AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

STRATEGIC DISTRIBUTION, INC.,

PROJECT EAGLE HOLDING CORPORATION

and

PROJECT EAGLE MERGER CORPORATION

AGREEMENT AND PLAN OF MERGER

Dated as of January 8, 2007

TABLE OF CONTENTS

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AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of January 8, 2007 (this " Agreement "), among Strategic Distribution, Inc., a Delaware corporation (the " Company "), Project Eagle Holding Corporation, a Delaware corporation (" Parent "), and Project Eagle Merger Corporation, a Delaware corporation and a direct wholly-owned subsidiary of Parent (" Merger Sub ").  (Certain defined terms used herein are defined in Section 9.4.)

W I T N E S S E T H :

WHEREAS, the Board of Directors of the Company (the " Board of Directors ") has (i) determined that this Agreement, the Merger (as defined in Section 1.1) and the transactions contemplated hereby are fair to, and in the best interests of, the stockholders of the Company, (ii) approved this Agreement and declared it advisable, and (iii) resolved to recommend that the stockholders of the Company approve and adopt this Agreement, the Merger and the transactions contemplated hereby;

WHEREAS, the respective Boards of Directors of Parent and Merger Sub have approved the Merger on the terms set forth in this Agreement; and

WHEREAS, in order to induce Parent and Merger Sub to enter into this Agreement, concurrently with the execution and delivery of this Agreement certain stockholders of the Company have entered into and delivered to Parent and Merger Sub support agreements (the " Support Agreements ").

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, the Company, Parent and Merger Sub hereby agree as follows:

ARTICLE I
THE MERGER

Section 1.1             The Merger .  At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and Delaware Law, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall cease, and the Company shall continue as the surviving corporation (the " Merger ").  The Company as the surviving corporation after the Merger is hereinafter sometimes referred to as the " Surviving Corporation ."

Section 1.2             Effective Time .  The Merger shall become effective at such time (the " Effective Time ") as shall be stated in the Certificate of Merger, in a form reasonably acceptable to Parent, the Company and Merger Sub, respectively, to be filed with the Secretary of State of the State of Delaware in accordance with Delaware Law (the " Merger Filing ").  The Merger Filing shall provide for the effectiveness of the Merger immediately upon its filing.  The Merger Filing shall be made at the Closing (as defined in Section 2.4).

Section 1.3             Effect of the Merger .  At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law.  Without limiting the

generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation.

Section 1.4              Certificate of Incorporation; By-Laws; Directors and Officers .

(a)            The Certificate of Incorporation of Merger Sub as in effect immediately before the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided by all applicable Laws and such Certificate of Incorporation; provided , that the Merger Filing shall amend such Certificate of Incorporation such that the name of the Surviving Corporation shall be "Strategic Distribution, Inc."

(b)           The By-Laws of Merger Sub, as in effect immediately before the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended as provided by Law, the Certificate of Incorporation of the Surviving Corporation and such By-Laws.

(c)           The directors of Merger Sub immediately before the Effective Time will be the initial directors of the Surviving Corporation, and the officers of the Company immediately before the Effective Time will be the initial officers of the Surviving Corporation, in each case until their successors are elected or appointed and qualified.  If, at the Effective Time, a vacancy shall exist on the Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by Law.

Section 1.5              Company Action .  The Company hereby represents and warrants that the Board of Directors, at a meeting duly called and held on January 5, 2007:  (i) approved and adopted this Agreement and the transactions contemplated hereby, including the Merger; (ii) recommended that the stockholders of the Company approve this Agreement and the transactions contemplated hereby, including the Merger; (iii) determined that this Agreement and the transactions contemplated hereby, including the Merger, are fair to and in the best interests of the stockholders of the Company; and (iv) took all action necessary to render the limitations on business combinations contained in Section 203 of the Delaware General Corporation Law (the " DGCL ") inapplicable to this Agreement and the transactions contemplated hereby, including the Merger.  The Company further represents and warrants that (x) William Blair & Company, L.L.C., as financial advisor to the Company, delivered to the Board of Directors a written opinion (the " Fairness Opinion "), dated January 5, 2007, to the effect that the Per Share Amount (as defined in Section 2.1(c)) to be received by the stockholders of the Company pursuant to the Merger was, as of such date, fair to such stockholders from a financial point of view and (y) a true and correct copy of such opinion has been delivered to Parent.

Section 1.6              Subsequent Actions .  If, at any time after the Effective Time, the Surviving Corporation shall determine or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Merger Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, the officers and directors of the Surviving Corporation shall be

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authorized to execute and deliver, in the name and on behalf of either the Company or Merger Sub, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of such corporations or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

ARTICLE II
CONVERSION OF SECURITIES

Section 2.1             Conversion of Securities .  At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, Parent, the Company, the holder of any of the following securities or any other Person:

(a)           Common Stock of Merger Sub .  Each share of common stock, par value $.01 per share, of Merger Sub (the " Merger Sub Common Stock "), issued and outstanding immediately prior to the Effective Time shall be converted into one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation.

(b)           Cancellation of Treasury Stock and Parent-and Merger Sub-Owned Company Common Stock .  Each share of common stock, par value $.10 per share, of the Company (" Company Common Stock ") that is owned by Parent, Merger Sub or any subsidiary of Parent or Merger Sub or held in the treasury of the Company (collectively, the " Excluded Shares ") shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered or deliverable in exchange therefor.

(c)           Conversion of Company Common Stock .  Each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (" Shares ") other than the Excluded Shares and the Dissenting Shares (as defined in Section 2.1(d)) shall be converted into the right to receive $10.00 (the " Per Share Amount ") in cash payable to the holder thereof upon surrender of the certificate formerly representing such share of Company Common Stock in accordance with Section 2.3 hereof.

(d)           Dissenting Shares .  Notwithstanding any other provision of this Agreement to the contrary, Shares that are held by stockholders who shall have not voted in favor of the Merger or consented thereto in writing and who shall have properly demanded appraisal for such shares in accordance with Section 262 of the DGCL (collectively, the " Dissenting Shares ") shall not be converted into or represent the right to receive the Per Share Amount.  Such stockholders instead shall be entitled to receive payment of the appraised value of such Shares held by them in accordance with the provisions of Section 262 of the DGCL, except that all Dissenting Shares held by stockholders who shall have failed to perfect or who effectively shall have withdrawn or otherwise lost their rights to appraisal of such Shares under Section 262 of the DGCL shall thereupon be deemed to have been converted into and to have become exchangeable, as of the Effective Time, for the right to receive, without any interest thereon, the Per Share Amount in accordance with Section 2.1(c) hereof.  The Company shall give prompt notice to Parent and Merger Sub of any demands received by the Company for appraisal of any Dissenting Shares, and Parent and Merger Sub shall have the right to participate

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in all negotiations and proceedings with respect to such demands.  The Company shall not, except with the prior written consent of Parent and Merger Sub, which shall not be unreasonably withheld, conditioned or delayed, make any payment with respect to, or settle or offer to settle, any such demands.

(e)           Cancellation and Retirement of Company Common Stock .  As of the Effective Time, all Shares (other than Dissenting Shares) issued and outstanding immediately prior to the Effective Time, shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall, to the extent such certificate represents such Shares, cease to have any rights with respect thereto, except, in all cases other than the Excluded Shares, the right to receive the Per Share Amount therefor upon surrender of such certificate in accordance with Section 2.3.

Section 2.2             Stock Plans

(a)           The Board of Directors or any relevant committee thereof shall take all actions necessary such that, at the Effective Time, each then outstanding option to purchase shares of Company Common Stock (collectively, the " Options "), whether granted under (i) the Amended and Restated Strategic Distribution, Inc. 1996 Non-Employee Director Stock Plan, as amended (the " Non-Employee Director Plan "), (ii) the Strategic Distribution, Inc. Amended and Restated 1990 Incentive Stock Option Plan, as amended (the " 1990 Plan "), (iii) the Strategic Distribution, Inc. 1999 Incentive Stock Option Plan, as amended (the " 1999 Plan " and, together with the Non-Employee Director Plan and the 1990 Plan, the " Option Plans "), or otherwise, and whether or not then exercisable or vested, (i) shall become exercisable and vested at the Effective Time, (ii) shall be canceled in exchange for the payment referred to in the immediately following sentence if the exercise price is less than the Per Share Amount (such Options, " In-the-Money Options "), and (iii) shall be canceled without any payment if the exercise price is less than the Per Share Amount.  Promptly following the Effective Time, the Surviving Corporation shall pay to each holder of an Option with respect to each In-the-Money Option an amount in cash equal to the product obtained by multiplying (x) the amount, if any, by which the Per Share Amount exceeds the per share exercise price relating to such In-the-Money Option, by (y) the number of shares of Company Common Stock subject to such In-the-Money Option (such payment to be net of applicable withholding Taxes).

(b)           Except as otherwise agreed to by the parties, (i) the Company shall cause the Option Plans to terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company of any interest in respect of the capital stock of the Company shall be terminated and shall have no further force or effect as of the Effective Time and (ii) the Company shall ensure that following the Effective Time no holder of Options or any participant in the Option Plans or any other plan, program or arrangement of the Company shall have any right to acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary (as defined in Section 4.3(a)) or subsidiary of the Surviving Corporation.

(c)           Section 16 Exemption .  Prior to the Effective Time, the Company shall use its reasonable best efforts to cause the transactions contemplated by this Section 2.2 and any other dispositions of equity securities of the Company (including derivative securities) in

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connection with this Agreement by each individual who is subject to Section 16(a) of the Exchange Act with respect to the Company to be exempt under Rule 16b-3 of the Exchange Act.

Section 2.3             Exchange of Certificates

(a)           Exchange Agent .  Prior to the Effective Time, Parent shall appoint a bank or trust company reasonably acceptable to the Company to act as exchange agent (the " Exchange Agent ") to receive the funds  necessary to make the payments contemplated by Section 2.1(c).  At the Effective Time, Parent shall deposit with the Exchange Agent, for the benefit of the holders of Shares, for exchange in accordance with this Article II, cash in an amount sufficient to make payments as provided in this Section 2.3 (such cash consideration being hereinafter referred to as the " Exchange Fund ").  The Exchange Agent shall, pursuant to irrevocable instructions of Parent and the Surviving Corporation, make payments out of the Exchange Fund as contemplated by this Section 2.3.  The Exchange Fund shall not be used for any purpose other than making the payments contemplated by this Section 2.3.

(b)           Exchange Procedures .  As soon as reasonably practicable after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record of a certificate or certificates, which immediately prior to the Effective Time represented outstanding Shares (the " Certificates "), whose Shares were converted pursuant to Section 2.1(c) into the right to receive the Per Share Amount (excluding, for the sake of clarity, the Excluded Shares and the Dissenting Shares), (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for payment of the Per Share Amount.  Upon surrender of a Certificate for cancellation to the Exchange Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed, Parent shall cause the Exchange Agent to pay to the holder of such Certificate in exchange therefor the Per Share Amount for each share formerly represented by such Certificate and the Certificate so surrendered shall forthwith be cancelled.  If payment is to be made to a Person other than the Person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the Person requesting such payment shall have paid any transfer and any other taxes required by reason of the payment to a Person other than the registered holder of the Certificate surrendered or shall have established to the reasonable satisfaction of Parent that such tax either has been paid or is not applicable.  Until surrender as contemplated by this Section 2.3(b), each Certificate (other than Certificates representing Excluded Shares or Dissenting Shares) shall be deemed at any time after the Effective Time to represent only the right to receive the Per Share Amount in cash as contemplated by Section 2.1(c).  The right of any stockholder to receive the Per Share Amount shall be subject to and reduced by any applicable federal backup withholding obligation.  After the Effective Time, there shall be no further transfer on the records of the Company or its transfer agent of Certificates which have been converted pursuant to this Agreement into the right to receive the Per Share Amount, and if such Certificates are presented to the Company for transfer, they shall be canceled against delivery of the Per Share Amount.  No interest will be paid or will accrue on any cash payable upon the surrender of a Certificate which immediately before the Effective Time represented outstanding Shares.

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(c)           No Further Ownership Rights in Company Common Stock Exchanged For Cash .  All cash paid upon the surrender for exchange of Certificates representing Shares in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares exchanged for cash theretofore represented by such Certificates.

(d)           Termination of Exchange Fund .  Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates for one (1) year after the Effective Time shall be delivered to Parent and any holders of Shares prior to the Merger who have not theretofore complied with this Article II shall thereafter look only to Parent and only as general creditors thereof for payment of the Per Share Amount.

(e)           No Liability .  None of Parent, the Surviving Corporation or the Exchange Agent, or any employee, officer, director, agent or affiliate thereof, shall be liable to any Person in respect of any cash from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Laws.

(f)            Investment of Exchange Fund .  The Exchange Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis.  Any interest and other income resulting from such investments shall be paid to Parent.  To the extent that there are losses with respect to such investments, or the Exchange Fund diminishes for other reasons below the level required to make prompt payments of the Per Share Amount as contemplated hereby, Parent shall promptly replace or restore the portion of the Exchange Fund lost through investments or other events so as to ensure that the Exchange Fund is, at all times, maintained at a level sufficient to make such payments.

(g)           Withholding Rights .  The Surviving Corporation or Parent, as applicable, shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as Parent or the Surviving Corporation, as applicable, is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the " Code "), or any provision of state, local or foreign tax Laws.  To the extent that amounts are so deducted and withheld by Parent or the Surviving Corporation, as applicable, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Parent or the Surviving Corporation, as applicable.

(h)           Lost Certificates .  If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such Person of a bond in such reasonable amount as the Surviving Corporation may reasonably require as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Certificate the Per Share Amount payable pursuant to this Agreement.

Section 2.4              Closing .  The closing (the " Closing ") of the Merger shall take place at the offices of Andrews Kurth LLP, 600 Travis, Suite 4200, Houston, Texas 77002, on the first business day immediately following the date on which the last of the conditions set forth

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in Article VII hereof (other than conditions which, by their nature, are to be satisfied on the Closing Date) have been satisfied or waived, or at such other time and place as Parent, Merger Sub and the Company shall agree in writing (the date on which the Closing occurs is referred to in this Agreement as the " Closing Date ").

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

Parent and Merger Sub jointly and severally represent and warrant to the Company as follows:

Section 3.1              Corporate Organization .  Parent is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted.  Merger Sub is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted.

Section 3.2              Capitalization .  The authorized capital stock of Merger Sub consists of 1,000 shares of Merger Sub Common Stock.  All such shares which are issued and outstanding are duly authorized, validly issued, fully paid and nonassessable and owned beneficially and of record by Parent free and clear of any liens, security interests, pledges, agreements, claims, charges or encumbrances of any nature whatsoever (" Liens ").  There are no options, warrants or other rights, agreements, arrangements or commitments of any character obligating Merger Sub to issue or sell any shares of capital stock of or other equity interests in Merger Sub.

Section 3.3              Authority Relative to this Agreement .  Parent and Merger Sub each has the necessary corporate power and authority to enter into this Agreement and to carry out its obligations hereunder.  The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and no other corporate action or proceeding is necessary for the execution and delivery of this Agreement by Parent or Merger Sub, the performance by Parent or Merger Sub of their respective obligations hereunder or the consummation by Parent or Merger Sub of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes a legal, valid and binding obligation of each of them, enforceable against each of them in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws in effect which affect the enforcement of creditors’ rights generally and by general equitable principles.

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Section 3.4             No Conflict; Required Filings and Consents .

(a)           The execution, delivery and performance of this Agreement by Parent and Merger Sub does not, and the consummation by Parent and Merger Sub of the transactions contemplated hereby will not: (i) conflict with or violate any applicable Laws, or any judgment or decree applicable to Parent or Merger Sub or by which Parent’s or Merger Sub’s properties are bound or subject; (ii) violate or conflict with the certificate of incorporation or bylaws of Parent or Merger Sub; or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of, or result in the creation of a Lien on any of the properties or assets of Parent or Merger Sub pursuant to, any contract, instrument, permit, license or franchise to which Parent or Merger Sub is a party or by which Parent or Merger Sub or Parent’s or Merger Sub’s properties are bound or subject, except, in the case of clauses (i) and (iii) immediately above, for any such conflicts, violations, breaches, defaults, terminations, cancellations or Liens which would not, individually or in the aggregate, have a material adverse effect on or otherwise materially impair or materially delay Parent’s or Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

(b)           Except (i) for applicable requirements, if any, of the Exchange Act and (ii) for the filing and recordation of appropriate merger or other documents (including the Merger Filing) as required by Delaware Law or the "takeover" or "blue sky" Laws of any domestic or foreign jurisdiction to which the transactions contemplated by this Agreement are subject, Parent and Merger Sub are not required to submit any notice, report or other filing with any governmental or regulatory authority, agency or body, domestic or foreign (a " Governmental Entity "), in connection with the execution and delivery by Parent or Merger Sub of this Agreement or the consummation by Parent and Merger Sub of the transactions contemplated hereby.  Except as contemplated by the immediately preceding sentence, no waiver, consent, approval or authorization of any Governmental Entity, is required to be obtained by Parent or Merger Sub in connection with its execution and delivery of this Agreement or the consummation by Parent and Merger Sub of the transactions contemplated hereby, except where the failure to obtain any such waiver, consent, approval or authorization would not, individually or in the aggregate, have a material adverse effect on or otherwise materially impair or materially delay Parent’s or Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

Section 3.5             Financing Arrangements .  Parent and Merger Sub have or will have funds available to them sufficient (i) to pay the aggregate Per Share Amount (including all amounts payable to the holders of Options as contemplated by Section 2.2 hereof) and (ii) to pay all related fees and expenses and otherwise to consummate the transactions contemplated by this Agreement.

Section 3.6             Litigation .  There are no claims, actions, suits, proceedings (including arbitrations or mediations) or investigations pending or, to the knowledge of Parent or Merger Sub, threatened against Parent or Merger Sub or any of their respective subsidiaries or any of their respective properties or rights, before any court or other Governmental Entity, which, individually or in the aggregate, has had or would have a material adverse effect on or otherwise materially impair or materially delay Parent’s or Merger Sub’s ability to consummate

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the transactions contemplated by this Agreement.  Neither Parent or Merger Sub nor any of their respective subsidiaries or properties is subject to any order, judgment, injunction or decree, which, individually or in the aggregate, has had or would have a material adverse effect on or otherwise materially impair or materially delay Parent’s or Merger Sub’s ability to consummate the transactions contemplated by this Agreement.

Section 3.7             No Prior Activities .  Except for obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby (including any financing), Merger Sub has not incurred any obligations or liabilities, and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person or entity.

Section 3.8             Brokers .  No broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or Merger Sub.

Section 3.9             Information Supplied for Proxy Statement .  None of the written information supplied by Parent, Merger Sub or their officers, directors, representatives, agents or employees specifically for inclusion in the proxy statement (such proxy statement, as amended or supplemented, is herein referred to as the " Proxy Statement "), to be filed with the SEC by the Company in connection with the solicitation of proxies from stockholders at the special meeting of stockholders of the Company to consider this Agreement and the Merger (the " Company Stockholders’ Meeting ") will, on the date the Proxy Statement is first sent to the Company’s stockholders or at the time of Company Stockholders’ Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

Section 3.10           Beneficial Ownership of Shares .  Neither Parent nor any of its affiliates beneficially owns more than 5% of the outstanding shares of capital stock of the Company or is a party to any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any capital stock of the Company, other than as contemplated by this Agreement.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Merger Sub as follows:

Section 4.1             Organization and Qualification .  The Company is a corporation duly organized, validly existing and in good standing under the Laws of the State of Delaware.  Each Subsidiary is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be.  The Company and each of the Subsidiaries has the requisite power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its

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business as it is now being conducted, and the Company and each of the Subsidiaries (to the extent applicable thereto) is duly qualified as a foreign corporation or other form of business entity to do business, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except where the failure to be so qualified and in good standing would not, individually or in the aggregate, have a Material Adverse Effect.  Section 4.1 of the Disclosure Schedule sets forth, for the Company and each Subsidiary, each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes qualification to do business as a foreign corporation or other form of business entity necessary.

For purposes of this Agreement, " Material Adverse Effect " means any change or effect that has or would reasonably be anticipated to have, individually or in the aggregate with other changes and effects, a material adverse effect on the business, operations, properties, condition (financial or otherwise), assets or liabilities of the Company and the Subsidiaries taken as a whole; provided , however, that none of the following shall be deemed to constitute a "Material Adverse Effect" or shall be considered in determining whether a "Material Adverse Effect" has occurred: (a) changes in general economic or political conditions or the financing or capital markets in general or changes in currency exchange rates; (b) changes affecting generally the industries or markets in which the Company or any of the Subsidiaries conduct business; (c) changes in any Laws issued, enacted, adopted, promulgated or otherwise put into effect after the date hereof by or under the authority of any Governmental Entity or the Nasdaq Global Market or a similar regulatory agency; or (d) changes or effects resulting from the execution and delivery of this Agreement or the announcement thereof or from the performance by the Company of its obligations hereunder.

Section 4.2             Capitalization .  The authorized capital stock of the Company consists of: (a) 20,000,000 shares of Company Common Stock; and (b) 500,000 shares of preferred stock, par value $.10 per share, of the Company (" Company Preferred Stock ").  As of January 1, 2007 (the " Measurement Date "): (i) 2,962,174 shares of Company Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable; (ii) no shares of Company Preferred Stock were issued and outstanding; (iii) 27,500 shares of Company Common Stock were reserved for issuance under the Non-Employee Director Plan and, as of the Measurement Date, 13,200 shares of Company Common Stock were underlying outstanding options or other outstanding awards granted under the Non-Employee Director Plan, (iv) 200,000 shares of Company Common Stock were reserved for issuance under the 1990 Plan and, as of the Measurement Date, 10,777 shares of Company Common Stock were underlying outstanding options or other outstanding awards granted under the 1990 Plan, (v) 150,000 shares of Company Common Stock were reserved for issuance under the 1999 Plan and, as of the Measurement Date, 49,017 shares of Company Common Stock were underlying outstanding options or other outstanding awards granted under the 1999 Plan and (vi) 50,000 shares of Company Common Stock were reserved for issuance under the Strategic Distribution, Inc. Executive Compensation Plan, as amended (the " Executive Plan "), and, as of the Measurement Date, no shares of Company Common Stock or options to purchase shares of Company Common Stock were issued and outstanding under the Executive Plan.  Section 4.2(i) of the Disclosure Schedule lists, for each holder of outstanding options or other rights to purchase Company Common Stock, such Person’s name, date of grant of such option or right, the number of shares for which such option or right is exercisable, and the exercise or strike price for such option or

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right.  Except for the Support Agreements or as set forth in this Section 4.2, in the SEC Reports (as defined in Section 4.6(a)) or in Section 4.2 of the Disclosure Schedule: (x) there are no preemptive rights, conversion rights, stock appreciation rights or other options, calls, warrants, rights, agreements, commitments or obligations of any character obligating the Company or any of the Subsidiaries to issue, deliver, sell, repurchase, redeem or otherwise acquire, any shares of capital stock of or other equity interests in the Company; (y) there are no bonds, debentures, notes or other indebtedness of the Company or any of the Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote; and (z) there are no stockholders agreements, voting trusts, irrevocable proxies or other agreements to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries is bound relating to the voting, registration or disposition of any shares of the capital stock of the Company or granting to any Person or group of Persons the right to elect, or to designate or nominate for election, a director to the Board of Directors.

Section 4.3             Subsidiaries .

(a)           Section 4.3(a)(i) of the Disclosure Schedule sets forth a true and complete list of all of the Subsidiaries, together with a list of each director of such Subsidiary.  All of the outstanding shares of capital stock of, or other equity interests in, each Subsidiary have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by the Company, free and clear of all Liens.  The Company does not directly or indirectly own any securities or other beneficial ownership interests in any entity (including through joint ventures or partnership arrangements) other than (i) the Subsidiaries listed in Section 4.3(a)(i) of the Disclosure Schedule, (ii) as set forth in Section 4.3(a)(ii) of the Disclosure Schedule or in the SEC Reports and (iii) securities or other beneficial ownership interests constituting cash or cash equivalents.  For purposes of this Agreement, " Subsidiary " means any corporation or other legal entity of which the Company (either alone or through or together with any other Subsidiary) owns, directly or indirectly, more than 50% of the stock or other equity interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

(b)           Except as set forth in Section 4.3(b) of the Disclosure Schedule or in the SEC Reports: (i) there are no preemptive rights, conversion rights, stock appreciation rights or other options, calls, warrants, rights, agreements, commitments or obligations of any character obligating any Subsidiary to issue, or the Company or any of the Subsidiaries to issue, deliver, sell, repurchase, redeem or otherwise acquire any shares of capital stock of or other equity interests in any Subsidiary; (ii) there are no bonds, debentures, notes or other indebtedness of the Company or any of the Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders or other equity holders of any such Subsidiary may vote; and (iii) there are no stockholders agreements, voting trusts or other agreements to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries is bound relating to the voting, registration or disposition of any shares of the capital stock or other equity interests of any such Subsidiary or granting to any Person or group of Persons the right to elect, or to designate or nominate for election, a director to the board of directors or other governing body of any such Subsidiary.

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Section 4.4             Authority Relative to this Agreement .  The Company has the necessary corporate power and authority to enter into this Agreement and, subject to obtaining any necessary stockholder approval of the Merger, to carry out its obligations hereunder.  The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company and, subject to any approval of the Merger by the Company’s stockholders required in accordance with Delaware Law, no other corporate action or proceeding is necessary for the execution and delivery of this Agreement by the Company, the performance by the Company of its obligations hereunder and the consummation by the Company of the transactions contemplated hereby.  This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium, reorganization or similar Laws in effect which affect the enforcement of creditors’ rights generally and by general equitable principles.

Section 4.5             No Conflict; Required Filings and Consents .

(a)           The execution, delivery and performance of this Agreement by the Company does not, and the consummation by the Company of the transactions contemplated hereby will not: (i) conflict with or violate any Law applicable to the Company or the Subsidiaries or by which its or any of the Subsidiaries’ property is bound or subject; (ii) violate or conflict with the Second Restated Certificate of Incorporation of the Company, as amended (the " Restated Certificate "), or the Amended and Restated By-Laws of the Company, as amended (the " Company Bylaws "), or the comparable organizational documents of any of the Subsidiaries; or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of, or result in the creation of a Lien on any of the properties or assets of the Company or any of the Subsidiaries pursuant to, any contract, instrument, permit, license or franchise to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or its or any of the Subsidiaries’ property is bound or subject, except, in the case of clauses (i) and (iii) immediately above, for any such conflicts, violations, breaches, defaults, terminations, cancellations or Liens which would not, individually or in the aggregate, have a Material Adverse Effect.

(b)           Except for (i) applicable requirements, if any, of the Exchange Act and (ii) the filing and recordation of appropriate merger or other documents (including the Merger Filing) as required by Delaware Law or the "takeover" or "blue sky" Laws of any domestic or foreign jurisdiction to which the Company or any of the Subsidiaries is subject and (iv) as set forth in Section 4.5(b) of the Disclosure Schedule, the Company and the Subsidiaries are not required to submit any notice, report or other filing with any Governmental Entity in connection with the execution and delivery by the Company of this Agreement or the consummation by the Company of the transactions contemplated hereby.  Except as set forth in Section 4.5(b) of the Disclosure Schedule, no waiver, consent, approval or authorization of any Governmental Entity or other Person, is required to be obtained by the Company in connection with its execution, delivery and performance of this Agreement or the consummation by the Company of the transactions contemplated hereby, except where the failure to obtain any such waiver, consent,

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approval or authorization would not, individually or in the aggregate, have a Material Adverse Effect.

Section 4.6             SEC Filings; Financial Statements .

(a)           The Company has filed all forms, reports and documents required to be filed with the SEC since January 1, 2005 (collectively, the " SEC Reports ").  The SEC Reports, including the financial statements contained therein, (i) were prepared in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, as in effect at the time they were filed and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.  None of the Subsidiaries is, or has been at any time, subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange Act.

(b)           The financial statements contained in the SEC Reports were prepared in accordance with United States generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly presented in all material respects the consolidated financial position of the Company and the Subsidiaries as at the respective dates thereof and the consolidated statements of operations and cash flows of the Company and the Subsidiaries for the periods indicated, except that the unaudited interim financial statements included in any SEC Report were or are subject to normal year-end adjustments.

(c)           Except (i) as reflected or reserved against in the financial statements contained in the SEC Reports or as otherwise disclosed in such SEC Reports, (ii) for liabilities incurred in the ordinary course consistent with past practice since September 30, 2006 and (iii) for those liabilities set forth in Section 4.6(c) of the Disclosure Schedule, neither the Company nor any Subsidiary has any liabilities of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, has had or would have a Material Adverse Effect.

(d)           The principal executive officer of the Company and the principal financial officer of the Company (and each applicable former principal executive officer or principal financial officer of the Company) have each made the certifications required by Sections 302 and 906 of the Sarbanes-Oxley Act with respect to the SEC Reports filed since January 1, 2005.  For purposes of the preceding sentence, "principal executive officer" and "principal financial officer" shall have the meanings given to such terms in the Sarbanes-Oxley Act.  The Company maintains disclosure controls and procedures and internal controls over financial reporting required by, and in accordance with, Rule 13a-15 or 15d-15 under the Exchange Act; such controls and procedures are effective to ensure that all material information concerning the Company and the Subsidiaries required to be disclosed in the reports the Company files or submits under the Exchange Act is accumulated and communicated on a timely basis to the Company’s management, including its principal executive and principal financial officers, and to those individuals responsible for the preparation of the Company’s filings with the SEC and other public disclosure documents and such internal controls over financial reporting are effective to provide reasonable assurance to the Company’s management and the Board of

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Directors regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United Stated generally accepted accounting principles.

(e)           There are no outstanding loans made by the Company or any of the Subsidiaries to any executive officer (as defined in Rule 3b-7 under the Exchange Act) or director of the Company or any of the Subsidiaries.  There are no outstanding contracts, agreements or understandings that forgive (or purport to forgive) any such loans.  Since the enactment of the Sarbanes-Oxley Act of 2002, neither the Company nor any of its Subsidiaries has made any loans to any executive officer or director of the Company or any of the Subsidiaries.

Section 4.7             Absence of Certain Changes or Events .  Since September 30, 2006, and except as contemplated by this Agreement or as set forth in Section 4.7 of the Disclosure Schedule or in the SEC Reports, there has not been:

(a)           any Material Adverse Effect;

(b)           any amendment, modification, rescission or other change to the Restated Certificate or the Company Bylaws;

(c)           any adoption or approval of any Employee Plan (as defined in Section 4.9), or any amendment, modification, rescission or other change to any existing Employee Plan;

(d)           any increase in the salary, benefits, bonus or other compensation payable or to become payable to any of the Company’s or any Subsidiaries’ directors or officers;

(e)           any damage, destruction or loss (whether or not covered by insurance) with respect to any of the assets of the Company or any of the Subsidiaries which are material to the Company and the Subsidiaries taken as a whole;

(f)            any redemption or other acquisition of Company Common Stock by the Company or any of the Subsidiaries or any declaration or payment by the Company or any of the Subsidiaries of any dividend or other distribution in cash, stock or property with respect to Company Common Stock;

(g)           any purchase, acquisition, sale or disposition (by merger, consolidation, purchase or sale of assets, purchase or sale of stock or otherwise), or agreement to purchase, acquire, sell or dispose of, (i) any Person or business by the Company or any of the Subsidiaries, or (ii) any material assets of the Company or any of the Subsidiaries, except in the case of the sale of inventory or other assets in the ordinary course of business consistent with past practice;

(h)           any incurrence, assumption, guarantee or endorsement by the Company or any of the Subsidiaries of any debt or borrowings of any Third Party;

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(i)            any pledge of any material assets of the Company or any of the Subsidiaries or th