SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
Bell Microproducts Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as specified in its charter)
Bell Microproducts Inc.
- --------------------------------------------------------------------------------
(Name of person(s) filing proxy statement)
Payment of Filing Fee (Check the appropriate box):
[X ] No fee required.
[ ] $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: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] 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: N/A
(2) Form, Schedule, or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
BELL MICROPRODUCTS INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 21, 1997
TO THE SHAREHOLDERS OF BELL MICROPRODUCTS INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Bell
Microproducts Inc., a California corporation (the "Company"), will be held on
Wednesday, May 21, 1997, at 1:00 p.m., local time, at the offices of the
Company, 1941 Ringwood Avenue, San Jose, California 95131 for the following
purposes:
1. To elect five (5) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To approve an amendment to the Company's 1988 Incentive Stock Plan to
increase the number of shares of Common Stock available for grant under the
plan by 300,000 shares.
3. To ratify the appointment of Price Waterhouse LLP as independent
accountants of the Company for the fiscal year 1997.
4. To transact such other business as may properly come before the meeting
and at any and all continuations or adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on April 3, 1997 are
entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
By Order of the Board of Directors
/s/ Remo Canessa
Chief Financial Officer
San Jose, California
April 17, 1997
YOUR VOTE IS IMPORTANT
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN
PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
POSTAGE-PAID ENVELOPE ENCLOSED FOR THAT PURPOSE. RETURNING YOUR PROXY WILL HELP
THE COMPANY ENSURE A QUORUM AND AVOID THE ADDITIONAL EXPENSE OF DUPLICATE PROXY
SOLICITATIONS. ANY SHAREHOLDER ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF
HE OR SHE HAS RETURNED THE PROXY.
<PAGE>
BELL MICROPRODUCTS INC.
1941 RINGWOOD AVENUE
SAN JOSE, CALIFORNIA 95131
----------------------
PROXY STATEMENT FOR 1997 ANNUAL MEETING OF SHAREHOLDERS
----------------------
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Bell
Microproducts Inc. (the "Company"), for use at the Annual Meeting of
Shareholders to be held on Wednesday, May 21, 1997, at 1:00 p.m., local time
(the "Annual Meeting"), and at any and all continuations or adjournments
thereof, for the purposes set forth herein and in the accompanying Notice of
Annual Meeting of Shareholders. The Annual Meeting will be held at the principal
executive offices of the Company, 1941 Ringwood Avenue, San Jose, California
95131. The telephone number at this address is (408) 451-9400.
These proxy solicitation materials were mailed on or about April 17, 1997 to
all shareholders entitled to vote at the Annual Meeting.
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are to (1) elect five directors to serve
for the ensuing year and until their successors are duly elected and qualified,
(2) approve an amendment to the Company's 1988 Incentive Stock Plan to increase
the number of shares of Common Stock available for grant thereunder by 300,000
shares, (3) ratify the appointment of Price Waterhouse LLP as the Company's
independent accountants for the fiscal year 1997, and (4) transact such other
business as may properly come before the meeting and at any and all
continuations or adjournments thereof.
RECORD DATE AND SHARE OWNERSHIP
Only shareholders of record at the close of business on April 3, 1997 (the
"Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. As of the Record Date, the Company had outstanding 8,523,966 shares of
Common Stock. For information regarding holders of more than 5% of the
outstanding Common Stock, see "Share Ownership of Directors, Officers and
Certain Beneficial Owners." The closing price of the Company's Common Stock on
the Record Date, as reported by the Nasdaq National Market, was $11.75 per
share.
REVOCABILITY OF PROXIES
Any person giving a proxy in the form accompanying this statement has the
power to revoke it at any time before it is voted by delivering to the Secretary
of the Company at the Company's principal executive office, 1941 Ringwood
Avenue, San Jose, California 95131, a written notice of revocation or a duly
executed proxy bearing a later date, or by attending the meeting and voting in
person.
VOTING AND SOLICITATION
Each shareholder voting for the election of directors may cumulate his or her
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of shares which the shareholder is
entitled to vote, or distributing the shareholder's votes under the same
principle among as many candidates as the shareholder chooses, provided that
votes may not be cast for more than five (5) candidates. However, no shareholder
shall be entitled to cumulate votes for any candidate unless the candidate's
name has been placed in nomination prior to the voting, and the shareholder, or
any other shareholder, has given notice at the meeting prior to the voting of
the intention to cumulate the shareholder's votes. On all other matters, each
share has one vote.
<PAGE>
The cost of soliciting proxies will be borne by the Company. The Company may
also reimburse brokerage firms and other persons representing beneficial owners
of shares for their expenses in forwarding solicitation materials to such
beneficial owners. In addition, the Company's directors, officers and employees,
without receiving any additional compensation, may solicit proxies personally or
by telephone, telegraph or facsimile copy.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock issued and outstanding on the Record
Date (the "Quorum"). Shares that are voted "For" or "Against" a matter are
treated as being present at the meeting for purposes of establishing a Quorum
and are also treated as shares "represented and voting" at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California as
to the proper treatment of abstentions in the counting of votes with respect to
a proposal such as the amendment of a stock option plan, the Company believes
that abstentions should be counted for purposes of determining both (i) the
presence or absence of a Quorum and (ii) the total number of Votes Cast with
respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the proposal. Broker
non-votes will be counted for purposes of determining the presence or absence of
a Quorum, but will not be counted for purposes of determining the number of
Votes Cast with respect to a particular proposal.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company which are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting of Shareholders must
be received by the Company no later than December 11, 1997, in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
A board of five directors is to be elected at the Annual Meeting. Unless
otherwise instructed by the shareholder, the proxy holders will vote the proxies
received by them for the Company's nominees named below. All nominees are
currently directors of the Company. In the event that any nominee of the Company
is unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. It is not expected that any nominee will
be unable or will decline to serve as a director. In the event that additional
persons are nominated for election as directors, the proxy holders intend to
vote all proxies received by them in such a manner and in accordance with
cumulative voting as will assure the election of as many of the nominees listed
below as possible, and in such event the specific nominees to be voted for will
be determined by the proxy holders. The term of office of each person elected as
a director will continue until the next Annual Meeting of Shareholders or until
a successor has been duly elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
"FOR" THE NOMINEES LISTED BELOW.
2
<PAGE>
NOMINEES FOR DIRECTOR
The names of the nominees, each of whom is currently a director of the
Company, and certain information about them is set forth below, including
information furnished by them as to their principal occupation for the last five
years, certain other directorships held by them and their ages as of April 17,
1997:
DIRECTOR
NAME AGE POSITION WITH THE COMPANY SINCE
- ---------------------- ---- --------------------------------- ----------
W. Donald Bell ........ 59 President, Chief Executive Officer 1987
and Chairman of the Board
Glenn E. Penisten(2) .. 65 Director 1988
Gordon A. Campbell(1) . 52 Director 1988
Jon H. Beedle(2) ...... 64 Director 1988
Edward L. Gelbach(1) .. 65 Director 1993
- ------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
W. Donald Bell has been President, Chief Executive Officer and Chairman of
the Board of the Company since its inception in 1987. Mr. Bell has over 30 years
of experience in the electronics industry. Mr. Bell was formerly the President
of Ducommun, Inc. and its subsidiary, Kierulff Electronics, Inc. as well as
Electronic Arrays, Inc. He has also held senior management positions at Texas
Instruments Incorporated, American Microsystems, Inc. and other electronics
companies. He is a director of Control Data Systems, Inc., a systems integration
company.
Glenn E. Penisten has served on the Company's Board of Directors since May
1988. Mr. Penisten is a General Partner of Alpha Venture Partners III, a venture
capital fund. Mr. Penisten is a director of IKOS Systems, Inc., a manufacturer
of ASIC simulation equipment, Superconductor Technologies, Inc., a developer of
products utilizing superconductivity materials, Pinnacle Systems, Inc., a
designer and manufacturer of special effects video equipment, and Network
Peripherals, Inc., a networking products manufacturing company. Mr. Penisten was
Chairman of the American Electronics Association in 1982. From 1976 to 1984, Mr.
Penisten was President of American Microsystems, Inc.
Gordon A. Campbell has served on the Company's Board of Directors since May
1988. Mr. Campbell has served as President of Techfarm, Inc., a company involved
in funding and advising start-up companies, since its inception in September
1993. From 1985 to July 1993, Mr. Campbell served as Chairman of the Board,
President and Chief Executive Officer of Chips & Technologies, a semiconductor
company. From July 1993 to November 1995, Mr. Campbell served as Chairman of the
Board of Directors of Chips & Technologies. Mr. Campbell is a director of 3Com
Corporation, a data networking company.
Jon H. Beedle has served on the Company's Board of Directors since July of
1988. Mr. Beedle was the President of In-Stat, a semiconductor market research
company, from 1981 to 1995. Mr. Beedle is a director of Microchip Technology
Incorporated, a semiconductor equipment manufacturing company.
Edward L. Gelbach has served on the Company's Board of Directors since March
1993. From 1971 to 1988, Mr. Gelbach was Senior Vice President and a director of
Intel, and since 1989 has been a self-employed investor. Mr. Gelbach is also a
director of Richey-Cypress Electronics, Inc., an electro-mechanical components
distributor, and Etec Systems, Inc., a manufacturer of pattern generation
equipment.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted for them shall be elected as directors. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum for the transaction of business, but have no other legal
effect in the election of directors under California law.
3
<PAGE>
BOARD MEETINGS AND COMMITTEES
During the fiscal year ended December 31, 1996 (the "Last Fiscal Year"), the
Board of Directors held a total of five meetings. Each of the incumbent
directors attended at least 75% of all meetings of the Board of Directors and of
the committees, if any, upon which such director served, except Jon H. Beedle,
who attended 50% of all meetings of the Board of Directors.
The Audit Committee, which currently consists of Glenn E. Penisten and Jon H.
Beedle, was established to review, in consultation with the independent
accountants, the Company's financial statements, accounting and other policies,
accounting systems and system of internal controls. The Audit Committee also
recommends the engagement of the Company's independent accountants and reviews
other matters relating to the relationship of the Company with its accountants.
The Audit Committee met one time during the Last Fiscal Year.
The Compensation Committee, which currently consists of Gordon A. Campbell
and Edward L. Gelbach, was established to review and act on matters relating to
compensation levels and benefit plans for key executives of the Company, among
other things. The Compensation Committee met three times during the Last Fiscal
Year.
The Board of Directors currently has no nominating committee or a committee
performing a similar function.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists between the Company's Board of Directors
or Compensation Committee and the Board of Directors or Compensation Committee
of any other company.
Glenn E. Penisten, a director of the Company, is a director of Pinnacle
Systems, Inc. ("Pinnacle"). In March 1994, the Company entered into a
manufacturing agreement with Pinnacle providing for the performance by the
Company's manufacturing division of value-added turnkey services for Pinnacle.
The agreement was entered in the ordinary course of business and the Company
believes that it has terms no less favorable than reasonably could be expected
to be obtained from unaffiliated parties. The agreement term is automatically
renewed for successive one year periods unless terminated by either party on
ninety days' prior written notice. The Company sold approximately $9,692,000 of
services to Pinnacle during 1996 and purchased approximately $350,000 of
inventory from Pinnacle in 1996.
Glenn E. Penisten and Gordon A. Campbell, directors of the Company, are
directors of Reply Corporation ("Reply"). In May 1994, the Company entered into
a manufacturing agreement with Reply providing for the performance by the
Company's manufacturing division of value-added turnkey services for Reply. The
agreement was entered in the ordinary course of business and the Company
believes that it has terms no less favorable than reasonably could be expected
to be obtained from unaffiliated parties. The agreement term is automatically
renewed for successive one year periods unless terminated by either party on
ninety days' prior written notice. The Company sold approximately $2,594,000 of
services to Reply during 1996 and purchased approximately $167,000 of inventory
from Reply in 1996.
COMPENSATION OF DIRECTORS
Directors are reimbursed for their expenses incurred in attending Board
meetings and each non-employee director is paid $4,000 for each meeting
attended. Non-employee directors participate in the 1993 Director Stock Option
Plan (the "Director Plan"). Under the Director Plan, each current non-employee
director has been granted a nonstatutory option to purchase 15,000 shares of
Common Stock which vests or will vest and become exercisable as to one-third of
the shares on each anniversary of its date of grant, based on continued service
as a director. Provided that shares are then available under the Director Plan,
three years following the grant of the initial option, and each year thereafter
so long as a non-employee director continues to serve as a director, each
non-employee director will automatically receive a nonstatutory option to
purchase an additional 5,000 shares of the Company's Common Stock, which option
will vest 100% one year from the date of grant. The exercise price of each
option granted under the Director Plan must be equal to 100% of the fair market
value of the Common Stock on the date
4
<PAGE>
of grant. During the fiscal year ended December 31, 1996, options to purchase
5,000 shares were automatically granted to Directors Glenn E. Penisten, Gordon
A. Campbell, Jon H. Beedle and Edward L. Gelbach in March 1996, which options
have a per share exercise price of $7.00 and became fully vested and exercisable
on March 15, 1997. Options to purchase 15,000 shares granted to Directors Glenn
E. Penisten, Gordon A. Campbell, Jon H. Beedle and Edward L. Gelbach in 1993
each became fully vested and exercisable on March 15, 1996 and have a per share
exercise price of $8.00. Pursuant to the terms of the Director Plan discussed
above, on March 17, 1997, Directors Penisten, Campbell, Beedle and Gelbach were
each automatically granted options to purchase 5,000 shares of the Company's
Common Stock, which options have a per share exercise price of $12.625 and will
vest 100% on March 17, 1998 so long as each director continues to serve.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into a three-year Employment Agreement with W. Donald
Bell, its Chairman, President and Chief Executive Officer. The Employment
Agreement provides for a minimum base salary of $375,000 per year, participation
in all Company annual incentive compensation plans, including the Management
Incentive Program, a lump-sum cash incentive payment (the "EPS Enhancement
Incentive") based on the Company's annual net earnings per share, payment of
premiums for long-term disability insurance, reimbursement for ordinary and
necessary travel and other out-of-pocket expenses, and participation in other
employee benefit plans and programs. In the event that Mr. Bell's employment is
terminated by the Company without cause or in the event of Mr. Bell's
involuntary termination, Mr. Bell shall be entitled to receive his salary and
benefits through at least the expiration of the initial term of employment, cash
payments based on the EPS Enhancement Incentive that Mr. Bell may have earned
during the initial term of employment, and full acceleration of unvested stock
options and restricted stock awards, subject to certain restrictions. In
addition, the Employment Agreement provides for a two-year covenant not to
compete with the Company.
The Company has entered into Management Retention Agreements with W. Donald
Bell, Remo E. Canessa, William A. Murphy, Philip M. Roussey and Robert Sturgeon.
The Management Retention Agreements have three-year terms, subject to extension
in the event their has been a change of control. The Management Retention
Agreements provide that in the event the employee's employment terminates within
12 months following a change of control, then the employee is entitled to
receive the following severance benefits. If the employee is involuntarily
terminated other than for cause, then the employee will receive a cash payment
equal to the employee's base salary, continued Company-paid employee benefits
for one year from the date of the change of control or until the date that the
employee becomes covered under another employer's benefit plans, and full
vesting of unvested stock options. In the event that the employee's employment
is terminated for any reason either prior to the occurrence of a change of
control or after the 12-month period following a change of control, then the
employee is entitled only to receive severance and other benefits under
established Company severance and benefits plans and practices or pursuant to
other agreements with the Company.
PROPOSAL 2
APPROVAL OF AN AMENDMENT TO THE 1988 INCENTIVE STOCK PLAN
The 1988 Incentive Stock Plan (the "Stock Plan") was originally adopted by
the Board of Directors in 1988 and by the shareholders in 1988, amended and
restated in 1993, and approved by the shareholders in 1993. The shareholders
also approved amendments to the Stock Plan in 1994 to increase reserved shares
thereunder and to limit stock option grants to certain employees in accordance
with Section 162(m) of the Internal Revenue Code (the "Code") and amendments in
1995 and 1996 to increase reserved shares thereunder.
PROPOSED AMENDMENT TO THE STOCK PLAN
In January 1997, the Board of Directors increased the shares reserved for
issuance under the Stock Plan by 300,000 shares, bringing the total shares
currently reserved for issuance on exercise of outstanding
5
<PAGE>
options, plus those shares currently available for grant under the Stock Plan,
as of April 3, 1997, to a total of 1,673,281 shares. Proposal 2 seeks
shareholder approval of this amendment.
Stock options play a key role in the Company's ability to recruit, reward and
retain executives and key employees. Companies like Bell Microproducts Inc. have
historically used stock options as an important part of recruitment and
retention packages. The Company competes directly with these companies for
experienced executives and sales personnel and must be able to offer comparable
packages to attract the caliber of individual that the Company believes is
necessary to provide the growth that shareholders desire. The Company's growth
is partly responsible for the need to increase shares issuable under the Stock
Plan. The total number of employees has increased from 462 people as of December
31, 1995 to 650 people as of December 31, 1996.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required to
approve the amendment to the Stock Plan, provided such affirmative vote also
constitutes a majority of the Quorum.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 2.
The essential provisions of the Stock Plan are outlined below.
ADMINISTRATION
The Stock Plan may be administered by the Board of Directors or a committee
designated by the Board, provided that with respect to grants of options to
employees who are also officers or directors of the Company, the Stock Plan
shall be administered by (i) the Board if the Board may administer the Stock
Plan in compliance with Rule 16b-3 with respect to a plan intended to qualify
thereunder or (ii) a committee designated by the Board to administer the Stock
Plan, which committee shall be constituted to comply with the rules governing a
plan intended to qualify under Rule 16b-3 as a discretionary plan. The
administrators of the Stock Plan are referred to as the "Administrator."
ELIGIBILITY; LIMITS ON GRANTS
The Stock Plan provides that options and stock purchase rights may be granted
to employees and consultants. Incentive stock options may be granted only to
employees. The Administrator approves the participants, the time or times at
which options and stock purchase rights shall be granted and the number of
shares to be subject to each option or stock purchase right. In making such
determination, there is taken into account the duties and responsibilities of
the employee, the value of the employee's services, his or her present and
potential contributions to the success of the Company and other relevant
factors.
The Stock Plan places specific limitations on the discretion allowed to the
Administrator in granting options and stock purchase rights to employees. These
limitations are intended to preserve the Company's ability to deduct for federal
income tax purposes the compensation expense relating to stock options and stock
purchase rights granted to certain executive officers under the Stock Plan,
prior to legislation enacted in August 1993. The limitations provide that no
employee shall be granted in any fiscal year of the Company options and stock
purchase rights to purchase more than 200,000 shares.
As of December 31, 1996, there were approximately 650 employees currently
eligible to participate in the Stock Plan, and 147 optionees holding outstanding
options under the Stock Plan.
TERMS OF OPTIONS
The terms of options granted under the Stock Plan are determined by the
Administrator. Each option is evidenced by a stock option agreement between the
Company and the employee or consultant to whom such option is granted and is
normally subject to the following additional terms and conditions:
(a) EXERCISE OF THE OPTION: The Administrator determines when options may
be exercisable. Shares subject to an option generally vest over a period of
four (4) years and become exercisable at the rate of one-quarter (1/4) of
the shares subject to option on each anniversary of the option grant, or for
new employees on each anniversary of their date of hire. The Administrator
may accelerate
6
<PAGE>
the vesting of any outstanding option. The purchase price of the shares
purchased upon exercise of any option shall be paid, at the discretion of the
Administrator, in cash, check, other shares of Common Stock (with some
restrictions), cashless exercise, or other legally permitted consideration.
(b) EXERCISE PRICE: The exercise price under the Stock Plan is determined
by the Administrator, provided that in the case of an incentive stock option,
the exercise price shall not be less than 100% of the fair market value of
the Common Stock on the date the option is granted, and provided further that
in the case of an incentive stock option granted to an employee who, at the
time of grant, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any parent or
subsidiary of the Company, the exercise price shall be no less than 110% of
the fair market value of the Common Stock on the date the option is granted.
(c) TERMINATION OF EMPLOYMENT: If the optionee's status as an employee or
consultant terminates for any reason other than death or disability, an
option under the Stock Plan may be exercised for a period of thirty (30) days
(or such other period of time, not exceeding three (3) months, as is
determined by the Administrator) after such termination (but in no event
later than the date of expiration of the term of the option set forth in the
option agreement) and may be exercised only to the extent such option was
exercisable and vested on the date of termination.
(d) DISABILITY OF OPTIONEE: If an optionee should become totally and
permanently disabled while employed by the Company, an option may be
exercised within three (3) months (or such other period of time, not less
than three (3) nor more than twelve (12) months, as is determined by the
Administrator) after termination of the employment or consulting relationship
due to such disability, but only to the extent such option was exercisable
and vested on the date of termination.
(e) DEATH OF OPTIONEE: If an optionee should die while employed by the
Company or within thirty (30) days after termination as an employee or
consultant, an option may be exercised at any time within six (6) months (or
such other period of time, not less than six (6) nor more than twelve (12)
months, as is determined by the Administrator) after the date of death (but
in no event later than the date of expiration of the term of the option set
forth in the option agreement), but only to the extent such option was
exercisable and vested on the date of termination.
(f) TERMINATION OF OPTIONS: Incentive stock options granted under the
Stock Plan expire no later than ten (10) years from the date of grant and
nonstatutory stock options granted under the Stock Plan expire as determined
by the Administrator. However, in the case of an incentive stock option
granted to an employee who, at the time of such grant, owns stock
representing more than ten percent (10%) of the voting power of all classes
of stock of the Company or any parent or subsidiary of the Company, the term
of the option shall not be greater than five (5) years. Under the form of
option agreement currently used by the company, options generally expire ten
(10) years from the date of grant.
(g) NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS: Options and
stock purchase rights are non-transferable by the optionee other than by will
or by the laws of descent or distribution and are exercisable during the
optionee's lifetime only by the optionee.
(h) OTHER PROVISIONS: The option agreement or restricted stock purchase
agreement may contain such other terms, provisions and conditions not
inconsistent with the Stock Plan as may be determined by the Administrator.
TERMS OF STOCK PURCHASE RIGHTS
The terms of stock purchase rights under the Stock Plan are determined by the
Administrator. Each person offered a stock purchase right shall have a period of
time during which to accept such offer, not exceeding 60 days from the date of
grant. The offer is accepted by execution of a Restricted Stock Purchase
Agreement in a form determined by the Administrator. The Restricted Stock
Purchase Agreement may include a Company right of repurchase of unvested shares
in the event of a purchaser's termination of employment with the Company for any
reason (including death or disability). The repurchase price for shares shall be
the original price paid for the shares by the purchaser. The right of repurchase
shall lapse at such a rate as the Administrator may determine.
7
<PAGE>
Exercise of a stock purchase right decreases the number of shares available
for grant under the Stock Plan by the number of shares as to which the stock
purchase right is exercised. Shares repurchased by the Company shall not be
available for reissuance under the Stock Plan.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
In the event any change is made in the Company's capitalization which results
from a stock split or payment of a stock dividend or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration, appropriate adjustment shall be made in the exercise price and in
the number of shares subject to the option or stock purchase right.
In the event of a proposed dissolution or liquidation of the Company, each
option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may in the exercise of
its discretion, declare that any option shall terminate as of a fixed date, and
may make each option fully vested and exercisable.
In the event of a proposed sale of all or substantially all of the assets of
the Company, or the merger of the Company with or into another corporation, the
options shall be assumed or an equivalent option shall be substituted by the
successor corporation or a parent or subsidiary of such successor corporation,
unless such successor corporation does not agree to such assumption or
substitution, in which case the Board shall make the option fully vested and
exercisable prior to the merger or sale of assets. If the Board makes an option
vested and exercisable prior to the merger or sale of assets, the Board shall
notify the participant that the option shall be fully vested and exercisable for
a period of fifteen days from the date of such notice and the option will
terminate upon the expiration of such period.
AMENDMENT AND TERMINATION
The Board may amend or terminate the Stock Plan from time to time in such
respects as the Board may deem advisable; provided that shareholder approval of
any amendment shall be obtained to the extent necessary to comply with Rule
16b-3 or with Section 422 of the Code (or any successor statute or rule or other
applicable law, rule or regulation, including the requirement of any exchange or
quotation system on which the Common Stock of the Company is listed or quoted).
The Stock Plan will terminate in 1998, unless terminated earlier by the Board.
CERTAIN FEDERAL INCOME TAX INFORMATION
The following is a brief summary of the effect of federal income taxation
upon the optionee or stock purchase right holder and the Company with respect to
the grant and exercise of options and stock purchase rights under the Stock
Plan. This summary does not purport to be complete and does not discuss the tax
consequences of the optionee's or stock purchase right holder's death or the
income tax laws of any municipality, state or foreign country in which an
optionee or stock purchase right holder may reside.
Options granted under the Stock Plan may be either "incentive stock options,"
as defined in Section 422 of the Code, or nonstatutory options.
An optionee who is granted an incentive stock option generally will not
recognize taxable income either at the time the option is granted or upon its
exercise, although the exercise may subject the optionee to the alternative
minimum tax. Upon the sale or exchange of the shares more than two years after
grant of the option and one year after exercising the option, any gain or loss
will be treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee will recognize ordinary income at the time of sale
or exchange equal to the difference between the exercise price and the lower of
(i) the fair market value of the shares at the date of the option exercise or
(ii) the sale price of the shares. In such event, the Company generally will be
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Any gain or loss recognized on such a premature disposition of the
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain or loss, depending on the holding
period.
An optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory option. However, upon its exercise, the optionee will
recognize taxable income generally measured by the
8
<PAGE>
excess of the then fair market value of the shares purchased over the purchase
price. Any taxable income recognized in connection with an exercise of a
non-statutory option by an optionee who is also an employee of the Company will
be subject to tax withholding by the Company. Upon sale of such shares by the
optionee, any difference between the sale price and the optionee's purchase
price, to the extent not recognized as taxable income as described above, will
be treated as long-term or short-term capital gain or loss, depending on the
holding period.
Generally, the Company will be entitled to a tax deduction in the same amount
as the ordinary income recognized by the optionee with respect to shares
acquired upon exercise of a nonstatutory option.
Stock purchase rights will generally be taxed in the same manner as
nonstatutory stock options. However, restricted stock is generally purchased
upon exercise of a stock purchase right. At the time of purchase, restricted
stock is subject to a "substantial risk of forfeiture" within the meaning of
Section 83 of the Code. As a result, the purchaser will not recognize ordinary
income at the time of purchase. Instead, the purchaser will recognize ordinary
income on the dates when the stock ceases to be subject to a substantial risk of
forfeiture. The stock will generally cease to be subject to a substantial risk
of forfeiture when it is no longer subject to the Company's right to repurchase
the stock upon the purchaser's termination of employment with the Company (i.e.,
as it "vests"). At such times, the purchaser will recognize the ordinary income
measured as the difference between the purchase price and the fair market value
of the stock on the date the stock is no longer subject to a substantial risk of
forfeiture. However, a purchaser may accelerate to the date of purchase his or
her recognition of ordinary income, if any, and the beginning of any capital
gain holding period by timely filing an election pursuant to Section 83(b) of
the Code. In such event, the ordinary income recognized, if any, would be equal
to the difference between the purchase price and the fair market value of the
stock on the date of purchase, and the capital gain holding period would
commence on the purchase date. The ordinary income recognized by a purchaser who
is an employee will be treated as wages and will be subject to tax withholding
by the Company out of the current compensation of the purchaser. If such current
compensation is insufficient to pay the withholding tax, the purchaser will be
required to make direct payment to the Company for the tax liability.
PARTICIPATION IN THE STOCK PLAN
The grant of options and stock purchase rights under the Stock Plan to
eligible employees and consultants, including the Company's Chief Executive
Officer and each of the other most highly compensated executive officers of the
Company whose aggregate cash compensation exceeded $100,000 during the fiscal
years ended December 31, 1996, 1995 and 1994 (the "Named Executive Officers"),
is subject to the discretion of the Administrator. As of the date of this proxy
statement, there has been no determination by the Administrator with respect to
future awards under the Stock Plan. The following table sets forth additional
information with respect to options granted under the Stock Plan during the Last
Fiscal Year to all current executive officers as a group and to all other
employees. The term of options under the Stock Plan (other than those granted to
10% shareholders, as to which the term is five years from date of grant) is
generally ten years from date of grant.
AVERAGE % OF TOTAL
OPTIONS EXERCISE GRANTS UNDER
IDENTITY OF GROUP GRANTED (#) PRICE ($) THE STOCK PLAN
- ------------------------------------------ ----------- ---------- --------------
W. Donald Bell ............................ 50,000 $6.50 4.43%
Phillip M. Roussey ........................ 30,000 $6.50 2.66%
Robert J. Sturgeon ........................ 24,000 $6.50 2.13%
Remo E. Canessa ........................... 40,000 $7.03 3.55%
William A. Murphy ......................... 70,000 $6.50 6.21%
All Current Executive Officers as a group . 214,000 $6.71 19%
All Other Employees as a group ............ 912,800 $6.98 81%
9
<PAGE>
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of the Company for the current
fiscal year ending December 31, 1997. Price Waterhouse LLP has audited the
Company's financial statements annually since 1988. In the event that a majority
of the Votes Cast are against the ratification, the Board of Directors will
reconsider its selection.
A representative of Price Waterhouse LLP will be present at the meeting to
make a statement if such representative desires to do so and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
OTHER INFORMATION
SHARE OWNERSHIP OF DIRECTORS, OFFICERS AND
CERTAIN BENEFICIAL OWNERS
<TABLE>
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the Record Date by (i) each
shareholder known by the Company to be a beneficial owner of more than 5% of the
Company's Common Stock; (ii) each director; (iii) each of the Named Executive
Officers; and (iv) all current executive officers and directors of the Company
as a group. Unless otherwise indicated, officers and directors can be reached at
the Company's principal executive offices.
<CAPTION>
BENEFICIAL OWNERSHIP
----------------------
BENEFICIAL OWNER SHARES PERCENT(1)
- --------------------------------------------------------------- ----------- ----------
<S> <C> <C>
PNC Bank Corp.(2) .............................................. 582,300 6.8%
One PNC Plaza
249 5th Avenue
Pittsburgh, PA 15222-2707
Travelers Group Inc.(3) ........................................ 492,900 5.8%
388 Greenwich Street
New York, NY 10013
W. Donald Bell(4) .............................................. 729,348 8.6%
Philip M. Roussey(5) ........................................... 194,612 2.3%
Gordon A. Campbell(6) .......................................... 75,014 *
c/o Techfarm, Inc.
404 Tasman Drive
Sunnyvale, CA 94089
Glenn E. Penisten(7) ........................................... 73,097 *
Alpha Venture Partners
545 Middlefield Road, Suite 170
Menlo Park, CA 94025
Edward L. Gelbach(8) ........................................... 64,439 *
Jon H. Beedle(9) ............................................... 20,000 *
6537 Jack Rabbit
Scottsdale, AZ 85253-6901
William A. Murphy(10) .......................................... 17,250 *
Robert J. Sturgeon(11) ......................................... 12,770 *
Remo E. Canessa(12) ............................................ 7,750 *
All directors and executive officers as a group (9 persons)(13) 1,194,280 13.8%
(Footnotes on following page)
10
<PAGE>
(Footnotes for table on previous page)
<FN>
- -------------
* Less than 1%
(1) Based on 8,523,966 shares of common stock outstanding on April 3, 1997.
(2) Represents shares held as disclosed on Schedule 13G filed on February 14,
1997. PNC Bank Corp., along with its subsidiaries PNC Bancorp, Inc., PNC
Bank, National Association, PNC Asset Management Group, Inc. and Provident
Capital Management, Inc., reported sole voting power over 567,600 shares
and sole dispositive power over 582,300 shares.
(3) Represents shares held as disclosed on Schedule 13G filed on January 23,
1997. Travelers Group Inc. shares voting and dispositive power with respect
to 492,900 shares with its wholly-owned subsidiary, Smith Barney Holding
Inc., and shares voting and dispositive power with respect to 492,000
shares with its wholly-owned subsidiary, Smith Barney Mutual Funds
Management Inc.
(4) Represents 724,348 shares held by W. Donald Bell and Lynne F. Bell,
Trustees of the Bell Family Trust U/D/T dated April 26, 1991, and excludes
40,000 shares held by Mr. Bell's children. Also includes 5,000 shares
subject to stock options exercisable within 60 days after April 3, 1997.
(5) Includes 177,612 shares held by Philip M. Roussey and Mounawar Roussey,
Trustees of the Roussey Family Trust U/D/T dated November 8, 1991. Also
includes 17,000 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(6) Includes 6 shares held by Diversified Growth Associates, of which Mr.
Campbell is a Limited Partner, and 45 shares held by Diversified Growth
Management, of which Mr. Campbell is also a Limited Partner. Also includes
20,000 shares subject to stock options exercisable within 60 days after
April 3, 1997.
(7) Also includes 20,000 shares subject to stock options exercisable within 60
days after April 3, 1997.
(8) Includes 20,000 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(9) Includes 20,000 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(10) Includes 12,250 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(11) Includes 12,200 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(12) Includes 7,750 shares subject to stock options exercisable within 60 days
after April 3, 1997.
(13) See footnotes (4) - (12).
</FN>
</TABLE>
REPORT OF THE COMPENSATION COMMITTEE
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON EXECUTIVE
COMPENSATION
Decisions on compensation of the Company's executive officers are made by the
Compensation Committee of the Board of Directors. The members of the
Compensation Committee, Messrs. Edward Gelbach and Gordon Campbell, are
non-employee directors. Decisions by the Compensation Committee relating to the
compensation of the Company's executive officers are reviewed by the full Board
(which did not modify or reject any Compensation Committee decisions during
1996), except for decisions about awards under the Company's Stock Plan, which
decisions must be made solely by the Committee in order for the grants under
such Stock Plan to satisfy Rule 16b-3.
Compensation Philosophy and Relationship of Performance. This report reflects
the Compensation Committee's executive officer compensation philosophy for the
year ended December 31, 1996 as endorsed by the Board of Directors. The
resulting actions taken by the Company are shown in the compensation tables
supporting this report. The Compensation Committee either approves or recommends
to the Board of Directors compensation levels and compensation components for
the executive officers. With regard to compensation actions affecting the Chief
Executive Officer, all of the non-employee members of the Board of Directors
acted as the approving body.
The Compensation Committee's executive compensation policies are designed to
enhance the financial performance of the Company, and thus shareholder value, by
aligning the financial interests of the key executives with those of
shareholders.
11
<PAGE>
The executive compensation program is viewed in total considering all of the
component parts: base salary, annual performance incentives, benefits (including
a car allowance for certain of the Named Executive Officers), and long-term
incentive opportunity in the form of stock options and stock ownership. The
annual compensation components consist generally of equal or lower base salaries
than those of companies within the industry combined with incentive plans based
on the Company's financial performance that can result in total compensation
generally in line with those at comparable companies. Long-term incentives are
tied to stock performance through the use of stock options. The Compensation
Committee's position is that stock ownership by management is beneficial in
aligning management's and shareholders' interests in the enhancement of
shareholder value. Overall, the intent is to have more significant emphasis on
variable compensation components and less on fixed cost components. The
Committee believes this philosophy and structure are in the best interests of
the shareholders.
Executive compensation for fiscal 1996 primarily consisted of base salary and
performance incentives paid in the form of cash for such period.
Annual Incentive Arrangements. The Company has adopted a Management Incentive
Program (the "Program") under the Stock Plan which provides annual incentive
compensation in the form of stock options to key employees, including the Named
Executive Officers, who by the nature of their positions are deemed sufficiently
accountable to impact directly the financial results of the Company. The Program
is approved by the Compensation Committee, whose members are not eligible to
participate in the Program.
Options granted under the Program typically have a term of ten (10) years and
vest as to 10% of the shares each year from the date of grant. If, however, the
optionee's division meets annual plan goals established by the Board of
Directors for such year, which goals are similar to the performance goals
established for annual cash incentive compensation discussed below, then 25% of
the shares subject to the option shall vest in each such year.
In addition to stock options granted under the Program, the Committee
believes that key executives should have a significant proportion of total cash
compensation subject to specific strategic and financial measurements. At the
beginning of each fiscal year, or upon an individual being appointed an
executive officer, the Committee sets a target bonus amount for each executive
officer expressed as a percentage of the executive's base salary. Performance
goals for purposes of determining annual incentive compensation are established,
which include net earnings and other strategic and financial measurements.
Generally, the target level of net earnings and return on sales percentages is
assigned a significantly greater weight than the aggregate weight assigned to
all remaining factors. Senior management, including the Named Executive
Officers, have the potential to earn significantly higher levels of incentive
compensation if the Company exceeds its targets. The target incentive
compensation levels established by the Compensation Committee for 1996 expressed
as a percentage of base salary for Messrs. Roussey, Sturgeon, Canessa and Murphy
were approximately 50%.
The performance goals established at the beginning of 1996 were based on
several strategic and financial measurements including a target level of net
earnings and a return on sales percentages goal and attainment of certain other
objectives. The earnings goals were assigned a significantly greater weight than
the aggregate weight assigned to the remaining factors. Based on the evaluation
of the above criteria, the Compensation Committee awarded incentive payments for
1996 at approximately 39% of base salary for each Named Executive Officer.
Stock Options. The Compensation Committee of the Board of Directors generally
determines stock option grants to eligible employees including the Named
Executive Officers. The Committee believes that options granted to management
reinforce the Committee's philosophy that management compensation should be
closely linked with shareholder value. The Stock Plan is more fully described in
the section of this Proxy Statement entitled "Proposal 2." Stock options have
been granted to approximately 100% of the Company's management and key
employees.
Other Compensation Plans. The Company has adopted certain broad-based
employee benefit plans in which all employees, including the Named Executive
Officers, are permitted to participate on the same terms and conditions relating
to eligibility and generally subject to the same limitations on the amounts
12
<PAGE>
that may be contributed or the benefits payable under those plans. Under the
Company's Personal Investment Plan (the "401(k) Plan"), which is a defined
contribution plan qualified under Sections 401(a) and 401(k) of the Code,
participants, including the Named Executive Officers, can contribute a
percentage of their annual compensation. Although the 401(k) Plan allows for the
Company to make matching contributions, the Company did not make a matching
contribution for participants in 1996. The Company also has adopted the Purchase
Plan under Section 423 of the Code, pursuant to which participating employees
can purchase the Company's stock at a discount through payroll deductions.
Stock Option Repricing. In February 1996, the Compensation Committee
authorized the reduction of the exercise price under options granted to
employees, including executives, which had an exercise price higher than the
current market price of the Company's Common Stock at the time of the repricing
($6.50). The options granted to employees were designed to provide incentive to
the employees to work to achieve long term success for the Company. The decline
in the market price of the Company's Common Stock since the date the options
were granted frustrated the purpose of the options and the Committee deemed it
to be in the best interests of the Company to allow the reissue of the options
to reduce the exercise price to the market price at the time of the reissue. All
repriced options are subject to a new four-year vesting period, beginning on the
date of reissue.
Mr. Bell's 1996 Compensation. Compensation for the Chief Executive Officer
aligns with the philosophies and practices discussed above for executive
officers in general. All compensation determinations and stock option grants to
the Chief Executive Officer are reviewed by the Compensation Committee with the
Board of Directors. Mr. Bell is not eligible to participate in the Employee
Stock Purchase Plan. At the beginning of each fiscal year, the Compensation
Committee sets a target bonus amount for the Chief Executive Officer. The target
incentive compensation level established for Mr. Bell for 1996, expressed as a
percentage of his base salary, was 75%. For 1996, the Chief Executive Officer's
performance goals were established based on strategic and financial
measurements, including a target level of net earnings. The target level of net
earnings was assigned a significantly greater weight than the aggregate weight
assigned to the remaining factors. In evaluating Mr. Bell's performance for the
purpose of determining his incentive compensation for such period, which
included the grant of 50,000 reissued stock options pursuant to the February 7,
1996 repricing, the Compensation Committee considered his leadership and the
Company's performance against its financial and strategic objectives. Based on
the evaluation, the Compensation Committee decided that Mr. Bell's performance
partially met the goals established for him for the fiscal year, and awarded Mr.
Bell an incentive payment of 63.6% of his salary. In December 1996, the Company
entered into an Employment Agreement with Mr. Bell, which reflects the Company's
desire to retain and motivate him with performance-based and long-term
incentives. For specific data regarding Mr. Bell's 1996 compensation, see
"Executive Compensation--Summary Compensation Table."
COMPENSATION COMMITTEE
Gordon A. Campbell
Edward L. Gelbach
13
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and the four other most highly paid executive officers during
the three fiscal years ended December 31, 1996, 1995 and 1994.
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
--------------------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($) OPTIONS (#) (#)
- ---------------------------------- -------- ---------- --------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell 1996 367,692 238,480 3,600 (1) 50,000 (2) 50,581 (4)
President, Chief Executive 1995 295,477 119,280 3,600 (1) 30,000 (3) 48,791 (4)
Officer and Chairman of the Board 1994 235,546 84,174 3,600 (1) -- 32,614 (4)
Philip M. Roussey. 1996 185,462 80,119 3,600 (1) 30,000 (2) --
Senior Vice President of 1995 155,984 55,063 3,600 (1) 30,000 (3) --
Computer Products Marketing 1994 132,058 46,292 3,600 (1) -- --
Robert J. Sturgeon 1996 119,077 49,502 -- 24,000 (2) --
Vice President of 1995 113,308 33,930 -- 14,000 (3) --
Operations 1994 104,019 36,005 -- -- --
Remo E. Canessa 1996 90,000 38,157 -- 40,000 (2) --
Chief Financial Officer, Vice 1995 80,640 24,812 -- 10,000 (3) --
President of Finance, Corporate 1994 75,000 18,590 -- 5,000 (3) --
Controller and Secretary
William A. Murphy(5) 1996 190,000 70,475 3,600 (1) 70,000 (2) 85,244 (6)
Senior Vice President of 1995 109,840 33,250 1,868 (1) 70,000 (3) 19,690 (6)
Industrial Sales 1994 -- -- -- -- --
<FN>
- ------------
(1) Represents a car allowance paid by the Company.
(2) Includes options to purchase 50,000 shares, 30,000 shares, 14,000 shares,
20,000 shares and 70,000 shares reissued to Messrs. Bell, Roussey, Sturgeon,
Canessa and Murphy, respectively, in connection with the option repricing on
February 7, 1996.
(3) Represents options that were cancelled and repriced on February 7, 1996 to
$6.50 per share.
(4) Consists of premiums paid by the Company on a term life insurance policy
(face amount of $1.0 million in 1996), the proceeds of which are payable to
the Company and to designated beneficiaries of Mr. Bell.
(5) In June 1995, Mr. Murphy became an employee of the Company at an annual base
salary of $190,000.
(6) Represents relocation expenses paid by the Company.
</FN>
</TABLE>
14
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
The following table provides information with respect to option grants in the
Last Fiscal Year to the Named Executive Officers.
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE OR PRICE APPRECIATION
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION FOR OPTION TERM(2)
----------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
- ------------------- ----------- --------------- ------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell ..... 50,000 4.43% $6.50 2/7/06 $204,391 $517,966
Philip M. Roussey .. 30,000 2.66% $6.50 2/7/06 $122,635 $310,780
Robert J. Sturgeon . 24,000 2.13% $6.50 2/7/06 $ 98,108 $248,624
Remo E. Canessa ... 40,000 3.55% $6.50- 2/7/01- $112,084 $267,571
$8.625 2/7/06
William A. Murphy .. 70,000 6.21% $6.50 2/7/01- $205,928 $501,467
2/7/06
<FN>
- ------------
(1) Represents number of shares granted under stock options that were reissued
in connection with the stock option repricing on February 7, 1996. The
Company did not grant stock appreciation rights or restricted stock awards
in fiscal 1996.
(2) The "potential realizable value" shown represents the potential gains based
on annual compound stock price appreciation of 5 percent and 10 percent from
the date of grant through the full 10-year option term, net of exercise
price, but before taxes associated with exercise. The amounts represent
certain assumed rates of appreciation only, based on the Securities and
Exchange Commission rules. Actual gains, if any, on stock option exercises
are dependent on the future performance of the Common Stock, overall market
conditions and the option holders' continued employment through the vesting
period. The amounts reflected in this table may not necessarily be achieved
and do not reflect the Company's estimate of future stock price growth.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
The following table provides information with respect to option exercises in
the Last Fiscal Year by the Named Executive Officers. All unexercised options
were out-of-the-money at fiscal year end, based on the market value of the
Company's stock of $8.875 on December 31, 1996.
<CAPTION>
VALUE OF
SHARES TOTAL NUMBER OF UNEXERCISED
ACQUIRED ON VALUE UNEXERCISED OPTIONS AT IN-THE-MONEY OPTION AT
NAME EXERCISE (#) REALIZED ($) FISCAL YEAR END(1) FISCAL YEAR END
- ------------------- ------------ ------------ ----------------------------- -----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell ..... -- -- -- 50,000 -- $118,750
Philip M. Roussey .. -- -- 12,000 38,000 $16,500 $ 82,250
Robert J. Sturgeon . 5,000 $37,500(2) 7,400 33,600 $10,175 $ 70,200
Remo E. Canessa ... -- -- -- 40,000 -- $ 73,750
William A. Murphy .. -- -- -- 70,000 -- $166,250
<FN>
- ------------
(1) The repriced options replaced options that were cancelled and are no longer
exercisable.
(2) Based on a market value of the underlying securities of $8.625 at June 6,
1996 and $8.00 at December 11, 1996.
</FN>
</TABLE>
15
<PAGE>
<TABLE>
The following table summarizes stock options granted to the executive
officers of the Company that have been repriced during the past ten fiscal
years.
TEN-YEAR OPTION REPRICINGS
<CAPTION>
NUMBER OF MARKET
SECURITIES PRICE OF EXERCISE LENGTH OF
UNDERLYING STOCK AT PRICE AT NEW ORIGINAL OPTION
OPTIONS TIME OF TIME OF EXERCISE TERM REMAINING
REPRICING REPRICED REPRICING REPRICING PRICE AT DATE OF
NAME DATE (#) ($) ($) ($) REPRICING
- ----------------------------------- ----------- ------------ ----------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell ..................... 2/7/96 20,000 6.50 8.25 6.50 7 years 156 days
President, Chief Executive Officer 2/7/96 30,000 6.50 9.625 6.50 9 years 126 days
and Chairman of the Board
Phillip M. Roussey ................. 2/7/96 30,000 6.50 9.625 6.50 9 years 126 days
Senior Vice President of
Computer Products Marketing
Robert J. Sturgeon ................. 2/7/96 14,000 6.50 9.625 6.50 9 years 126 days
Vice President of Operations
Remo E. Canessa .................... 2/7/96 5,000 6.50 9.25 6.50 2 years 279 days
Chief Financial Officer, Vice 2/7/96 5,000 6.50 11.00 6.50 3 years 5 days
President of Finance, Corporate 2/7/96 5,000 6.50 9.50 6.50 4 years 106 days
Controller and Secretary 2/7/96 5,000 6.50 9.625 6.50 4 years 126 days
William A. Murphy ................. 2/7/96 27,288 6.50 9.6875 6.50 9 years 132 days
Senior Vice President of 2/7/96 35,000 6.50 9.6875 6.50 4 years 132 days
Industrial Sales 2/7/96 7,712 6.50 9.6875 6.50 9 years 132 days
</TABLE>
16
<PAGE>
PERFORMANCE GRAPH
<TABLE>
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, from the date of the final
prospectus for the initial public offering of the Company's Common Stock (June
15, 1993) through 1996 fiscal year end (December 31, 1996) for Bell
Microproducts Inc., the S&P 500 Composite Index (the "S&P 500") and the Pacific
Stock Exchange Technology Index (the "PSE High Tech Index"). The graph assumes
that $100 was invested in the Company's Common Stock on June 15, 1993 at the
initial public offering price and in the S&P 500 and the PSE High Tech Index at
the closing price on June 15, 1993. Note that historic stock price performance
is not necessarily indicative of future stock price performance. The Company's
stock price on December 31, 1996 was $8.875.
The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T
<CAPTION>
Total Return Analysis
-------------------------
<S> <C> <C> <C> <C> <C>
6/15/93 12/31/93 12/30/94 12/29/95 12/31/96
Bell Microproducts Inc. 100 102 143 97 118
PSI Hi-Tech Index 100 112 135 191 230
S&P 500 100 106 107 148 182
<FN>
Source: Carl Thompson Associates www.ctaonline.com (303) 494-5472. Data from Bloomberg Financial Markets
</FN>
</TABLE>
17
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires that directors, certain officers
of the Company and ten percent shareholders file reports of ownership and
changes in ownership with the Securities and Exchange Commission (the "SEC") as
to the Company's securities beneficially owned by them. Such persons are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file.
Based solely on its review of copies of Forms 3 and 4 and amendments thereto
furnished to the Company pursuant to Rule 16a-3(e) and Forms 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
and any written representations referred to in Item 405(b)(2)(i) of Regulation
S-K stating that no Forms 5 were required, the Company believes that, during the
Last Fiscal Year, all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent shareholders were complied with,
except for two late Form 4 filings by Robert J. Sturgeon, resulting in two
purchase transactions not being reported on a timely basis, two late Form 4
filings by Philip M. Roussey, resulting in five purchase transactions not being
reported on a timely basis, and a late Form 3 filing by William A. Murphy.
FINANCIAL STATEMENTS
The Company's Annual Report to Shareholders for the last fiscal year is being
mailed with this proxy statement to shareholders entitled to notice of the
meeting. The Annual Report includes the consolidated financial statements,
unaudited selected financial data and management's discussion and analysis of
financial condition and results of operations.
OTHER MATTERS
The Company knows of no other matters to be submitted to the meeting. If any
other matters properly come before the meeting, it is the intention of the
persons named in the accompanying proxy to vote the shares represented thereby
on such matters in accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
San Jose, California
April 17, 1997
18
<PAGE>
Appendix A
1988 Incentive Stock Plan
<PAGE>
BELL MICROPRODUCTS INC.
1988 INCENTIVE STOCK PLAN
(As proposed to be amended as of May 21, 1997)
1. Purposes of the Plan. The purposes of this Incentive Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Administrator and as
reflected in the terms of the written option agreement. The Administrator may
also grant Stock Purchase Rights under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Committee" shall mean a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(e) "Common Stock" shall mean the Common Stock of the Company.
(f) "Company" shall mean Bell Microproducts, Inc., California
corporation.
(g) "Consultant" shall mean any person who is engaged by the Company or
any Parent or Subsidiary to render consulting ser vices and is compensated for
such consulting services; provided that the term Consultant shall not include
directors who are not compensated for their services or are paid only a
director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of
<PAGE>
service as an Employee or Consultant. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of sick leave,
military leave, or any other leave of absence approved by the Board; provided
that such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.
(i) "Employee" shall mean any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(j) "Incentive Stock Option" shall mean an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code.
(k) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(l) "Option" shall mean a stock option granted pursuant to the Plan.
(m) "Optioned Stock" shall mean the Common Stock subject to an Option or
Stock Purchase Right.
(n) "Optionee" shall mean an Employee who receives an Option or Stock
Purchase Right.
(o) "Parent" shall mean a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1988 Incentive Stock Plan.
(q) "Purchaser" shall mean an Employee or Consultant who exercises a
Stock Purchase Right.
(r) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(s) "Stock Purchase Right" shall mean a right, other than an Option, to
purchase Common Stock pursuant to the Plan.
(t) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
-2-
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and/or
sold under the Plan is 2,037,670 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. However, any shares sold under the Plan and
subsequently repur chased by the Company shall not be available for new issuance
pursuant to the Plan.
4. Administration of the Plan.
(a) Composition of Administrator.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") or any successor rule thereto, as in effect at the time that
discretion is being exercised with respect to the Plan ("Rule 16b-3") and by the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and the Code
(collectively, the "Applicable Laws"), the Plan may (but need not) be
administered by different bodies with respect to Directors, Officers who are not
Directors, and Employees who are neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers Subject to
Section 16(b). With respect to Option or Stock Purchase Right grants made to
Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan intended to
qualify as a discretionary plan under Rule 16b-3, or (B) a committee designated
by the Board, which committee shall be constituted to comply with the rules
governing a plan intended to qualify as a discretionary plan under Rule 16b-3.
Once appointed, such committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the committee and appoint additional members, remove
members (with or without cause) and substitute new members, fill vacancies
(however caused), and remove all members of the committee and thereafter
directly administer the Plan, all to the extent permitted by the rules governing
a plan intended to qualify as a discretionary plan under Rule 16b-3.
-3-
<PAGE>
(iii) Administration With Respect to Other Persons. With respect to
Option or Stock Purchase Right grants made to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board of (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan,
the Administrator shall have the authority, in its discretion: (i) to grant
Incentive Stock Options, Nonstatutory Stock Options and Stock Purchase Rights;
(ii) to determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (iii) to
determine the exercise price per Share of Options or Stock Purchase Rights to be
granted, which exercise price shall be determined in accordance with Section
8(a) of the Plan; (iv) to determine the Employees or Consultants to whom, and
the time or times at which, Options or Stock Purchase Rights shall be granted
and the number of shares to be represented by each Option or Stock Purchase
Right; (v) to interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and provisions of
each Option or Stock Purchase Right granted (which need not be identical) and,
with the consent of the holder thereof, modify or amend each Option or Stock Pur
chase Right; (viii) to accelerate or defer (with the consent of the Optionee)
the exercise date of any Option consistent with the provisions of Section 5 of
the Plan; (ix) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option or Stock Purchase Right
previ ously granted by the Administrator; and (x) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees, Purchasers and any other holders of any Options or Stock Purchase
Rights granted under the Plan.
-4-
<PAGE>
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be granted
only to Employees or Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option or Stock
Purchase Right may, if he is otherwise eligible, be granted additional Options
or Stock Purchase Rights, provided that:
(i) No Employee shall be granted, in any fiscal year of the Company,
Options and Stock Purchase Rights to purchase more than 200,000 Shares.
(ii) The limitation set forth in Section 5(a)(i) shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12; and
(iii) If an Option or Stock Purchase Right is cancelled (other than
in connection with a transaction described in Section 12), the cancelled Option
or Stock Purchase Right will be counted against the limit set forth in Section
5(a)(i). For this purpose, if the exercise price of an Option or Stock Purchase
Right is reduced, the transaction will be treated as a cancellation of the
Option or Stock Purchase Right and the grant of a new Option or Stock Purchase
Right.
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Options shall be taken into account in
the order in which they were granted, and the fair market value of the Shares
shall be determined as of the time the Option with respect to such Shares is
granted.
(d) The Plan shall not confer upon any Optionee or Purchaser any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
-5-
<PAGE>
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Sec tion 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Incentive Stock Option shall be ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Incentive Stock Option Agreement. However, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Option shall be five (5) years from the date of grant thereof or such
shorter term as may be provided in the Incentive Stock Option Agreement. The
term of each Nonstatutory Stock Option shall be determined by the Administrator.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option or Stock Purchase Right shall be such price as is
determined by the Administrator, but shall be subject to the following:
(i) In the case of any Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the fair
market value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price shall be
no less than 100% of the fair market value per Share on the date of grant.
(ii) In the case of any Nonstatutory Stock Option or Stock Purchase
Right granted to any person, the per Share exercise price shall be such price as
is determined by the Administrator.
For purposes of this Section 8(a), in the event that an Option is amended to
reduce the exercise price, the date of grant of such Option shall thereafter be
considered to be the date of such amendment.
-6-
<PAGE>
(b) The fair market value shall be determined by the Administrator in
its discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices (or the closing price per share if the Common Stock is listed on
the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant, as reported
in The Wall Street Journal (or if not so reported, as otherwise reported by the
NASDAQ System) or, in the event the Common Stock is listed on a stock exchange,
the fair market value per Share shall be the closing price on such exchange on
the day of determination, as reported in The Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option or Stock Purchase Right, includ ing the method of payment,
shall be determined by the Administrator and may consist entirely of: (i) cash,
(ii) check, (iii) promissory note, (iv) other shares of Common Stock which (a)
either have been owned by the Optionee or Purchaser for more than six (6) months
on the date of surrender or were not acquired, directly or indirectly, from the
Company, and (b) have a fair market value on the date of surrender not greater
than the aggregate exercise price of the Shares as to which said Option or Stock
Purchase Right shall be exercised, (v) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect an exercise of the Option or
Stock Purchase Right and delivery to the Company of the sale or loan proceeds
required to pay the exercise price, or (vi) any combination of such methods of
payment, or (vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted under Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment
-7-
<PAGE>
may, as authorized by the Administrator, consist of any consideration and method
of payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. In the event that the
exercise of an Option is treated in part as the exercise of an Incentive Stock
Option and in part as the exercise of a Nonstatutory Stock Option pursuant to
Section 5(b), the Company shall issue a separate stock certificate evidencing
the Shares treated as acquired upon exercise of an Incentive Stock Option and a
separate stock certificate evidencing the Shares treated as acquired upon
exercise of a Nonstatutory Stock Option, and shall identify each such
certificate accordingly in its stock transfer records. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Except as provided in Section 3 of the Plan, exercise of an Option in
any manner shall result in a decrease in the number of Shares which thereafter
may be available, both for purposes of the Plan and for sale under the Option,
by the number of Shares as to which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event of
termination of an Optionee's Continuous Status as an Employee or Consultant,
such Optionee may, but only within thirty (30) days (or such other period of
time, not exceeding three (3) months, as is determined by the Administrator)
after the date of such termination (but in no event later than the date of
expiration of the term of such Option as set forth in the Option Agreement),
exercise his Option to the extent that he was entitled to exercise it at the
date of such termination. To the extent that he was not entitled to exercise the
Option at the date of such termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status as an
Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within three (3)
months (or such other period of time not less than three (3) months nor more
-8-
<PAGE>
than twelve (12) months as is determined by the Administrator) after the date of
such termination (but in no event later than the date of expiration of the term
of such Option as set forth in the Option Agreement), exercise his Option to the
extent that he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. Notwithstanding the provisions of Section 9(b)
above, in the event of (i) the death of an Optionee during the term of his
Option, where such Optionee is at the time of his death an Employee or
Consultant of the Company and such Optionee shall at the date of death have been
in Continuous Status as an Employee or Consultant since the date of grant of the
Option, or (ii) the death of an Optionee within thirty (30) days after the
termination of such Optionee's Continuous Status as an Employee or Consultant,
then the Option may be exercised at any time within six (6) months (or such
other period of time not less than six (6) months nor more than twelve (12)
months as determined by the Administrator) following the date of death (but in
no event later than ten years from the date of grant of the Option), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent that the Option was vested as
of the date of termination of employment, and the Optionee was entitled to
exercise it at the date of ter mination of employment. To the extent that the
Option was not vested or the Optionee was not entitled to exercise the Option,
at the date of such termination of employment, or if the Optionee does not
exercise such Option within the time specified herein, the Option shall
terminate.
10. Stock Purchase Rights.
(a) Rights to Purchase. After the Administrator determines that it will
offer an Employee or Consultant the right to purchase Shares under the Plan, it
shall advise the offeree in writing of the terms, conditions and restrictions
relating to the offer, including the number of Shares that such person shall be
entitled to purchase, and the time within which such person must accept such
offer, which shall in no event exceed sixty (60) days from the date upon which
the Administrator made the determination to grant the Stock Purchase Right. The
offer shall be accepted by execution of a Restricted Stock Purchase Agreement in
the form determined by the Administrator.
-9-
<PAGE>
(b) Issuance of Shares. Forthwith after payment therefore, the Shares
purchased shall be duly issued; provided, however, that the Administrator may
require that the Purchaser make adequate provision for any Federal and State
withholding obligations of the Company as a condition to such purchase.
(c) Repurchase Agreement and Repurchase Option. Unless the Administrator
determines otherwise, and subject to this Plan, a Restricted Stock Purchase
Agreement shall govern the purchase of Shares pursuant to a Stock Purchase Right
and shall grant the Company a repurchase option exercisable upon the voluntary
or involuntary termination of the Purchaser's employment with the Company for
any reason (including death or disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the Purchaser and may be paid by cancellation of any
indebtedness of the Purchaser to the Company. The repurchase option shall lapse
at such a rate as the Administrator may determine.
(d) Other Provisions. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator.
(e) Rights as a Shareholder. A Stock Purchase Right shall be deemed to
have been exercised when full payment for the Shares to be purchased thereunder
has been received by the Company. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or to receive dividends or any other rights as a share holder shall
exist with respect to shares, notwithstanding the exercise of a Stock Purchase
Right. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the Stock Purchase Right is exercised, except
as provided in Section 12 of the Plan.
(f) Shares Available Under the Plan. Exercise of a Stock Purchase Right
in any manner shall result in a decrease in the number of Shares that thereafter
shall be available, both for purposes of the Plan and for sale under the Stock
Purchase Right provisions, by the number of Shares as to which the Stock
Purchase Right is exercised. Shares repurchased by the Company pursuant to
Section 10(c) hereof shall not be available for reissuance under the Plan.
11. Non-Transferability of Options and Stock Purchase Rights. Options and
Stock Purchase Rights may not be sold, pledged,
-10-
<PAGE>
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Stock Purchase Right, and
the number of shares of Common Stock which have been authorized for issuance
under the Plan but as to which no Options or Stock Purchase Rights have yet been
granted or which have been returned to the Plan pursuant to Section 3, as well
as the price per share of Common Stock covered by each such outstanding Option
or Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option or Stock Purchase Right.
In the event of the proposed dissolution or liquidation of the Company,
the Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board, and give each Optionee the right to
exercise his Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, the Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless such successor or
corporation does not agree to assume the Option or to substitute an equivalent
option, in which the case the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise the Option
as to all of the
-11-
<PAGE>
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option or Stock Purchase Right shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option will terminate upon the expiration of such period. For the purposes
of this paragraph, the Option or Stock Purchase Right shall be considered
assumed if, following the merger or sale of assets, the option confers the right
to purchase, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of the
successor corporation and the participant, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consider ation received by holders of Common Stock in the
merger or sale of assets.
13. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option. Notice of the deter mination shall be given to each
Employee or Consultant to whom an Option is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan
from time to time in such respects as the Board may deem advisable;
(b) Shareholder Approval. The Company shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with Rule
16b-3 of the Exchange Act or with Section 422 of the Code (or any successor
statute or rule or other applicable law, rule or regulation, including the
requirements of
-12-
<PAGE>
any exchange or quotation system on which the Common Stock is listed or quoted).
Such shareholder approval, if required, shall be obtained in such a manner and
to such a degree as is required by the applicable law, rule or regulation.
(c) Effect of Amendment or Termination. Any such amend ment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Board and the Optionee or Purchaser and
the Board, which agreement must be in writing and signed by the Optionee or
Purchaser and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
16. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.
-13-
<PAGE>
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
-14-
<PAGE>
APPENDIX B
PROXY BELL MICROPRODUCTS INC. PROXY
1997 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of BELL MICROPRODUCTS INC., a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated April 17, 1997, and hereby appoints
W. Donald Bell and Remo E. Canessa, or either of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Shareholders of Bell Microproducts Inc. to be held on May 21, 1997, at 1:00
p.m. local time, at the Company's principal offices, 1941 Ringwood Avenue, San
Jose, California, and at any adjournment(s) thereof, and to vote all shares of
Common Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse side, and, in their
discretion, upon such other matter or matters which may properly come before the
meeting and any adjournment(s) thereof.
This proxy will be voted as directed, or, if no contrary direction is
indicated, will be voted FOR the election of the specified nominees as
directors, FOR the amendment of the Company's 1988 Incentive Stock Plan to
increase the number of shares of Common Stock available for grant thereunder by
300,000 shares, and FOR the ratification of the appointment of Price Waterhouse
as independent accountants of the Company for the fiscal year 1997 and as said
proxies deem advisable on such other matters as may properly come before the
meeting ad at any and all continuations and adjournments thereof.
Please mark, sign, date and return the proxy card promptly
using the enclosed envelope.
(Continued and to be signed on the reverse side)
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
[X] Please mark
your votes
as this
WITHHOLD
FOR FOR ALL FOR AGAINST ABSTAIN
1. ELECTION OF DIRECTORS [ ] [ ] 2. Amendment to the Company's 1988 [ ] [ ] [ ]
(INSTRUCTION: If you wish to Incentive Stock Plan to increase
withhold autority to vote for the number of shares of Common Stock
any individual nominee, strike available for grant thereunder by
a line through that nominee's 300,000.
name in the list below.)
Nominees: W. Donald Bell, Glenn E. Penisten,
Gordon A. Campbell, Jon H. Beedle,
Edward L. Gelbach.
--------------------------------------------- 3. Ratification of the appointment of [ ] [ ] [ ]
For all nominees listed above except as noted Price Waterhouse LLP as the
above. independent accountants of the
Company for the fiscal year 1997.
I PLAN TO ATTEND THE MEETING [ ]
In their discretion, upon such other matter or
matters which may properly come before the meeting
and any adjournment(s) thereof.
Mark here for address change and note at left.
(This Proxy should be marked, dated, signed by the
shareholder(s) exactly as his or her name appears
hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity
should so indicate. If shares are held by joint
tenants or as community property, both should sign.)
Signature(s):__________________________________________________________________ Dated:________________________________________, 1997
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING REGARDLESS OF THE NUMBER OF SHARES YOU HOLD. PLEASE DATE, SIGN, AND
RETURN THE PROXY PROMPTLY IN THE ENCLOSED, STAMPED ENVELOPE.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
