SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. __)
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] 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.
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[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:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
BELL MICROPRODUCTS INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 13, 1999
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 13, 1999, 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 six (6) directors to serve for the ensuing year and until
their successors are duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors for the Company for the fiscal year ending December
31, 1999.
3. 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 March 26, 1999 are
entitled to notice of and to vote at the meeting and any continuation or
adjournment thereof.
By Order of the Board of Directors
/s/ Remo E. Canessa
Remo E. Canessa
Chief Financial Officer
San Jose, California
April 15, 1999
================================================================================
YOUR VOTE IS IMPORTANT
All shareholders are cordially invited to attend the Annual Meeting in
person. However, to ensure your representation at the meeting, you are urged
to mark, sign, date and return the enclosed Proxy as promptly as possible in
the postage-paid envelope enclosed for that purpose. Returning your proxy will
help the Company ensure a quorum and avoid the additional expense of duplicate
proxy solicitations. Any shareholder attending the meeting may vote in person
even if he or she has returned the proxy.
================================================================================
<PAGE>
BELL MICROPRODUCTS INC.
1941 Ringwood Avenue
San Jose, California 95131
----------------
PROXY STATEMENT FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
----------------
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The enclosed proxy is solicited on behalf of the Board of Directors of
Bell Microproducts Inc. (the "Company"), a California corporation, for use at
the Annual Meeting of Shareholders to be held on Thursday, May 13, 1999, 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 first mailed on or about April 15,
1999 to all shareholders entitled to vote at the Annual Meeting.
Deadline for Receipt of Shareholder Proposals
Proposals of shareholders of the Company intended to be presented by such
shareholders at the Company's 2000 Annual Meeting of Shareholders must be
received by the Company no later than December 15, 1999, 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 March 26, 1999
(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 8,935,340 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 distribute the shareholder's votes under
the same principle among as many candidates as the shareholder chooses,
provided that votes may not be cast for
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<PAGE>
more than six (6) candidates. However, no shareholder shall be entitled to
cumulate votes for any candidate unless the candidate's name has been placed in
nomination prior to the voting, and the shareholder, or any other shareholder,
has given notice at the meeting prior to the voting of the intention to
cumulate the shareholder's votes. On all other matters, each share has one
vote.
The cost of soliciting proxies will be borne by the Company. The Company
may 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; Votes Cast; Abstentions; Broker Non-Votes
The required quorum for the transaction of business at the Annual Meeting
is a majority of the shares of Common Stock issued and outstanding on the
Record Date (the "Quorum"). Shares that are voted "For" or "Against" a matter
are treated as being present at the meeting for purposes of establishing a
Quorum and are also treated as shares "represented and voting" at the Annual
Meeting (the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in California
as to the proper treatment of abstentions in the counting of votes with respect
to a proposal such as the amendment of a stock option plan, the Company
believes that abstentions should be counted for purposes of determining both
(i) the presence or absence of a Quorum and (ii) the total number of Votes Cast
with respect to the proposal. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the proposal. Broker
non-votes will be counted for purposes of determining the presence or absence
of a Quorum, but will not be counted for purposes of determining the number of
Votes Cast with respect to a particular proposal.
2
<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
--------------------------
Beneficial Ownership Shares(#) Percent(1)
- ------------------------------------------------------------------------ ----------- ------------
<S> <C> <C>
Bowman Capital Management, L.L.C.(2) ................................. 1,246,000 13.9%
1875 Grant St., Suite 600
San Mateo, CA 94402
W. Donald Bell(3) ...................................................... 769,348 8.6%
Advisory Research, Inc.(4) ............................................. 542,725 6.1%
180 N. Stetson Street, Ste. 5870
Two Prudential Plaza
Chicago, IL 60601
Dimensional Fund Advisors(5) .......................................... 463,100 5.2%
1299 Ocean Ave., 11th Floor
Santa Monica, CA 90401
Eugene B. Chaiken(6) ................................................ 356,000 3.8%
Philip M. Roussey(7) ................................................ 231,860 2.6%
Edward L. Gelbach(8) ................................................ 93,439 *
Gordon A. Campbell(9) ................................................ 84,963 *
Glenn E. Penisten(10) ................................................ 30,000 *
Ronald H. Mabry(11) ................................................... 26,000 *
Bruce M. Jaffe(12) ................................................... 19,226 *
Brian J. Clark(13) ................................................... 17,808 *
James E. Ousley(14) ................................................... 5,000 *
All directors and executive officers as a group (13 persons)(15) ...... 1,600,805 16.8%
3
<PAGE>
<FN>
- ------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Based on 8,935,340 shares of Common Stock outstanding on the Record Date.
(2) Represents shares held as disclosed on Schedule 13G/A filed on February 9,
1999. Bowman Capital Management, L.L.C. shares voting and dispositive
power with respect to 1,246,000 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 795,000 shares with
Spinnaker Technology Fund, L.P. and shares voting and dispositive power
with respect to 451,000 shares with Spinnaker Offshore Founders Fund,
Limited.
(3) Represents 769,348 shares held by W. Donald Bell and Lynne F. Bell,
Trustees of the Bell Family Trust U/D/T dated April 26, 1991, and excludes
40,000 shares held by Mr. Bell's children. Also includes 35,000 shares
subject to stock options exercisable within 60 days after the Record Date.
(4) Represents shares held as disclosed on Schedule 13G filed on February 16,
1999. Advisory Research, Inc. holds shared voting and dispositive power
with respect to 542,725 shares with David B. Heller, President and
controlling shareholder of Advisory Research, Inc.
(5) Represents shares held as disclosed on Schedule 13G filed on February 11,
1999. Dimensional Fund Advisors reported sole voting and dispositive power
over 463,100 shares.
(6) Includes 350,000 shares subject to warrants exercisable within 60 days
after the Record Date held by Almo Corporation. Mr. Chaiken is President,
Chief Executive Officer, Chairman of the Board and majority stockholder of
Almo Corporation. Mr. Chaiken disclaims beneficial ownership of such
shares except to the extent of any individual interest in Almo
Corporation.
(7) Includes 231,860 shares held by Philip M. Roussey and Mounawar Roussey,
Trustees of the Roussey Family Trust U/D/T dated November 8, 1991. Also
includes 35,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(8) Includes 30,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(9) Includes 30,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(10) Includes 30,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(11) Includes 26,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(12) Includes 14,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(13) Includes 16,250 shares subject to stock options exercisable within 60 days
after the Record Date.
(14) Includes 5,000 shares subject to stock options exercisable within 60 days
after the Record Date.
(15) Includes footnotes 3 and 6-14.
</FN>
</TABLE>
4
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
A board of six (6) 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.
<TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEES
LISTED BELOW.
Nominees for Director
The names of the nominees, each of whom is currently a director of the
Company, and certain information about them is set forth below, including
information furnished by them as to their principal occupation for the last
five years, certain other directorships held by them and their ages as of the
Record Date:
<CAPTION>
Name Age Position(s) with the Company Director Since
- ------------------------------ ----- ------------------------------------ ----------------
<S> <C> <C> <C>
W. Donald Bell ............... 61 President, Chief Executive Officer 1987
and Chairman of the Board
Gordon A. Campbell(1) ...... 54 Director 1988
Glenn E. Penisten(2) ......... 67 Director 1988
Edward L. Gelbach(1) ......... 67 Director 1993
James E. Ousley(2) ......... 53 Director 1998
Eugene B. Chaiken(2) ......... 58 Director 1998
<FN>
- ------------
(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. In September 1993, Mr. Campbell founded
Techfarm, Inc., a venture capital investment firm, and currently serves as
President. In 1985, Mr. Campbell founded Chips and Technologies, Inc.
("CHIPS"), a semiconductor and related device company, and served as Chairman,
Chief Executive Officer and President of CHIPS until September 1993. Mr.
Campbell currently serves as a director of 3Com Corporation. He is also a
director of several private companies.
5
<PAGE>
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.
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 Etec Systems, Inc., a manufacturer of pattern
generation equipment.
James E. 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 Activcard S.A., (EASDAQ
as ACTV), an internet security software company, and Datalink Systems
Corporation, a data storage integration company.
Eugene B. Chaiken has served on the Company's Board of Directors since
November 1998. Since 1973, Mr. Chaiken has served as the Chairman, President
and Chief Executive Officer of Almo Corporation, a major appliance, consumer
electronics and wire and cable distribution company.
Vote Required
The six (6) 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 six (6) persons for director.
Board Meetings and Committees
During the fiscal year ended December 31, 1998, the Board of Directors
held a total of four (4) meetings.
The Audit Committee, which consisted of Glenn E. Penisten, Eugene B.
Chaiken and James E. Ousley in fiscal 1998, 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 once
during fiscal year 1998.
The Compensation Committee, which consisted of Gordon A. Campbell and
Edward L. Gelbach in fiscal 1998, 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 twice during fiscal
year 1998.
The Board of Directors currently has no nominating committee or a
committee performing a similar function.
6
<PAGE>
Each of the incumbent directors attended at least 83% 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 1998, each of the directors was paid an annual fee of
$8,000, payable quarterly, a fee of $4,000 per board meeting attended in
person, $2,000 per committee meeting attended in person, and $1,000 per board
or committee meeting attended by telephone, and was reimbursed for expenses
incurred in attending Board meetings and committee meetings. In fiscal year
1999, each director will be paid an annual fee of $8,000, payable quarterly. In
fiscal 1999, each director will be paid $4,000 for each regular Board meeting
attended in person, 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 1998, directors received stock options granted pursuant to
the 1993 Director Option Plan ("1993 Plan"), which was terminated in February
1998. 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 James E. 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 and vested as to 33% or 5,000
shares on February 12, 1999.
1998 Stock Plan
During fiscal 1998, all outside directors received an automatic and
non-discretionary stock options grant pursuant to the 1998 Stock Plan (the
"Stock Plan). Each non-employee director who previously received options
pursuant to the 1993 Plan (the "Returning Directors") received an automatic and
non-discretionary option to purchase 5,000 shares of the Company's Common
Stock, which option becomes fully vested and exercisable on May 21, 1999, based
on continued service as a director. Each non-employee director who was first
elected to the Board of Directors following the adoption of the Stock Plan (the
"New Directors") was automatically granted an option to purchase 15,000 shares
of Common Stock, which option becomes fully vested and exercisable as to
one-third of the shares on the first, second, and third anniversaries,
respectively, of such New Director's election to the Board of Directors, based
on continued service as a director. Provided that shares are then available
under the Stock Plan, on the date of the 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 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.
7
<PAGE>
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.
Under the terms of the Stock Plan, on May 21, 1998, Returning Directors
Penisten, Campbell and Gelbach each automatically received options to purchase
5,000 shares of the Company's Common Stock which options have a per share
exercise price of $7.875, the fair market value on the date of grant, and will
become fully vested and exercisable as to one-third of the shares on May 21,
1999. Pursuant to the terms of the Stock Plan, on November 27, 1998, New
Director Eugene B. Chaiken automatically received options to purchase 15,000
shares of the Company's Common Stock which options have a per share exercise
price of $8.813, and will become fully vested and exercisable as to one-third
of the shares on November 27, 1999, 2000 and 2001, respectively.
8
<PAGE>
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected PricewaterhouseCoopers LLP,
independent accountants, to audit the financial statements of the Company for
the current fiscal year ending December 31, 1999. PricewaterhouseCoopers 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 PricewaterhouseCoopers 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.
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 $9,590,000 of
services to Pinnacle during 1998 and purchased approximately $1,564,000 of
inventory from Pinnacle in 1998.
In May 1998, the Company entered into a manufacturing agreement with
Network Peripherals Inc. ("NPI") providing for the performance by the Company's
manufacturing division of value-added turnkey services for NPI. Sales to NPI
totaled approximately $8,241,000 for 1998. The Company has purchased inventory
totaling approximately $546,000 and inventory on hand, purchased under contract
with NPI, totaled $737,000 at December 31, 1998. Glen E. Penisten, a director
of the Company, is a director of NPI. The agreement was entered into 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.
In November 1998, the Company acquired the assets of the Computer Products
Division of Almo Corporation for approximately $20.6 million and five-year
warrants to purchase 350,000 shares of Common Stock of the Company at an
exercise price of $12 per share. Eugene B. Chaiken, a director of the Company,
is President, Chief Executive Officer, Chairman of the Board and majority
stockholder of Almo Corporation. The purchase price of the assets of the
Computer Products Division of Almo Corporation was negotiated on an arms-length
basis and the Board of Directors of the Company (of which Mr. Chaiken was not a
member at the time) approved the purchase price. Upon consummation of the
transaction, Mr. Chaiken became a member of the Board of Directors of the
Company.
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
9
<PAGE>
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, Ronald H. Mabry and Robert J.
Sturgeon. The Management Retention Agreements have three-year terms, subject to
extension in the event there 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.
Section 16(a) Beneficial Ownership Reporting Compliance
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 1998, all Section 16(a) filing requirements applicable
to the Company's officers, directors and ten percent shareholders were complied
with, except that Remo E. Canessa and Robert J. Sturgeon each filed one late
report and Brian J. Clark filed two late reports. The late reports of Messrs.
Canessa and Clark related to initial statements of beneficial ownership and,
with respect to Mr. Clark only, two transactions thereafter. Mr Sturgeon's late
report related to two transactions.
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
1998).
10
<PAGE>
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, 1998 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 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 1998 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
1998 expressed as a percentage of base salary for Messrs. Roussey, Mabry and
Jaffe were approximately 44%.
11
<PAGE>
The performance goals established at the beginning of 1998 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 1998 at approximately 35% 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 "1993 Director Option Plan" and "1998 Stock Plan". Stock options
have been granted to 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 401(k) Plan allows for
the Company to make matching contributions, the Company did not make a matching
contribution for participants in 1998. The Company also has adopted the Stock
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 1998 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 1998,
expressed as a percentage of his base salary, was 75%. For 1998, 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 60% 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 1998 compensation,
see "Executive Compensation--Summary Compensation Table."
COMPENSATION COMMITTEE
Gordon A. Campbell
Edward L. Gelbach
12
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
The following table sets forth the compensation paid during the three
fiscal years ended December 31, 1998, 1997 and 1996 to the Company's Chief
Executive Officer and the four other most highly compensated executive officers
for the fiscal year 1998.
<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 1998 $ 389,423 $ 226,259 $ 3,600(1) $ -- $ 48,600(3)
President, Chief Executive 1997 375,000 59,333 3,600(1) 40,000 51,069(3)
Officer and Chairman of the Board 1996 367,692 238,480 3,600(1) 50,000(2) 50,581(3)
Philip M. Roussey 1998 $ 207,693 $ 110,294 $ 3,600(1) $ -- $ 10,388
Senior Vice President of 1997 200,000 52,179 3,600(1) 20,000 --
Computer Products Marketing 1996 185,462 80,119 3,600(1) 30,000(2) --
Ronald H. Mabry(4) 1998 $ 197,308 $ 56,806 $ 3,600(1) $ -- $ --
Senior Vice President of 1997 187,880 49,569 3,600(1) 10,000 --
Component Marketing 1996 29,423 21,720 783(1) 60,000 --
Bruce M. Jaffe(5) 1998 $ 311,538 $ 80,448 $ 3,600(1) $ -- $ --
Senior Vice President of 1997 119,240 46,591 1,691(1) 80,000 103,683(7)
Finance and Secretary 1996 -- -- -- -- --
Brian J. Clark(6) 1998 $ 205,311 $ 72,931 $ 3,600(1) $ 10,000 $ --
Senior Vice President of 1998 50,538 6,818 1,200(1) 70,000 --
Industrial Sales 1996 -- -- -- -- --
<FN>
- ------------
(1) Represents a car allowance paid by the Company.
(2) Includes options to purchase 50,000 shares and 30,000 shares reissued to
Messrs. Bell and Roussey, respectively, in connection with the option
repricing on February 7, 1996.
(3) Consists of premiums paid by the Company on a term life insurance policy
(face amount of $1.0 million in 1998), the proceeds of which are payable
to the Company and to designated beneficiaries of Mr. Bell.
(4) Mr. Mabry joined the Company in October 1996.
(5) Mr. Jaffe joined the Company in July 1997.
(6) Mr. Clark joined the Company in September 1997.
(7) Represents relocation expenses paid by the Company.
</FN>
</TABLE>
13
<PAGE>
Option Grants In Last Fiscal Year
<TABLE>
The following table provides information with respect to option grants in
fiscal year 1998 to the Named Executive Officers.
<CAPTION>
Potential Realizable
Value at Assumed
Percent of Annual Rates of
Number of Total Options of Stock Price
Securities Granted to Appreciation
Underlying Employees in Exercise or for Option Term(1)
Options Fiscal Base Price Expiration --------------------
Name Granted (#) Year (%) ($/Share) Date 5% 10%
- ------------------------- ------------- --------------- ------------- ------------ -------- ---------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell ......... -- -- -- -- -- --
Philip M. Roussey ...... -- -- -- -- -- --
Ronald H. Mabry ......... -- -- -- -- -- --
Bruce Jaffe ............ -- -- -- -- -- --
Brian J. Clark ......... 10,000 1.0% 7.50 2/12/08 47,167 119,530
<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 1998 by the Named Executive Officers. The value of unexercised
in-the-money options have been based on the market value of the Company's stock
of $9.25 on December 31, 1998.
<CAPTION>
Value of Unexercised
Total Number of Unexercised In-the-Money Option at
Shares Options at Fiscal Year End Fiscal Year End(1)
Acquired on Value ------------------------------- -------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- -------------- -------------- ------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
W. Donald Bell ......... -- -- 20,000 70,000 $ 27,500 $110,000
Philip M. Roussey ...... -- -- 26,000 44,000 42,750 74,750
Ronald H. Mabry ......... -- -- 25,000 45,000 33,000 49,500
Bruce Jaffe ............ -- -- 14,000 66,000 1,750 8,250
Brian J. Clark ......... -- -- 14,500 65,500 -- 17,500
<FN>
- ------------
(1) Based on a market value of the underlying securities of $9.25 at December
31, 1998.
</FN>
</TABLE>
14
<PAGE>
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, of the Company's Common
Stock from December 31, 1993 through December 31, 1998 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 December 31, 1993 and in the
S&P 500 and the PSE High Tech Index at the closing price on such date. Note
that historic stock price performance is not necessarily indicative of future
stock price performance. The Company's stock price on December 31, 1998 was
$9.25.
[GRAPHIC OMITTED]
[The following descriptive data is supplied in accordance with Rule 304(d) of
Regulation S-T]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Total Return Analysis
12/31/93 12/31/94 12/30/95 12/29/96 12/31/97 12/31/98
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Bell Microproducts. Inc. $ 100 $ 141 $ 95 $ 116 $ 103 $ 121
- --------------------------------------------------------------------------------------------------------------
PSE Hi-Tech Index $ 100 $ 121 $ 178 $ 214 $ 256 $ 396
- --------------------------------------------------------------------------------------------------------------
S&P 500 $ 100 $ 98 $ 132 $ 159 $ 208 $ 264
- --------------------------------------------------------------------------------------------------------------
</TABLE>
15
<PAGE>
OTHER MATTERS
The Company's Annual Report to Shareholders for fiscal year 1998 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
/s/ Remo E. Canessa
Remo E. Canessa
Chief Financial Officer
San Jose, California
April 15, 1999
16
<PAGE>
APPENDIX A
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
-------------------------------
PROXY BELL MICROPRODUCTS INC. PROXY
PROXY FOR 1999 ANNUAL MEETING OF SHAREHOLDERS
May 13, 1999
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 1999 Annual Meeting of Shareholders of the Company to be
held on Thursday, May 13, 1999 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)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
<PAGE>
Please mark
[X] 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 E. Ousley
and Eugene B. Chaiken
INSTRUCTION: If you wish to withhold authority to vote
for any individual nominee, write that nominee's name
in the space provided below.
---------------------------
2. Proposal to ratify the appointment of FOR AGAINST ABSTAIN
PricewaterhouseCoopers LLP as independent [ ] [ ] [ ]
auditors for the Company for the fiscal
year ending December 31, 1999.
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.
I PLAN TO ATTEND THE MEETING [ ]
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 _______, 1999
(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.)
- FOLD AND DETACH HERE -
