date over the purchase price. The participant's basis in such shares
will be increased by the amount includable as income, and any gain or loss
computed with reference to such adjusted basis will be a capital gain or loss,
either short-term, mid-term, or long-term, depending on the holding period for
such shares. In the event of a disposition within such two-year or one-year
periods, the Company will be entitled to a deduction equal to the amount the
participant is required to include in income.
A participant who is a nonresident of the United States will generally not
be subject to the federal income tax rules described above with respect to
shares of common stock purchased under the Plan.
NEW PLAN BENEFITS
As of March 23, 2001, approximately 64,000 shares were available for
purchase under the Plan. The Company expects that qualified employees in the
near future will make purchases under the Plan that will be made possible as a
result of the stockholders' approval of the amendment being sought at the Annual
Meeting.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
Stockholder approval of the Amendment to the Amended and Restated Plan is
required under the Code and the terms of the Plan because the proposal would
increase the aggregate number of shares of Common Stock from which purchases can
be made under the Plan. The affirmative vote of a majority of the shares of
Common Stock of the Company represented and voted at the Annual Meeting,
assuming the presence of a quorum, is required to approve the amendment.
The Board, which unanimously approved the amendment, recommends a vote
"For" approval of the amendment to the Plan by all of the Company's stockholders
who are entitled to vote. The full text of the proposed amendment is attached as
Exhibit A to this Proxy Statement.
4
8
AMENDMENT OF THE COMPANY'S
BYLAWS AND CERTIFICATE OF INCORPORATION
RELATING TO THE CLASSIFICATION OF THE BOARD OF DIRECTORS
(ITEM NUMBER 2 ON THE PROXY CARD)
SUMMARY AND PURPOSE OF AMENDMENTS
The Board of Directors voted to amend the Company's Bylaws and Certificate
of Incorporation on February 28, 2001 to create a classified Board of Directors.
The amendments to the Bylaws and Certificate of Incorporation, if approved by
the stockholders, will be effective as of such date. In all other respects, the
Bylaws and Certificate of Incorporation remain the same.
The Board of Directors believes that it is advisable and in the best
interest of the Company to create a Board of Directors whose members serve
staggered three-year terms. The Company's Board of Directors has unanimously
adopted, subject to the approval of the stockholders at the Annual Meeting,
amendments to the Company's present Bylaws and Certificate of Incorporation. The
amendment calls for the directors to be classified with respect to the time
during which they hold office, dividing them into three classes. The initial
term of the Class I directors will expire at the annual meeting of stockholders
in 2002, the initial term of Class II directors will expire at the annual
meeting of stockholders in 2003, and the initial term of the Class III directors
will expire at the annual meeting of stockholders in 2004. Following their
initial term, the members of each class will serve three-year terms. In the
event that one or more vacancies occurs in the Board of Directors because of the
death of a director, resignation or otherwise, the remaining directors may, by a
majority vote, elect a successor or successors for the unexpired term or terms.
Creating classes of directors makes it difficult for stockholders to change
the composition of the Board of Directors at a single meeting. However,
classifying the Board in this manner will help ensure the continuity and
stability of the Company's management and policies. At least two annual
stockholders' meetings, instead of one, will generally be required for
stockholders to effect a change in control of the Board. Although the Company
has not encountered any lack of continuity or stability, the Board believes that
requiring a longer period of time to elect a majority of directors will help to
assure continuity and stability of the Company's affairs and policies in the
future. The classification provisions could also discourage a third party from
accumulating large blocks of Company stock to attempt to obtain control of the
Company, even though such an attempt might be beneficial to the Company or to
stockholders.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
Stockholder approval of the amendment to the Bylaws is required under the
Delaware General Corporation Law because the proposal would divide the Company's
Board into three classes. The affirmative vote of holders of a majority of the
shares of Common Stock of the Company, represented and voted at the Annual
Meeting, assuming the presence of a quorum, is required to approve the amendment
to the Bylaws. Stockholder approval of an amendment to the Certificate of
Incorporation is also required under the Delaware General Corporation Law.
The Board, which approved the amendments to the Bylaws and Certificate of
Incorporation recommends a vote "For" approval of the amendments to the Bylaws
and Certificate of Incorporation by all of the Company's stockholders who are
entitled to vote. The full text of the proposed amendment to the Bylaws and
Certificate of Incorporation is attached as Exhibits B and C to this Proxy
Statement, respectively.
ELECTION OF DIRECTORS
(ITEM NUMBER 3 ON THE PROXY CARD)
The Bylaws of IDG provide that the Board of Directors shall consist of not
less than three nor more than fifteen directors, with the exact number being set
from time to time by the Board. The Board presently consists of eight directors,
each of whom serves until the expiration of his term and until his successor, if
there is to be one, is elected and qualified. Classification of the Board of
Directors has been approved by the Board of
5
9
Directors and will be voted upon by the stockholders at the Annual Meeting. The
classification of the Board of Directors is wholly contingent upon the approval
by the stockholders.
Directors are elected by a plurality of the votes cast by the holder of
shares of Common Stock entitled to vote for the election of directors at a
meeting at which quorum is present. A quorum will be present for the Annual
Meeting when the holders of a majority of the shares outstanding on the Record
Date are present in person or by proxy. An abstention and a broker non-vote are
included in determining whether a quorum is present, but will not affect the
outcome of the vote for the election of directors. Unless otherwise indicated on
a proxy, all duly executed proxies granted by the holders of Common Stock will
be voted individually at the Annual Meeting for the election of each nominee.
If Item 2 is approved by the stockholders, all duly executed proxies will
be voted for the classification of the nominees identified below into three
classes and their election to serve as directors of the Company for the terms
set forth below until their successors are elected and qualified. Each nominee
has indicated that he will serve if elected, but if the situation should arise
that any nominee is no longer able or willing to serve, the proxy may be voted
for the election of such other person as may be designated by the Board of
Directors. Nominations are made in order to provide that Directors are divided
into three classes, as nearly equal in number as possible.
NOMINEES FOR ELECTION WHOSE TERMS WILL EXPIRE IN 2002 (CLASS I)
David K. Barth
George L. Sachs, Jr.
NOMINEES FOR ELECTION WHOSE TERMS WILL EXPIRE IN 2003 (CLASS II)
William J. Burkland
William R. Fenoglio
William T. Parr
NOMINEES FOR ELECTION WHOSE TERMS WILL EXPIRE IN 2004 (CLASS III)
Patrick S. O'Keefe
Andrew B. Shearer
Richard M. Seigel
If the proposal to amend the Company's Bylaws and Certificate of
Incorporation to provide for a classified Board of Directors is not approved,
all duly elected proxies will be voted for the election of nominees identified
below to serve for a term of one year and until their successors are elected and
qualified. Information with respect to each current director and nominee,
including biographical data for at least the last five years, is set forth
below:
PRESIDENT
DAVID K. BARTH BARTH SMITH COMPANY
Mr. Barth, age 57, is the President of Barth Smith Company, an investment and
management consulting firm, which he founded in 1991 and which assisted the
Company with its formation in 1997. Prior to that time, he served as Vice
President, Planning and Development, from 1985 to 1990, and Treasurer, from 1979
to 1984, of W.W. Grainger, Inc., a national distributor of maintenance, repair,
and operating supplies and related information to commercial, industrial,
contractor, and institutional customers. Mr. Barth also served as Treasurer,
Financial Services Group, from 1975 to 1979, and Manager, Treasury Operations,
from 1972 to 1975, of Borg-Warner Corporation, a multinational diversified
manufacturing, finance, and services company. Mr. Barth is a member of the
Executive and Compensation Committees of the Board of Directors.
VICE PRESIDENT
WILLIAM J. BURKLAND IDG SEATTLE
Mr. Burkland, age 39, is a co-founder of the Company. Mr. Burkland has served
since 1994 as a Vice President of the IDG Seattle business unit, formerly B&J
Industrial Supply Company ("B&J"), one of the
6
10
companies that founded the Company in 1997. From 1992 to 1994, Mr. Burkland
served as B&J's Director of International Sales, during which time he initiated,
managed, and expanded B&J's international business.
CHIEF EXECUTIVE OFFICER (RETIRED)
WILLIAM R. FENOGLIO AUGAT, INC.
Mr. Fenoglio, age 61, served as the President and Chief Executive Officer of
Augat, Inc., a manufacturer of connector products, from 1994 to 1996. Prior to
that time, Mr. Fenoglio served as President and Chief Executive Officer (1991 to
1994) and Chief Operating Officer (1985 to 1991) of Barnes Group, Inc., a
diversified manufacturer and distributor which owns Bowman Distribution Company.
From 1961 to 1984, Mr. Fenoglio was employed by General Electric Corporation and
served as the Vice President and General Manager of the Component Motor Division
from 1981 to 1984. Mr. Fenoglio is currently a director of Standex
International, Inc., and he has served as Chairman of the Board of Connecticut
Business & Industry Association. Mr. Fenoglio is a member of the Executive,
Compensation and Audit Committees of the Board of Directors.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
PATRICK S. O'KEEFE INDUSTRIAL DISTRIBUTION GROUP, INC.
Mr. O'Keefe, age 48, became President and Chief Executive Officer of the Company
on December 1, 1999. Prior to joining the Company, Mr. O'Keefe served as
President of the ZEP Chemical Unit of National Service Industries from December
1997 to October 1999. From July 1996 to July 1997, Mr. O'Keefe served as the
President and Chief Executive Officer of Huttig Building Products (formerly a
subsidiary of Crane Co.) and from June 1994 to June 1996 he served as the
President and Chief Executive Officer of Crane Canada (a subsidiary of Crane
Co.). Mr. O'Keefe is a member of the Executive Committee of the Board of
Directors.
VICE CHAIRMAN
WILLIAM T. PARR J. SMITH LANIER & CO.
Mr. Parr, age 64, has served as Vice Chairman and a director of J. Smith Lanier
& Co., an insurance placement company, since 1980. Mr. Parr is currently a
director of ITC DeltaCom, Inc., and he also currently serves as a director of
ITC Holding Company, Inc. and several of its subsidiaries. Mr. Parr is a member
of the Executive, Audit and Compensation Committees of the Board of Directors.
PRESIDENT
GEORGE L. SACHS, JR. IDG ST. LOUIS
Mr. Sachs, age 59, is a co-founder of the Company. Mr. Sachs has served since
1985 as the President of the IDG St. Louis business unit, formerly Tri-Star
Industrial Supply, Inc. ("Tri-Star"), one of the companies that founded the
Company in 1997, and from 1978 to 1985, he served as Tri-Star's Vice
President-Finance. Prior to joining Tri-Star, Mr. Sachs served as an Audit
Manager for Arthur Andersen & Co. from 1968 to 1978.
CHAIRMAN OF THE BOARD
RICHARD M. SEIGEL INDUSTRIAL DISTRIBUTION GROUP, INC.
Mr. Seigel, age 55, became Chairman of the Board on March 4, 1999, and served as
President and Acting Chief Executive Officer of the Company from March 8, 1999
to November 30, 1999. Mr. Seigel is the retired former Chairman and Chief
Executive Officer of SYSCO Food Services of Los Angeles, a subsidiary of SYSCO
Corporation, with which he had held the position of Senior Vice President
Foodservice operations. Prior to that, Mr. Seigel was President of Continental
Foodservice Company, a national distributor of foodservice products. Mr. Seigel
is a member of the Executive, Audit and Compensation Committees of the Board of
Directors.
PRESIDENT
ANDREW B. SHEARER IDG YORK
Mr. Shearer, age 37, is a co-founder of the Company. Mr. Shearer has served
since 1991 as the President of the IDG York business unit, formerly Shearer
Industrial Supply Co. ("Shearer"), one of the companies that
7
11
founded the Company in 1997. Prior to becoming President, Mr. Shearer was
employed by Shearer in various positions from 1985.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company meets on a regular basis to
supervise, review, and direct the business and affairs of the Company. During
the Company's 2000 fiscal year, the Board held six meetings. The Board of
Directors has established an Executive Committee, an Audit Committee, and a
Compensation Committee to which it has assigned certain responsibilities in
connection with the governance and management of the Company's affairs. The
Company has no standing nominating committee or other committee performing
similar functions.
Each of the directors attended all of the Board meetings and meetings of
committees on which he served.
Executive Committee. The Executive Committee, pursuant to authority
delegated by the Board, from time to time considers certain matters in lieu of
convening a meeting of the full Board, subject to any restrictions in applicable
law related to the delegation of certain powers to a committee of the Board.
Messrs. Barth, Fenoglio, Parr, O'Keefe, and Seigel, comprise the members of the
Executive Committee. The Executive Committee held six meetings during fiscal
2000.
Audit Committee. The Audit Committee recommends the appointment of
independent public accountants, reviews the scope of audits proposed by the
independent public accountants, reviews audit reports on various aspects of
corporate operations, and periodically consults with the independent public
accountants on matters relating to internal financial controls and procedures.
Messrs. Fenoglio, Parr, and Seigel comprise the members of the Audit Committee.
The Audit Committee held four meetings during fiscal 2000.
Compensation Committee. The Compensation Committee is responsible for the
review and approval of compensation of senior management, the review of
management recommendations relating to incentive compensation plans, the
administration of the Company's stock option and stock purchase plans, the
review of compensation of directors, and consultation with management and the
Board on senior executive continuity and organizational matters. Messrs. Barth,
Fenoglio, Parr, and Seigel comprise the members of the Compensation Committee.
The Compensation Committee held four meetings during fiscal 2000. Messrs.
Fenoglio and Seigel comprise the members of a subcommittee of the Compensation
Committee to act with respect to certain matters of compensation to the
Company's most highly compensated executive officers in order to comply with
requirements of Section 162(m) of the Internal Revenue Code.
DIRECTORS' COMPENSATION
The Company pays its outside directors an annual fee of $20,000, payable
quarterly, and an additional $15,000 annually to its non-executive Chairman of
the Board. The Company also pays each director $1,000 for each meeting attended
in person, reimburses all directors for their travel and other expenses incurred
in connection with attending Board or Committee meetings, and also reimburses
its outside directors for actual expenses otherwise incurred in performing their
duties. The Company also pays certain health insurance costs for Messrs. Barth,
Fenoglio, Parr and Seigel; such costs were $24,277 in total for 2000.
8
12
EXECUTIVE COMPENSATION
The following table sets forth the total compensation paid or accrued by
the Company for services rendered during the fiscal year ended December 31,
2000, to or for those individuals who served as the Company's chief executive
officer during 2000 and both of the Company's two other executive officers who
were paid or accrued at least $100,000 during fiscal 2000 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------------
AWARDS
ANNUAL COMPENSATION ----------------------------
--------------------------- RESTRICTED SECURITIES
FISCAL STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) YEAR SALARY BONUS AWARD(S) OPTIONS/SARS(#) COMPENSATION
------------------------------ ------ -------- ------- ---------- --------------- ------------
Patrick S. O'Keefe.............. 2000 $275,000 -- -- -- $ 0
Chief Executive Officer and 1999 22,916 -- $387,500 -- 272
President(1)
Jack P. Healey.................. 2000 205,000 -- -- -- 4,587
Senior Vice President, Chief 1999 187,500 $22,000 -- -- 3,271
Financial Officer and 1998 175,000 $25,000 -- -- 3,271
Secretary
Thomas W. Aldridge, Jr. ........ 2000 207,000 -- -- -- 1,658
Senior Vice President(2) 1999 195,000 -- -- -- 3,271
1998 86,250 -- -- 15,000 1,362
------------------------
(1) Mr. O'Keefe's employment by the Company commenced December 1, 1999. In
connection therewith, Mr. O'Keefe received 100,000 shares of the Common
Stock that are restricted and subject to forfeiture if he ceases to be
employed by the Company. The forfeiture provisions lapse as to 25,000 shares
on each of the four anniversary dates of the date of grant. Additional
restrictions relating to the trading price of the Common Stock were removed
by the compensation committee in January, 2001. The closing trading price of
the Common Stock on the date of grant was $3.875. Although no dividends are
expected to be declared on the Common Stock, if the Company does declare and
pay any dividends on its Common Stock in the future, such dividends will be
paid on the Common Stock granted to Mr. O'Keefe.
(2) Mr. Aldridge's employment by the Company commenced August 1, 1998.
The following table sets forth the fiscal year-end value of unexercised
options held by the Named Executive Officers at the end of fiscal 2000.
FISCAL YEAR-END OPTION VALUES
NO. OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END(1)
---------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
Patrick S. O'Keefe............................. 100,000 300,000 -- --
Jack P. Healey................................. 3,333 6,667 -- --
Thomas W. Aldridge, Jr......................... 7,500 7,500 -- --
------------------------
(1) As required by the rules of the Securities and Exchange Commission, the
value of unexercised in-the-money options is calculated based on the closing
sale price of the Company's Common Stock on the New York Stock Exchange
("NYSE") as of the last business day of its fiscal year, December 31, 2000,
which was $1.75 per share. Because the closing sale price of the Company's
Common Stock on December 31, 2000 was less than the exercise price of the
options, no unexercised options were in-the-money.
9
13
CERTAIN TRANSACTIONS
FORMATION OR COMBINATION RELATED MATTERS
Upon consummation of the formation of the Company (the "Combination"), the
Company succeeded to certain real property leases as lessee with respect to
which stockholders of the Company (former stockholders of certain of the nine
companies that formed the Company (the "Founding Companies")), or their
affiliates, are the lessors. The Company believes that the monthly rent and
other terms of each of these leases are not less favorable to the Company than
could be obtained from unaffiliated parties for comparable properties in the
respective geographic areas. Specifically, the Company leases property in (1)
Spokane, Washington from a company in which the father of William J. Burkland
has a 25% ownership interest; (2) Whitehall, Pennsylvania from Andrew B.
Shearer; (3) Lancaster, Williamsport, and York, Pennsylvania from a trust of
which Andrew B. Shearer's mother is the trustee and he and his father, sisters,
and deceased brother's estate are the beneficiaries; (4) Reading, Pennsylvania
from a trust of which Andrew B. Shearer and his father, mother, sisters, and
deceased brother's estate are the beneficiaries; and (5) St. Louis and
Springfield, Missouri from a company in which George L. Sachs, Jr. has a 15%
ownership interest. Messrs. Burkland, Shearer, and Sachs are directors of the
Company, and Mr. Shearer is also a principal stockholder of the Company.
Prior to the Combination, B&J had agreed to pay Charles T. Burkland, a
former president and a significant stockholder of B&J, a non-qualified, unfunded
pension in the amount of $10,000 per month during his lifetime and thereafter to
his spouse, if she survived him, for her lifetime. As a condition to B&J's
participation in the Combination, B&J made a lump sum payment of $1.11 million
to Charles T. Burkland in exchange for relief from its obligation to make such
monthly pension payments through 2012. As part of that arrangement, the Company
agreed to make such $10,000 monthly payments beginning in January 2013, if
either Mr. Burkland or his spouse is then surviving, and continuing thereafter
until both of them are deceased. In addition, the Company has agreed to pay 75%
of the health and dental insurance costs of Mr. Burkland and his spouse until
their deaths. Mr. Burkland is 73 years old, and his spouse is 69 years old. Mr.
Burkland is the father of William J. Burkland, a director of the Company.
OTHER RELATED PARTY MATTERS
During 2000, the Company has paid approximately $1,020,157 in insurance
premiums, of which $70,000 constituted a servicing fee, to J. Smith Lanier &
Co., an independent insurance agency, in connection with business and health
insurance purchased by the Company. William T. Parr, a director of the Company,
is the Vice Chairman of, and has less than 10% ownership interest in, J. Smith
Lanier & Co.
In July 1998, an operating subsidiary of the Company entered into a real
property lease as lessee with respect to which Andrew B. Shearer is the lessor.
The property is located in York, Pennsylvania and serves as the Company's
primary distribution center in the Mid-Atlantic region. The term of the lease is
for ten years and expires in December, 2008 with annual rent under the lease of
$319,215. The Company believes that the annual rent and other terms of this
lease are not less favorable to the Company than could be obtained from
unaffiliated parties for a comparable property in the York, Pennsylvania area.
Mr. Shearer is a principal stockholder and director of the Company.
POLICY RESPECTING RELATED PARTY TRANSACTIONS
On July 10, 1997, the Board of Directors adopted a policy that any
transactions between the Company and any of its officers, directors, or
principal stockholders or affiliates must be on terms no less favorable than
those that could be obtained from unaffiliated parties in comparable situations
and must be approved by a majority of the disinterested members of the Board of
Directors. The Audit Committee of the Board of Directors is responsible for
reviewing all related party transactions on a continuing basis and potential
conflict of interest situations where appropriate.
10
14
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Barth, Fenoglio, Parr, and Seigel served as members of the
Company's Compensation Committee throughout the 2000 fiscal year. Mr. Seigel is
the Chairman of the Board of the Company. None of the other members of the
Committee is an officer or former officer of the Company.
None of the executive officers of the Company served as either (1) a member
of the Compensation Committee or (2) a director of any entity of which any
member of the Compensation Committee is an executive officer. In addition, none
of the executive officers of the Company served as a member of the compensation
committee of any entity of which any member of the Board of Directors is an
executive officer.
REPORT OF COMPENSATION COMMITTEE
This report sets forth the factors currently being used in the Company's
compensation programs for its executive officers and describes the basis on
which fiscal 2000 compensation determinations were made with respect to the
executive officers of the Company, including the Chief Executive Officer and the
other Named Executive Officers of the Company.
GENERAL COMPENSATION PHILOSOPHY
The Compensation Committee (the "Committee") seeks to develop programs and
policies for the compensation of the Company's executive officers that will link
the compensation of executive officers to the performance of the Company and its
business units. The Committee intends that such a link will align the financial
interests of the Company's executive officers with those of its stockholders.
The Committee has identified several objectives for the Company's
compensation programs and policies, and it has determined that, to achieve these
objectives, the Company will use a combination of base salary, short-term and
long-term incentive plans, and performance bonus criteria in order to tie
executive compensation to increases in the Company's earnings and return on
stockholders' equity. While specific amounts and parameters are established
after further review and analysis, the Company's compensation programs will
consist of the following basic components:
- Reasonably competitive base salaries, in light of the Company's stage of
development and position within its industry;
- The issuance of performance-based stock options and restricted shares of
stock;
- Potentially significant annual incentive bonuses under the Company's
Management Incentive Program; and
- Customary benefits.
The Committee's formulation of the Company's compensation programs and
policies for executive officers is monitored and reviewed on an ongoing basis in
order for the Committee to determine the appropriateness of the compensation
paid to each of the executive officers of the Company from time to time in light
of its compensation philosophy and developments in the Company's industry and
generally. While promoting initiative and providing incentives for superior
performance by executives on behalf of the Company for the benefit of its
stockholders, the Committee also seeks to assure that the Company is able to
compete for and retain talented personnel who will lead the Company in achieving
levels of financial performance that will enhance stockholder value over the
long-term as well as the short-term.
BASE SALARIES
The Company has established the current base salaries of its executive
officers without reference to specific Company performance criteria. The base
salary for the Chief Executive Officer during 2000 was established in
negotiations with the approval of the Committee. Such base salaries were
intended to be competitive when compared to amounts paid to executive officers
of similar businesses in structure, size, and market orientation. The Committee
reviews salaries of the Company's executive officers on an annual basis.
11
15
STOCK INCENTIVE PLAN
During fiscal 2000, the Company granted options to purchase an aggregate of
12,500 shares of Company Common Stock to 25 employees, none of which were
granted to any of the Company's executive officers, pursuant to its Stock
Incentive Plan. Under the Stock Incentive Plan, the Company is permitted to
issue stock options that are qualified as incentive stock options under the
Internal Revenue Code (the "IRC"), options that are not so qualified, direct
awards of shares of stock, stock appreciation rights and other forms of awards
that use (or are based on) shares of Common Stock. To date, the Company has
issued only non-qualified stock options under the Stock Incentive Plan.
Stock options are awarded to executive officers and other persons both to
recognize outstanding contributions that they have made to the Company's
financial performance, and to encourage and provide incentives to continue to
make such contributions. While the Company has the flexibility to grant below-
market options, its policy has been to grant options at fair market value, with
vesting over a period of several years, in order to better align the personal
interests of optionees with those of the stockholders of the Company.
ANNUAL INCENTIVE COMPENSATION
The Company provides annual incentive compensation to executive officers of
the Company through its Management Incentive Program. The Management Incentive
Program is designed to offer compensation opportunities that are tied directly
to Company performance. The Management Incentive Program, at least as it relates
to designated executive officers of the Company, is administered by a
subcommittee of the Committee that will include only those members who qualify
as "outside" directors under Section 162(m) of the IRC. Pursuant to the
Management Incentive Program, the subcommittee establishes the specific criteria
and performance measures each year that are applicable to the Company's
designated Executive Officers for the purpose of earning incentive compensation
or bonuses for such year under the Management Incentive Program. Incentive
compensation for executive officers is currently based upon attaining certain
earnings per share targets approved by the Board of Directors.
BENEFITS
Executives are also eligible to participate in the Company's regular
employee benefit programs, including a 401(k) retirement savings plan, group
medical and dental coverage, group life insurance, group long-term disability
insurance, and other group benefit plans. Substantially all decisions with
respect to such benefits are made on a group basis, and no individual decisions
were made with respect to the executive officers during fiscal 2000.
COMPENSATION OF CEO
Mr. O'Keefe, who became the Company's Chief Executive Officer and President
on December 1, 1999, receives an annual base salary of $275,000, which will be
reviewed annually, and is eligible for an annual bonus determined by the Board
of Directors. In connection with his employment, Mr. O'Keefe also received
100,000 shares of Common Stock, which are restricted and subject to forfeiture
over a four year period from December 1, 1999, and options to purchase 400,000
shares of Common Stock that vest in 25% increments on the anniversary of the
date of grant. In January 2001, the Company granted Mr. O'Keefe options to
purchase 100,000 shares of common stock under the Company's Stock Incentive Plan
that vest in 25% increments on the date of grant and the first three
anniversaries of the date of grant. The Committee believes that the compensation
terms of Mr. O'Keefe's employment (as well as the terms for the initial purchase
of shares and the grant of options, in the circumstances in which they were
granted) are consistent with the fundamental elements that comprise the
Company's executive compensation philosophy. The Committee believes that the
base salary to Mr. O'Keefe is competitive with the Company's industry, and the
opportunities for value from the shares of restricted stock and stock options
are tied to increases in the price levels of the Company's Common Stock and thus
to enhanced value to the Company's stockholders. Mr. O'Keefe is also eligible to
12
16
participate in employee benefit plans as generally made available to senior
management of the Company, including the Stock Incentive Plan and the Management
Incentive Program.
David K. Barth -- William R. Fenoglio -- William T. Parr -- Richard M. Seigel
REPORT OF AUDIT COMMITTEE
The Audit Committee is comprised of two independent members and one member
that is not classified as independent by the listing standards of the New York
Stock Exchange ("NYSE"). Richard M. Seigel is not considered independent under
the NYSE's standards because he served as Acting President and Chief Executive
Officer from March 8, 1999 until November 30, 1999, during which time, the
Company conducted a search for a permanent President and Chief Executive
Officer. Even though Mr. Seigel is not considered independent by the standards
of the NYSE, the Board of Directors determined to use the limited exemption in
accordance with Section 303.02(D) of the NYSE listing standards to appoint him
to the Audit Committee. The Board made this determination based upon Mr.
Seigel's knowledge of distribution processes and issues specific to the
integration of highly acquisitive companies. The Audit Committee acts under a
written charter adopted and approved by the Board of Directors in August 2000. A
copy of the Audit Committee Charter is attached to this proxy statement as
Appendix D.
The responsibilities of the Audit Committee include recommending to the
Board of Directors an accounting firm to be engaged as independent accountants.
In addition, the Audit Committee is responsible for recommending to the Board of
Directors that the financial statements be included in the Annual Report to
shareholders.
In keeping with its responsibilities, the Audit Committee has reviewed and
discussed the audited financial statements for the fiscal year ended December
31, 2000 with management, and has discussed with Arthur Andersen LLP, the
independent public accountants, the matters required to be discussed by the
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The Audit Committee has also received the written disclosures and the letter
from Arthur Andersen LLP required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees) and the Audit Committee has
discussed the independence of Arthur Andersen LLP with that firm.
Based on the reports and discussions described in this report, and subject
to the limitations on the role and responsibilities of the Committee referred to
above and in the Audit Committee Charter, the Committee recommended to the Board
of Directors that the audited consolidated financial statements of the Company
be included in the Annual Report on Form 10-K for the year ended December 31,
2000 for filing with the Securities and Exchange Commission.
This report is respectfully submitted by the Audit Committee of the Board
of Directors.
William R. Fenoglio -- William T. Parr -- Richard M. Seigel
13
17
STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the percentage change in the
cumulative total shareholder return of the Company's Common Stock against the
cumulative total return of the Russell 2000 Index and the Media General SIC Code
508 -- machinery, equipment and supplies -- Index for the period commencing on
September 24, 1997 and ending on December 31, 2000.
MACHINERY EQUIPMENT,
INDUSTRIAL DISTRIBUTION SUPPLIES RUSSELL 2000 INDEX
----------------------- -------------------- ------------------
9/24/1997 100.00 100.00 100.00
9/30/1997 100.00 100.00 100.00
12/31/1997 74.70 90.91 96.65
3/31/1998 88.99 99.84 106.37
6/30/1998 73.81 86.66 101.41
9/30/1998 30.06 57.12 80.98
12/31/1998 36.31 56.71 93.94
3/31/1999 25.00 51.73 88.54
6/30/1999 24.11 55.92 101.97
9/30/1999 15.77 50.13 95.20
12/31/1999 15.48 49.04 112.35
3/31/2000 14.29 56.17 119.98
6/30/2000 12.50 52.98 115.06
9/30/2000 14.29 51.42 115.92
12/31/2000 8.33 58.03 107.50
Note: Base price date is 9/24/1997
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors, upon recommendation of the Audit Committee,
appoints each year the firm that will serve as the Company's independent public
accountants. The Board has appointed Arthur Andersen LLP, which firm served as
independent public accountants for the Company during the past fiscal year, to
serve as such accountants for the current fiscal year. Such appointment is not
subject to ratification or other vote by the stockholders.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting, with the opportunity to make a statement if he or she desires to
do so, and is expected to be available to respond to appropriate questions.
AUDIT FEES
Arthur Andersen LLP billed the Company aggregate fees of $275,500 for
professional services rendered for the audit of financial statements for fiscal
year 2000, and the reviews of financial statements included in Forms 10-Q filed
during fiscal year 2000.
14
18
ALL OTHER FEES
Arthur Andersen LLP billed the Company aggregate fees of $26,500 for all
other services rendered to it during fiscal year 2000.
STOCKHOLDERS' PROPOSALS FOR 2002 ANNUAL MEETING
Any stockholder who wishes to present a proposal appropriate for
consideration at the Company's 2002 Annual Meeting of Stockholders must submit
the proposal in proper form to the Company at its address set forth on the first
page of this Proxy Statement no later than November 30, 2001 for the proposal to
be considered for inclusion in the Company's proxy statement and form of proxy
relating to such Annual Meeting.
OTHER MATTERS
All of the expenses involved in preparing, assembling, and mailing this
Proxy Statement and the materials enclosed herewith and soliciting proxies will
be paid by the Company. It is estimated that such costs will be nominal. The
Company may reimburse banks, brokerage firms and other custodians, nominees, and
fiduciaries for expenses reasonably incurred by them in sending proxy materials
to beneficial owners of stock. The solicitation of proxies will be conducted
primarily by mail but may include telephone, telegraph, or oral communications
by directors, officers, or regular employees of the Company, acting without
special compensation.
The Board of Directors is aware of no other matters, except for those
incidental to the conduct of the Annual Meeting, that are to be presented to
stockholders for formal action at the Annual Meeting. If, however, any other
matters properly come before the Annual Meeting or any postponement,
adjournment, or adjournments thereof, it is the intention of the persons named
in the proxy to vote the proxy in accordance with their judgment.
Stockholders are urged to fill in, date, and sign the accompanying form of
proxy and return it to the Company as soon as possible.
BY ORDER OF THE BOARD OF DIRECTORS,
/S/ JACK P. HEALEY
Jack P. Healey
Secretary
15
19
APPENDIX A
INDUSTRIAL DISTRIBUTION GROUP, INC.
FIRST AMENDMENT TO AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
This First Amendment to the Amended and Restated Industrial Distribution
Group, Inc. Employee Stock Purchase Plan (the "Amendment") is made as of the
23rd day of March, 2001, by Industrial Distribution Group, Inc., a Delaware
corporation (the "Company").
WITNESSETH:
WHEREAS, the Company established the Industrial Distribution Group, Inc.
Employee Stock Purchase Plan effective September 19, 1997, which was amended and
restated on December 10, 1997 (the "Plan");
WHEREAS, Section 6.5 of the Plan permits the Board of Directors of the
Company to amend the Plan, subject to the approval of the Company's stockholders
at or before the next annual meeting of stockholders; and
WHEREAS, the Board of Directors has authorized and directed, subject to
such stockholder approval, to increase by 500,000 the total number of Shares
which may be granted or awarded under the Plan.
NOW, THEREFORE, for and in consideration of the foregoing premises, and
other good and valuable consideration, the Plan is amended as follows:
1. Section 4.1 is hereby amended by deleting the number "500,000"
and replacing it with the number "1,000,000".
2. This Amendment shall be effective as of the date set forth
above. Except as hereby amended, the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, the undersigned does hereby execute this Amendment as
of the date set forth above.
INDUSTRIAL DISTRIBUTION GROUP, INC.
By: /s/ PATRICK S. O'KEEFE
------------------------------------
Patrick S. O'Keefe,
President and Chief Executive
Officer
A-1
20
APPENDIX B
THE BYLAWS OF INDUSTRIAL DISTRIBUTION GROUP, INC. SHALL BE AMENDED BY DELETING
SECTION 3.2 OF ARTICLE THREE THEREOF IN ITS ENTIRETY AND REPLACING IN LIEU
THEREOF THE FOLLOWING SECTION 3.2:
"3.2 Number, Election and Term of Office. The number of directors shall be
fixed by resolution of the Board of Directors or of the stockholders from time
to time and, until otherwise determined, shall be three (3); provided, however,
that the number of directors shall not at any time be less than three (3) or
more than fifteen (15); and further provided, that no decrease in the number of
directors shall have the effect of shortening the term of an incumbent director.
The terms of office of the directors shall be staggered by dividing the total
number of directors into three classes, with each class accounting for
one-third, as near as may be, of the total number of directorships. The terms of
directors in the first class shall expire at the first annual stockholders'
meeting after their election, the terms of the second class shall expire at the
second annual stockholders' meeting after their election, and the terms of the
third class shall expire at the third annual stockholders' meeting after their
election. At each annual stockholders' meeting held thereafter, directors shall
be chosen for a term of three years to succeed those whose terms expire. If the
number of directorships is changed, any increase or decrease shall be so
apportioned among the classes as to make all the classes as nearly equal in
number as possible, and when the number of directorships is increased and newly
created directorships are filled by the Board, the terms of the additional
members shall expire at the next election by the stockholders of directors in
the class in which such member was placed. Each director, except in the case of
his or her earlier death, written resignation, retirement, disqualification or
removal, shall serve for the duration of his or her term, as staggered, and
thereafter until his or her successor, if there is to be one, shall have been
elected and qualified."
B-1
21
APPENDIX C
THE CERTIFICATE OF INCORPORATION OF INDUSTRIAL DISTRIBUTION GROUP, INC. SHALL BE
AMENDED BY DELETING SECTION (B) OF ARTICLE EIGHTH THEREOF IN ITS ENTIRETY AND
REPLACING IN LIEU THEREOF THE FOLLOWING SECTION (B):
"(b) The directors shall be classified as Class I, Class II and Class III
Directors and will initially serve one, two and three-year terms, respectively.
At each annual meeting following the initial classification and election, the
successors to the class of directors whose terms expire at that meeting shall be
elected for a term of office to expire at the third succeeding annual meeting
after their election. Directors shall hold office until their respective
successors, if there be any, have been duly elected and qualified. At each
annual meeting of stockholders at which a quorum is present, the person
receiving a plurality of the votes cast with respect to an election to a
position as a director shall be elected to the position. Election of directors
need not be by written ballot unless the Bylaws of the Corporation so provide."
C-1
22
APPENDIX D
AUDIT COMMITTEE CHARTER
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its financial and other oversight responsibilities by:
- Serving as an independent and objective party to monitor the Company's
financial statements, financial reporting process and internal control
system.
- Reviewing and appraising the Company's outside auditors and internal
financial management.
- Providing an open avenue of communication among the Company's outside
auditors, management, including internal financial management, and the
Board.
The Audit Committee will further carry out its purpose by engaging in the
activities enumerated in Section IV of this Charter.
II. MEMBERSHIP REQUIREMENTS
Members of the Audit Committee shall meet the following qualifications, or
such other qualifications as may be imposed from time to time by the Board, by
law or by the listing requirements of any stock exchange or automated quotation
system upon which a security of the Company may be traded or quoted.
(A) Independence
The Audit Committee shall be comprised of three or more directors as
determined by the Board. Except as provided below, all members of the Audit
Committee shall be free of any relationship to the Company that may interfere
with the exercise their independence from management and the Company.
In addition to the general requirement of independence described above, the
following restrictions shall apply to the members of the Audit Committee:
(1) Employees. A director who is an employee (including a
non-employee executive officer) of the Company or any of its affiliates may
not serve on the Audit Committee until three years following the
termination of his or her employment.
(2) Business Relationship. A director (a) who is a partner,
controlling stockholder, or executive officer of an organization that has a
business relationship with the Company, or (b) who has a direct business
relationship with the Company may serve on the Audit Committee only if the
Board determines in its business judgment that the relationship does not
interfere with the director's exercise of independent judgment. In making a
determination regarding the independence of a director pursuant to this
paragraph, the Board will consider, among other things, the materiality of
the relationship to the Company, to the director, and, if applicable, to
the organization with which the director is affiliated.
A "business relationship" can include commercial, industrial, banking,
consulting, legal, accounting and other relationships. A director can have
this relationship directly with the Company, or the director can be a
partner, officer or employee of an organization that has such a
relationship. The director may serve on the Audit Committee without the
above-referenced Board determination after three years following the
termination of, as applicable, either (x) the relationship between the
organization with which the director is affiliated and the Company, (y) the
relationship between the director and his or her partnership status,
stockholder interest or executive officer position or (z) the direct
business relationship between the director and the Company.
(3) Cross Compensation Committee Link. A director who is employed as
an executive of another corporation where any of the Company's executives
serves on that corporation's compensation committee may not serve on the
Audit Committee.
D-1
23
(4) Immediate Family. A director who is a spouse, parent, child,
sibling, mother-in-law, father-in-law, brother-in-law, sister-in-law,
son-in-law, daughter-in-law or who shares the home of an individual who is
an executive officer of the Company or any of its affiliates cannot serve
on the Audit Committee until three years following the termination of such
employment relationship.
Notwithstanding the preceding limitations, one director who is no longer an
employee or who is an immediate family member of a former executive officer of
the Company or its affiliates, but is not considered independent pursuant to
these provisions due to the three-year restriction period, may be appointed,
under exceptional and limited circumstances, to the Audit Committee if the Board
determines in its business judgment that membership on the Audit Committee by
the individual is required by the best interests of the Company and its
stockholders. This exception shall not apply to persons disqualified for any
other reason described above.
(B) Financial Literacy
Each member of the Audit Committee shall be financially literate, or must
become financially literate within a reasonable period of time after his or her
appointment to the Audit Committee; and at least one member of the Audit
Committee must have accounting or related financial management expertise.
(C) Election, Removal and Replacement
The members of the Audit Committee shall be elected by the Board. Unless a
Chair is elected by the full Board, the members of the Audit Committee may
designate a Chair.
In the event a director becomes disqualified from membership on the Audit
Committee, such director shall be removed as soon as practicable from service on
the Audit Committee by the Board. In the event the removal, resignation,
retirement, death or other termination of a director from service on the Audit
Committee results in the Audit Committee comprising less than three members, the
Board shall elect a new qualified director to the Audit Committee as soon as
practicable. If such election to the Audit Committee requires the election by
the shareholders of the Company or the directors of new director to the Board,
the Company and the Board may consult with any stock exchange or automated
quotation system upon which a security of the Company may be traded or quoted.
III. MEETINGS AND GOVERNANCE
The Audit Committee shall meet at least annually in connection with the
Company's annual audit, or more frequently as circumstances dictate. In
addition, the Audit Committee or its Chair shall meet to review the Company's
quarterly or other interim financial statements, as appropriate. Such meetings
may be held in or out of the presence of the Company's management, outside
auditors or both, as appropriate. Other governance matters not addressed herein
shall be governed by the Company's articles of incorporation or bylaws.
IV. DUTIES, RESPONSIBILITIES AND ACTIVITIES
To fulfill its purpose, the Audit Committee has the following duties and
responsibilities and shall engage in the following activities:
(A) Review of Charter and Financial Statements and Reports
The Audit Committee shall review the Company's financial statements,
reports and other financial information, in conjunction with the Company's
internal financial management and outside auditors, as appropriate. Such review
shall include candid discussions of the quality -- not merely the
acceptability -- of the Company's accounting principles as applied in its
financial reporting. Reviews shall occur prior to dissemination of the
statement, report or other document to a third party or the public. Without
limitation, the Audit Committee shall review:
- The annual financial statements and any reports or other financial
information, including any certification, report, opinion, or review
rendered by the outside auditors.
D-2
24
- Any quarterly or other interim financial statements and any reports or
other financial information, including any certification, report,
opinion, or review rendered by the outside auditors. The Chair of the
Audit Committee may represent the entire Audit Committee for purposes of
this review.
- This Charter on an annual basis, or more frequently as circumstances
dictate.
- As circumstances dictate and as deemed necessary or advisable from time
to time, any material internal financial reports to management prepared
by internal financial management.
- As circumstances dictate and as deemed necessary or advisable from time
to time, any financial statements and any reports or other financial
information, including any certification, report, opinion, or review by
accountants, of the Company's franchisees.
(B) Relationship with Outside Auditors
The Audit Committee's and the Board's relationship with the Company's
outside auditors shall governed by the following principles:
- The Company's outside auditors are ultimately accountable to the Audit
Committee and the Board.
- The Audit Committee and the Board are ultimately responsible for
selecting, evaluating and, where appropriate, replacing the Company's
outside auditors.
- The Audit Committee is responsible for ensuring receipt from the outside
auditors of a formal written statement delineating all relationships
between the outside auditors and the Company. The Audit Committee is
responsible for actively engaging in a dialogue with the outside auditors
with respect to any disclosed relationships or services that may impact
the objectivity and independence of the outside auditors. The Audit
Committee is further responsible for taking, or recommending that the
Board take, appropriate action in response to the outside auditors'
report to satisfy itself of the outside auditors' independence.
(C) Relationship with Company and Internal Financial Management
The Audit Committee's and the Board's relationship with the Company's
management, including its internal financial management, shall governed by the
following principles:
- The Audit Committee is responsible for reviewing the integrity of the
Company's financial reporting process, both internal and external.
- The Audit Committee is responsible for reviewing the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
- The Audit Committee is responsible for considering and approving, if
appropriate, major changes to the Company's auditing and accounting
principles and practices as suggested by the outside auditors or
management, including internal financial management.
(D) Audit Committee Report
The Audit Committee shall prepare an Audit Committee Report annually in
connection with the Company's annual audit. The Report shall address such
matters as deemed appropriate by the Audit Committee, but shall state whether
the Audit Committee:
- Reviewed and discussed the Company's audited financial statements with
management.
- Discussed with the outside auditors such qualitative matters concerning
the Company's accounting principles as applied in its financial reporting
as are appropriate.
- Received from the outside auditors a formal written statement delineating
all relationships between the outside auditors and the Company.
- Recommends to the Board that the Company's audited financial statements
be included in the Company's public filings or other publicly available
reports.
D-3
25
The names of the members of the Audit Committee shall appear at the end of
the Report.
(E) Other Activities
The Audit Committee may perform such activities from time to time, as the
Board deems appropriate. Without limitation, such activities may be assigned to
the Audit Committee because of the independence of its members.
D-4
26
(IDG LOGO)
27
COMMON STOCK
OF INDUSTRIAL DISTRIBUTION GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF
DIRECTORS FOR THE MAY 16, 2001
ANNUAL MEETING OF STOCKHOLDERS.
The undersigned hereby appoints Patrick S. O'Keefe and Jack P. Healey,
and each of them, the proxy of the undersigned to vote the Common Stock of the
undersigned at the Annual Meeting of Stockholders of INDUSTRIAL DISTRIBUTION
GROUP, INC. (the "Company") to be held on May 16, 2001, and any adjournment or
postponement thereof.
1. Amendment of the Amended and Restated Employee Stock Purchase Plan to
provide for an increase in the number of shares of Common Stock, from 500,000 to
1,000,000, that may be purchased pursuant to the Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Amendments to the Company's Bylaws and Certificate of Incorporation
relating to the classification of the Board of Directors
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Election of directors
Class I (term expiring 2002): David K. Barth, George L. Sachs, Jr.
____ FOR all nominees for director listed above (except as marked to the
contrary).
____ WITHHOLD AUTHORITY to vote for all nominees listed above.
____ WITHHOLD AUTHORITY to vote for an individual nominee(s). Write name(s)
below.
___________________________________________________
Class II (term expiring 2003): William J. Burkland, William R. Fenoglio,
William T. Parr
____ FOR all nominees for director listed above (except as marked to the
contrary).
____ WITHHOLD AUTHORITY to vote for all nominees listed above.
____ WITHHOLD AUTHORITY to vote for an individual nominee(s). Write name(s)
below.
___________________________________________________
Class III (term expiring 2004): Patrick S. O'Keefe, Andrew B. Shearer,
Richard M. Seigel
____ FOR all nominees for director listed above (except as marked to the
contrary).
____ WITHHOLD AUTHORITY to vote for all nominees listed above.
____ WITHHOLD AUTHORITY to vote for an individual nominee(s). Write names(s)
below.
__________________________________________________
4. In accordance with their best judgment with respect to any other
matters that may properly come before the meeting.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE AMENDMENTS TO THE BYLAWS AND
CERTIFICATE OF INCORPORATION AND THE ELECTION AS DIRECTORS OF THE PERSONS NAMED
IN THE PROXY AND ACCOMPANYING PROXY STATEMENT AND UNLESS INSTRUCTIONS TO THE
CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY WILL BE SO VOTED.
----------------------------------------------
Please sign this Proxy exactly as name appears
on the Proxy.
Note: When signing as attorney, trustee,
administrator, or guardian, please give your
title as such. In the case of joint tenants,
each joint owner must sign.
Date: _________________________, 2001
28
COMMON STOCK
OF INDUSTRIAL DISTRIBUTION GROUP, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
FOR THE MAY 16, 2001 ANNUAL MEETING OF STOCKHOLDERS
The undersigned hereby appoints Patrick S. O'Keefe and Jack P. Healey, and
each of them, the proxy of the undersigned to vote the Common Stock of the
undersigned at the Annual Meeting of Stockholders of INDUSTRIAL DISTRIBUTION
GROUP, INC. (the "Company") to be held on May 16, 2001, and any adjournment or
postponement thereof.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
29
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
INDUSTRIAL DISTRIBUTION GROUP, INC.
MAY 16, 2001
Please Detach and Mail in the Envelope Provided
--------------------------------------------------------------------------------
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees for WITHHOLD
director at right AUTHORITY
(except as marked to to vote for all nomi- NOMINEES:
the contrary). nees listed at right. CLASS I (term expiring 2002):
3. Election of David K. Barth
Directors [ ] [ ] George L. Sachs, Jr.
CLASS II (term expiring 2003):
William J. Burkland
William R. Fenoglio
WITHHOLD AUTHORITY to vote for an individual nominee, William T. Parr
write name(s) below: CLASS III (term expiring 2004):
Patrick S. O'Keefe
Andrew B. Shearer
Richard M. Seigel
____________________________________________________________
1. Amendment of the Amended and Restated
Employee Stock Purchase Plan to provide for
an increase in the number of shares of Common FOR AGAINST ABSTAIN
Stock, from 500,000 to 1,000,000 that may be
purchased pursuant to the Plan. [ ] [ ] [ ]
2. Amendments to the Company's Bylaws and
Certificate of Incorporation relating to the
classification of the Board of Directors. [ ] [ ] [ ]
4. In accordance with their best judgment with respect to any other matters that
may properly come before the meeting.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE AMENDMENTS TO THE BYLAWS
AND CERTIFICATE OF INCORPORATION AND THE ELECTION AS DIRECTORS OF THE PERSONS
NAMED IN THE PROXY AND ACCOMPANYING PROXY STATEMENT AND UNLESS INSTRUCTIONS TO
THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY WILL SO BE VOTED.
SIGNATURE _____________________ __________________________ DATE:________, 2001
SIGNATURE IF HELD JOINTLY
NOTE: Please sign this Proxy exactly as name appears on this Proxy. When signing
as attorney, trustee, administrator or guardian, please give your title as
such. In the case of joint tenants, each joint owner must sign.
--------------------------------------------------------------------------------