DEF 14A 1 c68803ddef14a.txt DEFINITIVE PROXY STATEMENT 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 Commission only (as permitted by Rule 14a-6(e)(2)). [X] Definitive proxy statement. [ ] Definitive additional materials. [ ] Soliciting material pursuant to 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)(1) and 0-11. (1) Title of each class of securities to which transaction applies: -------------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: -------------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): -------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: -------------------------------------------------------------------------------- (5) Total fee paid: -------------------------------------------------------------------------------- [ ] 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: -------------------------------------------------------------------------------- BELL MICROPRODUCTS INC. NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD MAY 16, 2002 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 16, 2002, 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, 2002. 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 27, 2002 are entitled to notice of and to vote at the meeting and any continuation or adjournment thereof. By Order of the Board of Directors Benedictus Borsboom Executive Vice President and Chief Financial Officer San Jose, California April 18, 2002 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. BELL MICROPRODUCTS INC. 1941 RINGWOOD AVENUE SAN JOSE, CALIFORNIA 95131 ---------- PROXY STATEMENT FOR 2002 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 16, 2002, 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 will first be mailed to shareholders on or about April 18, 2002. DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS Proposals of shareholders of the Company intended to be presented by such shareholders at the Company's 2003 Annual Meeting of Shareholders must be received by the Company no later than December 19, 2002, in order that they may be considered for inclusion in the proxy statement and form of proxy relating to that meeting. Also, if a shareholder proposal intended to be presented at the 2003 annual meeting but not included in the Company's proxy statement and proxy is received by the Company after March 3, 2003, then management named in the Company's proxy form for the 2003 annual meeting will have discretionary authority to vote shares represented by such proxies on the shareholder proposal, if presented at the meeting, without including information about the proposal in the Company's proxy materials. RECORD DATE AND SHARE OWNERSHIP Only shareholders of record at the close of business on March 27, 2002 (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 19,241,750 shares of Common Stock. For information regarding share ownership of - 1 - 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 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, 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 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 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 executive officers named in the Summary Compensation Table; 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.
Beneficial Owner Beneficial Ownership ---------------- -------------------- Shares(#) Percent(1) --------- ---------- Bowman Capital Management LLC (2)................................................ 2,250,000 12% 1875 South Grant Street, Suite 600 San Mateo, CA 94402 Pilgrim Baxter & Associates Ltd. (3)............................................. 1,539,952 8% 1400 Liberty Ridge Drive Wayne, PA 19087 W. Donald Bell (4)............................................................... 1,114,272 6% Philip M. Roussey (5)............................................................ 263,668 1% Edward L. Gelbach (6)............................................................ 140,158 * Glenn E. Penisten (7)............................................................ 117,145 * Gordon A. Campbell (8)........................................................... 84,944 * Brian J. Clark (9)............................................................... 74,962 * James E. Ousley (10)............................................................. 58,750 * Robert J. Sturgeon (11).......................................................... 56,850 * Benedictus Borsboom (12) ........................................................ 50,000 * Eugene B. Chaiken (13)........................................................... 40,500 * All directors and executive officers as a group (10 persons) (14)................ 2,001,249 10%
--------------- *Represents less than 1% of the outstanding shares of Common Stock. (1) Shares not outstanding but deemed beneficially owned by virtue of the right of a person to acquire them as of the Record Date or within 60 days of the Record Date are treated as outstanding only when determining the percent owned by such individual and when determining the percent owned by the group. (2) Includes 1,477,500 shares and a currently exercisable warrant to purchase 738,750 shares held by Bowman Capital Crossover Fund LP and 22,500 shares and a currently exercisable warrant to purchase 11,250 shares held by Bowman Capital Crossover Fund "A" LP. Bowman Capital Management LLC is the General Partner of such Funds. - 3 - (3) Represents shares held as disclosed on Schedule 13G filed on February 12, 2002. Pilgrim Baxter & Associates Ltd. reports sole voting power as to 1,500,852 of such shares and sole dispositive power over all of such shares. (4) Includes 983,022 shares held by the Bell Family Trust, and 131,250 shares subject to stock options exercisable within 60 days after the Record Date. (5) Includes 151,238 shares held by the Roussey Family Trust. Also includes 111,250 shares subject to stock options exercisable within 60 days after the Record Date. (6) Includes 95,158 shares held by the Edward L. Gelbach 1987 Trust. Also includes 45,000 shares subject to stock options exercisable within 60 days after the Record Date. (7) Includes 49,645 shares held by the Penisten Family Trust. Also includes 67,500 shares subject to stock options exercisable within 60 days after the Record Date. (8) Includes 67,500 shares subject to stock options exercisable within 60 days after the Record Date. (9) Includes 53,588 shares subject to stock options exercisable within 60 days after the Record Date. (10) Includes 58,750 shares subject to stock options exercisable within 60 days after the Record Date. (11) Includes 56,850 shares subject to stock options exercisable within 60 days after the Record Date. (12) Includes 50,000 shares subject to stock options exercisable within 60 days after the Record Date. (13) Includes 37,500 shares subject to stock options exercisable within 60 days after the Record Date. (14) Includes 679,188 shares subject to stock options exercisable within 60 days after the Record Date. - 4 - 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. 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:
Name Age Position(s) with the Company Director Since ---- --- ---------------------------- -------------- W. Donald Bell 64 President, Chief Executive Officer 1987 and Chairman of the Board James E. Ousley 56 Vice Chairman 1998 Gordon A. Campbell(1) 57 Director 1988 Glenn E. Penisten(1)(2) 70 Director 1988 Edward L. Gelbach(1)(2) 70 Director 1993 Eugene B. Chaiken(2) 61 Director 1998
(1) Member of the Compensation Committee. (2) Member of the Audit Committee. W. Donald Bell has been President, Chief Executive Officer and Chairman of the Board of the Company since its inception in 1987. Mr. Bell has over 30 years of experience in the electronics industry. Mr. Bell was formerly the President of Ducommun, Inc. and its subsidiary, Kierulff Electronics, Inc. as well as Electronic Arrays, Inc. He has also held senior management positions at Texas Instruments Incorporated, American Microsystems, Inc. and other electronics companies. Mr. Bell also serves as a director of PurchasePro.com, Inc. - 5 - Gordon A. Campbell has served on the Board of Directors since May 1988. Mr. Campbell is a managing member of the general partners of the following venture capital funds: Techfund Capital, L.P., Techfund Capital II, L.P., Techfarm Ventures, L.P. and Techfarm Ventures (Q), L.P. Mr. Campbell has been President of TechFarm Management, Inc., an incubation company for new technology companies, since he founded TechFarm in 1993. Mr. Campbell has founded and been involved in the start-up of numerous Silicon Valley companies, including Seeq, CHIPS and Technologies, Inc., a semiconductor and related device company, 3dfx Interactive and Cobalt Networks. Mr. Campbell also serves as a director of Palm Computing, as well as Chairman of the Board of 3dfx Interactive. Glenn E. Penisten has served on the Company's Board of Directors since May 1988. Since 1985, Mr. Penisten has served as 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, and Pinnacle Systems, Inc., a designer and manufacturer of special effects video equipment. 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. James E. Ousley has been the Company's Vice Chairman since October 2000 and has served on the Board of Directors since February 1998. Mr. Ousley is the President and Chief Executive Officer of Vytek Wireless, Inc. He is the Chairman of Syntegra (USA) and the former President and Chief Executive Officer of Syntegra (USA) Inc., a global e-Business solutions provider and a division of British Telecommunications. From September 1991 to August 1999, Mr. Ousley served as President and CEO of Control Data Systems (CDS) which was acquired by British Telecommunications in August 1999. From 1968 to 1991 he held various sales and executive management positions for Control Data Corporation, a global systems, software, services and peripherals company. Mr. Ousley also serves on the Boards of Vytek Wireless, Inc., Syntegra (USA), ActivCard, S.A., Control Data Federal Systems, Inc.and Datalink. Eugene B. Chaiken has served on the Company's Board of Directors since November 1998. Since 1963, 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. - 6 - BOARD MEETINGS AND COMMITTEES During the fiscal year ended December 31, 2001, the Board of Directors held a total of four meetings. The Audit Committee, which consisted of Glenn E. Penisten, Eugene B. Chaiken and Edward L. Gelbach in fiscal 2001, 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 four times during fiscal year 2001. The Compensation Committee, which consisted of Gordon A. Campbell, Edward L. Gelbach and Glenn E. Penisten in fiscal 2001, was established to review and act on matters relating to compensation levels and benefit plans for key executives of the Company, among other things. The Compensation Committee met two times during fiscal year 2001. The Board of Directors currently has no nominating committee or a committee performing a similar function. Each of the incumbent directors attended at least 70% 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 Directors who are not employees of the Company receive an annual fee of $8,000, payable quarterly, a fee of $4,000 for each board meeting attended in person, $2,000 per committee meeting attended in person, and $2,000 per board or committee meeting attended by telephone. In addition, under the terms of the Company's 1998 Stock Option Plan, each nonemployee director automatically receives a nonqualified option to purchase 22,500 shares of the Company's Common Stock upon his or her initial election as a director and a nonqualified option to purchase 7,500 shares of Common Stock annually thereafter. As of May 9, 2001, Messrs. Campbell, Chaiken, Gelbach and Penisten were each granted an option to purchase 7,500 shares at an option price of $9.37 per share. - 7 - AUDIT COMMITTEE REPORT The Board of Directors maintains an Audit Committee comprised of three of the Company's outside directors. The Board of Directors and the Audit Committee believe that the Audit Committee's current member composition satisfies the rule of the National Association of Securities Dealers, Inc. ("NASD") that governs audit committee composition, Rule 4310(c)(26)(B)(i), including the requirement that audit committee members all be "independent directors" as that term is defined by NASD Rule 4200(a)(14). In accordance with its written charter adopted by the Board of Directors (set forth in Appendix A to the proxy statement for the Company's 2001 Annual Meeting), the Audit Committee assists the Board of Directors with fulfilling its oversight responsibility regarding the quality and integrity of the accounting, auditing and financial reporting practices of the Company. In discharging its oversight responsibilities regarding the audit process, the Audit Committee: (1) reviewed and discussed the audited financial statements with management; (2) discussed with the independent auditors the material required to be discussed by Statement on Auditing Standards No. 61; and (3) reviewed the written disclosures and the letter from the independent auditors required by the Independence Standards Board's Standard No. 1, and discussed with the independent auditors any relationships that may impact their objectivity and independence. Based upon the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Securities and Exchange Commission. AUDIT COMMITTEE Glenn E. Penisten Eugene B. Chaiken Edward L. Gelbach - 8 - 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, 2002. PricewaterhouseCoopers LLP has audited the Company's financial statements annually since 1988. Although it is not required to do so, the Board wishes to submit the selection of PricewaterhouseCoopers LLP to the shareholders for ratification. 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 shareholders vote "FOR" the ratification of appointment of independent accountants. AUDIT FEES. The aggregate fees billed by PricewaterhouseCoopers LLP for professional services rendered in connection with the audit of the Company's annual financial statements for fiscal 2001 and reviews of the financial statements included in the Company's Forms 10-Q for fiscal 2001 were $540,000. FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There were no fees billed by PricewaterhouseCoopers LLP during fiscal 2001 for financial information systems design and implementation services rendered to the Company. ALL OTHER FEES. The aggregate fees billed by PricewaterhouseCoopers LLP for all other non-audit services rendered to the Company during fiscal 2001, including fees for tax-related services, were $636,000. The Company's Audit Committee has considered whether provision of the above non-audit services is compatible with maintaining PricewaterhouseCoopers LLP's independence and has determined that such services have not adversely affected Pricewaterhouse Coopers LLP's independence. - 9 - ADDITIONAL INFORMATION RELATING TO DIRECTORS AND OFFICERS OF THE COMPANY CERTAIN TRANSACTIONS Glenn E. Penisten, a director of the Company, is a director of Pinnacle Systems, Inc., ("Pinnacle") and Network Peripherals Inc., ("NPI"). Gordon A. Campbell, a director of the Company, is a director of 3Com Corporation, ("3Com"). James E. Ousley, a director of the Company, is a director of Syntegra (USA), ("Syntegra"). Sales to these parties and purchases of inventory from these parties for the three years ended December 31, 2001 and accounts receivable at December 31, 2001 and 2000 are summarized below:
(In thousands) -------------------------------------------------- 2001 2000 1999 ---------------- ---------------- -------------- SALES: Pinnacle $1,718 $3,345 $3,645 NPI - - 1,446 Syntegra 431 - - ACCOUNTS RECEIVABLE: Pinnacle 127 355 - Syntegra 21 - - INVENTORY PURCHASED: Pinnacle - 199 1,150 3Com 111 364 -
The Company believes that terms of these transactions were no less favorable than reasonably could be expected to be obtained from unaffiliated parties. EMPLOYMENT AGREEMENTS The Company has entered into a three-year Employment Agreement with W. Donald Bell, its Chairman, President and Chief Executive Officer effective July 1, 1999. The Employment Agreement provides for a minimum base salary of $375,000 per year, participation in all Company annual incentive compensation plans, including the Management Incentive Program, a lump-sum cash incentive payment (the "EPS Enhancement Incentive") based on the Company's annual net earnings per share, payment of premiums for long-term disability insurance, reimbursement for ordinary and necessary travel and other out-of-pocket expenses, and participation in other employee benefit plans and programs. In the event that Mr. Bell's employment is terminated by the Company without cause or in the event of Mr. Bell's involuntary termination, Mr. Bell shall be entitled to receive his salary and benefits through at least the expiration of the initial term of employment, cash payments based on the EPS Enhancement Incentive that Mr. Bell may have earned during the initial term of employment, and full acceleration of unvested stock options and restricted stock awards, subject to certain restrictions. In addition, the Employment Agreement provides for a two-year covenant not to compete with the Company. The Company has entered into Management Retention Agreements with W. Donald Bell, Benedictus Borsboom, Brian J. Clark, Philip M. Roussey and Robert J. Sturgeon. The Management Retention Agreements have three-year terms, subject to extension in the event there - 10 - 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. The Company has entered into a two-year Employment Agreement with James E. Ousley, its Vice Chairman, effective October 18, 2000, pursuant to which Mr. Ousley has agreed to provided services to the Company in connection with various matters, including advising on and facilitating (i) mergers and acquisitions, (ii) a global storage solutions business and (iii) the identification of new executive management. The Employment Agreement provides for an annual salary of $136,000 and the grant of an option to purchase 100,000 shares of Common Stock of 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 2001, all Section 16(a) filing requirements applicable to the Company's officers, directors and ten percent shareholders were complied with, except Mr. Roussey was late filing one form for one transaction. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION No interlocking relationship exists among members of 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 - 11 - Committee, Messrs. Edward Gelbach, Gordon Campbell and Glenn Penisten, 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 2001). - 12 - 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, 2001 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. In carrying out its duties, the Compensation Committee intends to make all reasonable attempts to comply with the requirements to exempt executive compensation from the $1 million deduction limitation under 162(m) of the Internal Revenue Code, unless the Committee determines that such compliance in given circumstances would not be in the best interests of the Company and its shareholders. 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 2001 primarily consisted of base salary and performance incentives paid in the form of cash for such period. ANNUAL INCENTIVE ARRANGEMENTS. 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 executives 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 - 13 - Committee for 2001 expressed as a percentage of base salary for Messrs. Borsboom, Clark, Roussey and Sturgeon were approximately 56%. The performance goals established at the beginning of 2001 were based on several strategic and financial measurements including a target level of earnings per share and attainment of certain other objectives. The earnings per share 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 2001 at an average 17% of the aggregate base salaries 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. 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 2001. 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 2001 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 2001, expressed as a percentage of his base salary, was 100%. For 2001, the Chief Executive Officer's performance goals were established based on a target level of earnings per share. 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 substantially met the goals established for him for the fiscal year, and awarded Mr. Bell an incentive payment of 14.5% of his salary. In July 1999, 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 2001 compensation, see "Executive Compensation-Summary Compensation Table." COMPENSATION COMMITTEE Gordon A. Campbell Edward L. Gelbach Glenn E. Penisten - 14 - EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth the compensation paid during the three fiscal years ended December 31, 2001 to the Company's Chief Executive Officer and the four other most highly compensated executive officers for the fiscal year 2001.
Long-Term Compensation Awards Other ------ Annual Securities All Other Fiscal Salary Compensation Underlying Compensation Name and Principal Position Year ($) Bonus ($) ($) Options (#) ($) --------------------------- ---- ------- --------- ------------- ----------- -------- W. Donald Bell 2001 $ 550,000 $ 80,000 $ 3,600(1) -- $ 18,340(2) President, Chief Executive Officer 2000 536,538 1,302,012 3,600 300,000 16,300 and Chairman of the Board 1999 439,383 249,814 3,600 -- 73,600 Philip M. Roussey 2001 $ 249,300 $ 17,465 $ 3,600(1) 10,000 $ -- Executive Vice President of 2000 245,961 293,148 3,600 45,000 -- Computer Products Marketing 1999 216,754 75,431 3,600 44,910 20,000 Brian J. Clark 2001 $ 250,000 $ 16,494 $ 3,600(1) 10,000 $ -- Executive Vice President of 2000 244,615 407,960 3,600 75,000 -- Industrial Sales 1999 208,467 142,734 3,600 30,000 10,000 Robert J. Sturgeon 2001 $ 200,000 $ 57,860 $ -- 10,000 $ -- Chief Information Officer 2000 193,942 172,375 -- 30,000 -- 1999 155,923 63,746 -- 60,000 -- Benedictus Borsboom 2001 $ 285,384 $ 86,133 $ -- 200,000 $ -- Executive Vice President of 2000 -- -- -- -- -- Finance and Chief Financial Officer 1999 -- -- -- -- --
------------- (1) Represents a car allowance paid by the Company. (2) Consists of premiums paid by the Company on a term life insurance policy (face amount of $1.0 million in 2001), the proceeds of which are payable to the Company and to designated beneficiaries of Mr. Bell. - 15 - OPTION GRANTS IN LAST FISCAL YEAR The following table provides information with respect to option grants in fiscal year 2001 to the Named Executive Officers.
Potential Realizable Value at Assumed Annual Rates of Stock Number of Percent of Price Appreciation for Securities Total Options Option Underlying Granted to Exercise or Term(1) Options Employees in Base Price Expiration ------------------------- Name Granted (#) Fiscal Year (%) ($/Share) Date 5% 10% ---- ----------- --------------- --------- ---- --------- -------- W. Donald Bell 0 N/A N/A N/A N/A N/A Philip M. Roussey 10,000(2) .9% $21.00 1/23/06 $58,019 $128,207 Brian J. Clark 10,000(2) .9% 21.00 1/23/06 58,019 128,207 Robert J. Sturgeon 10,000(2) .9% 21.00 1/23/06 58,019 128,207 Benedictus Borsboom 200,000(3) 17.4% 7.50 4/16/06 414,422 915,765
------------- (1) The "potential realizable value" shown represents the potential gains based on annual compound stock price appreciation of 5 percent and 10 percent from the date of grant through the full option terms, net of exercise price, but before taxes associated with exercise. The amounts represent certain assumed rates of appreciation only, based on the Securities and Exchange Commission rules. Actual gains, if any, on stock option exercises are dependent on the future performance of the Common Stock, overall market conditions and the option holders, continued employment through the vesting period. The amounts reflected in this table may not necessarily be achieved and do not reflect the Company's estimate of future stock price growth. (2) Option is exercisable 25% per year over four years, commencing January 23, 2002. (3) Option is exercisable 25% per year over four years, commencing April 6, 2002. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table provides information with respect to option exercises in fiscal year 2001 by the Named Executive Officers.
Shares Value of Unexercised Acquired Total Number of Unexercised In-the-Money Option at on Value Options at Fiscal Year End Fiscal Year End (1) Exercise Realized ------------------------------ ---------------------------- Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable ---- --- --- ----------- ------------- ----------- ------------- W. Donald Bell -- -- 183,750 251,250 $726,177 $ 217,526 Philip M. Roussey 30,000 108,230 93,000 82,000 706,600 486,954 Brian J. Clark 37,281 234,081 56,717 101,087 359,738 554,273 Robert J. Sturgeon 20,761 167,596 41,750 87,439 290,804 540,181 Benedictus Borsboom -- -- -- 200,000 -- 1,024,000
------------- (1) Based on a market value of the underlying securities of $12.62 at December 31, 2001. - 16 - 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, 1996 through December 31, 2001 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, 1996 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, 2001 was $12.62. TOTAL RETURN TO STOCKHOLDERS (Assumes $100 investment on 12/31/96) [LINE GRAPH]
Total Return Analysis 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 Bell Microproducts Inc. $100 $ 89 $104 $124 $179 $142 PSE Hi-Tech Index $100 $120 $185 $401 $336 $284 S&P 500 Index $100 $131 $166 $198 $178 $155
- 17 - OTHER MATTERS The Company's Annual Report to shareholders for fiscal year 2001 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 Benedictus Borsboom Executive Vice President and Chief Financial Officer San Jose, California April 18, 2002 - 18 - THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS PROXY BELL MICROPRODUCTS INC. PROXY PROXY FOR 2002 ANNUAL MEETING OF SHAREHOLDERS May 16, 2002 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 2002 Annual Meeting of Shareholders of the Company to be held on Thursday, May 16, 2002 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 Benedictus Borsboom, 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 [X] Please mark your votes as this WITHHOLD 1. ELECTION OF DIRECTORS: FOR FOR ALL INSTRUCTION: If you wish to withhold [ ] [ ] authority to vote for any individual nominee, write that nominee's name in the space provided opposite. NOMINEES: 01 W. Donald Bell, 02 Gordon A. Campbell, 03 Glenn E. Penisten, 04 Edward L. Gelbach, 05 James E. Ousley and 06 Eugene B. Chaiken 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, 2002. In their discretion, the Proxies are entitled to vote upon such other matters as may properly come before the Annual Meeting or any adjournment thereof. I plan to attend the Meeting [ ] THESE 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 , 2002 --------------------------------------- --------------- (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 offices held designated. If shares are held by joint tenants or as community property, both holders should sign.) ------------------------------------------------------------------------------ *FOLD AND DETACH HERE* I PLAN TO ATTEND THE MEETING [ ] THESE 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 , 2002 ------------------------------------------- --------- (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 offices held designated. If shares are held by joint tenants or as community property, both holders should sign.)