SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
(Amendment no. 1)
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
[X] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
BELL MICROPRODUCTS INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transactions applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
BELL MICROPRODUCTS INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 21, 1998
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
Thursday, May 21, 1998, 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 Employee Stock
Purchase Plan to increase the number of shares of Common Stock reserved
for issuance thereunder by 250,000 shares.
3. To approve the adoption of the 1998 Stock Plan and the
reservation of 500,000 shares for issuance thereunder (plus such number
of shares as remain available for grant under the 1988 Incentive Stock
Plan and the 1993 Director Stock Option Plan).
4. To ratify the appointment of Price Waterhouse LLP as
independent auditors for the Company for the fiscal year ending
December 31, 1998.
5. To transact such other business as may properly come before
the meeting or any adjournment 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 9, 1998
are entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
By Order of the Board of Directors
Bruce M. Jaffe
Chief Financial Officer
San Jose, California
April 21, 1998
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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.
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<PAGE>
BELL MICROPRODUCTS INC.
1941 Ringwood Avenue
San Jose, California 95131
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PROXY STATEMENT FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
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INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Bell Microproducts Inc. (the "Company"), a California corporation, for use at
the Annual Meeting of Shareholders to be held on Thursday, May 21, 1998, 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 21,
1998 to all shareholders entitled to vote at the Annual Meeting.
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 1999 Annual Meeting of
Shareholders must be received by the Company no later than December 21, 1998, in
order that they may be considered for inclusion in the proxy statement and form
of proxy relating to that meeting.
Record Date and Share Ownership
Only shareholders of record at the close of business on April 9, 1998
(the "Record Date") are entitled to receive notice of and to vote at the Annual
Meeting. The Company has one class of Common Stock outstanding, $0.01 par value.
As of the Record Date, the Company had outstanding 8,766,127 shares of Common
Stock. For information regarding share ownership of officers, directors and
holders of more than 5% of the outstanding Common Stock, see "Security Ownership
of Certain Beneficial Owners and Management."
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.
<PAGE>
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.
The cost of soliciting proxies will be borne by the Company. The
Company has retained Corporate Investor Communications, Inc. to assist in the
solicitation of proxies at a cost of approximately $5,500, plus customary
expenses. In addition, 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. 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 prece dent 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 nonvotes 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.
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<PAGE>
Security Ownership of Certain Beneficial Owners and Management
<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
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Beneficial Ownership Shares (#) Percent(1)
- ----------------------------------------------------- ---------- ----------
<S> <C> <C>
Bowman Capital Management, L.L.C.(2)................. 861,000 9.8%
1875 Grant St., Suite 600
San Mateo, CA 94402
Brinson Partners, Inc.(3)............................ 720,600 8.2%
209 South LaSalle
Chicago, IL 60604-1295
W. Donald Bell(4).................................... 744,348 8.5%
Academy Capital Management(5)........................ 545,070 6.2%
500 North Valley Mills Dr., Suite 208
Waco, TX 76710
Smith Barney Mutual Funds Management Inc.(6)......... 492,000 5.6%
388 Greenwich Street
New York, NY 10013
Dimensional Fund Advisors(7)......................... 459,100 5.2%
1299 Ocean Ave., 11th Place
Santa Monica, CA 90401
Philip M. Roussey(8)................................. 189,060 2.1%
Gordon A. Campbell(9)................................ 79,963 *
Glenn E. Penisten(10)................................ 78,097 *
Edward L. Gelbach(11)................................ 68,439 *
James Ousley......................................... -- --
William A. Murphy(12)................................ 4,100 *
Ronald Mabry (13).................................... 13,000 *
Bruce M. Jaffe....................................... -- --
All directors and executive officers as a
group (10 persons)(14)......................... 1,196,207 13.6%
<FN>
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* Represents less than 1% of the outstanding shares of Common Stock.
(1) Based on 8,766,127 shares of common stock outstanding on the Record Date.
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<PAGE>
(2) Represents shares held as disclosed on Schedule 13D filed on March 3,
1998. Bowman Capital Management, L.L.C. shares voting and dispositive
power with respect to 861,000 shares with Lawrence A. Bowman, the manager
and principal member of Bowman Capital Management L.L.C. and shares
voting and dispositive power with respect to 438,000 shares with
Spinnaker Technology Fund, L.P.
(3) As reported on Schedule 13G filed on February 10, 1998, Brinson Partners,
Inc., an Investment Advisor, and each of Brinson Holdings, Inc., SBC
Holding (USA), Inc. and Swiss Bank Corporation, each a Parent Holding
Company holds shared voting and dispositive power with respect to 720,600
shares.
(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 as reported
on Schedule 13G/A filed on February 12, 1998, and excludes 40,000 shares
held by Mr. Bell's children. Also includes 20,000 shares subject to stock
options exercisable within 60 days after the Record Date.
(5) Represents shares held as disclosed on Schedule 13G filed on March 9,
1998.
(6) Represents shares held as disclosed on Schedule 13G filed on January 16,
1998. Smith Barney Mutual Funds Management Inc. shares voting and
dispositive power with respect to 492,000 shares with two of its
wholly-owned subsidiaries, Salomon Smith Barney Holdings Inc. and
Travelers Group Inc.
(7) Represents shares held as disclosed on Schedule 13G filed on February 10,
1998. Dimensional Fund Advisors reported sole voting power over 299,400
shares and sole dispositive power over 459,100. Dimensional Fund Advisors
shares voting power with respect to 53,700 shares with DFA Investment
Dimensions Group Inc. and with respect to 106,000 shares with the DFA
Investment Trust Company.
(8) Includes 163,060 shares held by Philip M. Roussey and Mounawar Roussey,
Trustees of the Roussey Family Trust U/D/T dated November 8, 1991. Also
includes 26,000 shares subject to stock options exercisable within 60
days after the Record Date.
(9) 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 25,000 shares subject to stock options exercisable within 60
days after the Record Date.
(10) Includes 25,000 shares subject to stock options exercisable within 60
days after the Record Date.
(11) Includes 25,000 shares subject to stock options exercisable within 60
days after the Record Date.
(12) Includes 4,100 shares subject to stock options exercisable within 60 days
after the Record Date. (13) Includes 13,000 shares subject to stock
options exercisable within 60 days after the Record Date. (14) Includes
footnotes 4-10 and 23,300 shares subject to stock options exercisable
within 60 days after the Record Date.
</FN>
</TABLE>
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<PAGE>
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.
Nominees for Director
<TABLE>
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 the Record
Date:
<CAPTION>
Name Age Position(s) with the Company Director Since
- ------------------------------------ --- -------------------------------------- --------------------
<S> <C> <C> <C>
W. Donald Bell...................... 60 President, Chief Executive Officer and 1987
Chairman of the Board
Gordon A. Campbell(1)............... 53 Director 1988
Glenn E. Penisten(2)................ 66 Director 1988
Edward L. Gelbach(1)................ 66 Director 1993
James Ousley(2)..................... 52 Director 1998
<FN>
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
</FN>
</TABLE>
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.
Gordon A. Campbell has served on the Company's Board of Directors since
May 1988. Mr. Campbell has served as the Chairman of the Board of Directors of
3Dfx Interactive, Inc. ("3Dfx") since August 1994 when he co- founded 3Dfx. Mr.
Campbell also served as President and Chief Executive Officer of 3Dfx from
January 1995 to December 1996. Prior to joining 3Dfx, Mr. Campbell founded
Techfarm, Inc., a venture capital investment firm, and has served as President
since September 1993. In 1985, Mr. Campbell founded Chips and
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<PAGE>
Technologies, Inc. ("CHIPS"), a semiconductor and related device company, and
served as Chairman, Chief Executive Officer and President of CHIPS until July
1993. Mr. Campbell founded SEEQ Technology, Inc. ("SEEQ"), a semiconductor and
related device company, in 1981. He served as President and Chief Executive
Officer of SEEQ from 1981 to 1985. Mr. Campbell currently serves as a director
of 3Com Corporation. He is also a director of several private companies.
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.
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 electromechanical
components distributor, and Etec Systems, Inc., a manufacturer of pattern
generation equipment.
James Ousley has served on the Company's Board of Directors since
February 1998. He has been President and Chief Executive Officer of Control Data
Corporation ("CDC") since the spin-off of CDC from Ceridian Corporation
("Ceridian") effective July 31, 1992. Mr. Ousley was President of Ceridian's
Computer Products business since 1989 and was Executive Vice President of
Ceridian from February 1990 until the spin-off of the Company. From January 1989
to April 1989, Mr. Ousley was Vice President, Marketing and Sales for Ceridian's
Computer Products business and prior thereto he held various positions with
Ceridian. Mr. Ousley is also a director of Memorex-Telex N.V., a public company.
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. No shareholder may
vote for more than five persons for director.
Board Meetings and Committees
During the fiscal year ended December 31,1997, the Board of Directors
held a total of four meetings.
The Audit Committee, which currently consists of Glenn E. Penisten and
James Ousley, 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 two times during fiscal year 1997.
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 two times during
fiscal year 1997.
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<PAGE>
The Board of Directors currently has no nominating committee or a
committee performing a similar function.
Each of the incumbent directors attended at least 75% of the aggregate
of all meetings of the Board of Directors and of the committees, if any, upon
which such director served, during the period for which such person has been a
director or committee member.
Compensation of Directors
During fiscal 1997, each of the directors was paid a fee of $4,000 per
board meeting attended and $2,000 per committee meeting attended and was
reimbursed for expenses incurred in attending Board meetings and com mittee
meetings. In fiscal year 1998, each director will be paid an annual fee of
$8,000, payable quarterly. In fiscal 1998, each director will be paid $4,000 for
each regular Board meeting attended, each committee member in attendance at a
regular committee meeting will be paid $2,000 for participation in person and
each director or committee member in attendance at a board or committee meeting
held by telephone will be paid $1,000.
1993 Director Option Plan
During fiscal 1997, directors received stock options granted pursuant
to the 1993 Director Option Plan ("1993 Plan"), which was terminated in February
1998 subject to shareholder approval of the Company's 1998 Stock Plan.
Outstanding options under the 1993 Plan will continue to be governed pursuant to
the 1993 Plan. Pursuant to the 1993 Plan, non-employee directors received an
automatic and non-discretionary options grant.
Under the 1993 Plan, options to purchase 5,000 shares were
automatically granted to Directors Glenn E. Penisten, Gordon A. Campbell, Edward
L. Gelbach and former director Jon H. Beedle in March 1996, which options have a
per share exercise price of $7.00 and became fully vested and exercisable on
March 15,1997. In March 1997 options to purchase 5,000 shares were automatically
granted to Directors Glenn E. Penisten, Gordon A. Campbell, Edward L. Gelbach
and former director Jon H. Beedle, which options have a per share exercise price
of $12.625 and will become fully vested and exercisable on March 15, 1998,
except that Mr. Beedle's options terminated upon his resignation. Under the 1993
Director Option Plan, on February 12, 1998 New Director Ousley was granted an
option to purchase 15,000 shares of the Company's Common Stock which option has
a per share exercise price of $7.50, the fair market value on the date of grant
and will vest as to 33% on February 12, 1999, so long as he continues to serve
as director.
1998 Stock Plan
Following the adoption of the 1998 Stock Plan (the "Stock Plan") by the
shareholders, all outside directors will be eligible to receive an automatic and
non-discretionary stock options grant pursuant to the Stock Plan. Each
non-employee director who has previously received options pursuant to the 1993
Plan (the "Returning Directors") will be entitled to receive an automatic and
non-discretionary option to purchase 5,000 shares of the Company's Common Stock,
which option will vest 100% one year from the date of grant, based on continued
service as a director. Each non-employee director who is first elected to the
Board of Directors following the adoption of the Stock Plan (the "New
Directors") will be granted an option to purchase 15,000 shares of Common Stock,
which option 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 Stock Plan, on the date of the
Company's annual meeting, 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
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<PAGE>
exercise price of each option granted under the Stock Plan must be equal to 100%
of the fair market value of the Common Stock on the date of grant unless such
director is a 10% stockholder in which case each option granted must be equal to
110% of the fair market value of the Common Stock on the date of grant.
If a non-employee director ceases to be a director, other than upon the
non-employee director's death or disability, the non-employee director may
exercise his or her option within such period of time as is specified in the
option agreement, which generally allows exercise of the option within thirty
(30) days to the extent that the option is vested on the date of termination
(but in no event later than the expiration of the term of such option as set
forth in the option agreement). In the absence of a specified time in the option
agreement, the option shall remain exercisable for three (3) months following
the non-employee director's termination. If, on the date of termination, the
non-employee director is not vested as to his or her entire option, the shares
covered by the unvested portion of the option shall revert to the Stock Plan.
If, after termination, the non-employee director does not exercise his or her
option within the time specified by the Administrator, the option shall
terminate, and the shares covered by such option shall revert to the Stock Plan.
Pursuant to the terms of the Stock Plan as discussed above, on May 21,
1998, Returning Directors Penisten, Campbell, and Gelbach will be each
automatically granted options to purchase 5,000 shares of the Company's Common
Stock which options will have a per share exercise price of the fair market
value on the date of grant and will vest 100% on May 21, 1999.
-8-
<PAGE>
PROPOSAL 2
AMENDMENT TO THE
EMPLOYEE STOCK PURCHASE PLAN
Proposed Amendment
The Board of Directors in March 1998 approved amendments to the
Company's Employee Stock Purchase Plan (the "Purchase Plan") (i) to increase the
number of shares reserved for issuance thereunder by 250,000 shares from 380,000
shares to 630,000 shares, and (ii) to provide for automatic annual increases in
the number of shares reserved for issuance under the Purchase Plan on January 1
of each year, beginning on January 1, 1999 by a number of shares equal to the
lesser of (A) 150,000 shares, (B) 1.5% of the outstanding shares on such date,
or (C) a lesser amount determined by the Board, subject to adjustment upon
changes in capitalization of the Company.
Required Vote
At the Annual Meeting, the stockholders are being asked to approve the
amendments to the Purchase Plan (i) to increase the number of shares reserved
for issuance thereunder by 250,000 shares from 380,000 shares to 630,000 shares
and (ii) to provide for automatic annual increases in the number of shares
reserved for issuance under the Purchase Plan. The affirmative vote of the
holders of a majority of the shares entitled to vote at the Annual Meeting will
be required to approve the amendments to the Purchase Plan.
Reasons for the Amendment
The Company believes that its Purchase Plan is an important factor in
attracting and retaining skilled personnel. Each year the Company reviews the
number of shares available for issuance under the Purchase Plan and, based on
the Company's estimates of the number of shares expected to be purchased under
the Purchase Plan during the coming year, management presents to the Board of
Directors a recommendation for the addition of shares to the pool reserved for
issuance under the Purchase Plan. As of the Record Date, 329,114 shares of
Common Stock had been issued under the Purchase Plan and 50,886 were available
for sale under the Purchase Plan. In March 1998, management recommended and the
Board approved the amendments to the Purchase Plan described above, including
the amendment to the Purchase Plan that provides for annual increases in the
number of shares reserved for issuance thereunder (the "Purchase Plan Evergreen
Provision"). The Board believes that the amendments to the Purchase Plan,
including the Purchase Plan Evergreen Provision, ensure that a sufficient number
of shares will be available for employee purchases under the Purchase Plan in
each offering period. The Board believes that ensuring the availability of
shares for a growing employee base enhances the Company's ability to attract and
retain high quality personnel, but also effectively eliminates the risk of the
Company's having to record a compensation change under recent accounting
pronouncements in the event of a share shortfall under the Purchase Plan during
an offering period, which would likely have a material adverse effect on the
Company's operating results for a period and the price of the Company's Common
Stock in the public market. The Board also considered the dilutive effect of the
additional shares under the Purchase Plan on the Company's existing stockholders
as well as other negative factors; however, the Board believes that the benefits
of the amendments outweigh the potential negative factors.
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<PAGE>
The Board of Directors recommends that stockholders vote "FOR" the
approval of the amendments to the Company's Purchase Plan.
The essential features of the Purchase Plan are outlined below.
General
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Tax Code. See "Tax Information--The Purchase Plan."
Purpose
The purpose of the Purchase Plan is to provide employees of the Company
with an opportunity to purchase Common Stock of the Company at a discount
through accumulated payroll deductions.
Administration
The Purchase Plan is administered by the Board of Directors or a
committee of members of the Board appointed by the Board, who receive no
separate additional compensation for such service. All questions of interpre
tation or application of the Purchase Plan are determined by the Board or its
appointed committee, whose decisions are final and binding upon all
participants.
Eligibility
Any person who is customarily employed at least 20 hours per week and
more than five months per calendar year by the Company during the applicable
offering period is eligible to participate in the Purchase Plan, unless the
employee would own five percent or more of the total combined voting power or
value of all classes of stock of the Company or of its subsidiaries (including
stock issuable upon exercise of options held by such person) at the end of the
offering period, or the employee would receive more than $25,000 worth of stock
(computed as of the date of grant) pursuant to the Purchase Plan in any calendar
year.
At the Record Date, the Company employed approximately 645 people,
substantially all of whom were eligible to participate in the Purchase Plan.
Approximately 212 employees were participating in the Purchase Plan as of the
Record Date.
Offering Dates
The Purchase Plan is generally implemented by one offering during each
six-month period. Offering periods commence on or about January 1 and July 1 of
each year. The Board in its discretion may declare extended offering periods
which last approximately twelve, eighteen or twenty-four months during which
options granted pursuant to the Purchase Plan may be exercised.
Shares Sold Pursuant to the Purchase Plan
The initial offering period under the Purchase Plan began on June 15,
1993, and from that date to the Record Date 329,114 shares of the Company's
Common Stock were sold under the Purchase Plan. The number of shares sold in
each offering period will vary with the number of participants, the amount of
their payroll deductions and the fair market value of the Company's Common
Stock.
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<PAGE>
Enrollment in the Plan
Eligible employees become participants in the Purchase Plan by
delivering to the Company's payroll office a subscription agreement authorizing
payroll deductions. Employees hired after the first day of an offering period
(or who otherwise become eligible after such date) may begin participation in
the next offering period. Under the Purchase Plan, once an employee elects to
participate in the Purchase Plan, enrollment in each successive offering period
occurs automatically unless the employee withdraws from participation in the
Purchase Plan.
Purchase Price
The purchase price per share under the Purchase Plan is the lower of
(i) 85% of the fair market value of a share of Common Stock on the date of
commencement of the offering (or for employees beginning participation later,
the date such participation began) or (ii) 85% of the fair market value of a
share of Common Stock on the last day of the offering period. The fair market
value of the Common Stock on a given date is the closing sale price on The
Nasdaq National Market.
Payment of Purchase Price; Payroll Deductions
The purchase price of the shares is accumulated by after-tax payroll
deductions over the offering period. The deductions may not exceed 15% of a
participant's compensation on each pay day during the offering period or
extended offering period, and the aggregate of such payroll deductions during
the offering period or extended offering period shall not exceed fifteen percent
(15%) of the participant's compensation during any such offering period or
extended offering period. A participant may discontinue participation in the
Purchase Plan, and may increase or decrease the rate of payroll deductions,
during the offering period or extended offering period.
Purchase of Stock; Exercise of Option
By executing a subscription agreement to participate in the Purchase
Plan, the employee is entitled to have shares placed under option to him. An
employee may purchase up to a number of shares of the Company's Common Stock
determined by dividing such employee's payroll deductions accumulated prior to
such exercise date and retained in the participant's account as of the exercise
date by the applicable Purchase Price; provided that in no event shall an
employee be permitted to purchase during any two offering periods more than a
number of shares determined by dividing $25,000 by the fair market value of a
share of the Company's Common Stock on the enrollment date. Unless the
employee's participation is discontinued, the option for the purchase of shares
will be exercised automatically at the end of the offering period at the
applicable price. No fractional shares will be issued upon exercise of the
option. Any amounts insufficient to purchase a full share remaining in a
participant's account after exercise of the option will be credited to the
participant and used in a future offering period. No interest will accrue on the
payroll deductions of a participant in the Purchase Plan.
Withdrawal
A participant's interest in a given offering may be terminated by
signing and delivering to the Company a notice of withdrawal from the Purchase
Plan. Upon withdrawal from the Purchase Plan, accrued but unused payroll
deductions are returned to the employee. Such withdrawal may be elected at any
time prior to the end of the applicable six-month offering period. A
participant's withdrawal from an offering will not have any effect upon such
participant's eligibility to participate in subsequent offering periods under
the Purchase Plan.
-11-
<PAGE>
Termination of Employment
Termination of a participant's employment for any reason, including
retirement or death, cancels participation in the Purchase Plan immediately. In
such event the payroll deductions credited to the participant's account will be
returned to such participant, or, in the case of death, to the person or persons
entitled thereto as specified by the employee in the subscription agreement.
Capital Changes
In the event of changes in the capitalization of the Company, such as
stock splits or stock dividends, which result in an increase or decrease in the
number of shares of Common Stock without receipt of consideration by the
Company, appropriate adjustments will be made by the Company in the number of
shares subject to purchase and in the price per share.
Effect of Liquidation, Dissolution, Sale of Assets or Merger
In the event of a liquidation or dissolution of the Company, an
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise proposed by the Board. In the event of a sale
of all or substantially all of the assets of the Company or a merger of the
Company with or into another corporation, the employee's rights may be satisfied
by assumption of the Company's obligations by such acquiring or successor
corporation unless the Board determines otherwise. If the Board chooses to
terminate the offering period, it shall notify each participant in writing at
lease ten (10) business days prior to the termination date on which date all
options subject to the Purchase Plan will be exercised automatically.
Non-assignability
No rights or accumulated payroll deductions of an employee under the
Purchase Plan may be pledged, assigned or transferred for any reason, and any
such attempt may be treated by the Company as an election to withdraw from the
Purchase Plan.
Reports
Individual accounting will be maintained for each participant in the
Purchase Plan. Each participant receives as a report showing the details of the
participant's account at least once every 12 months.
Amendment and Termination of the Plan
The Board may at any time amend, alter, suspend or discontinue the
Purchase Plan, but, except under certain conditions, no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
participant arising out of any offering period which has already commenced
without such participant's written consent. In addition, to the extent necessary
and desirable to comply with Section 423 of the Tax Code (or any other
applicable law or regulation, including the requirements of the NASD or an
established stock exchange), the Company shall obtain stockholder approval of
any Purchase Plan amendment in such a manner and to such a degree as required.
-12-
<PAGE>
Tax Information--The Purchase Plan
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Tax Code. Under these provisions, no income will be taxable to a par
ticipant until the shares purchased under the Plan are sold or otherwise
disposed of. Upon sale or other disposition of the shares, the participant will
generally be subject to tax and the amount of the tax will depend upon the
holding period. If the shares are sold or otherwise disposed of more than two
years from the first day of the offering period, the participant will recognize
ordinary income measured as the lesser of (a) the excess of the fair market
value of the shares at the time of such sale or disposition over the purchase
price, or (b) an amount equal to 15% of the fair market value of the shares as
of the first day of the offering period. Any additional gain will be treated as
long-term capital gain. If the shares are sold or otherwise disposed of before
the expiration of this holding period, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term capital
gain or loss, depending on the holding period. The Company is not entitled to a
deduction for amounts taxed as ordinary income or capital gain to a participant
except to the extent of ordinary income recognized by participants upon a sale
or disposition of shares prior to the expiration of the holding period(s)
described above.
The foregoing is only a summary of the effect of federal income taxation upon
the participant and the Company with respect to the shares purchased under the
Purchase Plan and does not purport to be complete. Reference should be made to
the applicable provisions of the Tax Code. In addition, this Summary does not
discuss the tax consequences of a participant's death or the income tax laws of
any municipality, state or foreign country in which the participant may reside.
Participation in the Purchase Plan
The following table sets forth information with respect to shares
purchased under the Purchase Plan during the fiscal year ended December 31, 1997
to (i) each Named Executive Officer (as defined below), (ii) all persons who
were executive officers during fiscal year 1997 as a group, (iii) all other
employees as a group:
Number of
Shares Dollar
Name and Position of Individual or Identity of Group Purchased Value(1)
- ---------------------------------------------------- --------- --------
W. Donald Bell ..................................... -- --
Philip M. Roussey .................................. 448 $ 529
Ron Mabry........................................... -- --
Bruce M. Jaffe...................................... -- --
William A. Murphy .................................. -- --
All current executive officers as a group .......... 700 $ 1,332
All other employees as a group ..................... 103,890 $214,453
- ---------------------------
(1) This column represents the market value of the shares on the date of
purchase, minus the purchase price.
-13-
<PAGE>
PROPOSAL 3
ADOPTION OF THE 1998 STOCK PLAN
In February 1998, the Board of Directors adopted the 1998 Stock Plan
(the "Plan") and reserved for issuance, subject to stockholder approval, a total
of 500,000 shares of Common Stock, plus (i) 181,672 shares of Common Stock which
were reserved but unissued under the Company's 1988 Incentive Stock Plan (as
amended) (the "1988 Plan") as of the date of stockholder approval of this Plan,
(ii) 35,000 shares of Common Stock which were reserved but unissued under the
Company's 1993 Director Stock Option Plan (as amended) (the "Director Plan") as
of the date of stockholder approval of this Plan and (iii) any shares of Common
Stock returned to the 1988 Plan or Director Plan as a result of termination of
options under the 1988 Plan or Director Plan, as applicable. As of April 16,
1998, no additional options or rights to purchase stock had been granted
pursuant to the 1988 Plan. The maximum aggregate number of shares of Common
Stock which may be optioned and sold under the 1998 Plan is 716,672 shares, plus
an annual increase to be added on January 1 of each year beginning in 1999,
equal to the lesser of (i) 400,000 shares, (ii) 4% of the outstanding shares on
such date, or (iii) a lesser amount determined by the Board, subject to
adjustment upon changes in capitalization of the Company.
At the annual meeting, the stockholders are being asked to approve the
Plan and the reservation of shares thereunder.
Required Vote
At the Annual Meeting, the stockholders are being asked to approve the
adoption of the 1998 Stock Plan. The affirmative vote of the holders of a
majority of the shares entitled to vote at the Annual Meeting will be required
to approve the adoption of the 1998 Stock Plan.
The Board of Directors recommends that stockholders vote "FOR" the
approval of the Company's 1998 Stock Plan.
Summary of the 1998 Plan
General. The purpose of the Plan is to attract and retain the best
available personnel for positions of substantial responsibility with the
Company, to provide additional incentive to the employees, directors and consul
tants of the Company and to promote the success of the Company's business.
Options and stock purchase rights may be granted under the Plan. Options granted
under the Plan may be either "incentive stock options," as defined in Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonstatutory stock options.
Administration. The Plan may generally be administered by the Board or
the Committee appointed by the Board (as applicable, the "Administrator").
Option grants to non-employee directors ("Outside Directors") will be automatic
and nondiscretionary.
Eligibility; Limitations. Nonstatutory stock options and stock purchase
rights may be granted under the Plan to employees, directors and consultants of
the Company and any parent or subsidiary of the Company. Incentive stock options
may be granted only to employees. The Administrator, in its discretion, selects
the employees, directors and consultants to whom discretionary options and stock
purchase rights may be granted, the time or times at which such options and
stock purchase rights shall be granted, and the number of shares subject to each
such grant.
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<PAGE>
Section 162(m) of the Code places limits on the deductibility for
federal income tax purposes of compensation paid to certain executive officers
of the Company. In order to preserve the Company's ability to deduct the
compensation income associated with options and stock purchase rights granted to
such persons, the Plan provides that no employee, director or consultant may be
granted, in any fiscal year of the Company, options and stock purchase rights to
purchase more than 200,000 shares of Common Stock. Notwithstanding this limit,
however, in connection with such individual's initial employment with the
Company, he or she may be granted options or stock purchase rights to purchase
up to an additional 200,000 shares of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted; provided that the exercise price of
options may not be less than 100% of the fair market value of the Common Stock
on the date such option is granted; and provided further, that the exercise
price of an incentive stock option granted to a 10% stockholder may not be less
than 110% of the fair market value of the Common Stock on the date such option
is granted. The fair market value of the Common Stock is generally determined
with reference to the closing sale price for the Common Stock (or the closing
bid if no sales were reported) on the last market trading day prior to the date
the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted under
the Plan generally vest and become exercisable over four years. The means of
payment for shares issued upon exercise of an option is specified in each option
agreement. The Plan permits payment to be made by cash, check, promissory note,
other shares of Common Stock of the Company (with some restrictions), cashless
exercises, a reduction in the amount of any Company liability to the optionee,
any other form of consideration permitted by applicable law, or any combination
thereof.
(c) Term of Option. The term of an incentive stock option may be no
more than ten (10) years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% stockholder, the term of the option may
be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or
consulting relationship terminates for any reason (other than death or
disability), then all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant or, if no date
is specified in the notice of grant, three months following the termination or
(ii) the expiration date of such option. To the extent the option is exercisable
at the time of such termination, the optionee may exercise all or part of his or
her option at any time before termination.
(e) Death or Disability. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all options
held by such optionee under the Plan expire on the earlier of (i) 12 months from
the date of such termination or (ii) the expiration date of such option. The
optionee (or the optionee's estate or the person who acquires the right to
exercise the option by bequest or inheritance), may exercise all or part of the
option at any time before such expiration to the extent that the option was
exercisable at the time of such termination.
-15-
<PAGE>
(g) Nontransferability of Options: Options granted under the Plan are
generally not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee.
(h) Other Provisions: The stock option agreement may contain other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
Stock Purchase Rights. In the case of SPRs, unless the Administrator
determines otherwise, the Restricted Stock Purchase Agreement 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 repurchase option shall lapse at a rate
determined by the Administrator.
Automatic Option Grants to Outside Directors. Generally, each Outside
Director who becomes an Outside Director after the effective date of this Plan
will be automatically granted a nonstatutory stock option to purchase 15,000
shares of Common Stock (the "First Option"). Each Outside Director who has
served on the Board for at least six months will be automatically granted a
nonstatutory stock option to purchase 5,000 shares of Common Stock each year
(the "Annual Option"). The exercise price for options granted to Outside
Directors may not be less than 100% of fair market value on the date of grant.
The First Option will vest as to one-third of the shares subject to option on
each anniversary of its date of grant. The Annual Option will vest as the entire
option on the anniversary of its date of grant.
Adjustments Upon Changes in Capitalization. In the event that the stock
of the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Plan, the number and class of shares of stock subject to any
option or stock purchase right outstanding under the Plan, and the exercise
price of any such outstanding option or stock purchase right.
In the event of a liquidation or dissolution, any unexercised options
or stock purchase rights will terminate. The Administrator may, in its
discretion provide that each optionee shall have the right to exercise all of
the optionee's options and stock purchase rights, including those not otherwise
exercisable.
In connection with any merger, consolidation, acquisition of assets or
like occurrence involving the Company, each outstanding option or stock purchase
right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the successor corporation refuses to assume the
options and stock purchase rights or to substitute substantially equivalent
options and stock purchase rights, the optionee shall have the right to exercise
the option or stock purchase right as to all the optioned stock, including
shares not otherwise exercisable.
Amendment and Termination of the Plan. The Board may amend, alter,
suspend or terminate the Plan, or any part thereof, at any time and for any
reason. However, the Company shall obtain stockholder approval for any amendment
to the Plan to the extent necessary to comply with Section 162(m) and Section
422 of the Code, or any similar rule or statute. No such action by the Board or
stockholders may alter or impair any option or stock purchase right previously
granted under the Plan without the written consent of the optionee. Unless
terminated earlier, the Plan shall terminate ten years from the date of its
approval by the stockholders or the Board of the Company, whichever is earlier.
-16-
<PAGE>
Federal Income Tax Consequences
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition 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. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as ordinary
income is treated as long-term or short-term capital gain or loss, depending on
the holding period. A different rule for measuring ordinary income upon such a
premature disposition may apply if the optionee is also an officer, director, or
10% stockholder of the Company. The Company is entitled to a deduction in the
same amount as the ordinary income recognized by the optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price. Any
taxable income recognized in connection with an option exercise by an employee
of the Company is subject to tax withholding by the Company. The Company is
entitled to a deduction in the same amount as the ordinary income recognized by
the optionee. Upon a disposition of such shares by the optionee, any difference
between the sale price and the optionee's exercise price, to the extent not
recognized as taxable income as provided above, is treated as long-term or
short-term capital gain or loss, depending on the holding period.
Stock Purchase Rights. Stock purchase rights will generally be taxed in
the same manner as nonstatutory stock options. However, restricted stock is
generally purchased upon the 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 a 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. At such times, the purchaser will recognize
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.
The 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, is measured as 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 commences on such
date. The ordinary income recognized by a purchaser who is an employee will be
subject to tax withholding by the Company. Different rules may apply if the
purchaser is also an officer, director, or 10% stockholder of the Company.
The foregoing is only a summary of the effect of federal income
taxation upon optionees, holders of stock purchase rights, and the Company with
respect to the grant and exercise of options and stock purchase rights under the
Plan. It does not purport to be complete, and does not discuss the tax
consequences of the employee's or consultant's death or the provisions of the
income tax laws of any municipality, state or foreign country in which the
employee or consultant may reside.
-17-
<PAGE>
Participation in the 1988 Stock Plan
<TABLE>
The grant of options and stock purchase rights under the 1988 Plan to
eligible employees and consultants, including the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company whose aggregate cash compensation exceeded $100,000 during the
fiscal year ended December 31, 1997 (the "Named Executive Officers"), is subject
to the discretion of the Administrator . As of the date of this proxy statement,
there has been no determination by the Administrator with respect to future
awards under the 1998 Stock Plan. The following table sets forth additional
information with respect to options granted under the 1988 Plan during fiscal
year 1997 to all current executive officers as a group and to all other
employees. The term of options under the 1988 Plan (other than those granted to
10% shareholders, as to which the term is five years from date of grant) is
generally ten years from date of grant.
<CAPTION>
% of Total
Average Grants
Options Exercise Under the
Identity of Group Granted(#) Price($) Stock Plan
- -------------------------------------------------------- ----------- ---------- ----------
<S> <C> <C> <C>
W. Donald Bell.......................................... 40,000 $10.875 6.35%
Philip M. Roussey....................................... 20,000 $10.875 3.17%
Ron Mabry............................................... 10,000 $10.875 1.58%
Bruce M. Jaffe.......................................... 80,000 $ 9.125 12.70%
William A. Murphy....................................... -- -- --
All current executive officers as a group............... 230,000 $ 9.77 36.50%
All other employees as a group.......................... 399,500 $ 9.41 63.50%
</TABLE>
PROPOSAL 4
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, 1998. 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 that stockholders vote "FOR" the
ratification of appointment of independent accountants.
-18-
<PAGE>
ADDITIONAL INFORMATION RELATING TO
DIRECTORS & OFFICERS OF THE COMPANY
Certain Transactions
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 $2,840,000 of
services to Pinnacle during 1997 and purchased approximately $1,532,000 of
inventory from Pinnacle in 1997.
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 1997 and purchased approximately $167,000 of inventory
from Reply in 1997.
The Company has entered into a three-year Employment Agreement with W.
Donald Bell, its Chairman, President and Chief Executive Officer effective
December 10, 1996. 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, Bruce M. Jaffe, Philip M. Roussey and Ronald Mabry. 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 annual 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.
-19-
<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 fiscal year 1997, all Section 16(a) filing requirements applicable to the
Company's officers, directors and ten percent shareholders were complied with.
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.
Compensation Committee Report
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
1997).
COMPENSATION COMMITTEE REPORT
Compensation Philosophy and Relationship of Performance. This report
reflects the Compensation Committee's executive officer compensation philosophy
for the year ended December 31, 1997 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.
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
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<PAGE>
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 1997 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 1997 expressed
as a percentage of base salary for Messrs. Roussey, Mabry and Jaffe were
approximately 44%.
The performance goals established at the beginning of 1997 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
1997 at approximately 28% 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 3." 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 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
-21-
<PAGE>
401(k) Plan allows for the Company to make matching contributions, the Company
did not make a matching contribution for participants in 1997. 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.
Mr. Bell's 1997 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 1997, expressed as a
percentage of his base salary, was 75%. For 1997, 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, 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 15.8% 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 1997 compensation, see "Executive
Compensation-Summary Compensation Table."
COMPENSATION COMMITTEE
Gordon A. Campbell
Edward L. Gelbach
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<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
The following table sets forth the compensation paid during the three
fiscal years ended December 31, 1997, 1996 and 1995 to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
for the fiscal year 1997.
<CAPTION>
Long-Term
Compensation
------------
Awards
------------
Securities
Fiscal Other Annual Underlying All Other
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#) Compensation($)
- ------------------------------- ------- ----------- ----------- ---------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell 1997 $375,000 $ 59,333 $3,600(1) 40,000 $51,069(4)
President, Chief Executive 1996 367,692 238,480 3,600(1) 50,000(2) 50,581(4)
Officer and Chairman of the 1995 295,447 119,280 3,600(1) 30,000(3) 48,791(4)
Board
Philip M. Roussey 1997 200,000 52,179 3,600(1) 20,000 --
Senior Vice President of 1996 185,462 80,119 3,600(1) 30,000(2) --
Computer Products Marketing 1995 155,984 55,063 3,600(1) 30,000(3) --
Ron Mabry(5) 1997 187,880 49,569 3,600(1) 10,000 --
Senior Vice President of 1996 29,423 21,720 783(1) 60,000 --
Semiconductor Marketing 1995 -- -- -- -- --
Bruce M. Jaffe(6) 1997 119,240 46,591 1,691(1) 80,000 103,683(8)
Senior Vice President of 1996 -- -- -- -- --
Finance, Chief Financial 1995 -- -- -- -- --
Officer and Secretary
William A. Murphy(7) 1997 169,913 73,845 2,804(1) -- --
Senior Vice President of 1996 190,000 70,475 3,600(1) 70,000(2) 85,244(8)
Industrial Sales 1995 109,840 33,250 1,868(1) 70,000(3) 19,690(8)
<FN>
- ---------------------------
(1) Represents a car allowance paid by the Company.
(2) Includes options to purchase 50,000 shares, 30,000 shares and 70,000
shares reissued to Messrs. Bell, Roussey and Murphy, respectively, in
connection with the option repricing on February 7, 1996.
(3) Represents options that were canceled 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 1997), the proceeds of which are payable
to the Company and to designated beneficiaries of Mr. Bell.
(5) Mr Mabry joined the Company in October 1996. (6) Mr. Jaffe joined the
Company in July 1997.
(7) In June 1995, Mr. Murphy became an employee of the Company at an annual
base salary of $190,000. Mr. Murphy resigned in October 1997.
(8) Represents relocation expenses paid by the Company.
</FN>
</TABLE>
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<PAGE>
Option Grants In Last Fiscal Year
<TABLE>
The following table provides information with respect to option grants
in fiscal year 1997 to the Named Executive Officers.
<CAPTION>
Potential Realizable
Value at Assumed
Number of Percent of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation for
Underlying Granted to or Base Option Term (1)
Options Employees in Price Expiration ---------------------
Name Granted(#) Fiscal Year(%) ($/Share) Date 5% 10%
- --------------------------------- ---------- -------------- --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell................... 40,000 6.35% $10.875 1/28/02 120,182 265,572
Philip M. Roussey................ 20,000 3.17% 10.875 1/28/02 60,091 132,786
Ron Mabry........................ 10,000 1.58% 10.875 1/28/07 68,392 173,319
Bruce Jaffe...................... 40,000 6.35% 9.125 7/14/07 229,547 581,716
40,000 6.35% 9.125 7/14/02 100,843 222,836
William A. Murphy................ -- -- -- -- -- --
<FN>
- ---------------------------
(1) 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 fiscal year 1997 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 $7.875 on December 31, 1997.
<CAPTION>
Value of Total Number of Unexercised
Shares Unexercised Options at In-the-Money Option at
Acquired Fiscal Year End(1) Fiscal Year End
on Value ----------------------------- ------------------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------- ----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell................ -- -- 5,000 85,000 $6,875 $61,875
Philip M. Roussey............. -- -- 17,000 53,000 $9,375 $39,375
Ron Mabry..................... -- -- 12,000 58,000 -- --
Bruce Jaffe................... -- -- -- 80,000 -- --
William A. Murphy............. 12,250 $79,625 -- -- -- --
<FN>
- ---------------------------
(1) Based on a market value of the underlying securities of $11.25 at June 6,
1997 and $7.8125 at December 11, 1997.
</FN>
</TABLE>
-24-
<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 1997 fiscal year end (December 31, 1997) 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, 1997 was $7.875.
[The following descriptive data is supplied in accordance with Rult 304(d) of
Regulation S-T]
<CAPTION>
Total Return Analysis
6/15/93 12/31/93 12/30/94 12/29/95 12/31/96 12/31/97
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bell Microproducts, Inc. $100 $102 $143 $ 97 $118 $105
- ------------------------------------------------------------------------------------
PSE Hi-Tech Index $100 $112 $135 $191 $239 $277
- ------------------------------------------------------------------------------------
S&P 500 $100 $106 $107 $148 $182 $243
- ------------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
OTHER MATTERS
The Company's Annual Report to Shareholders for fiscal year 1997 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, results of operations and certain information about the
Company's executive officers.
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
Bruce M. Jaffe
Chief Financial Officer
San Jose, California
April 21, 1998
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<PAGE>
APPENDIX A
BELL MICROPRODUCTS INC.
(As proposed to be adopted on May 21, 1998)
1. Purposes of the Plan. The purposes of this Stock Plan are:
* to attract and retain the best available personnel for
positions of substantial responsibility,
* to provide additional incentive to Employees, Directors
and Consultants, and
* to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan. The Plan also
provides for automatic grants of Nonstatutory Stock Options to Outside
Directors.
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) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options or Stock Purchase Rights are,
or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the
Board in accordance with Section of the Plan.
(f) "Common Stock" means the common stock of the Company.
(g) "Company" means Bell Microproducts Inc., a California
corporation.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services to such entity.
<PAGE>
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Inside Director" means a Director who is an Employee.
-2-
<PAGE>
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(r) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(u) "Option Exchange Program" means a program whereby outstanding
Options are surrendered in exchange for Options with a lower exercise price.
(v) "Optioned Stock" means the Common Stock subject to an Option
or Stock Purchase Right.
(w) "Optionee" means the holder of an outstanding Option or Stock
Purchase Right granted under the Plan.
(x) "Outside Director" means a Director who is not an Employee.
(y) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(z) "Plan" means this 1998 Stock Plan.
(aa) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(bb) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(cc) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
-3-
<PAGE>
(dd) "Section 16(b)" means Section 16(b) of the Exchange Act.
(ee) "Service Provider" means an Employee, Director or
Consultant.
(ff) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(gg) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 716,672 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year beginning January 1, 1999, equal to the
lesser of (i) 400,000 Shares, (ii) 4% of the outstanding Shares on such date or
(iii) a lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The Plan may be
administered by different Committees with respect to different groups of Service
Providers.
(ii) Section 162(m). To the extent that the Administrator
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
-4-
<PAGE>
(iv) Grants to Outside Directors. All grants of Options
to Outside Directors made pursuant to Section 12 of the Plan shall be automatic
and nondiscretionary.
(v) Other Administration. Other than as provided above,
the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and
Stock Purchase Rights may be granted
hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option and Stock
Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the shares of Common
Stock relating thereto, based in each case on such factors as the Administrator,
in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or Stock
Purchase Right to the then current Fair Market Value if the Fair Market Value of
the Common Stock covered by such Option or Stock Purchase Right shall have
declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
-5-
<PAGE>
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 16(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options longer
than is otherwise provided for in the Plan;
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined. All elections by an
Optionee to have Shares withheld for this purpose shall be made in such form and
under such conditions as the Administrator may deem necessary or advisable;
(xii) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Stock Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase Rights may
be granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
-6-
<PAGE>
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than 200,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional 200,000
Shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
(iv) If an Option is cancelled in the same fiscal year of
the Company in which it was granted (other than in connection with a transaction
described in Section 14), the cancelled Option will be counted against the
limits set forth in subsections (i) and (ii) above. For this purpose, if the
exercise price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Option
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares
to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock 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 per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
-7-
<PAGE>
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, 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 a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
-8-
<PAGE>
(viii) such other consideration and method of payment for
the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), 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 Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter 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 Relationship as a Service Provider. If an
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time
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<PAGE>
as is specified in the Option Agreement to the extent the Option is vested on
the date of termination (but in no event later than the expiration of the term
of such Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service 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
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<PAGE>
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at a rate determined by the Administrator.
(c) 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 in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. 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 14
of the Plan.
12. Automatic Option Grants to Outside Directors. All grants of Options
to Outside Directors pursuant to this Section shall be automatic and
nondiscretionary and shall be made strictly in accordance with the following
provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
(b) No person shall have any discretion to select which Outside
Directors shall be granted Options under this Section or to determine the number
of Shares to be covered by such Options.
(c) Each person who first becomes an Outside Director following
the effective date of this Plan, as determined in accordance with Section 7
hereof, shall be automatically granted an Option to purchase 15,000 Shares (the
"First Option") on the date on which such person first becomes an Outside
Director, whether through election by the shareholders of the Company or
appointment by the Board to fill a vacancy; provided, however, that an Inside
Director who ceases to be an Inside Director but who remains a Director shall
not receive a First Option.
(d) Each Outside Director shall be automatically granted, subject
to such Outside Director's right to decline such grant in his/her discretion, an
Option to purchase 5,000 Shares (a "Subsequent Option") on the date of the
Company's annual meeting of the shareholders each year; provided, such Outside
Director continues to serve as a Director on such dates and, if as of such date,
he or she shall have served on the Board for at least the preceding six (6)
months.
(e) Notwithstanding the provisions of subsections (c) and (d)
hereof, any exercise of an Option granted before the Company has obtained
shareholder approval of the Plan in accordance with Section 20 hereof shall be
conditioned upon obtaining such shareholder approval of the Plan in accordance
with Section 20 hereof.
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<PAGE>
(f) The terms of each Option granted pursuant to this Section
shall be as follows:
(i) the term of the Option shall be ten (10) years.
(ii) the Option shall be exercisable only while the
Outside Director remains a Director of
the Company, except as set forth in Section 10 hereof.
(iii) the exercise price per Share shall be 100% of the
Fair Market Value per Share on the
date of grant of the Option.
(iv) the First Option shall be exercisable in
installments cumulatively as to one-third of
the Shares subject to the First Option on each anniversary of its date of grant,
provided the Optionee is a Director on such anniversary.
(v) each Subsequent Option shall be exercisable
cumulatively as to all of the Shares subject
to the Subsequent Option on the first anniversary of its date of grant, provided
the Optionee is a Director on such anniversary.
13. Non-Transferability of Options and Stock Purchase Rights. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, 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. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. 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 upon cancellation or expiration of an Option or Stock
Purchase Right, 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 Board,
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
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<PAGE>
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option or Stock Purchase Right shall lapse
as to all such Shares, provided the proposed dissolution or liquidation takes
place at the time and in the manner contemplated. To the extent it has not been
previously exercised, an Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall 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 or
right confers the right to purchase or receive, 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 is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, 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 consideration received by holders of Common Stock in the
merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Stock Purchase
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the
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<PAGE>
determination shall be provided to each Optionee within a reasonable time after
the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. 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 shall
comply with Applicable Laws and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
(b) Investment Representations. 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.
18. Inability to Obtain Authority. 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.
19. 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.
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<PAGE>
20. Shareholder Approval. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
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<PAGE>
BELL MICROPRODUCTS INC.
1998 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates].
<PAGE>
Termination Period:
This Option may be exercised for thirty (30) days after Optionee ceases
to be a Service Provider. Upon the death or Disability of the Optionee, this
Option may be exercised for one year after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 16(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Secretary of the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
Exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by such aggregate
Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
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<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares][; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement].
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The Optionee will
be treated as having received compensation income (taxable at ordinary income
tax rates) equal to the excess, if any, of the Fair
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<PAGE>
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as
an ISO, the Optionee will have no regular federal income tax liability upon its
exercise, although the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price will be
treated as an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in the year of
exercise. In the event that the Optionee ceases to be an Employee but remains a
Service Provider, any Incentive Stock Option of the Optionee that remains
unexercised shall cease to qualify as an Incentive Stock Option and will be
treated for tax purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least
one year after exercise and two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price. Any additional gain will be taxed
as capital gain, short-term or long-term depending on the period that the ISO
Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the
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<PAGE>
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: BELL MICROPRODUCTS INC.
- --------------------------------- ------------------------------------
Signature By
- --------------------------------- ------------------------------------
Print Name Title
- ---------------------------------
Residence Address
- ---------------------------------
-5-
<PAGE>
EXHIBIT A
---------
1998 STOCK PLAN
EXERCISE NOTICE
Bell Microproducts Inc.
1941 Ringwood Avenue
San Jose, CA 95131
Attention: Secretary
1. Exercise of Option. Effective as of today, ________________, 199__,
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Bell Microproducts Inc. (the "Company")
under and pursuant to the 1998 Stock Plan (the "Plan") and the Stock Option
Agreement dated _____, 19___ (the "Option Agreement"). The purchase price for
the Shares shall be $ ______, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. 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 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 Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 14 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing
<PAGE>
signed by the Company and Purchaser. This agreement is governed by the internal
substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: BELL MICROPRODUCTS INC.
- ---------------------------------- ------------------------------------
Signature By
- ---------------------------------- ------------------------------------
Print Name Its
Address: Address:
- --------------------------------- 1941 Ringwood Avenue
San Jose, CA 95131
- ---------------------------------
------------------------------------
Date Received
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EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between Bell
Microproducts Inc., a California corporation ("Pledgee"), and
_________________________ ("Pledgor").
Recitals
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1998 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration of
the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledgeholder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the principal sum of
the Note secured hereby, together with interest thereon, at the time and in the
manner provided in the Note.
b. Encumbrances. The Shares are free of all other encumbrances,
defenses and liens, and Pledgor will not further encumber the Shares without the
prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common Stock
is now or later becomes margin-listed by the Federal Reserve Board and Pledgee
is classified as a "lender" within
<PAGE>
the meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as all
payments of principal and interest are made as they become due under the terms
of the Note, Pledgor shall have the right to vote all of the Shares pledged
hereunder.
4. Stock Adjustments. In the event that during the term of the pledge
any stock dividend, reclassification, readjustment or other changes are declared
or made in the capital structure of Pledgee, all new, substituted and additional
shares or other securities issued by reason of any such change shall be
delivered to and held by the Pledgee under the terms of this Security Agreement
in the same manner as the Shares originally pledged hereunder. In the event of
substitution of such securities, Pledgor, Pledgee and Pledgeholder shall
cooperate and execute such documents as are reasonable so as to provide for the
substitution of such Collateral and, upon such substitution, references to
"Shares" in this Security Agreement shall include the substituted shares of
capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note and of
this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth in the
Option or contained in this Security Agreement for a period of 10 days after
written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules under
Regulation G, there shall be released from this pledge a portion of the pledged
Shares held by Pledgeholder hereunder upon payments of the principal of the
Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
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<PAGE>
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not sell,
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the payment of
all indebtedness secured hereby, at which time the remaining pledged stock shall
be promptly delivered to Pledgor, subject to the provisions for prior release of
a portion of the Collateral as provided in paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted and
governed under the internal substantive laws, but not the choice of law rules,
of California.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR"
-------------------------------
Signature
-------------------------------
Print Name
Address:
-------------------------------
-------------------------------
"PLEDGEE" Bell Microproducts Inc.,
a California corporation
-------------------------------
Signature
-------------------------------
Print Name
-------------------------------
Title
"PLEDGEHOLDER"
-------------------------------
Secretary of
Bell Microproducts Inc.
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<PAGE>
EXHIBIT C
---------
NOTE
$_______________ [City, State]
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Bell
Microproducts Inc., a California corporation (the "Company"), or order, the
principal sum of _______________________ ($_____________), together with
interest on the unpaid principal hereof from the date hereof at the rate of
_______________ percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
-----------------------------------
-----------------------------------
<PAGE>
APPENDIX B
BELL MICROPRODUCTS INC.
EMPLOYEE STOCK PURCHASE PLAN
(As proposed to be amended and restated as of May 21, 1998)
The following constitute the provisions of the Employee Stock Purchase
Plan of Bell Microproducts Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Bell Microproducts Inc.
(e) "Compensation" shall mean all base straight time gross
earnings, exclusive of payments for overtime, shift premium, incentive
compensation, incentive payments, bonuses, commissions and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries
which have been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of
the Company or any Designated Subsidiary for purposes of tax withholding under
the Code whose customary employment with the Company or any Designated
Subsidiary is at least twenty (20) hours per week and more than five (5) months
in any calendar year. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
Offering Period or Extended Offering Period.
<PAGE>
(i) "Exercise Date" shall mean the last day of each Offering
Period, or with respect to an Extended Offering Period, the last day of each
Purchase Period.
(j) "Extended Offering Period" shall mean a period of
approximately twelve (12), eighteen (18) or twenty-four (24) months, commencing
on the date or dates so specified by the Board, during which options granted
pursuant to the Plan may be exercised. The duration, commencement and
termination of Extended Offering Periods may be changed pursuant to Section 4 of
this Plan.
(k) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day on the date of such determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable, or;
(1) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(1) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Board.
(l) "Offering Period" shall mean a period of approximately six
(6) months, commencing on a date determined by the Board, during which an option
granted pursuant to the Plan may be exercised. The duration, commencement and
termination of Offering Periods may be changed pursuant to Section 4 of this
Plan.
(m) "Plan" shall mean this Employee Stock Purchase Plan.
(n) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(o) "Purchase Period" shall mean, with respect to an Extended
Offering Period, the approximately six (6) month period commencing after one
Exercise Date and ending with the next Exercise Date, except that the first
Purchase Period of any Extended Offering Period shall commence on the Enrollment
Date and end with the next Exercise Date. The duration, commencement and
termination of Purchase Periods may be changed pursuant to Section 4 of this
Plan.
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(p) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(q) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods and Extended Offering Periods. The Plan shall be
implemented by Offering Periods and/or Extended Offering Periods which may be
consecutive and/or overlapping, as determined by the Board, commencing on such
dates as the Board shall determine, and continuing thereafter until terminated
in accordance with Section 19 hereof. The Board shall have the power to change
the duration, commencement and termination of Offering Periods, Extended
Offering Periods and/or Purchase Periods with respect to future offerings
without shareholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period, Extended Offering
Period or Purchase Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such
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<PAGE>
authorization is applicable, unless sooner terminated by the participant as
provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period or Extended Offering Period in an amount not
exceeding fifteen percent (15%) of the Compensation which he or she receives on
each pay day during the Offering Period or Extended Offering Period, and the
aggregate of such payroll deductions during the Offering Period or Extended
Offering Period shall not exceed fifteen percent (15%) of the participant's
Compensation during any such Offering Period or Extended Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period or Extended Offering
Period by completing or filing with the Company a new subscription agreement
authorizing a change in payroll deduction rate. The Board may, in its
discretion, limit the number of participation rate changes during any Offering
Period or Extended Offering Period. The change in rate shall be effective with
the first full payroll period following five (5) business days after the
Company's receipt of the new subscription agreement unless the Company elects to
process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods or
Extended Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to 0% at such time during any
Offering Period or Extended Offering Period which is scheduled to end during the
current calendar year (the "Current Offering Period or Extended Offering
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period or Extended Offering
Period which ended during that calendar year plus all payroll deductions
accumulated with respect to the Current Offering Period or Extended Offering
Period equal $21,250. Payroll deductions shall recommence at the rate provided
in such participant' s subscription agreement at the beginning of the first
Offering Period or Extended Offering Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make
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<PAGE>
adequate provision for the Company's federal, state, or other tax withholding
obligations, if any, which arise upon the exercise of the option or the
disposition of the Common Stock. At any time, the Company may, but will not be
obligated to, withhold from the participant's compensation the amount necessary
for the Company to meet applicable withholding obligations, including any
withholding required to make available to the Company any tax deductions or
benefits attributable to sale or early disposition of Common Stock by the
Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period or
Extended Offering Period, each eligible Employee participating in such Offering
Period or Extended Offering Period shall be granted an option to purchase on the
Exercise Date(s) of such Offering Period or Extended Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during any two Offering Periods (or, with
respect to an Extended Offering Period, during any Purchase Period) more than a
number of Shares determined by dividing $25,000 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. Exercise of the option shall occur as provided in Section 8
hereof, unless the participant has withdrawn pursuant to Section 10 hereof, and
shall expire on the last day of the Offering Period or Extended Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant' s account for the subsequent
Offering Period or Extended Offering Period, subject to earlier withdrawal by
the participant as provided in Section 10 hereof. Any other monies left over in
a participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
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<PAGE>
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account will be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period or Extended Offering Period will be automatically
terminated, and no further payroll deductions for the purchase of shares will be
made during the Offering Period or Extended Offering Period or Extended Offering
Period. If a participant withdraws from an Offering Period or Extended Offering
Period, payroll deductions will not resume at the beginning of the succeeding
Offering Period or Extended Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined
in Section 2(g) hereof ), for any reason, including by virtue of him or her
having failed to remain an Employee of the Company for at least twenty (20)
hours per week during an Offering Period or Extended Offering Period in which
the Employee is a participant, he or she will be deemed to have elected to
withdraw from the Plan and the payroll deductions credited to such participant'
s account during the Offering Period or Extended Offering Period but not yet
used to exercise the option will be returned to such participant or, in the case
of his or her death, to the person or persons entitled thereto under Section 14
hereof, and such participant's option will be automatically terminated.
(c) A participant's withdrawal from an Offering Period or
Extended Offering Period will not have any effect upon his or her eligibility to
participate in any similar plan which may hereafter be adopted by the Company or
in succeeding Offering Periods or Extended Offering Periods which commence after
the termination of the Offering Period or Extended Offering Period from which
the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) Subject to adjustment upon changes in capitalization of
the Company as provided in Section 18 hereof, the maximum number of shares of
the Company's Common Stock which shall be made available for sale under the Plan
shall be 630,000 shares, plus an annual increase to be added on the first day of
the Company's fiscal year beginning January 1, 1999, equal to the lesser of (i)
150,000 shares, (ii) 1.5% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board. If on a given Exercise Date the number of
shares with respect to which options are to be exercised exceeds the number of
shares than available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant will have no interest or voting right in
shares covered by his option until such option has been exercised.
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<PAGE>
(c) Shares to be delivered to a participant under the Plan
will be registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The Board
or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period or Extended Offering Period in accordance with
Section 10 hereof.
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<PAGE>
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
participant in the Plan. Statements of account will be given to participating
Employees at least annually, which statements will set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action
by the shareholders of the Company, the Reserves as well as the price per share
of Common Stock covered by each option under the Plan which has not yet been
exercised 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 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 Board, 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.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period or Extended
Offering Period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board.
(c) Merger or Asset Sale. 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, each option under the Plan shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, to shorten the Offering Period(s) or Extended
Offering Period(s) then in progress by setting a new Exercise Date (the "New
Exercise Date") or to cancel each outstanding right to purchase and refund all
sums collected from participants during the Offering Period(s) or Extended
Offering Period(s) then in progress. If the Board shortens the Offering
Period(s) or Extended Offering Period(s) then in progress in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify each participant in writing, at least ten (10) business days prior to the
New Exercise Date, that the Exercise Date for his option has been changed to the
New Exercise Date and that his
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<PAGE>
option will be exercised automatically on the New Exercise Date, unless prior to
such date he has withdrawn from the Offering Period(s) or Extended Offering
Period(s) as provided in Section 10 hereof. For purposes of this paragraph, an
option granted under the Plan shall be deemed to be assumed if, following the
sale of assets or merger, the option confers the right to purchase, for each
share of option stock subject to the option immediately prior to the sale of
assets or merger, the consideration (whether stock, cash or other securities or
property) received in the sale of assets or merger by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if such holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
sale of assets or merger was not solely common stock of the successor
corporation or its parent (as defined in Section 424(e) of the Code), the Board
may, with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be solely
common stock of the successor corporation or its parent equal in fair market
value to the per share consideration received by holders of Common Stock and the
sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalization, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided that
an Offering Period or Extended Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the termination of
the Plan is in the best interests of the Company and its shareholders. Except as
provided in Section 18 hereof, no amendment may make any change in any option
theretofore granted which adversely affects the rights of any participant. To
the extent necessary to comply with Section 423 of the Code (or any successor
rule or provision or any other applicable law or regulation), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods or
Extended Offering Periods, limit the frequency and/or number of changes in the
amount withheld during an Offering Period or Extended Offering Period, establish
the exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
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<PAGE>
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, and establish such other limitations or procedures as the Board
(or its committee) determines in its sole discretion advisable which are
consistent with the Plan.
20. Notices. All notices or other communications by a participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, 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, the Company may require
the person exercising such option 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 applicable provisions of law.
22. 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. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Extended Offering Period. To the
extent permitted by any applicable laws, regulations, or stock exchange rules if
the Fair Market Value of the Common Stock on any Exercise Date in an Extended
Offering Period is lower than the Fair Market Value of the Common Stock on the
Enrollment Date of such Extended Offering Period, then all participants in such
Extended Offering Period shall be automatically withdrawn from such Extended
Offering Period immediately after the exercise of their option on such Exercise
Date and automatically re-enrolled in the immediately following Extended
Offering Period as of the first day thereof.
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<PAGE>
Exhibit A
---------
BELL MICROPRODUCTS INC.
EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the Bell Microproducts Inc. Employee Stock Purchase Plan (the "Employee
Stock Purchase Plan") and subscribes to purchase shares of the Company'
s Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (not to exceed 15%) during
the Offering Period or Extended Offering Period in accordance with the
Employee Stock Purchase Plan. (Please note that no fractional
percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period or
Extended Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete "Employee Stock Purchase Plan."
I understand that my participation in the Employee Stock Purchase Plan
is in all respects subject to the terms of the Plan. I understand that
the grant of the option by the Company under this Subscription
Agreement is subject to obtaining shareholder approval of the Employee
Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):____
__________
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period or Extended Offering Period during which I purchased
such shares), or one year from the Exercise Date, I will be treated for
federal income tax purposes as having received ordinary income at the
time of such
<PAGE>
disposition in an amount equal to the excess of the fair market value
of the shares at the time such shares were purchased by me over the
price which I paid for the shares. I hereby agree to notify the Company
in writing within 30 days after the date of any disposition of shares
and I will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of
the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time
of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2)
15% of the fair market value of the shares on the first day of the
Offering Period or Extended Offering Period. The remainder of the gain,
if any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)
-----------------------------------------------------------
(First) (Middle) (Last)
- ------------------------- -----------------------------------------------
Relationship
-------------------------------------
(Address)
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<PAGE>
NAME: (Please print)
----------------------------------------------------------
(First) (Middle) (Last)
- ------------------------- -----------------------------------------------
Relationship
-----------------------------------------------
(Address)
Employee's Social
Security Number
-----------------------------------------------
Employee's Address:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS OR EXTENDED OFFERING PERIODS UNLESS TERMINATED BY
ME.
Dated:
--------------------- -----------------------------------------------
Signature of Employee
-----------------------------------------------
Spouse's Signature (If beneficiary
other than spouse)
-3-
<PAGE>
Exhibit B
---------
BELL MICROPRODUCTS INC.
EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period or Extended Offering
Period of the Bell Microproducts Inc. Employee Stock Purchase Plan which began
on ___________ 19____ (the "Enrollment Date") hereby notifies the Company that
he or she hereby withdraws from the Offering Period or Extended Offering Period.
He or she hereby directs the Company to pay to the undersigned as promptly as
practicable all the payroll deductions credited to his or her account with
respect to such Offering Period or Extended Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period or
Extended Offering Period will be automatically terminated. The undersigned
understands further that no further payroll deductions will be made for the
purchase of shares in the current Offering Period or Extended Offering Period
and the undersigned shall be eligible to participate in succeeding Offering
Periods or Extended Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
-------------------------------
-------------------------------
-------------------------------
Signature:
-------------------------------
Date:
--------------------------
<PAGE>
APPENDIX C
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THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-----------------------------
PROXY BELL MICROPRODUCTS INC. PROXY
PROXY FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
May 21, 1998
The undersigned shareholder of Bell Microproducts Inc. (the "Company")
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement for the 1998 Annual Meeting of Shareholders of the Company to be
held on Thursday, May 21, 1998 at 1:00 p.m., local time, at the offices of the
Company, 1941 Ringwood Avenue, San Jose, California, and hereby revokes all
previous proxies and appoints W. Donald Bell and Bruce M. Jaffe, or either of
them, will full power of substitution, Proxies and Attorneys-in-Fact, on behalf
and in the name of the undersigned, to vote and otherwise represent all of the
shares registered in the name of the undersigned at said Annual Meeting, or any
adjournment thereof, with the same effect as if the undersigned were present and
voting such shares, on the following matters and in the following manner:
TO ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK, SIGN AND
DATE THIS PROXY AND RETURN IT AS PROMPTLY AS POSSIBLE.
(Continued, and to be signed on the other side)
- --------------------------------------------------------------------------------
o FOLD AND DETACH HERE o
<PAGE>
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[X] Please mark
your votes
as this
WITHHOLD
FOR FOR ALL
1. ELECTION OF DIRECTORS: [ ] [ ]
Nominees: W. Donald Bell,
Gordon A. Campbell,
Glenn E. Penisten, Edward L. Gelbach, James Ousley
INSTRUCTION: If you wish to withhold authority to vote
for any individual nominee, write that nominee's name
in the space provided below.
------------------------------------------------------
I PLAN TO ATTEND THE MEETING [ ]
2. Proposal to approve an amendment to the FOR AGAINST ABSTAIN
Company's Employee Stock Purchase Plan (i) to [ ] [ ] [ ]
increase the number of shares of Common Stock
reserved for issuance thereunder by 250,000
shares, and (ii) to provide for automatic
annual increases in the number of shares
reserved for issuance under the Employee Stock
Purchase Plan beginning on January 1, 1999 by a
number of shares equal to the lesser of (a)
150,000 shares (b) 1.5% of the outstanding
shares on such date, or (c) a lesser amount
determined by the Board of Directors, subject
to changes in the capitalization of the
Company.
3. Proposal to approve the adoption of the 1998 [ ] [ ] [ ]
Stock Plan and the reservation of 500,000
shares for issuance thereunder (plus such
number of shares as remain available for grant
under the 1986 Incentive Stock Plan and the
1993 Director Stock Option Plan).
4. Proposal to ratify the appointment of Price [ ] [ ] [ ]
Waterhouse LLP as independent auditors for the
Company for the fiscal year ending December 31,
1998.
In their discretion, the Proxies are entitled to
vote upon such other matters as may properly come
before the Annual Meeting or any adjournments
thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
IN ACCORDANCE WITH THE SPECIFICATIONS MADE. IF NO
SPECIFICATION IS MADE, THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE
PERSONS AND PROPOSALS, AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AS THE
PROXYHOLDERS DEEM ADVISABLE.
Signature(s) ---------------------------------------- Dated ------------- , 1998
(This proxy should be marked, dated and signed by each shareholder exactly as
such shareholder's name appears hereon, and returned promptly in the enclosed
envelope. Persons signing in a fiduciary capacity should so indicate. A
corporation is requested to sign its name by its President or other authorized
officer, with the office held designated. If shares are held by joint tenants
or as community property, both holders should sign.)
o FOLD AND DETACH HERE o
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