<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
BELL INDUSTRIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[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 transaction applies:
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(2) Aggregate number of securities to which transaction 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.
[ ] 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
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> 2
BELL LOGO
1960 EAST GRAND AVENUE
EL SEGUNDO, CALIFORNIA 90245-4608
Dear Shareholder:
This year's Annual Meeting of Shareholders will be held on Wednesday, June
28, 2000, at 4:00 P.M., at the Doubletree Club Hotel, 1985 East Grand Avenue, El
Segundo, California. Management hopes that you will come to the meeting and give
us an opportunity to meet you and discuss any questions you may have.
The formal notice of meeting and the Proxy Statement follow. The only
formal action to be taken at the meeting is the election of the Board of
Directors for the ensuing year. I urge you to review the Proxy Statement
carefully and, at your earliest convenience, sign, date and mail the enclosed
proxy card so that your shares will be represented at the meeting. A prepaid
return envelope is provided for this purpose.
Sincerely yours,
TRACY A. EDWARDS
President
May 19, 2000
<PAGE> 3
BELL INDUSTRIES, INC.
1960 EAST GRAND AVENUE
EL SEGUNDO, CALIFORNIA 90245-4608
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 28, 2000
The Annual Meeting of Shareholders of Bell Industries, Inc., a California
corporation, will be held at the Doubletree Club Hotel, 1985 East Grand Avenue,
El Segundo, California, on Wednesday, June 28, 2000 at 4:00 P.M.
The purpose of the meeting is to elect five directors to hold office until
the next Annual Meeting of Shareholders and thereafter until their successors
are elected and to transact any other business that may properly come before the
meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on Friday, May 19,
2000 as the record date for the determination of shareholders entitled to
receive notice of, and to vote at, said meeting and any adjournment or
adjournments thereof.
By Order of the Board of Directors
JOHN J. COST
Secretary
May 19, 2000
YOUR VOTE IS IMPORTANT. IF YOU DO NOT EXPECT TO ATTEND THE ANNUAL MEETING
OF SHAREHOLDERS, OR IF YOU DO PLAN TO ATTEND AND WISH TO VOTE BY PROXY, PLEASE
DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY CARD, FOR WHICH A RETURN,
STAMPED ENVELOPE IS PROVIDED. YOUR PROMPT RETURN OF THE PROXY CARD WILL HELP THE
COMPANY AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION TO ASSURE A QUORUM
AT THE MEETING.
<PAGE> 4
PROXY STATEMENT
------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF BELL INDUSTRIES, INC.
JUNE 28, 2000
------------------------
INTRODUCTION
This Proxy Statement is being mailed on or about May 19, 2000 to
shareholders of Bell Industries, Inc. (the "Company") in connection with the
solicitation of Proxies by the Company's Board of Directors for use at the
Company's Annual Meeting of Shareholders to be held on June 28, 2000, or any
adjournments thereof, for the purposes set forth herein and in the accompanying
Notice of Annual Meeting of Shareholders. Expenses relating to the proxy
statement, the proxy and the solicitation thereof will be paid by the Company.
The persons named in the accompanying proxy have advised the Company that
they intend to vote the proxies received by them in their discretion for as many
director nominees as the votes represented by such proxies are entitled to elect
(see "Election of Directors"). Any shareholder may revoke his or her proxy at
any time prior to its use by filing with the Secretary of the Company a written
notice of revocation or a duly executed proxy bearing a later date.
Only shareholders of record at the close of business on Friday, May 19,
2000, will be entitled to notice of, and to vote at, the meeting or any
adjournments thereof. At such record date, there were outstanding and entitled
to vote approximately 8,798,415 shares of common stock. Each of the foregoing
shares is entitled to one vote on all matters other than the election of
directors. In connection with the election of directors, each shareholder is
entitled to cumulate votes.
A quorum must be present to take any action on a voting matter at the
meeting. The presence in person or represented by proxy of the persons entitled
to vote a majority of the shares constitutes a quorum. For purposes of
determining the number of shares present in person or represented by proxy on
voting matters, all votes cast "for," "against" or "abstain" are included.
"Broker non-votes," which occur when brokers or other nominees are prohibited
from exercising discretionary voting authority for beneficial owners who have
not provided voting instructions, are not counted for the purpose of determining
the number of shares present in person or represented by proxy on a voting
matter.
ELECTION OF DIRECTORS
In voting for directors of the Company, each shareholder has the right to
cumulate votes and give one candidate a number of votes equal to the number of
directors to be elected, multiplied by the number of votes to which the shares
are entitled, or to distribute the votes on the same principle among as many
candidates as the shareholder chooses. The candidates receiving the highest
number of votes, up to the number of directors to be elected, shall be elected.
For a shareholder to exercise cumulative voting rights, such shareholder must
give notice of intent to cumulate votes prior to the vote at the meeting.
The Company's Board of Directors presently consists of eight directors. Of
these eight directors, five have chosen not to stand for re-election; these
being Anthony L. Craig, Herbert S. Davidson, Gordon Graham, Milton Rosenberg and
Theodore Williams. Messrs. Craig and Graham had been directors for over five
years, Mr. Davidson since 1997, and Messrs. Rosenberg and Williams for over 25
years. Immediately prior to the Annual Meeting, the Company's By-laws will be
amended to fix the number of authorized directors at five.
<PAGE> 5
The Board believes that reducing its number from eight to five and the election
of two new persons is desirable in light of the contraction of the Company's
size and change in its direction over the last two years.
The persons who are elected directors will hold office until the next
Annual Meeting of Shareholders and thereafter until their successors are
elected. Three of the five nominees are currently directors of the Company. The
names and principal occupations of the nominees for election as directors, and
the respective numbers of shares of voting stock of the Company beneficially
owned, directly or indirectly, by each nominee are set forth below.
<TABLE>
<CAPTION>
YEAR SHARES BENEFICIALLY
FIRST OWNED AS OF PERCENT
NAME AND PRINCIPAL OCCUPATION AGE ELECTED APRIL 30, 2000 OF CLASS
----------------------------- --- ------- ------------------- --------
<S> <C> <C> <C> <C>
John J. Cost(2)(3)................................. 65 1971 17,506(5) (4)
of Counsel Irell & Manella LLP, Attorneys
Tracy A. Edwards................................... 43 1999 133,577(6) 1.4%
President and Chief Executive Officer
James Lawson....................................... 44 2,800 (4)
Partner, Lincoln Partners, investment bankers
Michael R. Parks................................... 37
Chairman and Chief Executive Officer
The Revere Group, technology consultants
Mark E. Schwartz(1)................................ 39 2000 8,900 (4)
General Partner, Newcastle Partners, L.P.
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
(3) Member of Nominating Committee.
(4) Less than 1% of total outstanding shares.
(5) Includes 14,800 shares with respect to Mr. Cost issuable pursuant to
currently exercisable stock options issued under Bell's Non-employees
Directors' Stock Option Plan.
(6) Includes 86,209 shares issuable pursuant to currently exercisable stock
options.
(7) On February 1, 1999, the Company's Board of Directors declared a dividend
distribution of one share purchase right ("Right") for each outstanding
share of Common Stock to shareholders of record on February 1, 1999, and
with respect to shares of Common Stock issued thereafter until certain
events occur. Consequently, each share of Common Stock shown in this table
and the tables set forth below includes an attendant Right.
On February 1, 1999, Mr. Edwards was elected President and Chief Executive
Officer, and a director of the Company. From January 1998 until that time, Mr.
Edwards was the Executive Vice President of the Company and for more than five
years prior to January 1998, Mr. Edwards served as the Company's Vice President
and Chief Financial Officer. Mr. Edwards' business address is 1960 East Grand
Avenue, Suite 560, El Segundo, California 90245-4608.
Mr. Cost was a partner in the law firm of Irell & Manella LLP, Los Angeles,
California, from 1969 through December 1994. Effective January 1, 1995, Mr. Cost
retired as a partner of that firm and now acts "of counsel." He was elected
Secretary in 1987. Irell & Manella LLP provide legal services to the Company.
Mr. Cost's business address is 333 South Hope Street, Suite 3300, Los Angeles,
California 90071.
Since April 1, 1996, Mr. Lawson has been a Managing Director and Managing
Member of Lincoln Partners, LLC, a privately held investment banking firm. From
1990 to 1996, Mr. Lawson was an Executive or
2
<PAGE> 6
Managing Director with Peers & Co., an international merchant banking firm,
owned by The Long-Term Credit Bank of Japan, Ltd., a Tokyo Stock Exchange
company. Lincoln Partners and Peers have provided investment banking services to
the Company. Mr. Lawson's business address is 181 West Adams, Suite 3750,
Chicago, Illinois, 60602.
Since 1992, Mr. Parks has been Chairman and Chief Executive Officer of The
Revere Group, a privately held e-solutions technology consulting company. Mr.
Parks' business address is 1751 Lake Cook Road, Suite 600, Deerfield, Illinois
60015.
Mr. Schwarz, elected as a director in February 2000, is the sole general
partner of Newcastle Partners, L.P., a private investment firm, since January
1993. Additionally, Mr. Schwarz was the Vice President and Manager of Sandera
L.L.C., a private investment firm, from December 1995 to September 1999. Prior
to that time, Mr. Schwarz was a securities analyst and portfolio manager for SCM
Advisors, L.L.C., a registered investment advisor, from May 1993 to 1996. Mr.
Schwarz served as a director of Aydin Corporation, a NYSE listed company, from
October 1998 until its sale to L-3 Communications Corporation in April 1999. Mr.
Schwarz's business address is c/o Newcastle Partners, 4514 Cole Avenue, Suite
600, Dallas, Texas 75205.
If for any reason one or more of the nominees named above should not be
available as a candidate for director, an event that the Board of Directors does
not anticipate, the persons named in the enclosed proxy will vote for such other
candidate or candidates as may be nominated by the Board and discretionary
authority to do so is included in the Proxy.
DIRECTOR COMPENSATION
During 1999, directors who were employees (except Mr. Cost) received no
additional compensation for serving on the Board of Directors. Non-employee
directors (including Mr. Cost) received an annual retainer of $40,000, plus
$1,000 for each attendance at a meeting of the Board or a committee thereof
which does not immediately precede or follow a meeting of the Board. Effective
January 1, 2000, no director received an annual retainer except for Mr. Craig
who is receiving an annual retainer of $25,000. The annual retainer to be
received by the non-employee directors elected at the upcoming annual meeting of
shareholders has not yet been determined. The Company had a directors'
retirement plan for non-employee directors. Under the plan, directors having
served at least ten years as a director after reaching the age of 65 are
entitled to receive an annual retirement benefit of $40,000. Such payments will
be made for the number of years equal to the number of years served as a
director or until his or her death; provided, that a surviving spouse is
entitled for a period of five years after death to continue to receive the same
benefits that such director would have been so entitled to receive. If a
director has reached age 60 and ceases to serve as a director at the request of
the Company, he will be entitled to the same retirement benefits as if he
retired at age 65. In the event of a change in control, a director leaving the
Board would be entitled to receive an immediate lump sum payment of the present
value of his accrued retirement benefit. In January 1996, the Company terminated
the directors' retirement plan except to the extent rights thereunder were
vested. The rights of Mr. Cost and Mr. Rosenberg (each a director for over 20
years) were fully vested under the plan; and, commencing January 1, 2000, each
began receiving their annual retirement benefit. Messrs. Cost, Lawson, Parks and
Schwarz are also entitled to receive stock options under the Company's
Non-employee Directors' Stock Option Plan. Under the Plan, each non-employee
director receives options for 10,000 shares upon his election as a director and
an option for 1,000 shares for each year thereafter in which he is reelected.
Pursuant to the Plan, Mr. Cost received options covering 10,000 shares in May
1996 when the Plan was first adopted and options covering 1,000 shares in May
1997, 1998 and February 2000. Mr. Schwarz received an option covering 10,000
shares in February 2000. Mr. Lawson and Mr. Parks also will each receive an
option covering 10,000 shares in June 2000, if elected as a director.
3
<PAGE> 7
Options granted under the Plan are for a term of five years, vest and may
be exercised six months from the date of grant and when granted have an exercise
price equal to the market price of the Company's common stock on the date of
grant.
INFORMATION REGARDING SHAREHOLDERS
PRINCIPAL SECURITY HOLDERS
To the Company's knowledge, except as hereinafter described, no single
shareholder owned of record or beneficially as of March 31, 2000 more than 5% of
the Company's common stock. As of that date, Cede & Co., a nominee of securities
depositories for various segments of the financial industry, held approximately
8,474,445 shares representing 91.9% of the Company's outstanding common stock,
none of which was owned beneficially by such organization. Based upon reports
filed through March 31, 2000 with the Securities and Exchange Commission, the
Company believes that only the company named below beneficially owns five
percent (5.0%) or more of the Company's common stock:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------------------ -------------------- --------
<S> <C> <C>
Dimensional Fund Advisors................................... 625,820 7.0%
1299 Ocean Avenue, 11th Floor (Direct)
Santa Monica, California 90401
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the beneficial ownership of the Company's common
stock of those executive officers of the Company listed in the "Summary
Compensation Table" under EXECUTIVE COMPENSATION, who are not directors, as well
as the beneficial ownership of common stock of all nominees for directors and
executive officers of the Company as a group as of April 30, 2000. Information
regarding the stock ownership of director nominees is contained in the prior
table under ELECTION OF DIRECTORS.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------------- --------
<S> <C> <C>
Russell A. Doll............................................. 11,500(2) (1)
Senior Vice President (Direct)
and Chief Financial Officer
Christopher G. Ferry........................................ 25,287(3) (1)
Senior Vice President (Direct)
Charles S. Troy............................................. 21,944(4) (1)
Vice President (Direct)
All directors and executive officers as a group (eight
persons).................................................. 221,514(5) 2.5%
</TABLE>
- ---------------
(1) Less than 1% of the outstanding.
(2) Includes 7,500 shares issuable pursuant to currently exercisable stock
options.
(3) Includes 21,960 shares issuable pursuant to currently exercisable stock
options.
(4) Includes 21,300 shares issuable pursuant to currently exercisable stock
options.
(5) Includes 151,769 shares issuable pursuant to currently exercisable stock
options.
4
<PAGE> 8
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
BELL INDUSTRIES, INC. PEER GROUP(A) BROAD MARKET(B)
--------------------- ------------- ---------------
<S> <C> <C> <C>
1994 100 100 100
1995 116 168 130
1996 116 319 156
1997 89 234 205
1998 74 158 245
1999 138 102 268
</TABLE>
(A) For the period December 31, 1998 through December 31, 1999, assumes
$100 invested on December 31, 1994 and dividends reinvested. The Peer Group for
this period consists of the following system integration companies:
<TABLE>
<S> <C>
Alphanet Solutions, Inc. Manchester Equipment Company
Aztec Technology Partners Microage, Inc.
CompuCom Systems, Inc. Micros-to-Mainframes, Inc.
Inacom Corporation Pomeroy Computer Resources
</TABLE>
The new Peer Group reflects the Company's principal business following the
sale of its Electronics Distribution Group ("EDG") to Arrow Electronics Inc.
("Arrow") in January 1999.
For the period December 31, 1994 through December 31, 1998, assumes $100
invested on December 31, 1994 and dividends reinvested. The Peer Group for this
period consists of the following electronics distribution companies:
<TABLE>
<S> <C>
Arrow Electronics, Inc. Kent Electronics Corp.
Avnet, Inc. Marshall Industries
Bell Microproducts, Inc. NV-Horizons Electronics
Jaco Electronics Inc. Pioneer Standard Electronics
</TABLE>
(B) The Broad Market Index chosen was the New York Stock Exchange Market
Index.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table shows all cash compensation and certain other
compensation paid to (i) the current and former chief executive officers and
(ii) the other four most highly compensated executive officers (the "Named
Officers") for the three years in the period ended December 31, 1999 for
services rendered in all capacities to the Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION OPTIONS
-------------------------------- (NUMBER OF
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) OTHER(2) SHARES)
--------------------------- ---- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
Tracy A. Edwards..................... 1999 $315,000 $337,500 $ 6,327 300,000
President and 1998 300,000 200,000 31,885 --0--
Chief Executive Officer 1997 250,000 50,000 27,627 54,800
Russell A. Doll...................... 1999 200,000 187,000 4,875 75,000
Sr. Vice President and 1998 129,615 100,000 11,278 --0--
Chief Financial Officer
Christopher G. Ferry................. 1999 250,000 179,000 4,887 150,000
Senior Vice President 1998 175,000 307,099 19,500 --0--
1997 160,577 267,122 17,878 --0--
Charles S. Troy...................... 1999 175,000 148,000 2,692 75,000
Vice President 1998 175,000 50,000 --0-- --0--
1977 47,115 16,667 --0-- --0--
Gordon Graham........................ 1999 92,308 --0-- 959,231 --0--
Former President and 1998 600,000 --0-- 60,000 --0--
Chief Executive Officer 1997 619,000 50,000 56,527 60,000
</TABLE>
- ---------------
Certain columns have not been included in this table because the
information called for therein is not applicable to the Company or the
individuals named above for the periods indicated.
(1) Includes bonuses accrued and earned for the period although paid in a later
period. For example, executive bonuses earned in 1999 were not paid until
February 2000. The 1999 bonuses for Messrs. Doll and Troy include $75,000
and $50,000, respectively, for their efforts related to the resizing of the
Company's corporate structure. The 1998 bonuses for Messrs. Edwards, Doll
and Troy related to the sales of the Company's electronics distribution and
graphics imaging businesses.
(2) Consists of amounts contributed by the Company on behalf of the named
individual under the Company's Savings and Profit Sharing Plan and Executive
Deferred Income and Pension Plan. Additionally, with respect to Mr. Graham,
includes $950,000 paid in 1999 pursuant to a severance agreement.
The list of named officers does not include officers who left the Company
in 1999 after the transition of certain EDG support systems to Arrow. These
officers are D. J. Hough, Senior Vice President and Chief Information Officer
(resigned effective April 30, 1999); Peter A. Resnick, Vice President and
Controller (resigned effective August 31, 1999); and Steven A. Weeks, Vice
President and Treasurer (resigned effective May 7, 1999).
6
<PAGE> 10
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the current and
former chief executive officers and the Named Officers, concerning the grant of
options during the twelve month period ended December 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE VALUE OF
TOTAL ASSUMED ANNUAL RATES OF
OPTIONS EXERCISE STOCK PRICE APPRECIATION
GRANTED TO PRICE FOR OPTION TERM(4)
OPTIONS EMPLOYEES IN PER EXPIRATION ------------------------------
NAME GRANTS(1)(2) FISCAL 1999 SHARE(2)(3) DATE 5% 10%
---- ------------ ------------- ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Tracy A. Edwards.......... 300,000 37% $4.13 1/23/09 $780,000 $1,974,000
Russell A. Doll........... 75,000 9% 4.13 1/23/09 195,000 493,500
Christopher G. Ferry...... 150,000 18% 4.13 1/23/09 390,000 987,000
Charles S. Troy........... 75,000 9% 4.13 1/23/09 195,000 493,000
Gordon Graham............. -0- -0- -0- -0- -0-
</TABLE>
- ---------------
(1) All options granted are exercisable in cumulative equal installments
commencing one year from date of grant, with full vesting on the fourth
anniversary date. Vesting may be accelerated in certain events relating to
the change of the Company's ownership or certain corporate transactions.
(2) All exercise price per share data has been adjusted to reflect the Company's
cash distributions totaling $7.00 per share during 1999.
(3) All stock options were granted at market value (closing price on the New
York Stock Exchange -- Composite Transactions of the Company's common stock)
on the date of grant.
(4) Reported net of the option exercise price. These amounts represent certain
assumed rates of appreciation only. Actual gains, if any, on stock option
exercises are dependent on the future performance of the common stock,
overall stock conditions, as well as the option holders' continued
employment through the vesting period. The amounts reflected in this table
may not be indicative of the value that will actually be achieved or
realized.
7
<PAGE> 11
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the current and
former chief executive officers and the Named Officers, concerning the exercise
of options during the twelve month period ended December 31, 1999 and
unexercised options held as of December 31, 1999:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE NUMBER OF VALUE OF
REALIZED UNEXERCISED OPTIONS AT UNEXERCISED OPTIONS AT
(MARKET PRICE DECEMBER 31, 1999 DECEMBER 31, 1999(1)
SHARES ACQUIRED AT EXERCISE LESS --------------------------- ---------------------------
NAME ON EXERCISE EXERCISE PRICE) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ---------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tracy A. Edwards....... -0- $-0- 54,193 340,376 $40,303 $1,017,352
Russell A. Doll........ -0- -0- -0- 75,000 -0- 248,250
Christopher G. Ferry... -0- -0- 6,960 157,960 151 496,500
Charles S. Troy........ -0- -0- 13,800 75,000 828 248,250
Gordon Graham.......... -0- -0- 21,024 44,016 -0- -0-
</TABLE>
- ---------------
(1) Based upon the closing price on the New York Stock Exchange on that date
($7.44).
EMPLOYMENT AGREEMENTS
In February 1999, the Company entered into an employment agreement with Mr.
Edwards, the Company's President and Chief Executive Officer. This agreement
provides for an annual salary of $315,000 plus a bonus dependent upon the
Company achieving performance goals to be established from time to time by the
Company's Compensation Committee. Further, for calendar 1999, Mr. Edwards was
entitled to a minimum bonus of $150,000. The agreement also provides that Mr.
Edwards would receive an amount equal to two times his annual salary in the
event he no longer serves as President and Chief Executive Officer and such
termination is by the Company without cause or by Mr. Edwards if there has
occurred a material change in his duties, a reduction in his compensation or a
"change in control" (as defined below) of the Company. Under such circumstances,
Mr. Edwards would also receive payments under his severance agreement described
below.
The Company has severance agreements with its executive officers. Severance
agreements currently in effect are with Messrs. Edwards, Doll, Ferry and Troy.
Each of these agreements provides, in essence, that should there be a "change in
control" (as defined) and the officer's employment is terminated either (i)
involuntarily, without just cause, or (ii) voluntarily, if the officer has
determined in good faith that his duties have been altered in a material respect
or there has been a reduction in his compensation or employee benefits, then
upon termination, the officer would be entitled to receive a severance payment.
A "change in control" of the Company is generally defined as (i) any
consolidation or merger of the Company, other than a merger of the Company in
which the holders of the Company's common stock immediately prior to the merger
have at least seventy-five percent (75%) ownership of the voting capital stock
of the surviving corporation immediately after the merger, (ii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company, (iii)
the shareholders of the Company approve any plan or proposal for the liquidation
or dissolution of the Company, (iv) any person shall become the beneficial owner
of thirty percent (30%) or more of the Company's outstanding common stock, or
(v) during any period of two consecutive years, individuals who at the beginning
of such period constitute the entire Board of Directors shall cease for any
reason (except death) to constitute a majority thereof unless the election, or
the nomination for election by the Company's
8
<PAGE> 12
shareholders, of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning of the
period.
The sale of the Company's electronics distribution business in January 1999
constituted a "change in control". After the sale of the Company's electronics
distribution business Messrs. Hough's, Weeks' and Resnick's corporate functions
were no longer needed, their employment ceased and they received $642,000,
$141,000 and $284,000, respectively, under severance agreements entered into in
October 1991, September 1993 and January 1997, respectively. Additionally,
Messrs. Weeks and Resnick each received a payment of $60,000 in lieu of
continued employee benefits under their severance agreements.
Mr. Edwards' severance agreement entered into in April 1993 provides that
if he is terminated under circumstances giving rise to a severance payment, the
amount of such payment would be 295% of the "base amount" (generally equivalent
to the highest twelve months compensation during such person's last three years
prior to termination). In addition, under his severance agreement and employment
agreement the Company agrees to pay Mr. Edwards the amount of any excise tax on
the payment of any amount which constitutes an "excess parachute payment" under
Section 4999 of the Internal Revenue Code of 1986. The severance agreements with
Messrs. Doll, Ferry and Troy entered into in April 1998, April 1996 and March
1998, respectively, provide that if they are terminated under circumstances
giving rise to a severance payment, the amount of such payment would be the
lesser of 150% of their "base amount" and the maximum amount payable that would
not constitute an "excess parachute payment." In June 1999, Mr. Doll entered
into a second severance agreement having substantially the same terms except the
payment calculation would be 145% of the base amount.
Mr. Graham had a severance agreement entered into in October 1991 pursuant
to which he received $950,000 in February 1999 when Mr. Edwards assumed the
office of President and Chief Executive Officer. Also, in February 1999, Mr.
Graham entered into a three year consulting agreement that provides for annual
payments of $250,000. These payments may be accelerated upon the occurrence of a
"change in control" event. He receives no other payment for his services to the
Company.
In February 1999, the Company paid Mr. Williams, Bell's former Chairman of
the Board, President and Chief Executive Officer approximately $1,723,000 owing
him under his deferred compensation agreement ($1,446,000 ) and consulting
agreement ($277,000). He was also paid an additional $277,000 in lieu of
continued salary as Co-Chairman of the Board. Mr. Williams will receive no
further moneys for his services to the Company.
The Company has entered into Indemnity Agreements with all directors and
all executive officers of the Company after having received shareholder approval
at the Company's 1986 Annual Meeting. The Indemnity Agreements provide for
indemnification of directors and officers in cases where indemnification might
not otherwise have been available.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Cost, who is also a member of the Compensation Committee, is the
Secretary of the Company. During 1999, he received as compensation for his
services as Secretary, in lieu of the annual retainer for being a director, an
amount equal to the annual retainer (approximately $40,000). Effective January
1, 2000, he is being paid $15,000 per year for his services as Secretary. In
addition, he commenced receiving his retirement benefits of $40,000 per year
under the Company's Non-Employee Director's Retirement Plan.
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COMPENSATION STRUCTURE AND COMMITTEE RESPONSIBILITIES
The Company compensates its executive officers with two basic forms of
compensation: cash (salary and incentive bonus) and stock options. The Company's
earnings for 1997 and 1998 were not sufficient to warrant the payment of bonuses
under the predetermined formula for incentive compensation based upon a minimum
return on shareholders' equity, although special bonuses were awarded in 1998 in
connection with the sale of two major segments of the Company's business.
Further in January and December 1997 and January 1999, executives were awarded
stock options under Bell's stock option plans at an exercise price equal to the
fair market value for the underlying shares on the date of grant. No options
were granted in calendar 1998. Following the Company's $5.70 cash distribution
in June 1999 and the $1.30 cash distribution in December 1999, the exercise
prices were reduced by the amount of the per share distributions.
During fiscal 1999 and through the meeting date for the 2000 Annual
Meeting, the Company's Compensation Committee consisted of Messrs. Cost, Craig,
Davidson and Rosenberg. The duties of the Committee are to determine the overall
compensation policy for the Company's executive officers, including specifically
fixing the compensation of the chief executive officer.
The following report is submitted by the Compensation Committee as it
relates to both cash compensation of, and stock options granted to executive
officers of the Company. This report is not deemed "filed" with the Securities
and Exchange Commission and is therefore not intended to be incorporated by
reference in any other document filed by the Company with the Commission.
REPORT OF THE COMPENSATION COMMITTEE
The Company's compensation philosophy is based upon the belief that the
Company's success is the result of the coordinated efforts of all employees
working towards common objectives. Its executive officer compensation program is
composed of base salary, annual incentive cash bonuses and long-term incentive
compensation in the form of stock options.
BASE SALARY
The Committee attempts to set the base salary levels competitively with
those paid by others in its Peer Group. In determining salaries, the Committee
also takes into account individual experience and performance, past salary
history and specific issues particular to the Company.
ANNUAL INCENTIVE BONUS
Prior to fiscal 1994, cash bonuses were considered annually and awarded
generally upon a subjective evaluation of the particular officer's performance
for the year and were dependent upon the overall financial achievement of the
Company during the year. For example, bonuses usually were not given in years
where the Company's growth was nominal. Thereafter, the Committee established an
incentive bonus program based upon the return on shareholders' equity and
awarded incentive bonuses for those periods in accordance with such programs.
For each period, no incentive bonus would be earned unless the Company's
earnings exceeded a predetermined percentage minimum return on shareholders'
equity as at the beginning of the period. If that minimum return was achieved,
each executive officer (including the Chief Executive Officer) earned a bonus
based upon the extent to which the Company's actual earnings exceeded the
minimum return on shareholders' equity. For the fiscal years ended December 31,
1997 and 1998, the Company's return on shareholder's equity did not equal or
exceed the predetermined percentage minimum; and therefore, no bonuses were
earned under the formula plan. Although the Company's earnings for 1997 were
less than necessary to achieve the minimum return on shareholders' equity
previously established, the Committee awarded discretionary cash
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bonuses to six corporate officers in the aggregate amount of $206,667. The
Committee believed that merit bonuses were justified that year due to the effort
expended by such officers in connection with the integration of the business of
Milgray Electronics that was acquired by the Company in January 1997. For
calendar 1998, certain officers were granted special cash bonuses relating to
the sale of the Company's electronics distribution and graphics imaging
businesses. Each of these officers was instrumental in completing the sale of
these two divisions. For the 1999 fiscal year, the Committee changed the
incentive bonus criteria to one based upon the Company achieving a percentage of
predetermined targeted net income. Under this new program, the Committee awarded
a bonus of $225,000 to Mr. Edwards and bonuses aggregating $389,000 to three
other executive officers. Additionally, special cash bonuses were awarded for
that fiscal year to Messrs. Doll and Troy in recognition of their efforts in
resizing the Company after the sale of the electronics distribution and graphics
imaging businesses.
LONG-TERM INCENTIVE PROGRAM
Currently, the Company's long-term incentive program consists of the award
of stock options to executive officers and other key employees at current market
prices. The grant of options with exercise prices at prevailing market prices is
designed to align executive compensation and shareholder long-term interests by
creating a direct link between long-term executive compensation and shareholder
return as evidenced by increased stock market value.
The Compensation Committee's current policy is to award significant amounts
of stock options to executive officers and other key employees. Exercise prices
are established equal to the fair market value of Bell's common stock on the
date of grant. Options are usually for a term of five (5) or ten (10) years and
become vested over a period of four (4) years dependent upon continued
employment. The number of stock options granted to executive officers is based
upon an evaluation of the particular officer's deemed ability to influence the
long-term growth and profitability of the Company. Stock options were granted to
the Company's executive officers in January 1997 and December 1997.
Additionally, Mr. Edwards, Mr. Ferry, Mr. Doll and Mr. Troy were granted stock
options covering 300,000, 150,000, 75,000 and 75,000 shares, respectively, in
January 1999.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
On February 1, 1999, Mr. Edwards became President and Chief Executive
Officer of the Company. His employment arrangements have been previously
described. Salary for the Chief Executive Officer is based upon numerous
factors, the most prominent being salaries earned by chief executive officers of
comparable companies, the individual's past salary history and the complexity of
the Company's business during his term.
Submitted By: John J. Cost (Chairman), Anthony Craig,
Herbert Davidson and Milton Rosenberg.
OTHER COMPENSATION
SAVINGS AND PROFIT SHARING PLAN
The Company established the Bell Industries' Employees' Savings and Profit
Sharing Plan (the "PSP") in 1973 under which both employees and the Company may
make contributions. The PSP will continue until terminated by the Board of
Directors. Employees must contribute at least 1% of their annual compensation to
participate in the PSP. The Board of Directors determines the Company's
contribution to the PSP in its discretion. For the fiscal year ended December
31, 1999, the Company contributed $340,000 to the PSP.
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EXECUTIVE DEFERRED INCOME AND PENSION PLAN
In July 1993, the Company adopted an Executive Deferred Income and Pension
Plan (the "EDP"). Under the EDP, each officer and such other highly compensated
employees as the Board may designate are eligible to participate. Each
participant may elect a percentage (not more than 10%) of his salary that he
wishes to defer. Initially, the Company matched the amount of the chosen
deferral. Such deferred sums are assigned to employee designated investment
options which are funded through Company-owned life insurance policies. In 1999,
the Plan was amended to eliminate the Company's matching contribution and fully
vested previously unvested Company matching contributions. Effective January 1,
2000, the Plan was amended to reestablish a Company matching contribution in an
amount equal to 50% of a participant's chosen deferral. The maximum annual
Company matching contribution per participant is limited to the lesser of 50% of
the deferred amount or $20,000.
In the event of an unforeseen emergency, a participant may withdraw his
deferred salary plus accrued earnings but no portion of the matching funds
contributed by the Company. In such an event, the participant would be
ineligible from participating in the EDP for a period of two years. After
reaching age 62 and retiring, a participant may elect to have his benefit paid
in a lump sum or payable over a period of 5 to 15 years.
If a participant voluntarily resigns before age 62, he will be entitled to
receive at age 62 only a pro-rata portion of Company matching funds through the
date of his termination. That proration is based upon the period of EDP
participation; the participant being fully vested after 12 years. If a
participant dies while employed, his beneficiary would receive a lump sum
payment equal to all amounts that have accrued for his benefit through date of
death. If a participant's employment is terminated without cause or after a
change in control, he will receive the same benefit as he would have received if
his employment had been terminated due to death. If a participant is terminated
for cause, or if the Board determines within one year after termination that
cause existed at the time of termination, he will be entitled to receive in a
lump sum payment only the amount attributable to his deferred salary plus
accrued earnings.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Company's Board of Directors held ten meetings during calendar 1999.
Each director attended at least 80% of the meetings of the Board of Directors
and the committees on which he served.
The Board of Directors also has standing committees: an Audit Committee, a
Compensation Committee, and a Nominating Committee. The Company does not
currently have an acting Executive Committee. During calendar 1999, the Audit
Committee consisted of Messrs. Cost, Davidson and Rosenberg and held one meeting
during that year. The Audit Committee reviews periodic financial statements of
the Company, reviews the independent accountants' scope of engagement,
performance and fees, and reviews the adequacy of the Company's financial
control procedures. The Compensation Committee was composed of Messrs. Cost,
Craig, Davidson and Rosenberg and during calendar 1999 held one meeting. Its
function is to fix compensation of the chief executive officer and other key
executives and to administer various benefit plans, including the stock option
plans, in which officers and employees may participate. Messrs. Cost, Rosenberg
and Williams were members of the Nominating Committee which was established in
March 1993. The Nominating Committee held no meetings during calendar 1999. Its
function is to recommend individuals to be members of the Board of Directors.
ANNUAL REPORT ON FORM 10-K
The Company will provide, without charge, a copy of the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission for the
year ended December 31, 1999 upon the written request
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of any shareholder. This request should be directed to Mr. Russell A. Doll,
Senior Vice President and Chief Financial Officer, Bell Industries, Inc., 1960
Grand Avenue, Suite 560, El Segundo, California 90245-4608.
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal printed in the Proxy Statement
to be used in connection with the Company's next Annual Meeting of Shareholders,
tentatively scheduled for May 11, 2001, such a proposal must be received by the
Company at its Corporate Office prior to December 18, 2000.
MISCELLANEOUS
PricewaterhouseCoopers LLP has been the Company's independent accountants
for a number of years and has been selected to continue in such capacity for the
current fiscal year. It is anticipated that a representative from
PricewaterhouseCoopers LLP will attend the Annual Meeting of Shareholders, will
be available to answer questions, and will be afforded the opportunity to make
any statements the representative desires to make.
The Board of Directors knows of no other matters that are likely to come
before the meeting. If any such matters should properly come before the meeting,
however, it is intended that the persons named in the accompanying form of proxy
will vote such proxy in accordance with their best judgment on such matters. The
Company's Bylaws require that, for other business to be properly brought before
an annual meeting by a shareholder, the Company must have received written
notice thereof not less than 60 nor more than 90 days prior to the annual
meeting (or, if less than 70 days notice or other public disclosure of the date
of the annual meeting is given, not later than 10 days after the earlier of the
date notice was mailed or public disclosure of the date was made). The notice
must set forth (a) a brief description of the business proposed to be brought
before the annual meeting, (b) the shareholder's name and address, (c) the
number of shares beneficially owned by such shareholder as of the date of the
shareholder's Notice, and (d) any financial interest of such shareholder in the
proposal. Similar information is required with respect to any other shareholder,
known by the shareholder giving notice, supporting the proposal. Further, if the
proposal includes the nomination of a person to become a director which person
was not set forth in a proxy statement submitted to all shareholders pursuant to
the federal proxy rules, such proposal shall contain all the information
specified by such rules.
By Order of the Board of Directors
John J. Cost
Secretary
May 19, 2000
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PROXY
BELL INDUSTRIES, INC.
1960 East Grand Avenue
El Segundo, California 90245-4608
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Tracy A. Edwards and John J. Cost and each of
them, as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote as designated below, all the
shares of common stock of Bell Industries, Inc. held of record by the
undersigned on May 19, 2000, at the Annual Meeting of Shareholders to be held
on June 28, 2000 or any adjournment or postponement thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
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<PAGE> 18
Please mark
your votes as
indicated in
this example [X]
<TABLE>
<S> <C>
The Board of Directors recommends a vote FOR the FOR ALL NOMINEES WITHHOLD AUTHORITY
election as Directors of the nominees listed below: (EXCEPT AS MARKED TO TO VOTE FOR
THE CONTRARY BELOW) ALL NOMINEES
1. ELECTION OF DIRECTORS: [ ] [ ]
Nominees: J. Cost, T. Edwards, J. Lawson,
M. Parks, M. Schwarz
</TABLE>
(INSTRUCTION: To withhold authority to vote for an individual nominee write that
nominee's name on the space provided below).
________________________________________________________________________
In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
ACCOUNT NUMBER SHARES PROXY NUMBER
This proxy when properly executed will be voted in the manner directed herein
by the undersigned shareholder. If no direction is made, the proxy will be
voted for the election of all nominees as directors.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears at left.
Signature(s)________________________________________ DATED: ____________,2000
When shares are held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
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