DEF 14A: Definitive proxy statements
Published on April 17, 2001
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
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ENTERPRISE SOLUTIONS
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April 17, 2001
To our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders.
The meeting will be held at 10:00 a.m. on Wednesday, May 2, 2001 at the law
offices of Morgan, Lewis & Bockius LLP, 1701 Market St., Room 18 A & B (18th
Floor), Philadelphia, PA.
At the meeting we will elect directors and transact such other business as
may properly be presented at the meeting. We will also review SunSource's 2000
performance and answer your questions.
Your vote is important. Whether you plan to attend the meeting or not, we
urge you to complete, sign and return your proxy card as soon as possible in
the envelope provided. This will ensure representation of your shares in the
event you are not able to attend the meeting. You may revoke your proxy and
vote in person at the meeting if you so desire.
Sincerely yours,
/s/ Maurice P. Andrien, Jr.
MAURICE P. ANDRIEN, JR.
President and Chief Executive Officer
[GRAPHIC OMITTED]
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 2, 2001
The Annual Meeting of Stockholders of SunSource Inc. will be held at 10:00
a.m. on Wednesday, May 2, 2001 at the law offices of Morgan, Lewis & Bockius
LLP, 1701 Market St., Room 18 A&B (18th Floor), Philadelphia, PA to consider
and take action on the following:
1. To elect three members to the Company's Board of Directors;
2. To transact such other business as may properly be presented at the
Annual Meeting or any adjournments thereof.
Your Board of Directors recommends a vote "FOR" the election of the
directors nominated by the Board of Directors.
Stockholders of record at the close of business on March 30, 2001 will be
entitled to vote at the Annual Meeting or any adjournments of the meeting. A
list of such stockholders will be available for examination at the offices of
the Company, 3000 One Logan Square, Philadelphia, PA for ten days prior to the
date of the meeting.
By Order of the Board of Directors
/s/ Joseph M. Corvino
Joseph M. Corvino
Secretary
April 17, 2001
TABLE OF CONTENTS
SUNSOURCE INC.
3000 One Logan Square
Philadelphia, PA 19103
PROXY STATEMENT
The Board of Directors of SunSource Inc. (the "Company" or "SunSource") is
soliciting your proxy for use at the Annual Meeting of Stockholders to be held
at 10:00 a.m. on Wednesday, May 2, 2001, at the law offices of Morgan, Lewis &
Bockius LLP, 1701 Market Street, Philadelphia, PA, and at any adjournment or
postponement of the Annual Meeting.
This Proxy Statement, the foregoing notice and the enclosed proxy are
being sent to stockholders on or about April 17, 2001. The stockholders of
record at the close of business on March 30, 2001 (the "Record Date") will be
entitled to be notified of, and to vote at, the Annual Meeting.
VOTING PROCEDURES
YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend our Annual
Meeting of Stockholders, please take the time to vote by completing and mailing
the enclosed proxy card or use the electronic (telephone/internet) voting
system indicated on your proxy. We have included a postage-prepaid envelope for
your convenience.
If you sign, date and mail your proxy card without indicating how you want
to vote, your proxy will be voted "FOR" the election of the nominees to the
Board of Directors.
Revoking Your Proxy
If you later wish to revoke your proxy, you may do so by: (1) sending a
written statement to that effect to the Secretary of the Company; (2)
submitting a properly signed proxy with a later date; or (3) voting in person
at the annual meeting.
Vote Required and Method of Counting Votes
Number of Shares Outstanding and Quorum. At the close of business on the
Record Date, there were 6,882,409 shares of common stock of the Company
(the "Common Shares") outstanding and entitled to vote at the annual
meeting. Each stockholder is entitled to one vote for each Common Share
owned of record by such stockholders with respect to each matter to be
voted on at the Annual Meeting.
Vote Required. The following is an explanation of the vote required for the
item to be voted on at the annual meeting:
Item 1 -- Election of Directors.
The nominees receiving the highest number of votes will be elected. If
you do not wish your shares to be voted for a particular nominee, you may
so indicate in the space provided on the proxy card.
Brokers who hold shares for the accounts of their clients may vote such
shares either as directed by their clients or in their own discretion if
permitted by the stock exchange or other organization of which they are
members. Members of the New York Stock Exchange ("NYSE") are permitted to
vote their clients' proxies in their own discretion as to the election of
directors if their clients have not furnished voting instructions within
ten days of the meeting.
Other Business
We know of no other matters to be presented for stockholder action at the
meeting. If other matters are properly brought before the meeting, the persons
named in the proxy card intend to vote your shares in accordance with their
best judgment.
BOARD OF DIRECTORS
Election of Directors
The SunSource Board of Directors (the "Board") is classifiied into three
classes (Class I, Class II, and Class III). The members of the Board serve for
three years and until their successors are duly elected and qualified. The
terms of office of the members of one class of directors expire each year in
rotation so that the members of one class are elected at each annual meeting
for full three-year terms. The terms of office of three of the present
directors will expire at this annual meeting. Messrs. Keith, Shepard and
Ziegler are standing for re-election. John P. McDonnell retired from the Board
in May 2000. If any of the nominees become unavailable for election prior to
this annual meeting, the number of directors to be elected at the meeting will
be reduced.
Unless instructions to the contrary are given, the shares represented by a
properly executed proxy will be voted "FOR" the election of the nominees set
forth below. The table below sets forth information with respect to each
nominee:
Class II Directors - Nominees to serve until the 2004 Annual Meeting and until
such time as their respective successors are duly elected and qualified.
Your Board of Directors recommends a vote "FOR"
the election of the above nominees.
Continuing Directors
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Classs I Directors (Terms expire at the 2003 Annual Meeting)
2
Class III Directors (Terms expire at the 2002 Annual Meeting)
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(1) Member of Compensation Committee
(2) Member of Audit Committee
(3) Member of the Nominating Committee
Board Meetings; Committees of the Board; Nominations to Board
The Board of Directors met eight times in 2000. Three of these meetings
were telephonic.
The Board has three standing committees: the Audit Committee, whose
members are Messrs. Bliss, Brewer, and Shepard; the Compensation Committee,
whose members are Messrs. Hoffman, Keith and Ziegler; and the Nominating
Committee, whose members are Messrs. Brewer and Shepard. The Audit Committee
met five times in 2000; the Compensation Committee met three times with Messrs.
Keith and Ziegler each missing one meeting; and the Nominating Committee met
once.
The Audit Committee reviews the performance and independence of the
Company's independent accountants, makes an annual recommendation to the Board
with respect to the appointment of independent accountants, approves the
general nature of the services to be performed and solicits and reviews the
accountants' recommendations. The Committee also consults with the Company's
financial officers and internal accountants.
The Compensation Committee reviews the Company's compensation policies and
executive compensation changes and makes recommendations on compensation plans.
The Nominating Committee considers recommendations for nominees for
director from stockholders, who must submit such recommendations in writing to
the Chairman of the Nominating Committee. Pursuant to the Company's Bylaws, a
nomination by a stockholder of a person for election as a director must be made
not later than 60 days nor earlier than 90 days prior to the anniversary of the
preceding year's annual meeting in writing with the information specified in
the Bylaws.
Compensation of Directors
Employee directors receive no additional compensation for serving as
directors.
During 2000 non-employee directors received an annual retainer of $20,000
plus $1,000 for each Board or committee meeting attended. The non-employee
directors are entitled to elect to take up to 100% of the retainer in the form
of Common Shares.
3
OWNERSHIP OF COMMON SHARES
The following table shows for (i) each director, (ii) each executive
officer named in the summary compensation table, (iii) certain persons known to
the Company to own beneficially more than 5% of the outstanding Common Shares,
and (iv) all officers and directors as a group, the beneficial ownership of
Common Shares as of March 30, 2001.
The firms identified in the table below have reported that they beneficially
owned at December 31, 2000 more than 5% of the outstanding shares of the Common
Stock as follows:
Other 5% Owners (3)
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* Less than 1%
(1) Pursuant to a Stockholders Agreement dated as of July 31, 1997, Messrs.,
Corvino, Edmonson, Hillman, Marshall and McDonnell have agreed to vote, in
the same proportion as the unaffiliated Common Shares that are voted on
any matter, that percentage of Excess Voting Shares held by them that
equals the percentage of unaffiliated Common Shares that are voted on such
matter. "Excess Voting Shares" means the Common Shares beneficially owned
by such individuals that represent voting power in excess of the
respective voting powers they would have had immediately prior to the
conversion of SunSource L.P., the predecessor to the Company (the
"Partnership") into corporate form (the "Conversion") in a vote of the
holders of Class A Interests and Class B Interests voting together as a
single class.
(2) Includes 2,000 Common Shares owned by Hoffman Investment Co., of which Mr.
Hoffman is Managing Partner. In addition, Mr. Hoffman's children own 1,000
Common Shares with respect to which he disclaims beneficial ownership.
(3) As reported to the Company in filings with the Securities and Exchange
Commission made by these reporting firms on Form 13-G as of December 31,
2000.
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REPORT OF COMPENSATION COMMITTEE
The Company's compensation program for executive officers is designed to
attract, retain and motivate superior executive talent and to align a
significant portion of each officer's total compensation with the performance
of the applicable business unit, the Company, and the interests of the
Company's stockholders.
The Company maintains a highly leveraged pay for performance compensation
program recognizing and supporting its high risk / high reward business
strategy and culture. When performance is exceptional, rewards can be
substantial and well above average / median labor market values. When
performance falls short of expectations, there may be no incentive award
payouts.
The Company has implemented a competitive total compensation program for
executive officers composed of the following elements discussed below: base
salary, annual bonus and long-term incentive compensation.
Base Salary
Executive base salaries reflect the Company's operating philosophy,
culture and business direction with each salary determined subjectively by the
skills, experience and performance level of the individual executive, and the
needs and resources of the Company. Base salaries are targeted to median market
levels based on reviews of published salary surveys and peer company
compensation conducted by an independent compensation consulting firm. The
Committee believes that the Company's most direct competitors for executive
talent encompass a broader group of companies engaged in the recruitment and
retention of executive talent in competition with the Company. Thus, the
compensation peer group is not the same as, and is broader than, the companies
comprising the peer group index as it appears in the graph in the "Stock
Performance Chart."
Annual Bonus
Annual bonuses may be earned by executive officers and key employees under
the Company's annual bonus plans. Payments under these plans are based on the
performance of the overall Company or the business unit over which the
individual has a direct influence. Annual bonus targets and goals are
recommended by the CEO. Generally, the goals incorporate the achievement of
business plan income targets, and Return on Assets ("ROA") or Return on Average
Net Tangible Assets ("ROANTA"), as well as the achievement of non-financial
management business objectives. The mix and weighting of the goals vary by
business unit and are subjectively determined. The level of achievement of the
goals determines the level of bonus. The maximum payout is two times the annual
bonus target.
Long-Term Incentive
SunSource maintains a deferred compensation plan for key employees (the
"Nonqualified Deferred Compensation Plan") which allows for deferral of cash
compensation from salary and annual bonuses. The Nonqualified Deferred
Compensation Plan also includes awards that were made under previous long-term
incentive plans of the Company. Executive deferrals can grow at mutual fund
investment rates.
In 1998, stockholders approved the 1998 Equity Compensation Plan (the
"Equity Plan"). The plan is designed to instill the economic incentives of
ownership, create management incentives to improve stockholder value and,
through the use of vesting periods, encourage executives to remain with the
Company and focus on long-term results.
The Equity Plan is designed to drive performance and reward top officers
and key employees when there is an increase in stock price, income growth, or
earnings per share, excluding extraordinary events (the "Performance Targets").
The maximum payout will be 100% of the targeted long-term incentive as defined
by the CEO with the approval of the Compensation Committee.
The Committee awards grants to qualifying participants with the number of
shares awarded varying according to position, responsibility, salary and
performance results.
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The number of shares awarded and the vesting period of the award are
determined by first setting a maximum number of shares and then measuring
performance of the Company and business units to compute actual stock option
grants up to the maximum and to determine the number of years over which the
stock options vest.
Targeted long-term dollar award values were established in 1998 by using
competitive survey data. Guidelines for the maximum number of shares were
determined by dividing target long-term incentive dollar values by the
estimated value of a stock option. Accepted stock option pricing models were
used to calculate the estimated option value. The number of shares that were
actually awarded in 2000 was determined on a discretionary basis by the
Company's CEO for corporate staff positions and business unit Chief Executive
Officers for their participating employees using these guidelines.
If the Company or the business unit, as applicable, meets certain
Performance Targets, stock options will become vested gradually over a three to
five-year period, depending on 2000 results. If Performance Targets are not
met, the options will not become vested until 9 years from the grant date. The
vesting period is determined as of the grant date based on 2000 performance
results.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code subjects public companies to
limits on the deductibility of certain executive compensation for taxable years
beginning on or after January 1, 1994. It limits deductible compensation for
the executive officers named in the Summary Compensation Table to $1 million
per year. Certain forms of compensation are exempt from this deductibility
limit, primarily performance-based compensation under plans approved by
stockholders.
The 1998 Equity Plan qualifies those awards that would be considered
performance-based for exemption under Section 162(m). The Committee will
continue to examine the impact of the deductibility limit on the Company and
the executive group to determine when and if other aspects of the executive
compensation program are affected by the limit and the appropriate actions
necessary for the best interests of the stockholders.
THE COMPENSATION COMMITTEE
Arnold S. Hoffman
Robert E. Keith, Jr.
Francis G. Ziegler
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Company's Board of Directors (the "Committee")
is composed of three [independent] directors and operates under a written
charter adopted by the Board of Directors that complies with the rules adopted
by the New York Stock Exchange (For a full copy of the written charter, see
Exhibit A). In accordance with the Charter, all members of the Committee are
independent. The members of the Committee are Stewart A. Bliss, O. Gordon
Brewer, Jr., and Geoffrey C. Shepard. The Committee recommends to the Board of
Directors the selection of the Company's independent accountants.
Management is responsible for the Company's internal controls and the
financial reporting process. The independent accountants are responsible for
performing an independent audit of the Company's consolidated financial
statements in accordance with generally accepted auditing standards and to
issue a report thereon. The Committee's responsibility is to monitor and
oversee these processes.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to the
Committee that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Committee has
reviewed and discussed the consolidated financial statements with management
and the independent accountants. The Committee discussed with the independent
accountants matters required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees).
The Company's independent accountants also provided to the Committee the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and the Committee discussed
with the independent accountants that firm's independence.
Based upon the Committee's discussion with management and the independent
accountants and the Committee's review of the representation of management and
the report of the independent accountants to the Committee, the Committee
recommended that the Board of Directors include the audited consolidated
financial statements in the Company's Annual Report on Form 10-K for the year
ended December 31, 2000, as filed with the Securities and Exchange Commission.
PricewaterhouseCoopers LLP audited the financial statements of the Company
for 2000. During 2000, PricewaterhouseCoopers LLP also performed certain
non-audit services for the Company. The Audit Committee has considered whether
the provision of these non-audit services is compatible with maintaining
PricewaterhouseCoopers' independence. A summary of the audit and non-audit fees
paid to PricewaterhouseCoopers in 2000 is as follows:
Audit Fees -- The aggregate fees billed by PricewaterhouseCoopers for
professional services rendered for the audit and the reviews of the
Company's annual financial statements including the Company's Quarterly
Reports on Form 10-Q was approximately $184,000.
Financial Information Systems Design and Implementation Fees -- There were
no aggregate fees billed by PricewaterhouseCoopers for professional
services relating to financial information system design and
implementation.
All Other Fees -- The aggregate fees billed to the Company by
PricewaterhouseCoopers for all other services, such as tax services and
benefits consulting, were approximately $1,130,000 .
THE AUDIT COMMITTEE
Stewart A. Bliss
O. Gordon Brewer, Jr.
Geoffrey C. Shepard
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STOCK PERFORMANCE CHART
The following graph compares the cumulative total stockholder return on
the Company's Common Shares (and Class B Interests of the Partnership) for the
five years ended December 31, 2000, with the cumulative total return on the
Russell 2000 Index and an industry peer group index. The 2000 Peer Group is
comprised of Applied Industrial Technologies, Inc.; Barnes Group, Inc.; Genuine
Parts Company; W.W. Grainger, Inc.; Hughes Supply, Inc.; Lawson Products, Inc.
and NCH Corporation. These companies were selected based on their similarities
in the aggregate to the Company.
The cumulative total shareholder return computations set forth in the
performance graph assume the investment of $100 on December 31, 1995, and the
reinvestment of all dividends. The returns of each company in the 2000 Peer
Group have been weighted according to the respective company's stock market
capitalization.
For periods prior to September 30, 1997, the Company's predecessor was
traded as a master limited partnership. For those periods, the index includes
returns on Class B interests only due to the fact that only those interests
were converted into Common Shares upon conversion to corporate form on
September 30, 1997 (one post-split share of the Company's Common Shares for
four Class B Interests). Also, for such periods, amounts distributed to
partners representing tax distributions were excluded from the calculation
based on the assumption that this type of distribution would not be reinvested.
The Class B tax distributions were intended to cover the partners' tax
liability on taxable income allocated from the Company's predecessor.
[GRAPHIC OMITTED]
8
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth all cash compensation paid and accrued for
services rendered during the three years ended December 31, 2000, by each of
the Chief Executive Officer, and the four other most highly compensated
executive officers of the Company and its subsidiaries whose remuneration
exceeded $100,000.
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(1) Represents base salary plus other types of miscellaneous compensation.
(2) Represents earned bonus for services rendered in each year.
(3) The 1999 compensation represents compensation paid or distributed from
April 27, 1999, commencement of employment, through December 31, 1999 only.
(4) On January 26, 2000, the Compensation Committee of the Board of Directors
amended the new CEO Grant by reducing the number of stock options from
150,000 to 50,000 and issued 100,000 shares of restricted stock. The
restricted shares were issued at a fair market value of $4.50 per share
(see Compensation of Chief Executive Officer on pages 11 and 12).
(5) Includes primarily compensation for the forgiveness of a loan in the
amount of $217,058 by the Company associated with the restricted stock
issued on January 26, 2000 (see note 4 above).
(6) Represents relocation expenses paid by the Company for the benefit of the
named executive officer.
(7) Represents deferred compensation awarded under the Share Plan for the year
ended December 31, 1997. These awards became eligible for distribution in
early 1999. The Share Plan terminated upon approval of the 1998 Equity
Plan.
(8) Includes term life insurance premiums of $372 paid by the Company in 2000,
1999 and 1998 and reserved parking fees of $2,480 and $1,400 paid by the
Company in 2000 and 1999.
(9) Includes primarily term life insurance premiums paid by the Company of
$17,491 in 2000; $15,546 in 1999; and $13,708 in 1998.
(10) Represents compensation paid or distributed from April 7, 2000 through
Decemeber 31, 2000 only as a result of the acquisition of Axxess
Technologies, Inc.
9
OPTIONS GRANTS IN 2000
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(1) Each option granted has a ten-year term and is vested based on financial
performance. If financial performance targets are met, vesting occurs
annually over three to five years from the date of grant. If performance
targets are not met, the options will not vest until nine years from the
date of grant depending upon the specific terms of the grant.
(2) Each option was granted at 85% of the fair market value.
(3) Options have a ten year term and were fully exercisable at the date of
grant.
(4) The amounts shown under these columns are calculated at the 0%, 5% and 10%
annual rates set by the Securities and Exchange Commission and are not
intended to forecast future appreciation of the Company's stock price.
10
AGGREGATED OPTION EXCERCISES IN 2000
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for each named executive
officer with regard to stock option exercises during 2000 and the aggregate
stock options held at December 31, 2000.
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(1) Represents the number of shares subject to outstanding options.
(2) Based on a price of $3.0625 per share, the closing price of the Company's
Common Stock on December 31, 2000, minus the associated exercise prices.
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
Upon a change in control of the Nonqualified Deferred Compensation Plan,
the plan provides for payment of all amounts, including accrued investment
earnings.
Compensation of the Chairman of the Board
Mr. Marshall retired as Chief Executive Officer (CEO) on April 27, 1999,
and has remained as Chairman of the Company. Mr. Marshall entered into an
employment agreement with the Company on April 28, 1999. This employment
agreement is for a term of three years and provides for an annual base salary
of $525,000 in the first year, $425,000 in the second year, and $325,000 in the
third year. The employment agreement provides that, in the event of a
termination of employment by the Company, except for cause, Mr. Marshall will
be entitled to receive his then current salary for a period no longer than
three years after April 28, 1999. Additionally, this agreement provides 150,000
stock options at the fair market value on April 28, 1999 of $15.00 per share
for his management of the CEO transition progress and his commitment to serve
the Company during the term of the agreement. These options vest in equal
installments over the three-year term of the agreement, provided Mr. Marshall
retains a Company relationship. This agreement also contains a covenant not to
compete with the Company for a period of one year immediately following the
termination of employment for any reason.
Compensation of the Chief Executive Officer
Mr. Andrien became CEO on April 27, 1999. Mr. Andrien entered into a three
year employment agreement with the Company on April 27, 1999, which term will
renew on a year-to-year basis after the initial term, unless this agreement is
terminated early or not renewed. This agreement provides for an annual base
salary of $450,000, a 1999 bonus of $180,000, and subsequent annual bonuses
equal to a target of 40% of the salary in effect for the bonus year, to be
determined annually in accordance with the incentive bonus plan as administered
by the Compensation Committee of the Board. Annually, beginning in the year
2000, the Company will grant to Mr. Andrien an option to purchase 70,000 shares
of SunSource common stock at fair market value, subject to the terms and
conditions of the 1998 Equity Compensation Plan. Mr. Andrien's employment
agreement contains a covenant not to compete with SunSource for one year
immediately following termination of employment with SunSource, with certain
exceptions. If Mr. Andrien is terminated without cause in the absence of a
change in control involving SunSource, then the agreement requires SunSource to
pay Mr. Andrien for a period of two
11
years following the termination date. If SunSource should undergo a change in
control within the terms of the agreement, Mr. Andrien will receive $1,000,000,
and upon termination of his employment Mr. Andrien would be subject to the
one-year non-compete covenant described above.
In addition to the employment agreement above, a grant of 150,000
non-qualified stock options, at fair market value (the "New CEO Grant"), was
made to Mr. Andrien on April 27, 1999. The options were fully exercisable at
the date of grant. Subsequent to the employment of Mr. Andrien, external
industry conditions and certain internal events that were in progress at the
time of Mr. Andrien's hire resulted in a significant reduction of the intended
value of the New CEO Grant. On January 26, 2000 the Compensation Committee of
the Board of Directors amended the New CEO Grant by reducing the number of
stock options from 150,000 to 50,000 and issued a grant of 100,000 shares of
restricted stock. One-third of the restricted shares vested six months from
the date of grant. Vesting of the remaining two-thirds of the restricted shares
will be based on achievement of certain performance goals. In the event that
some or all of the performance goals are not achieved within a three year
period from the date of grant, then the remaining shares will vest on the third
anniversary from their date of grant.
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OTHER INFORMATION
Certain Related Transactions
On February 24, 2000, in connection with taxes payable by Mr. Andrien
relating to the New CEO Grant, the Company loaned Mr. Andrien the principal
amount $206,000 in exchange for a promissory note and pledge agreement. The
prinicipal amount of the loan and interest at the rate of 6.11% per annum were
initially payable in three annual installments. However, on December 31, 2000,
the Compensation Committee of the Board of Directors agreed to foregive the
loan as part of Mr. Andrien's annual bonus.
In 2000, Mr. Bliss received $232,000 in connection with the acquisition of
Brampton Fastener Co. Limited, d/b/a Brafasco, by the Company's affiliate G-C
Sun Holdings L.P. Mr. Bliss received this fee from the selling partners of
Brafasco for his role in the transaction as an investment advisor.
Independent Accountants
PricewaterhouseCoopers LLP audited the financial statements of the Company
for 2000. Representatives of that firm are expected to be present at the
meeting, will have an opportunity to make a statement if they desire to do so
and are expected to be available to respond to appropriate questions.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors and beneficial owners of more than 10% of the
Company's Common Shares to file reports of ownership of Company securities and
changes in ownership with the SEC. The following filings of the Company's
officers and directors and beneficial owners of 10% of the Company's Common
Shares were not made on a timely basis: SEC Form 4 for Mr. Miller.
Stockholder Proposals
An eligible stockholder who wants to have a qualified proposal considered
for inclusion in the proxy statement for the 2002 annual meeting must notify
the Secretary of the Company. The proposal must be received at the Company's
offices no later than December 1, 2001. A stockholder must have been a record
or beneficial owner of at least one percent of the outstanding Common Shares or
Common Shares with a market value of $1,000 for at least one year prior to
submitting the proposal and must continue to own such shares through the date
on which the meeting is held.
Expenses of Solicitation
The Company pays the cost of preparing, assembling and mailing this
proxy-soliciting material. In addition to the use of the mail, proxies may be
solicited personally, by telephone or telegraph, or by Company officers without
additional compensation. The Company pays all costs of solicitation, including
certain expenses of brokers and nominees who will mail proxy material to their
customers or principals.
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EXHIBIT A
SunSource Inc.
Audit Committee Charter
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Organization
The Audit Committee is appointed by the Board of Directors. The Committee
shall consist of at least three Directors including a Chairperson. The
Committee shall include Directors as defined by the relevant listing authority.
Each member of the Committee shall be financially literate or must become
financially literate within a reasonable period of time after his or her
appointment to the Committee, and at least one member of the Committee must
have accounting or related financial management expertise as the foregoing
qualifications are interpreted by the Board of Directors ("Board") in its
business judgement.
Statement of Policy
The Committee shall, through regular or special meetings with management,
the General Accountant and the Company's independent accountant, provide
oversight on matters relating to accounting, financial reporting, internal
control, auditing, and regulatory compliance activities and other matters as
the Board or the Committee Chairperson deems appropriate. The Committee has the
right to retain special legal, accounting or other consultants to advise them.
The Committee has the right to request officers or employees of the Company or
counsel or the accountants to attend a meeting called by the Committee.
Responsibilities
The Committee shall recommend to the Board the appointment of the
Company's independent accountant and shall review the activities and
independence of the independent accountant. This includes communicating to the
independent accountant that he or she is ultimately accountable to the Board
and the Committee. The Committee and the Board have the ultimate authority and
responsibility to select, evaluate and, where appropriate, replace the
independent accountant (or to nominate the independent accountant to be
proposed for shareholder approval in any proxy statement). The Committee shall:
(1) ensure that the independent accountant provides annually to the Committee a
formal written statement delineating all relationships between the independent
accountant and the Company, (2) actively engage in a dialogue with the
independent accountant with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent accountant,
(3) recommend that the Board take appropriate action in response to the
independent accountant's report to satisfy itself of the independent
accountant's independence, and (4) assist the Board in monitoring the integrity
of the financial statements and complying with legal and regulatory
requirements.
The Committee shall appoint and evaluate, in consultation with executive
management, the General Auditor, and review and approve the budget and staffing
for the internal audit department.
The Committee shall make regular reports to the Board.
The Committee or the Chairman of the Committee at the discretion of the
Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting and auditing principles and
practices as well as the adequacy of internal controls that could
significantly affect the Company's financial statements.
3. Review an analysis prepared by management and the independent
accountant of significant financial reporting issues and judgements
made in connection with the preparation of the company's financial
statements.
4. Review with management and the independent accountant the Company's
quarterly financial statements prior to the release of quarterly
earnings.
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5. Meet periodically with management to review the Company's major
financial risk exposures and the steps management has taken to monitor
and control such exposures.
6. Review major changes to the Company's auditing and accounting
principles and practices as suggested by the independent accountant,
internal auditors or management.
7. Recommend to the Board the appointment of the independent accountant,
which firm is ultimately accountable to the Audit Committee and the
Board.
8. Approve the fees to be paid to the independent accountant. Meet with
the independent accountant prior to the audit to review the planning
and staffing of the audit.
9. Receive periodic reports from the independent accountant regarding the
accountant's independence, discuss such reports with the accountant,
and if so determined by the Audit Committee, recommend that the Board
take appropriate action to satisfy itself of the independence of the
accountant.
10. Evaluate together with the Board the performance of the independent
accountant and, if so determined by the Audit Committee, recommend that
the Board replace the independent accountant.
11. Review the appointment and replacement of the senior internal auditing
executive.
12. Review the significant reports to management prepared by the internal
auditing department and management's responses.
13. Obtain from the independent accountant assurance that Section 10A of
the Private Securities Litigation Reform Act of 1995 has not been
implicated.
14. Obtain reports from management, the Company's senior internal auditing
executive and the independent accountant that the Company's
subsidiary/foreign affiliated entities are in conformity with the
Foreign Corrupt Practices Act and the Company's Code of Conduct.
15. Discuss with the independent accountant the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
16. Review with the independent accountant any problems or difficulties the
accountant may have encountered and any management letter provided by
the accountant and the Company's response to that letter. Such review
should include:
(a) Any difficulties encountered in the course of the audit work,
including any restrictions on the scope of activities or access to
required information.
(b) Any changes required in the planned scope of the internal audit.
(c) The internal audit department responsibilities, budget and
staffing.
17. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.
18. Review with the Company's general counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
19. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Conduct.
20. Meet at least annually with the chief financial officer, the senior
internal audit executive and the independent accountant in separate
executive sessions.
While the Audit Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
This is the responsibility of management and the independent accountant. Nor is
it the duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent accountant or to
assure compliance with laws and regulations and the Company's Code of Conduct.
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