<PAGE> 1
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:
<TABLE>
<S> <C>
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Bell Industries, 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):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
<PAGE> 2
PRELIMINARY COPY
BELL INDUSTRIES, INC.
11812 SAN VICENTE BOULEVARD
LOS ANGELES, CALIFORNIA 90049-5069
Dear Shareholder:
This year's Annual Meeting of Shareholders will be held on Tuesday, May 9,
1995, at 10:00 A.M., at the Company's Corporate Office, 11812 San Vicente
Boulevard, Los Angeles, California. Management hopes that you will come to the
meeting and give us an opportunity to meet you and discuss any questions you may
have.
The formal notice of meeting and the Proxy Statement follow. The only
formal actions to be taken at the meeting are (1) the election of the Board of
Directors for the ensuing year; and (2) the consideration of a proposal to
change the Company's state of incorporation from Delaware to California.
I urge you to review the Proxy Statement carefully and, at your earliest
convenience, sign, date and mail the enclosed proxy card so that your shares
will be represented at the meeting. A prepaid return envelope is provided for
this purpose.
Sincerely yours,
THEODORE WILLIAMS
Chairman
March 17, 1995
<PAGE> 3
PRELIMINARY COPY
BELL INDUSTRIES, INC.
11812 SAN VICENTE BOULEVARD
LOS ANGELES, CALIFORNIA 90049-5069
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 9, 1995
------------------------
The Annual Meeting of Shareholders of Bell Industries, Inc., a Delaware
corporation, will be held at the Company's Corporate Office, 11812 San Vicente
Boulevard, Los Angeles, California, on Tuesday, May 9, 1995 at 10:00 A.M.
The purposes of the meeting are:
(1) To elect seven directors to hold office until the next Annual
Meeting of Shareholders and thereafter until their successors are elected;
(2) to consider changing the Company's state of incorporation from
Delaware to California; and
(3) to transact any other business that may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, March 17,
1995 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, said meeting and any adjournment or
adjournments thereof.
By Order of the Board of Directors
JOHN J. COST
Secretary
March 17, 1995
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING
OF SHAREHOLDERS, OR IF YOU DO PLAN TO ATTEND AND WISH TO VOTE BY PROXY, PLEASE
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, FOR WHICH A RETURN,
STAMPED ENVELOPE IS PROVIDED. YOUR PROMPT RETURN OF THE PROXY CARD WILL HELP THE
COMPANY AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION TO ASSURE A QUORUM
AT THE MEETING.
<PAGE> 4
PRELIMINARY COPY
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF BELL INDUSTRIES, INC.
MAY 9, 1995
------------------------
INTRODUCTION
This Proxy Statement is being mailed on or about March 17, 1995 to
shareholders of Bell Industries, Inc. (the "Company") in connection with the
solicitation of Proxies by the Company's Board of Directors for use at the
Company's Annual Meeting of Shareholders to be held on May 9, 1995, or any
adjournments thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. Expenses relating to the proxy
statement, the proxy and the solicitation thereof will be paid by the Company.
The persons named in the accompanying proxy have advised the Company that
they intend to vote the proxies received by them in their discretion for as many
director nominees as the votes represented by such proxies are entitled to elect
(see "Election of Directors") and FOR the proposal to change the Company's state
of incorporation from Delaware to California. Any shareholder may revoke his or
her proxy at any time prior to its use by filing with the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date.
Only shareholders of record at the close of business on Friday, March 17,
1995, will be entitled to notice of, and to vote at, the meeting or any
adjournments thereof. At such record date, there were outstanding and entitled
to vote 6,498,105 shares of Common Stock. Each of the foregoing shares is
entitled to one vote on all matters other than the election of directors. In
connection with the election of directors, each shareholder is entitled to
cumulate votes. To exercise such cumulative voting rights, a shareholder must
give notice of his intent to cumulate votes prior to the vote at the meeting. To
approve changing the Company's state of incorporation to California, the
approval of the holders of a majority of the outstanding shares is required. For
all other matters to be voted upon at the meeting, the affirmative vote of a
majority of shares present in person or represented by proxy, and entitled to
vote on the matter, is necessary for approval. For purposes of determining the
number of shares present in person or represented by proxy on a voting matter,
all votes cast "for," "against" or "abstain" are included. "Broker non-votes,"
which occur when brokers or other nominees are prohibited from exercising
discretionary voting authority for beneficial owners who have not provided
voting instructions, are not counted for the purpose of determining the number
of shares present in person or represented by proxy on a voting matter.
ELECTION OF DIRECTORS
In voting for directors of the Company, each shareholder has the right to
cumulate votes and give one candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of votes
1
<PAGE> 5
to which the shares are entitled, or to distribute the votes on the same
principle among as many candidates as the shareholder chooses. The candidates
receiving the highest number of votes, up to the number of directors to be
elected, shall be elected. For a shareholder to exercise cumulative voting
rights, such shareholder must give notice of intent to cumulate votes prior to
the vote at the meeting. Notice may be given in writing or by voice to either
the Chairman or Secretary of the meeting.
The Company's Board of Directors presently consists of seven directors. The
persons who are elected directors will hold office until the next Annual Meeting
of Shareholders and thereafter until their successors are elected. All of the
seven director nominees are currently directors of the Company. The names and
principal occupations of the nominees for election as directors, and the
respective numbers of shares of voting stock of the Company beneficially owned,
directly or indirectly, by each nominee are set forth below.
<TABLE>
<CAPTION>
SHARES
YEAR BENEFICIALLY PERCENT
FIRST OWNED AS OF OF
NAME AND PRINCIPAL OCCUPATION AGE ELECTED MARCH 1, 1995 CLASS
- ------------------------------------------------------ --- ------- ------------- --------
<S> <C> <C> <C> <C>
John J. Cost(1)(3).................................... 60 1971 1,774(4) (5)
Of Counsel
Irell & Manella, Attorneys
Anthony L. Craig(3)................................... 49 1993 105 (5)
Vice President, Digital Equipment Corporation
Gordon M. Graham...................................... 60 1994 14,304(6) (5)
Senior Vice President
Bruce M. Jaffe(2)..................................... 51 1981 26,680(7) (5)
President and Chief Operating Officer
Charles S. Troy(1)(3)................................. 51 1993 315 (5)
President, E&S Ring Management Corporation
Milton Rosenberg(1)(3)................................ 72 1975 3,931 (5)
Private investor and consultant to high technology
companies
Theodore Williams(2).................................. 74 1969 277,318(4) 4.3%
Chairman and Chief Executive Officer
</TABLE>
- ---------------
(1) Member of Audit and Nominating Committees.
(2) Member of Executive Committee.
(3) Member of Compensation Committee.
(4) Includes 27 shares and 1,571 shares held by Messrs. Cost and Williams,
respectively, as custodians for their children.
(5) Less than 1% of total outstanding shares.
(6) Includes 764 shares issuable pursuant to currently exercisable stock
options.
(7) Includes 2,402 shares issuable pursuant to currently exercisable stock
options.
Mr. Williams was President and Chief Executive Officer of the Company since
1970. In January 1995, he resigned as President but remains Chairman and Chief
Executive Officer. Mr. Jaffe had been Senior Vice President of the Company for
more than five years prior to his appointment as Executive Vice President in
1989. He assumed the additional responsibility of Chief Operating Officer in
1990 and was elected President in January 1995 to succeed Mr. Williams. For more
than the past five years, Mr. Graham has been employed by the Company in an
executive capacity. Mr. Cost was a partner in the law firm of Irell & Manella,
Los Angeles, California, from 1969 through December 1994. Effective January 1,
1995, Mr. Cost retired as a partner of that firm and now acts "of counsel" to
it. He was elected Secretary in 1987. Irell & Manella acts as
2
<PAGE> 6
general counsel to the Company. For more than the past five years, Mr. Rosenberg
has been self-employed as an investor in, and consultant to, high technology
companies. Mr. Rosenberg also serves as a director of M.R.V. Communications, a
laser communications firm, based in Woodland Hills, California.
Since November 1993, Mr. Craig has been a Vice President of Digital
Equipment Corporation, a New York Stock Exchange Company, located in Mayward,
Massachusetts, engaged in the manufacture of computer equipment. From June 1992
until July 1993, he was a Senior Vice President of Oracle Systems Corp., a
publicly traded data base and consulting company with annual revenues of over $1
billion. From June 1990 through February 1992, he was President and Chief
Executive Officer of C3 Inc., a private company involved in systems integration
for the U.S. Government. From October 1988 through September 1989, Mr. Craig was
the Chief Executive Officer of Prime Computer, a publicly traded computer
manufacturer. Mr. Craig is also a director of Iomega Corporation, a computer
disc storage firm located in Roy, Utah. For more than the last five years, Mr.
Troy has been President and Chief Executive Officer of E&S Ring Management
Corporation, Culver City, California. E&S Ring Management is a regional property
management firm, specializing in multi-family and commercial properties.
If for any reason one or more of the nominees named above should not be
available as a candidate for director, an event that the Board of Directors does
not anticipate, the persons named in the enclosed proxy will vote for such other
candidate or candidates as may be nominated by the Board and discretionary
authority to do so is included in the Proxy.
Directors who are employees receive no additional compensation for serving
on the Board of Directors. Non-employee directors receive an annual retainer of
$30,000, plus $1,000 for each attendance at a meeting of the Board or a
committee thereof which does not immediately precede or follow a meeting of the
Board. The Company has a directors' retirement plan for non-employee directors.
Under the plan, directors having served at least ten years as a director after
reaching the age of 65 are entitled to receive an annual retirement benefit
equal to 50% of the annual retainer fee in effect at the time of retirement,
increasing 10% for each year of service after the tenth year. Such payments will
be made for the number of years equal to the number of years served as a
director or until his or her death; provided, that a surviving spouse is
entitled for a period of five years after death to continue to receive the same
benefits that such director would have been so entitled to receive. If a
director has reached age 60 and ceases to serve as a director at the request of
the Company, he will be entitled to the same retirement benefits as if he
retired at age 65. In the event of a change in control, a director leaving the
Board would be entitled to receive an immediate lump sum payment of the present
value of his accrued retirement benefit.
3
<PAGE> 7
INFORMATION REGARDING SHAREHOLDERS
PRINCIPAL SECURITY HOLDERS
To the Company's knowledge, except as hereinafter described, no single
shareholder owned of record or beneficially as of March 1, 1995, more than 5% of
the Company's Common Stock. As of that date, Cede & Co., a nominee of securities
depositories for various segments of the financial industry, held 5,431,574
shares, representing 83% of the Company's outstanding Common Stock, none of
which was owned beneficially by such organization. Based upon reports filed
through March 1, 1995 with the Securities and Exchange Commission, the Company
believes that each of the companies named below beneficially owns five percent
(5.0%) or more of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------------------------------------ ----------------------- --------
<S> <C> <C>
Newsouth Capital Management..................... 558,547 8.6
755 Crossover Lane (Direct)
Memphis, Tennessee 38117
Quest Advisory Corp. and
Quest Management Company........................ 337,312 5.2
1414 Avenue of the Americas (Direct)
New York, New York 10019
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Company's common
stock of those executive officers of the Company listed in the "Summary
Compensation Table" under EXECUTIVE COMPENSATION, who are not directors, as well
as the beneficial ownership of common stock of all nominees for directors and
executive officers of the Company as a group as of March 1, 1995. Information
regarding the stock ownership of director nominees is contained in the prior
table under ELECTION OF DIRECTORS.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
------------------------------------------------ ----------------------- --------
<S> <C> <C>
Paul F. Doucette................................ 42,450 (1)
Senior Vice President (Direct)
D.J. Hough...................................... 33,373 (1)
Vice President (Direct)
Tracy A. Edwards................................ 3,827 (1)
Vice President (Direct)
All directors and executive officers
as a group(11)................................ 405,795 (2) 6.2
</TABLE>
- ---------------
(1) Less than 1% of the outstanding shares.
(2) Includes 9,388 shares issuable pursuant to currently exercisable stock
options.
4
<PAGE> 8
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN (A):
BELL INDUSTRIES, INC., NYSE MARKET INDEX AND PEER GROUP INDEX
<TABLE>
<CAPTION>
BELL IND.
INC. PEER GROUP BROAD MARKET
<S> <C> <C> <C>
1989 100 100 100
1990 118 96 96
1991 101 122 124
1992 110 165 130
1993 174 185 148
1994 202 174 145
</TABLE>
- ---------------
(A) Assumes $100 invested on December 31, 1989 and dividends reinvested.
(B) The Peer Group consists of the following electronics and industrial
distribution companies:
<TABLE>
<S> <C> <C>
Arrow Electronics, Inc. Milgray Electronics Inc.
Avnet, Inc. Pioneer Standard Electronics
Jaco Electronics Inc. Premier Industrial Corp.
Kent Electronics Corp. Sterling Electronics Corp.
Marshall Industries Wyle Electronics Inc.
</TABLE>
(C) The Broad Market Index chosen was the New York Stock Exchange Market Index.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table shows all cash compensation and certain other
compensation paid to (i) the chief executive officer and (ii) the other four
most highly compensated executive officers (the Named Officers) for the six
month period ending December 31, 1994 and each of the last three fiscal years
(ending June 30th) of the Company for services rendered in all capacities to the
Company and its subsidiaries (the Company recently changed its fiscal year from
one ending June 30th to one ending December 31st):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION OPTIONS
---------------------------------- (NUMBER OF
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER(1) SHARES)
- -------------------------------- ------------ -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Theodore Williams............... 6 months 94 $200,000 $141,874 $ 14,296 0
Chairman and Chief 1994 400,000 172,788 20,407 0
Executive Officer 1993 356,300 0 446 0
1992 364,000 0 0 0
Bruce M. Jaffe.................. 6 months 94 $142,500 $101,085 $ 10,315 68,250
President and Chief 1994 285,000 123,111 14,799 0
Operating Officer 1993 260,000 0 446 10,920
1992 260,000 0 0 0
Paul F. Doucette(2)............. 6 months 94 $115,000 $ 81,577 $ 8,412 47,250
Senior Vice President 1994 230,000 99,353 12,117 0
1993 230,000 0 446 10,920
1992 221,000 0 0 0
D.J. Hough...................... 6 months 94 $101,400 $ 71,930 $ 7,470 31,500
Vice President and Chief 1994 202,800 87,603 10,790 0
Information Officer 1993 202,800 0 446 6,552
1992 202,800 0 0 0
Tracy A. Edwards................ 6 months 94 $ 72,760 $ 51,614 $ 5,487 26,250
Vice President and Chief 1994 145,520 62,860 7,997 0
Financial Officer 1993 124,500 0 446 6,552
1992 113,100 0 0 0
</TABLE>
- ---------------
Certain columns have not been included in this table because the information
called for therein is not applicable to the Company or the individuals named
above for the periods indicated.
(1) Consists of amounts contributed by the Company on behalf of the named
individual under the Company's Savings and Profit Sharing Plan and Executive
Deferred Income and Pension Plan.
(2) Mr. Doucette is married to a niece of Mr. Williams.
6
<PAGE> 10
STOCK OPTIONS
The following table shows information on grants of stock options during the
1994 fiscal year and the six month period ended December 31, 1994 to the Named
Officers reflected in the Summary Compensation Table.
OPTION/SAR GRANTS IN FISCAL 1994 AND SIX MONTH PERIOD ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE
TOTAL OPTIONS VALUE AT ASSUMED ANNUAL
GRANTED TO RATES OF STOCK PRICE
EMPLOYEES IN EXERCISE APPRECIATION FOR OPTION
FISCAL 1994 AND PRICE TERM(4)
OPTIONS SIX MONTH PER EXPIRATION -----------------------
NAME GRANTS(1)(2) PERIOD SHARE(2)(3) DATE 5% 10%
- ----------------------- ------------ --------------- ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Theodore Williams...... -0- -- -- -- -- --
Chairman and Chief
Executive Officer
Bruce M. Jaffe......... 68,250 25% $ 17.98 9/14/2004 $771,700 $1,955,700
President and Chief
Operating Officer
Paul F. Doucette....... 47,250 17% 17.98 9/14/2004 534,300 1,354,000
Senior Vice President
D.J. Hough............. 31,500 11% 17.98 9/14/2004 356,200 902,600
Vice President and
Chief Information
Officer
Tracy A. Edwards....... 26,250 9% 17.98 9/14/2004 296,800 752,200
Vice President and
Chief Financial
Officer
Other employees........ 103,425 38%
------------ ---
276,675 100%
========== ===========
</TABLE>
- ---------------
(1) All options granted are exercisable in cumulative equal installments
commencing one year from date of grant, with full vesting on the fourth
anniversary date. Vesting may be accelerated in certain events relating to
the change of the Company's ownership or certain corporate transactions.
(2) All stock option numbers and per share data have been adjusted to reflect
stock dividends.
(3) All stock options were granted at market value (closing price on the New
York Stock Exchange -- Composite Transactions of the Company's common stock)
on the date of grant.
(4) Reported net of the option exercise price. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock,
overall stock conditions, as well as the option holders' continued
employment through the vesting period. The amounts reflected in this table
may not be indicative of the value that will actually be achieved or
realized.
7
<PAGE> 11
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the chief
executive officer and the Named Officers, concerning the exercise of options
during the six month period ended December 31, 1994 and for the last full fiscal
year ended June 30, 1994 and unexercised options held as of December 31, 1994:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
VALUE REALIZED OPTIONS AT OPTIONS AT
(MARKET PRICE DECEMBER 31, 1994 DECEMBER 31, 1994(1)
SHARES ACQUIRED AT EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Theodore Williams..... 0 0 0 0 0 0
Chairman and Chief
Executive Officer
Bruce M. Jaffe........ 0 0 2,402 76,768 $24,717 $241,968
President and Chief
Operating Officer
Paul F. Doucette...... 0 0 2,402 55,768 $24,717 $191,673
Senior Vice
President
D.J. Hough............ 0 0 1,529 36,523 $15,957 $123,094
Vice President and
Chief Information
Officer
Tracy A. Edwards...... 0 0 1,529 31,273 $15,957 $110,520
Vice President and
Chief Financial
Officer
</TABLE>
- ---------------
(1) Based upon the closing price on the New York Stock Exchange on that date
($20.38).
EMPLOYMENT AGREEMENTS
In January 1979, the Company entered into employment agreements with Mr.
Williams, the Company's Chairman and Chief Executive Officer, and two former
executives of the Company. Mr. Williams' agreement provides for an annual salary
of not less than $179,400. He is to be employed as Chief Executive Officer until
retirement. Upon retirement, Mr. Williams is entitled to receive for his
lifetime an annual amount equal to one-half of the average of the highest three
years of salary plus bonus paid during his last ten years of employment. Also,
the Company is required to maintain life and medical insurance benefits at least
equal to those in effect at the time of retirement. In August 1994, Mr.
Williams' agreement was amended so as to fix his retirement benefits to those
accrued through June 30, 1994. As amended, Mr. Williams' employment agreement
provides that upon his retirement or death prior to retirement, he or his estate
will receive approximately $2,187,000, which amount represents the present value
of the estimated future payments payable under his employment agreement as at
June 30, 1994, as determined by recognized actuarial standards.
In February 1995, the Company entered into employment and retirement
agreements with Bruce M. Jaffe, its President and Chief Operating Officer, and
Paul F. Doucette, a Senior Vice President. These agreements provide for annual
salaries of not less than $285,000 and $230,000, respectively. Mr. Jaffe is to
be employed as President and either Chief Operating Officer or Chief Executive
Officer and Mr. Doucette as a Senior Vice President or in a more senior office.
Upon retirement at age 65, Messrs. Jaffe and Doucette are entitled to annual
retirement payments for life equal to one-half of the average of the highest
three years of
8
<PAGE> 12
salary and bonus paid during his last ten years of employment. Further, each may
elect early retirement at age 62, in which event the retirement payments are
equal to one-third of such average amount. Under most circumstances, a
termination by the Company prior to age 62 is deemed a retirement by the officer
at age 62 and from age 62 through 65, the retirement payments are increased
proportionately. If there is a voluntary termination by either person prior to
age 62, he receives no retirement payments until he reaches age 62, at which
time he is deemed to have retired at age 62. If either is terminated after a
change in control, he is entitled to the same benefits as if he retired at age
65. Also, the Company is required to maintain life and medical insurance
benefits at least equal to those in effect at the time of retirement. Both Mr.
Jaffe and Mr. Doucette have been employed with the Company in managerial
positions for over twenty-five years.
The Company has severance agreements with its executive officers, including
Messrs. Graham, Hough and Edwards but not Messrs. Williams, Jaffe or Doucette.
Each of these contracts provides, in essence, that should there be a "change in
control" (as defined), and the officer's employment is terminated either (i)
involuntarily, without cause, or (ii) voluntarily, if the officer has determined
in good faith that his duties have been altered in a material respect or there
has been a reduction in his compensation or employee benefits, then upon
termination, the officer would be entitled to receive a payment in the amount of
295% of the officer's "base amount" (generally equivalent to the average of his
last three years compensation) as determined in accordance with Section 280G of
the Internal Revenue Code. A "change of control" of the Company is generally
defined as (i) any consolidation or merger of the Company, other than a merger
of the Company in which the holders of the Company's common stock immediately
prior to the merger have at least seventy-five percent (75%) ownership of the
voting capital stock of the surviving corporation immediately after the merger,
(ii) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all, or substantially all, of the assets of the
Company, (iii) the shareholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company, (iv) any person shall become the
beneficial owner of thirty percent (30%) or more of the Company's outstanding
common stock, or (v) during any period of two consecutive years, individuals who
at the beginning of such period constitute the entire Board of Directors shall
cease for any reason (except death) to constitute a majority thereof unless the
election, or the nomination for election by the Company's shareholders, of each
new director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period. Under the
severance agreements, an officer may be terminated for "cause"; defined
generally as (i) the willful and continued failure to perform his or her duties,
or (ii) the willful engagement in misconduct which is materially injurious to
the Company.
The Company has entered into Indemnity Agreements with all directors and
all executive officers of the Company after having received shareholder approval
at the Company's 1986 Annual Meeting. The Indemnity Agreements provide for
indemnification of directors and officers in cases where indemnification might
not otherwise have been available.
The Indemnity Agreements provide that the Company will pay any costs which
an indemnitee actually and reasonably incurs because of claims made against him
by reason of the fact that he is or was a director or officer of the Company,
except that the Company is not obligated to make any payment which the Company
is prohibited by law from paying as indemnity, or where (a) a final
determination is rendered on a claim based upon the indemnitee's obtaining a
personal profit or advantage to which he was not legally entitled; (b) a final
determination is rendered on a claim for an accounting of profits made in
connection with a violation of Section 16(b) of the Securities Exchange Act of
1934, or similar state or common law provisions; (c) a claim where the
indemnitee was adjudged to be deliberately dishonest; or (d) (with respect to a
director) any liability arising out of a breach of his fiduciary duties.
9
<PAGE> 13
The indemnification provided by the Indemnity Agreements is broader than
indemnification currently available under Delaware law. The principal changes or
additions are as follows:
First, unless a limitation applies, the Indemnity Agreements provide
for indemnification of any amount which a director or officer is legally
obligated to pay because of claims made against him relating to his service
as a director or officer. This indemnification covers, for example,
judgments and amounts paid in settlement of claims against a director by,
or in the right of, a corporation except liability arising out of a breach
of his fiduciary duties.
Second, the Indemnity Agreements make no distinction between civil and
criminal proceedings and require no specific standard of conduct.
Indemnification is not available, however, if an indemnitee is adjudicated
to have acted in a deliberately dishonest manner with actual dishonest
purpose and intent where such acts were material to the adjudicated
proceedings.
Third, the Indemnity Agreements permit indemnification without a prior
determination by the Company that the indemnitee meets the applicable
standard of conduct under Delaware law.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Cost who is also a member of the Compensation Committee is the
Secretary of the Company but not an employee. He receives no direct compensation
for his services as Secretary.
COMPENSATION STRUCTURE AND COMMITTEE RESPONSIBILITIES
The Company compensates its executive officers with two basic forms of
compensation: cash (salary and incentive bonus) and stock options. Although no
bonuses were awarded for fiscal 1992 and 1993, significant bonuses were granted
for the fiscal year ended June 30, 1994 and for the six month period ended
December 31, 1994, based upon the formulas described hereafter. Further, in
September 1994, executives were awarded substantial stock options under Bell's
stock option plans at an exercise price equal to the fair market value of the
underlying shares on the date of grant.
The Company Compensation Committee currently consists of Messrs. Cost,
Craig, Troy and Rosenberg. The duties of the Compensation Committee are to
determine the overall compensation policy for the Company's executive officers,
including specifically fixing the compensation of the chief executive and chief
operating officers.
The following report is submitted by the Compensation Committee as it
relates to both cash compensation of, and stock options granted to, executive
officers of the Company. This report is not deemed "filed" with the Securities
and Exchange Commission and is therefore not intended to be incorporated by
reference in any other document filed by the Company with the Commission.
REPORT OF THE COMPENSATION COMMITTEE
The Company's compensation philosophy is based upon the belief that the
Company's success is the result of the coordinated efforts of all employees
working towards common objectives. Its executive officer compensation program is
composed of base salary, annual incentive cash bonuses and long-term incentive
compensation in the form of stock options.
BASE SALARY
The Committee attempts to set the base salary levels competitively with
those paid by those electronics and industrial distribution companies comprising
its Peer Group. Based upon its most recent survey
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(May 1993), the Company believes that its compensation levels are in the mid to
lower range of compensation paid by its Peer Group. In determining salaries, the
Committee also takes into account individual experience and performance, past
salary history and specific issues particular to the Company.
ANNUAL INCENTIVE BONUS
Prior to fiscal 1994, cash bonuses were considered annually and awarded
generally upon a subjective evaluation of the particular officer's performance
during the year and were dependent upon the overall financial achievement of the
Company during the year. For example, bonuses usually were not given in years
where the Company's growth was nominal. Thus, no incentive cash bonuses were
awarded for fiscal 1992 and 1993. For the fiscal year ended June 30, 1994 and
for the six month period ended December 31, 1994, the Committee established an
incentive bonus program based upon the return on shareholders' equity and
awarded incentive bonuses for the 1994 fiscal year and the six month period in
accordance with such program. For each period, no incentive bonus would be
earned unless the Company's earnings exceeded a pre-determined percentage
minimum return on shareholders' equity as at the beginning of the period. If
that minimum return was achieved, each executive officer (including the Chief
Executive and Chief Operating Officer) earned a bonus based upon the extent to
which the Company's actual earnings exceeded the minimum return on shareholders'
equity. For the fiscal year ended June 30, 1994 and for the six month period
ended December 31, 1994, the Company's return on shareholders' equity was
approximately 10% and 12%, respectively, in each case in excess of the
pre-determined minimum. The amount of a particular officer's bonus was an
arithmetic calculation based upon the actual return on shareholders' equity and
that officer's base salary. Since the amount of any bonus was dependent upon the
extent to which the Company's actual return on shareholders' equity exceeded the
pre-determined minimum return, there was no arithmetic limitation upon the
amount of bonuses that could be earned. Although individual performance may also
be taken into consideration in determining bonuses, it was not for each of the
periods. For the current fiscal year, the Committee intends to continue an
incentive program upon which bonuses will be awarded and expects that the
performance objectives will be similar to those used in the past.
LONG-TERM INCENTIVE PROGRAM
Currently, the Company's long-term incentive program consists of the award
of stock options to executive officers and other key employees at current market
prices. The grant of options with exercise prices at prevailing market prices is
designed to align executive compensation and shareholder long-term interests by
creating a direct link between long-term executive compensation and shareholder
return as evidenced by increased stock market value.
The Compensation Committee's current policy is to award significant amounts
of stock options to executive officers and other key employees. Exercise prices
are established equal to the fair market value of Bell's common stock on the
date of grant. Options are usually for a term of 5 years and become vested over
a period of four years dependent upon continued employment. The number of stock
options granted to executive officers is based upon an evaluation of the
particular officer's deemed ability to influence the long-term growth and
profitability of the Company. Stock options were granted to the Company's
executive officers in September 1994 with exercise prices equal to fair market
value at the time of grant.
CHIEF EXECUTIVE AND OPERATING OFFICERS' COMPENSATION
Mr. Williams has been the Company's Chief Executive Officer for over twenty
years. His annual base salary was $400,000 for the fiscal year ended June 30,
1994 and continued at that rate through December 31, 1994. Additionally, Mr.
Williams was awarded a cash bonus of $172,788 for fiscal 1994 and $141,874 for
the six month period ended December 31, 1994 under the Company's incentive bonus
program previously
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described under the caption "Annual Incentive Bonus." The Committee has fixed
Mr. Williams' base salary for the current fiscal year at an annual rate of
$400,000. Due to his substantial stock ownership, the Committee decided that it
was not necessary to provide Mr. Williams with additional long-term incentive
through the grant of stock options.
Mr. Jaffe has been Chief Operating Officer since 1990. For many years
prior, he had been the Company's Chief Financial Officer. His annual base salary
for fiscal 1994 and for the six month period ended December 31, 1994 was
$285,000 and he received a cash bonus of $123,111 and $101,085, respectively,
for those periods under the Company's incentive bonus program previously
described under the caption "Annual Incentive Bonus." Additionally in September
1994, Mr. Jaffe was granted a stock option, as long-term incentive, covering
68,250 shares at an exercise price equal to fair market value at date of grant.
The Committee has fixed Mr. Jaffe's base salary for the current fiscal year at
$285,000.
The Committee believes that both Mr. Williams and Mr. Jaffe have managed
the Company exceptionally well during the past few years in the face of a very
challenging business environment. Due to the substantial improvement in the
Company's operating results during fiscal 1994 and for the six month period
ended December 31, 1994, each earned a cash bonus under the Company's incentive
bonus program previously described under the caption "Annual Incentive Bonus."
Submitted By: John J. Cost (Chairman),
Anthony Craig, Charles Troy and Milton
Rosenberg
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OTHER COMPENSATION
SAVINGS AND PROFIT SHARING PLAN
The Company established the Bell Industries' Employees' Savings and Profit
Sharing Plan (the "PSP") in 1973 under which both employees and the Company may
make contributions. The PSP will continue until terminated by the Board of
Directors. Employees must contribute at least 1% of their annual compensation to
participate in the PSP. The Company's contribution to the PSP is determined by
the Board of Directors in its discretion. During the fiscal year ended June 30,
1994 and for the six month period ended December 31, 1994, the Company
contributed $500,000 and $370,000, respectively, to the PSP.
EXECUTIVE DEFERRED INCOME AND PENSION PLAN
In July 1993, the Company adopted an Executive Deferred Income and Pension
Plan (the "EDP"). Under the EDP, each officer and such other highly compensated
employees as the Board may designate are eligible to participate. Each
participant may elect a percentage (not more than 10%) of his salary that he
wishes to defer. The Company matches the amount of the chosen deferral. Such
deferred sums bear an assumed interest at a rate equal to the Lehman Brothers
Long T-Bond index.
In the event of an unforeseen emergency, a participant may withdraw his
deferred salary plus accrued interest but no portion of the matching funds
contributed by the Company. In such an event, the participant would be
ineligible from participating in the EDP for a period of two years. After
reaching age 62 and retiring, a participant may elect to have his benefit paid
in a lump sum or payable over a period of 5 to 15 years.
If a participant voluntarily resigns before age 62, he will be entitled to
receive at age 62 only a pro-rata portion of Company matching funds through the
date of his termination. That proration is based upon the period of EDP
participation compared with the participant's age at the time of resignation. If
a participant dies while employed, his beneficiary would receive a lump sum
payment equal to all amounts that have accrued for his benefit through date of
death. If a participant's employment is terminated without cause or after a
change in control, he will receive the same benefit as he would have received if
his employment had been terminated due to death. If a participant is terminated
for cause, or if the Board determines within one year after termination that
cause existed at the time of termination, he will be entitled to receive in a
lump sum payment only the amount attributable to his deferred salary plus
accrued interest.
REINCORPORATION PROPOSAL
GENERAL
The Board of Directors believes that it is in the best interests of the
Company and its shareholders to change the Company's state of incorporation from
Delaware to California (the "Reincorporation"), and therefore the Board of
Directors has unanimously approved the Reincorporation. If the shareholders
approve the Reincorporation, the Company, a Delaware corporation ("Bell
Delaware"), will as promptly as practicable be merged into a newly-formed
California corporation ("Bell California") pursuant to an Agreement and Plan of
Merger (the "Merger"), a copy of which is attached hereto as Exhibit A, and Bell
California will be the surviving corporation. However, the Merger may be
abandoned if circumstances develop which, in the opinion of the Board of
Directors, make proceeding with the Merger inadvisable.
Upon the completion of the Merger, each outstanding share of common stock
of Bell Delaware will be automatically converted into a comparable share of Bell
California common stock. It will not be necessary to exchange Bell Delaware
stock certificates for Bell California stock certificates. It is anticipated
that Bell California shares will be listed on the New York Stock Exchange, as
the Bell Delaware shares are now listed.
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The authorized capital stock of Bell California will be the same as that of Bell
Delaware, consisting of 10,000,000 shares of common stock, $.25 par value, and
1,000,000 shares of preferred stock, $1.00 par value.
CHANGES RESULTING FROM THE REINCORPORATION
The Reincorporation will not effect any change in the business, management,
properties or financial condition of the Company. The stock option plans of Bell
Delaware will be continued by Bell California, and stock options outstanding
will become exercisable with respect to equivalent numbers of shares of Bell
California common stock. All other employee benefit plans and arrangements will
continue without change.
The Reincorporation, however, will result in a number of important changes
in the rights of shareholders. Upon completion of the Merger, the Company will
be governed by California law, which differs in many respects from Delaware law.
In addition, the Company will be governed by new articles of incorporation (the
"California Articles") and bylaws (the "California Bylaws"), which includes one
substantive provision that does not exist in the Company's present charter
documents since this provision is contained in Delaware law. See "Certain
Significant Differences Between the Corporation Laws of California and
Delaware." Approval of the Reincorporation by the shareholders will constitute
approval of the California Articles and the California Bylaws. The substantive
provision that will be included in the California Articles and Bylaws that is
not in the Company's present charter documents relates to the Company's ability
to make loans to officers and directors under certain circumstances. See
"Certain Significant Differences Between the Corporation Laws of California and
Delaware -- Loans to Officers and Employees."
APPROVAL OF THE REINCORPORATION WILL AFFECT CERTAIN RIGHTS OF THE
SHAREHOLDERS. THEREFORE, THE SHAREHOLDERS ARE URGED TO READ CAREFULLY THIS
ENTIRE PROXY STATEMENT AND THE EXHIBITS HERETO BEFORE VOTING. UNDER DELAWARE LAW
SHAREHOLDERS DO NOT HAVE DISSENTERS' OR APPRAISAL RIGHTS IN CONNECTION WITH THE
REINCORPORATION.
PRINCIPAL REASONS FOR THE REINCORPORATION
The decision by the Company to incorporate in Delaware, despite the fact
that the Company's principal executive offices were located in California, was
made at a time when Delaware corporate law contained several benefits not then
provided under California corporate law. In recent years, however, California
law has been modified such that many of these benefits are now provided to
California corporations. In particular, Delaware, to a larger extent than
California, authorized the limitation of liability of corporate directors in
situations not involving personal gain, dishonesty or other wrongful acts. In
addition, Delaware law authorized broader indemnification for directors and
officers than did California. In recent years, California's legislature has
adopted provisions regarding limitation of directors' liability and
indemnification of corporate officers and directors similar to those previously
adopted by the Delaware legislature. Consequently, one of the principal reasons
for being incorporated in Delaware is no longer applicable.
Additionally, Delaware law contained certain provisions regarding control
of the Company, largely absent from California law, that made it more difficult
for an individual to undertake a hostile takeover of the Company at the expense
of its other shareholders, such as the right to establish a classified board of
directors with staggered terms of office and to permit the removal of directors
only for cause. The California legislature has in recent years adopted some of
these provisions. Thus, another principal reason for being incorporated in
Delaware is no longer as compelling.
Whereas the major benefits of being a Delaware corporation vis-a-vis being
a California corporation have to a large extent disappeared, certain drawbacks
of being a Delaware corporation have appeared. Principally, under Delaware's
system of taxation, certain franchise taxes are assessed against the Company
based on the
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number of shares authorized. This formula of taxation has resulted in increased
tax costs to the Company. For the year ended December 31, 1994, the Company paid
Delaware franchise taxes totaling approximately $50,000. On the other hand, the
tax imposed on California corporations by virtue of being incorporated in
California is only $800 per year. Thus, had the Company been incorporated in
California in 1994, it would have paid approximately $50,000 less in taxes.
As described below, there are other differences between California and
Delaware law. However, the Board of Directors does not believe that the
substantive rights of the shareholders would be materially diminished as a
result of these differences.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND
DELAWARE
California law and Delaware law differ in many respects, and, consequently,
it is not practical to summarize all of the differences. The following is a
summary of certain significant provisions of both laws (including provisions of
the charter documents of the two companies, which provisions were adopted
pursuant to those laws), which may affect the rights and interest of
shareholders.
LIMITATION OF DIRECTORS' LIABILITY
Both California and Delaware law provide for inclusion in the corporation's
articles or certificate of incorporation (and the California Articles will
contain) a provision eliminating or limiting the personal liability for monetary
damages of a director to the corporation for breach of his fiduciary duty as a
director; provided, that in each case such liability cannot be eliminated or
limited for breaches of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of law
or from which the director derived an improper personal benefit. California law,
however, does not permit elimination or limitation of liability (i) for acts or
omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (ii) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, (iii) for transactions between the corporation
and such director or an entity in which such director has a material financial
interest, or (iv) who approves prohibited liquidating distributions or
prohibited loans or guarantees for directors or officers.
INDEMNIFICATION
With some exceptions, California law and Delaware law have similar
statutory provisions and limitations regarding indemnification by a corporation
of its officers, directors, employees and other agents. Each provides that
indemnification is mandatory under certain circumstances (generally in respect
of expenses incurred by an indemnified party who is successful on the merits in
the proceeding giving rise to the claim for indemnification) and permissive in
others, subject to authorization. The standard of conduct required of a person
seeking indemnification from a corporation is generally the same under
California and Delaware law and requires that a person seeking indemnification
shall have acted in good faith and in a manner he or she reasonably believed to
be in (or in the case of Delaware, not opposed to) the best interests of the
corporation and, in the case of a criminal proceeding, have no reasonable cause
to believe his conduct was illegal. In addition, both California and Delaware
law state expressly that the indemnification provided by statute shall not be
deemed exclusive of any other rights under any bylaw, agreement, vote of
shareholders or disinterested directors, or otherwise, except that with respect
to breach of fiduciary duty, California law prohibits indemnification for any
act for which a director may not be relieved of liability by the Corporation.
The Company intends to enter into Indemnification Agreements with its directors
and officers (consistent with
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California law) similar to its existing Indemnification Agreements. See
"Executive Compensation -- Employment Agreements."
CLASSIFICATION OF THE BOARD OF DIRECTORS
One traditional major difference between the laws of the two jurisdictions
has been the issue of a classified or "staggered term" board of directors.
Generally, with a classified board, the board will be divided into three
classes, with their three-year terms expiring at different times. As a result,
only one class of directors is elected at each annual meeting of shareholders,
with the remaining classes continuing their respective three-year terms. Thus,
it would generally take a new majority shareholder at least two annual
shareholders' meetings to elect a majority of the board and three to replace the
entire board.
Delaware law allows a classified board of directors; California law
traditionally has required that each director be elected annually. However, in
1989 California law was amended to permit "listed companies" (which include
corporations, such as the Company, with outstanding securities listed on the New
York Stock Exchange) to classify the board. The Company has no present intent to
classify its board of directors and the California Articles will not so provide.
CALL OF SPECIAL MEETINGS OF SHAREHOLDERS
Under California law, a special meeting of shareholders may be called by
the board of directors, the chairman of the board, the president or the holders
of shares entitled to cast not less than 10% of the votes at such meeting.
Delaware law provides that special meetings of shareholders may be called by the
board of directors. Delaware law also permits special meetings to be called by
any other person designated in the certificate of incorporation or bylaws, but
neither Bell Delaware's certificate of incorporation (the "Delaware
Certificate") or its bylaws (the "Delaware Bylaws") designate any such person.
Since 10% of the shareholders can call a special meeting in California, it
is easier for a potential acquiror to call such a meeting if the Company
reincorporates in California. This does not affect the percentage of the
shareholders required to take action at such a meeting.
"BUSINESS COMBINATIONS" (ANTI-TAKEOVER LAW)
Delaware has a "business combination" form of anti-takeover law. Briefly,
the Delaware statute prevents "business combinations" (e.g., mergers, sales of
assets, and certain stock transactions) between any corporation covered by the
Delaware statute (generally, all publicly-traded Delaware corporations with at
least 2,000 shareholders which have not "opted-out" of the statute, the Company
did not) and any person who owns 15% or more of the voting stock of such
corporation (an "interested shareholder") for three years from the date such
person became an interested shareholder, unless (1) prior to becoming an
interested shareholder, the board of directors of the target corporation
approved the business combination or the transaction making such person an
interested shareholder, (2) upon consummation of the transaction making such
person an interested shareholder, such person owned at least 85% of the voting
stock (excluding certain management-owned shares), or (3) the business
combination is approved by the board of directors and the holders of 2/3 of the
outstanding voting stock of the target corporation (excluding stock owned by the
interested shareholder but including management-owned stock) upon or after the
transaction making such person an interested shareholder.
In addition, the Delaware Certificate contains a further restriction on
business combinations. Briefly, the Delaware Certificate prohibits business
combinations between the Company and a person who owns 20% or more of the voting
stock of the Company (an "interested shareholder"), unless the business
combination is approved by 75% of the voting stock, and the majority of the
voting stock other than the voting stock of which
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the interested shareholder is a beneficial owner. This prohibition, however,
does not apply if the business combination is approved by the Company's Board of
Directors prior to the person becoming an interested shareholder, or, if a
majority of the outstanding shares of stock of the interested shareholder is
owned by the Company. In addition, the Delaware Certificate provides that the
purchase of shares by the Company from a shareholder who is the beneficial
holder of 5% or more of the Company's outstanding shares at a price per share in
excess of the then "Market Price" (as defined) must be approved by the holders
of at least a majority of the Company's outstanding shares excluding the shares
owned by such selling shareholder.
California law does not provide anti-takeover protection similar to that
provided by the Delaware "business combination" statute. However, the California
Articles will contain a restriction on business combinations substantially
similar to the restrictions imposed by the Delaware Certificate. Likewise, the
California Articles will contain a provision substantially similar to the
provision contained in the Delaware Certificate regarding the prior approval of
shareholders for purchases of Company shares from of 5% holder at a price in
excess of fair market value.
In addition, California law does restrict certain transactions between
corporations and "interested parties" (as defined below), as follows. California
law provides that if an interested party makes a tender offer (or proposes
certain reorganizations) to some or all of a corporation's shareholders, he must
deliver an opinion as to the fairness of the consideration (except if the
corporation does not have at least 100 shareholders of record or the securities
to be issued were qualified by the California Department of Corporations under
certain provisions of the California Corporate Securities Law). "Interested
party" is defined as a person who is a party to the transaction and (a) controls
the corporation that is subject to the tender offer or proposal, (b) is an
officer or director of the subject corporation, or (c) is an entity in which a
material financial interest is held by any director or executive officer of the
subject corporation.
NUMBER OF DIRECTORS
Under Delaware law, the board of directors may fix or change the authorized
number of directors pursuant to an amendment of the bylaws, unless the
certificate of incorporation fixes the number of directors (the Delaware
Certificate does not). Under California law, only the shareholders can fix or
change the authorized number of directors, although the board of directors may
fix the exact number of directors from time to time within a range provided in
the articles of incorporation or bylaws. The California Bylaws will provide that
the number of directors shall be no less than six nor more than eleven with the
current number of seven.
REMOVAL OF DIRECTORS
Under both California and Delaware law, a director may be removed without
cause by shareholder vote, except as follows. If the corporation's board of
directors is classified, he may not be removed under California law if the
shares voting against such removal would be sufficient to elect the director
under cumulative voting rules, and he may not be removed under Delaware law
without cause, unless the certificate of incorporation otherwise provides. In
addition, both California and Delaware provide that no director may be removed
without cause (unless the entire board is removed) if the shares voted against
removal would be sufficient to elect the director under cumulative voting rules,
except that under Delaware law, this restriction applies only if the corporation
has cumulative voting. Finally, California law permits a court, at the request
of shareholders holding at least 10% of the outstanding shares of any class, to
remove a director in the case of fraudulent or dishonest acts or gross abuse of
authority or discretion.
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CUMULATIVE VOTING FOR DIRECTORS
California law requires cumulative voting in the election of directors for
most corporations upon notice given by a shareholder at a shareholders' meeting.
However, as in the case of a classified board, the articles of incorporation of
a California "listed company" can eliminate cumulative voting. Under Delaware
law, shares may not be cumulatively voted for the election of directors unless
the certificate of incorporation specifically provides for cumulative voting
(the Delaware Certificate does, and the California Articles will not so
eliminate). Therefore, shareholders of the Company will have cumulative voting
rights regardless of whether the Company is incorporated in Delaware or
California. To exercise such cumulative voting rights, a shareholder must give
notice of his intent to cumulate votes prior to the vote at the meeting. Notice
may be given in writing or by voice to either the Chairman or Secretary of the
meeting.
VOTE REQUIRED FOR MERGERS AND REORGANIZATIONS
Delaware law relating to mergers and other corporate reorganizations
differs from California law in a number of respects. Generally, California law
requires a shareholder vote in more situations than does Delaware law. Both
California and Delaware law provide for shareholder votes (except as indicated
below and for certain mergers between a parent company and its 90% owned
subsidiary) of both the acquiring and acquired corporation to approve mergers,
and of the selling corporation for the sale by the corporation of substantially
all of its assets. In addition to the foregoing, California law requires the
affirmative vote of a majority of the outstanding shares of (i) an acquiring
corporation in share-for-share exchanges, (ii) the acquiring and acquired
corporation in sale-of-assets reorganizations, and (iii) any parent corporation
whose equity securities are being issued or transferred in connection with a
corporate reorganization. California law generally requires a class vote when a
vote is required in connection with these transactions, whereas Delaware law
generally does not (see "Class Vote for Certain Reorganizations" below).
Delaware law does not require a shareholder vote of the surviving
corporation in a merger if (i) the merger agreement does not amend the existing
certificate of incorporation, (ii) each outstanding or treasury share of the
surviving corporation before the merger is unchanged after the merger, and (iii)
the number of shares to be issued by the surviving corporation in the merger
does not exceed 20% of the shares outstanding immediately prior to such
issuance. California law contains a similar exception to its voting requirements
for reorganizations where any corporation or its shareholders immediately before
the reorganization own (immediately after the reorganization) more than
five-sixths of the voting power of the surviving or acquiring corporation (or
its parent).
CLASS VOTE FOR CERTAIN REORGANIZATIONS
With certain exceptions, California law requires that a merger or
reorganization and certain sales of assets or similar transactions be approved
by a majority vote of each class of shares outstanding, and provides for
separate series votes in certain circumstances. By contrast, Delaware law
generally does not require such class voting, except in circumstances where the
transaction involves an amendment to the certificate of incorporation which
would increase or decrease the aggregate number of authorized shares of such
class, increase or decrease the par value of the shares of such a class, or
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely.
APPRAISAL RIGHTS IN MERGERS
Under both California and Delaware law, a dissenting shareholder of a
corporation participating in certain transactions may, under varying
circumstances, receive cash in the amount of the fair value of his shares (as
determined by a court), in lieu of the consideration he would otherwise receive
in any such transaction.
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Delaware law does not require such dissenters' rights of appraisal, unless
a corporation's certificate of incorporation provides otherwise (the Delaware
Certificate does not), with respect to (i) a sale of assets; (ii) shares of a
corporation party to a merger or consolidation which are either listed on a
national securities exchange, are designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. (a "National Market Issue"), or are widely held (by
more than 2,000 shareholders), if such shareholders receive only shares of the
surviving corporation or shares of any other corporation which are listed on a
national securities exchange, are a National Market Issue or are held of record
by more than 2,000 holders; or (iii) shares of the surviving corporation in a
merger, if the number of shares to be issued in the merger does not exceed 20%
of the shares of the surviving corporation outstanding immediately prior to the
merger and certain other conditions are met.
California law generally provides for dissenters' rights in a
share-for-share exchange, a sale-of-assets reorganization or a merger. However,
under California law, dissenter's rights are not available for shares of any
"listed company" (which the Company will be) unless holders of 5% or more of the
class of securities claim dissenters' rights or unless the shares have certain
restrictions on transfer. Also, under California law, shareholders of a
corporation involved in a reorganization are not entitled to dissenters' rights
if the corporation, or its shareholders immediately before the reorganization,
or both, will own immediately after the reorganization more than five-sixths of
the voting power of the surviving or acquiring corporation or its parent entity.
INSPECTION OF SHAREHOLDER LISTS
California law provides for an absolute right of inspection of the
shareholder list for any shareholder holding 5% or more of a corporation's
shares or any shareholder holding 1% or more of a corporation's shares who has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors. In addition, California law provides a right of
inspection of shareholder lists for a purpose reasonably related to such
shareholder's interest as a shareholder.
Delaware law does not provide any similar absolute right of inspection, but
does permit any shareholder to inspect the list for any purpose reasonably
related to such person's interest as a shareholder and, for a ten-day period
preceding a shareholder's meeting, for any purpose germane to the meeting. The
increased difficulty that shareholders of a Delaware corporation might
experience in obtaining a shareholder list could make it more difficult to
attempt a non-negotiated takeover of a Delaware corporation or make it less
likely that such a takeover would be attempted.
LOANS TO OFFICERS AND EMPLOYEES
Under Delaware law, a corporation may make loans to, or guarantee the
obligations of, or otherwise assist, its officers or other employees and those
of its subsidiaries when such action, in the judgment of the directors, may
reasonably be expected to benefit the corporation. Under California law,
however, a corporation may not make any such loan or guarantee for the benefit
of any officer or director of a corporation or its parent unless approved by a
majority vote of shareholders or by the disinterested directors pursuant to a
bylaw provision adopted by the shareholders. However, California also permits
such a loan or guarantee to be approved by the board alone by a vote sufficient
without counting the vote of any interested director, if the corporation has at
least 100 shareholders, has a bylaw approved by the shareholders authorizing the
board alone to approve such a loan or guaranty (which the California Bylaws
shall have), and the board determines that such a loan or guarantee may
reasonably be expected to benefit the corporation. Approval of the
Reincorporation by the shareholders shall also be deemed to be approval of such
Bylaw.
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DIVIDENDS
California law provides that a corporation may not make any distribution
(including dividends, whether cash or other property, and repurchases of its
shares) unless (i) the corporation's retained earnings immediately prior to the
proposed distribution equal or exceed the amount of the proposed distribution,
or (ii) immediately after giving effect to such distribution, the corporation's
assets (exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1 1/4 times its liabilities (not
including deferred taxes, deferred income and other deferred credits) and the
corporation's current assets would be at least equal to its current liabilities
(or 1 1/4 times its current liabilities if the average pre-tax and pre-interest
expense earnings for the preceding two fiscal years were less than the average
interest expense for such years). Under California law assets are valued at book
value. In addition, California law provides that a corporation may not make any
such distribution if as a result the excess of the corporation's assets over its
liabilities would be less than the liquidation preference of all shares having a
preference on liquidation over the class or series to which the distribution is
to be made.
Delaware law provides that a corporation may, unless otherwise restricted
by its certificate of incorporation, declare and pay dividends out of surplus
(generally, the shareholders' equity of the corporation less the par value of
the capital stock outstanding), or if no surplus exists, out of net profits for
the current or preceding fiscal year (provided that the amount of capital of the
corporation following the declaration and payment of the dividend is not less
than the aggregate amount of the capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets). Additionally, Delaware law provides that a corporation may redeem or
repurchase its shares only out of surplus. To determine the surplus, assets and
liabilities are valued at their current fair market value, rather than book
value.
VOTING BY BALLOT
California law grants to each shareholder the right to require a vote by
written ballot for the election of directors at a shareholders' meeting. Such
right to require a vote by written ballot must be made prior to the vote and by
giving written or oral notice of such demand to either the Chairman or Secretary
of the meeting. Under Delaware law, all elections of directors must be by
written ballot, unless the certificate of incorporation provides otherwise (the
Delaware Certificate does not).
DISSOLUTION
Under California law, shareholders holding 50% or more of the total voting
power may authorize a corporation's dissolution. Delaware law allows a Delaware
corporation to include in its certificate of incorporation a supermajority
voting requirement in connection with dissolutions (the Delaware Certificate
does not). Without such a provision, Delaware law requires approval by a
majority of the total voting power and approval by a majority of the board of
directors, or approval of all of the shareholders to authorize dissolution.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Reincorporation will be a "tax free" reorganization under the Internal
Revenue Code of 1986, as amended. Accordingly, no gain or loss will be
recognized by the Company or by shareholders of the Company as a result of the
Reincorporation. Each shareholder of the Company will have the same basis in the
shares of California common stock received by him or her pursuant to the
Reincorporation as he or she has in the shares of the Delaware common stock held
by him or her at the time of consummation of the Reincorporation, and his or her
holding period with respect to such shares of California common stock will
include the period during
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<PAGE> 24
which he or she held the corresponding shares of Delaware common stock, provided
the latter were held by him or her as capital assets at the time of the
Reincorporation.
VOTE REQUIRED AND BOARD RECOMMENDATION
Delaware law requires the favorable vote of at least a majority of all the
outstanding stock of the Company to approve the Reincorporation. Accordingly,
abstentions and broker non-votes will effectively count as votes against the
Reincorporation.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE
REINCORPORATION.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held six meetings during fiscal 1994. Each
director attended at least 80% of the meetings of the Board of Directors and the
committees on which he served except for Mr. Craig who attended four of the six
Board of Directors' meetings and one of the two meetings of the Compensation
Committee. During the six month period ended December 31, 1994, the Board of
Directors held two meetings. Each director attended all of the Board and
committee meetings on which he served during the six month period.
The Board of Directors also has standing committees: an Executive
Committee, an Audit Committee, a Compensation Committee, and a Nominating
Committee. The Executive Committee is composed of Messrs. Williams and Jaffe and
held twelve meetings during fiscal 1994 and six meetings during the six month
period ended December 31, 1994. The Executive Committee exercises to a limited
extent the authority of the Board of Directors between meetings of the Board.
The Audit Committee consists of Messrs. Cost, Troy and Rosenberg and held two
meetings during fiscal 1994 and one meeting during the six month period ended
December 31, 1994. The Audit Committee reviews periodic financial statements of
the Company, reviews the independent accountants' scope of engagement,
performance and fees, and reviews the adequacy of the Company's financial
control procedures. The Compensation Committee is composed of Messrs. Cost,
Craig, Troy and Rosenberg and during fiscal 1994 and the December six month
period held two meetings and three meetings, respectively. Its function is to
review and recommend remuneration arrangements for various key executives and
various benefit plans, including the stock option plans, in which officers and
employees may participate. Messrs. Cost and Rosenberg are members of the
Nominating Committee which was established in March 1993. The Nominating
Committee held no meetings during fiscal 1994 or during the six month period
ended December 31, 1994. Its function is to recommend individuals to be members
of the Board of Directors.
TRANSITION REPORT ON FORM 10-K
The Company will provide, without charge, a copy of the Company's
Transition Report on Form 10-K filed with the Securities and Exchange Commission
for the six month period ended December 31, 1994 upon the written request of any
shareholder. This request should be directed to Mr. Tracy A. Edwards, Vice
President and Chief Financial Officer, Bell Industries, Inc., 11812 San Vicente
Boulevard, Los Angeles, California 90049-5069.
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SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal printed in the Proxy Statement
to be used in connection with the Company's next Annual Meeting of Shareholders,
tentatively scheduled for May 2, 1996, such a proposal must be received by the
Company at its corporate office prior to December 22, 1995.
MISCELLANEOUS
Price Waterhouse has been the Company's independent accountants for a
number of years and has been selected to continue in such capacity for the
current fiscal year. It is anticipated that a representative from Price
Waterhouse will attend the Annual Meeting of Shareholders, will be available to
answer questions, and will be afforded the opportunity to make any statements
the representative desires to make.
The Board of Directors knows of no other matters that are likely to come
before the meeting. If any such matters should properly come before the meeting,
however, it is intended that the persons named in the accompanying form of proxy
will vote such proxy in accordance with their best judgment on such matters. The
Company's Bylaws require that, for other business to be properly brought before
an annual meeting by a shareholder, the Company must have received written
notice thereof not less than 60 nor more than 90 days prior to the annual
meeting (or, if less than 70 days notice or other public disclosure of the date
of the annual meeting is given, not later than 10 days after the earlier of the
date notice was mailed or public disclosure of the date was made). The notice
must set forth (a) a brief description of the business proposed to be brought
before the annual meeting, (b) the shareholder's name and address, (c) the
number of shares beneficially owned by such shareholder as of the date of the
shareholder's Notice, and (d) any financial interest of such shareholder in the
proposal. Similar information is required with respect to any other shareholder,
known by the shareholder giving notice, supporting the proposal. Further, if the
proposal includes the nomination of a person to become a director which person
was not set forth in a proxy statement submitted to all shareholders pursuant to
the federal proxy rules, such proposal shall contain all the information
specified by such rules.
By Order of the Board of Directors
JOHN J. COST
Secretary
March 17, 1995
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EXHIBIT A
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (this "Agreement") is made as of ,
1995 by and between BELL INDUSTRIES, INC., a Delaware corporation ("Bell
Delaware"), and CALIFORNIA BELL INDUSTRIES, INC., a California corporation and a
wholly-owned subsidiary of Bell Delaware ("Bell California").
RECITALS:
The Board of Directors of Bell Delaware and the Board of Directors of Bell
California deem it advisable that Bell Delaware merge into Bell California
pursuant to the Laws of the states of California and Delaware, and the Board of
Directors of each such corporation has approved this Agreement.
The Board of Directors of Bell Delaware has directed that this Agreement be
submitted to a vote of Bell Delaware shareholders at the 1995 Annual Meeting of
Shareholders to be held on May 9, 1995, or any adjournment thereof.
The Board of Directors of Bell California has directed that this Agreement
be submitted to its sole shareholder, Bell Delaware, and said sole shareholder
has adopted and approved this Agreement by written consent dated as of
, 1995.
NOW, THEREFORE, the parties do hereby adopt the plan of reorganization and
merger encompassed by this Agreement and do hereby agree as follows:
Merger. Subject to the terms and conditions hereinafter set forth,
Bell Delaware shall be merged with and into Bell California, and Bell
California shall be the surviving corporation (the "Merger"). The Merger
shall become effective if and when appropriate documents necessary to
effectuate the Merger shall be filed with the Secretary of State of the
State of California and the Secretary of State of the State of Delaware
(the "Effective Date").
Effect of Merger. At the Effective Date, the following shall be
deemed simultaneously to have occurred, by reason of the Merger and without
any action required on the part of any person:
The separate corporate existence of Bell Delaware shall cease, and
the corporate existence of Bell California as governed by the California
Corporations Code, shall continue unimpaired and unaffected by the
Merger.
The shares of Bell California common stock, $0.25 par value per
share (the "California Common Stock"), theretofore issued and
outstanding shall be retired and cancelled.
Each share of Bell Delaware common stock, $0.25 par value (the
"Delaware Common Stock"), issued and outstanding shall be converted by
reason of the Merger and without any action on the part of the holders
thereof into and become one share of California Common Stock. The shares
of Delaware Common Stock so converted shall cease to exist as such and
shall exist only as shares of California Common Stock.
Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of the
Delaware Common Stock shall be deemed for all purposes to evidence
ownership of and to represent the shares of Bell California into which the
shares of Bell Delaware represented by such certificates have been
converted as herein provided. The registered owner on the books and records
of Bell Delaware or its transfer agent of any such outstanding stock
certificate shall,
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until such certificate shall have been surrendered for transfer or
conversion or otherwise accounted for to Bell California or its transfer
agent, have and be entitled to exercise any voting and other rights with
respect to and to receive any dividend and other distributions upon the
shares of Bell California evidenced by such outstanding certificate as
above provided.
Employee Option and Benefit Plans and Other Stock Rights. Each option
or other right to purchase or otherwise acquire shares of Delaware Common
Stock granted under (i) any employee option or benefit plan of Bell
Delaware (collectively, the "Plans"), or (ii) any other option or stock
right exercisable or convertible into shares of Delaware Common Stock,
which is outstanding immediately prior to the Effective Date, shall, by
virtue of the Merger and without any action on the part of the holder
thereof, be converted into and become an option or right to acquire (and
Bell California hereby assumes the obligation to deliver) the same number
of shares of California Common Stock at the same price per share, and upon
the same terms and subject to the same conditions, as set forth in each of
such Plans and/or rights as in effect at the Effective Date. The same
number of shares of California Common Stock shall be reserved for purposes
of such Plans and/or rights as is equal to the number of shares of Delaware
Common Stock so reserved as of the Effective Date. Bell California hereby
assumes, as of the Effective Date, (x) the Plans and all obligations of
Bell Delaware under the Plans, including the outstanding options or awards
or portions thereof granted pursuant to the Plans, and (y) all obligations
of Bell Delaware under all other benefit plans and outstanding stock rights
in effect as of the Effective Date with respect to which employee rights or
accrued benefits or other rights are outstanding as of the Effective Date.
California Articles of Incorporation and Bylaws. The Articles of
Incorporation of Bell California, as in effect at the Effective Date, shall
continue to be the Articles of Incorporation of Bell California until
further amended in accordance with the provisions thereof and applicable
law. The Bylaws of Bell California, as in effect on the Effective Date,
shall continue to be the Bylaws of Bell California without change or
amendment until further amended in accordance with the provisions thereof
and applicable law. Immediately after the Merger becomes effective, Bell
California shall file an amendment to its Articles of Incorporation with
the Secretary of State of the State of California changing its name to Bell
Industries, Inc.
Officers and Directors. The officers and directors of Bell Delaware
immediately prior to the Effective Date shall become the officers and
directors of Bell California on the Effective Date.
Conditions to Merger. The consummation of the Merger and the other
transactions contemplated by this Agreement is subject to the condition
that the Merger and the principal terms of this Agreement shall have been
approved by the shareholders of Bell Delaware, and that the California
Common Stock to be issued or reserved for issuance shall, upon official
notice of issuance, be listed on the New York Stock Exchange.
Further Assurances. From time to time, as and when required by Bell
California, or by its successors or assigns, there shall be executed and
delivered such deeds and other instruments, and there shall be taken or
caused to be taken all such further and other action as shall be
appropriate or necessary to vest, perfect, or confirm, of record or
otherwise, in Bell California the title to and possession of all property,
interests, assets, rights, privileges, immunities, powers, franchises and
authority of Bell Delaware, and otherwise to carry out the purposes of this
Agreement; and the officers and directors of Bell California are fully
authorized in the name and on behalf of Bell Delaware or otherwise, to take
any and all such action to execute and deliver any and all such deeds and
instruments.
Amendment. The parties hereto, by mutual consent of their respective
Boards of Directors, may amend, modify or supplement this Agreement at any
time prior to the Effective Date; provided, however,
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that no amendment shall be made subsequent to the adoption of this
Agreement by the stockholders of Bell Delaware which changes this Agreement
in a way which, in the judgment of the Board of Directors of Bell Delaware,
would have a material adverse effect on the stockholders of Bell Delaware,
unless such amendment is approved by such stockholders.
Deferral. Consummation of the transactions herein provided for may be
deferred by the Board of Directors of Bell Delaware for a reasonable period
of time if such Board of Directors determines that such deferral would be
in the best interests of Bell Delaware and its stockholders.
Termination. This Agreement may be terminated and the Merger and
other transactions herein provided for abandoned at any time prior to the
Effective Date, whether before or after approval of this Agreement by the
stockholders of Bell Delaware, by action of the Board of Directors of Bell
Delaware, if such Board of Directors determines that the consummation of
the transactions provided for herein would not, for any reason, be in the
best interests of Bell Delaware and its stockholders,
Counterparts. This Agreement may be executed in one or more
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute
but one agreement.
Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
Governing Law. This agreement shall be governed by, and construed in
accordance with the laws of the State of Delaware.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on behalf of each of said parties by their respective duly
authorized officers as of the date first above written.
BELL INDUSTRIES, INC.,
a Delaware corporation
By:
Name:
Its:
CALIFORNIA BELL INDUSTRIES, INC.,
a California corporation
By:
Name:
Its:
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PROXY
BELL INDUSTRIES, INC.
11812 SAN VICENTE BOULEVARD
LOS ANGELES, CALIFORNIA 90049
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Theodore Williams and Bruce M. Jaffe, and
each of them, as Proxies, each with the power to appoint his substitute,
and hereby authorizes each of them to represent and to vote as designated
below, all the shares of common stock of Bell Industries, Inc. held of
record by the undersigned on March 17, 1995, at the Annual Meeting of
Shareholders to be held on May 9, 1995 or any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, the proxy
will be voted for the election of all nominees as directors and for
changing the state of incorporation.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 30
BELL INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. Election of Directors: For All
Nominees:J. Cost, A. Craig, G. Graham, B. Jaffe, For Withheld Except
C. Troy, M. Rosenberg, T. Williams / / / / / /
For all except nominees written in
below.
-----------------------------------
2. Changing the state of incorporation from Delaware
to California. For Against
/ / / /
3. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
Please sign exactly as name appears below.
Dated: __________________________________
-----------------------------------------
Signature
-----------------------------------------
Signature if held jointly
When shares are held by joint tenants, both
should sign. When signing as attorney,
executor, administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full corporate
name by President or other authorized
officer. If a partnership, please sign in
partnership name by authorized person.
