UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ____)
Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2)
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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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):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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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)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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Bell Industries, Inc.
8888 Keystone Crossing
Suite 1700
Indianapolis, Indiana 46240-7657
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the Annual Meeting) of Bell
Industries, Inc., a California corporation (the Company, we, us, or our), will be held at
our headquarters located at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240, at
12:00 p.m., local time, on December 10, 2010, for the following purposes:
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1.
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To elect four directors to hold office until the next annual meeting of
shareholders and thereafter until their successors have been elected and qualified. Our
four nominees are: Mr. Dale A. Booth, Mr. Clinton J. Coleman, Mr. Michael R. Parks and
Mr. Mark E. Schwarz;
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2.
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To approve an amendment to our charter to eliminate the supermajority voting
requirements for transactions with related entities;
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3.
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To approve an amendment to Section 1.02 of our bylaws regarding the size of our board
of directors;
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4.
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To approve the reincorporation of the Company from California to Delaware (the
Reincorporation) by means of a merger with and into a wholly-owned Delaware subsidiary
(Bell Delaware);
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5.
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To approve, in the event that the Reincorporation is effected, an amendment to our
certificate of incorporation to effect a 1-for-20 reverse stock split;
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6.
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To ratify the appointment of Crowe Horwath LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2010;
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7.
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If necessary, to adjourn the Annual Meeting to permit further solicitation of proxies
if there are not sufficient votes to approve the Reincorporation and/or the reverse stock
split; and
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8.
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To act on such other matters as may properly come before the Annual Meeting or any
postponements or adjournments thereof.
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Our board of directors has fixed the close of business on [_____], 2010 as the
record date for the Annual Meeting and only shareholders of record at that time will be entitled to
notice of and to vote at the Annual Meeting or any adjournment or adjournments thereof.
Whether or not you attend the Annual Meeting, it is important that your shares be represented and
voted at the meeting. Therefore, I urge you to vote promptly via the Internet or by telephone by
following the instructions on the proxy card, or you may vote by signing, dating and promptly
returning the accompanying proxy card in the postage-paid envelope provided for that purpose.
Voting via the Internet or by telephone or returning a completed proxy card will ensure your
representation at the Annual Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Shareholders to
be held on December 10, 2010
In accordance with the rules of the Securities and Exchange Commission, we are advising our
shareholders of the availability on the Internet of our proxy materials related to the annual
meeting described above. These rules allow companies to provide access to proxy materials in one
of two ways. Because we have elected to utilize the full set delivery option, we are delivering to
all shareholders paper copies of all proxy materials, as well as providing access to those proxy
materials on a publicly accessible website.
The notice of annual meeting of shareholders, proxy statement, form of proxy card and annual report
to shareholders are available at
www.proxyvote.com
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Sincerely yours,
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Mark Schwarz
Chairman of the Board of Directors
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[______], 2010
TABLE OF CONTENTS
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1
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1
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12
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53
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ii
BELL INDUSTRIES, INC.
8888 Keystone Crossing
Suite 1700
Indianapolis, Indiana 46240-7657
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To be held December 10, 2010
GENERAL INFORMATION
This proxy statement and accompanying proxy are being provided to shareholders on or about [___], 2010 in connection with the solicitation by the board of directors of Bell
Industries, Inc., a California corporation (the Company, we, us, or our) of proxies to be
voted at the Annual Meeting of Shareholders (the Annual Meeting) to be held on December 10, 2010 at our headquarters located at 8888 Keystone Crossing, Suite 1700, Indianapolis,
Indiana 46240, or at any adjournment or postponement thereof.
Our board of directors recommends a vote:
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1.
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FOR each of the nominees for director listed in this proxy statement;
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2.
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FOR the approval of an amendment to our charter to eliminate the supermajority voting
requirements for transactions with related entities;
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3.
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FOR the approval of an amendment to Section 1.02 of our bylaws regarding the size of
our board of directors;
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4.
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FOR the approval of the reincorporation of the Company from California to Delaware
(the Reincorporation) by means of a merger with and into a wholly-owned Delaware
subsidiary (Bell Delaware);
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5.
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FOR the approval, in the event that the Reincorporation is effected, of an amendment
to our certificate of incorporation to effect a 1-for-20 reverse stock split (the reverse
split);
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6.
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FOR the ratification of the appointment of Crowe Horwath LLP as our independent
registered public accounting firm for the fiscal year ending December 31, 2010;
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7.
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FOR the adjournment of the Annual Meeting to permit further solicitation of proxies
if there are not sufficient votes to approve the Reincorporation and/or the reverse split
(the Adjournment); and
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8.
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In their discretion on such other matters as may properly come before the Annual
Meeting or any postponements or adjournments thereof.
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If you do not specify how your shares are to be voted, your proxy will be voted in accordance with
the recommendations of our board of directors.
In accordance with the rules of the Securities and Exchange Commission (the SEC), in addition to
mailing a full set of the proxy materials to our shareholders, we are also providing access to our
proxy materials on a publicly accessible website. Our notice of annual meeting of shareholders,
proxy statement, form of proxy card and annual report to shareholders are available at
www.proxyvote.com
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1
Our principal executive office is 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240,
telephone number 317-704-6000.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of the transactions, passed upon the merits or fairness of the transactions, or passed
upon the adequacy or accuracy of the disclosure in this proxy statement. Any representation to the
contrary is a criminal offense.
VOTING INFORMATION
Outstanding Shares; Quorum
The close of business on [___], 2010 has been fixed as the record date for
the determination of shareholders entitled to notice of and to vote at the Annual Meeting and any
postponements or adjournments thereof. As of the record date, there were 433,416 shares of our
common stock, without par value (the common stock) outstanding and entitled to vote. Each share
of common stock is entitled to one vote. The presence in person or by proxy at the Annual Meeting
of the holders of a majority of such shares shall constitute a quorum.
How to Vote
You may specify whether your shares should be voted for all, some or none of the nominees for
director and whether your shares should be voted for or against the other proposals. Depending on
whether your shares are registered directly in your name (as a shareholder of record) or your
shares are held in the name of a brokerage, bank, trust or other nominee as a custodian (in street
name), there are several methods you can choose from to cast your vote.
If you are a shareholder of record, you can vote your proxy in any one of these methods:
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Go to
www.proxyvote.com
shown on your proxy card and vote via the Internet;
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You may vote by touchtone telephone by calling 1-800-690-6903 (this call is toll-free
in the United States); or
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Mark, sign, date and promptly return your proxy card in the postage-paid envelope.
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You will need to have your proxy card available when voting via the Internet or by telephone.
Therefore, please follow the specific instructions set forth on the proxy card. For security
purposes, our electronic voting system has been designed to authenticate your identity as a
shareholder of our common stock.
If you hold your shares as a street name holder, your broker, bank, custodian or nominee will
provide you with materials and instructions for voting your shares. Broker non-votes occur when a
nominee (which has voted on one or more matters at the meeting) does not vote on one or more other
matters at the meeting because it has not received instructions to so vote from the beneficial
owner and does not have discretionary authority to so vote.
If you decide to join us in person at the Annual Meeting and you are a shareholder of record, you
may vote your shares in person at the meeting. If you hold your shares as a street name holder,
you must obtain a proxy from your broker, bank, custodian or nominee, giving you the right to vote
the shares at the meeting.
Votes shall be counted by one or more persons who shall serve as the inspectors of election. The
inspectors of election will canvass the shareholders present in person at the meeting, count their
votes and count the votes represented by proxies presented.
Regardless of whether you vote your shares at the Annual Meeting or by proxy and regardless of the
number of shares of our common stock you own, your vote is important.
2
Required Vote to Approve; Abstentions and Broker Non-Votes
Directors are elected by a plurality of the votes cast (Proposal No. 1). This means that the four
individuals nominated for election to the board who receive the most votes will be elected. In
voting for our directors, 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 his or her intent to cumulate votes prior to
the vote at the Annual Meeting by following the special instructions on the proxy card and voting
by mail. The return of an executed proxy provides the board of directors the discretionary
authority to cumulate votes. If a quorum is present and voting, the four nominees receiving the
highest number of votes will be elected to the board of directors. As a result, neither abstentions
nor broker non-votes will have an effect on the election of directors.
The affirmative vote of holders of seventy-five percent (75%) of the shares of our common stock
entitled to vote in the election of directors is necessary to amend our charter to eliminate the
supermajority voting requirements for transactions with related entities (Proposal No. 2).
Approval of the amendment to our bylaws requires the affirmative vote of a majority of the
outstanding shares of our common stock, unless the votes cast against its adoption are equal to
more than 16
2/3
% of the outstanding shares of common stock, in which case the amendment will not be
adopted (Proposal No. 3). The affirmative vote of the holders of a majority of our outstanding
shares of common stock is necessary to approve the Reincorporation (Proposal No. 4) and the
amendment to our certificate of incorporation to effect the 1-for-20 reverse split (Proposal No.
5). The approval of each of these proposals is a non-routine matter for brokers that hold their
clients shares in street name. Abstentions and broker non-votes will have the same effect as a
negative vote on each of these proposals.
Ratification of Crowe Horwath LLP as our independent registered public accounting firm (Proposal
No. 6) and approval of the Adjournment if needed to solicit additional votes (Proposal No. 7) each
requires the affirmative vote of a majority of the shares of our common stock represented and
voting at the meeting (and which shares voting affirmatively also constitute at least a majority of
the required quorum). The approval of each of these proposals is a routine matter for brokers that
hold their clients shares in street name. Abstentions will have the same effect as a negative
vote on each of these proposals.
Revoking Your Proxy
There are three ways in which you can change your vote before your proxy is voted at the Annual
Meeting. First, you can send our Secretary a written notice stating that you revoke your proxy.
Second, you can submit a later dated vote via the Internet or by telephone or can submit a new
proxy card, dated a later date than the first proxy card. Third, you can attend the Annual Meeting
and vote in person. Your attendance at the Annual Meeting will not, however, by itself revoke your
proxy. If you hold your shares in street name and have instructed your broker, bank or other
nominee to vote your shares, you must follow directions received from your broker, bank or other
nominee to change those instructions.
SUMMARY TERM SHEET
The following summary term sheet highlights selected information from this proxy statement and may
not contain all of the information that may be important to you. Accordingly, we encourage you to
read this entire proxy statement, its appendices and the documents referred to or incorporated by
reference in this proxy statement. Items in this summary term sheet include a caption reference
directing you to a more complete description of that item.
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Actions To Be Considered by Shareholders
(See Proposal No. 1 Election of Directors,
Proposal No. 2 Amendment to Charter to Eliminate Supermajority Voting for Transactions with
Related Entities, Proposal No. 3 Amendment to Bylaws Regarding Size of Board, Proposal No.
4 Reincorporation of the Company from California to Delaware, Proposal No. 5 Amendment to
Certificate of Incorporation to Effect 1-for-20 Reverse Split, and Proposal No. 6
Ratification of Independent Registered Public Accounting Firm)
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3
We are seeking shareholder approval of the following actions:
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Election of four directors to hold office until the next annual meeting of shareholders
and thereafter until their successors have been elected and qualified;
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An amendment to our charter to eliminate the supermajority voting requirements for
transactions with related entities;
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An amendment to Section 1.02 of our bylaws regarding the size of our board of
directors;
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Reincorporation of the Company from California to Delaware by means of a merger with
and into Bell Delaware;
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In the event that the Reincorporation is effected, an amendment to our certificate of
incorporation to effect a 1-for-20 reverse split;
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Ratification of the appointment of Crowe Horwath LLP as our independent registered
public accounting firm for the fiscal year ending December 31, 2010; and
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If necessary, adjourning the Annual Meeting to permit further solicitation of proxies
if there are not sufficient votes to approve the Reincorporation and/or the reverse split.
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Effect of the Reincorporation
(See Proposal No. 4 Reincorporation of the Company from
California to DelawareReincorporation of the Company from California to
DelawareMechanics of the Reincorporation, The Charters and Bylaws of the Company and
Bell Delaware Compared and Contrasted and Significant Differences Between the
Corporation Laws of California and Delaware)
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Our shareholders must approve the Reincorporation for the reverse split to occur. Failure
of the shareholders to approve the Reincorporation will result in abandonment of the
proposed reverse split. However, failure of the shareholders to approve the reverse split
will not result in abandonment of the Reincorporation.
Pursuant to the Agreement and Plan of Merger, in substantially the form attached hereto as
Appendix A, we will merge into Bell Delaware, with Bell Delaware as the surviving
corporation (the merger). Our separate corporate existence in California will cease upon
the effectiveness of the merger. Our business will continue unaffected and unimpaired by
the Reincorporation. Each outstanding share of common stock automatically will be converted
into one share of Bell Delaware common stock, and the existing holders of common stock will
own all of the outstanding shares of Bell Delaware common stock. No change in ownership
will result from the Reincorporation. Bell Delaware will assume our stock option plans as
well as our other employee incentive plans. Our directors and executive officers will be
the directors and executive officers of Bell Delaware.
With certain exceptions, the provisions of our proposed certificate of incorporation to be
effective after the Reincorporation, in substantially the form attached hereto as Appendix B
(the Delaware Certificate), and our proposed bylaws to be effective after the
Reincorporation, in substantially the form attached hereto as Appendix C (the Delaware
Bylaws), are generally consistent with those of our articles of incorporation filed in
California, as amended to date (the California Articles), and our Restated Bylaws, as
amended to date (the California Bylaws). However, the Reincorporation includes the
implementation of certain provisions in the Delaware Certificate and Delaware Bylaws which
are required or permitted by the Delaware General Corporation Law (the DGCL) and which may
alter the rights of shareholders and the powers of management and reduce shareholder
participation in certain important corporate decisions. In addition, the California General
Corporation Law (the CGCL) and the DGCL differ in many respects that may affect the rights
of our shareholders, as described in more detail under Proposal No. 4 Reincorporation of
the Company from California to DelawareReincorporation of the Company from
California to DelawareSignificant Differences Between the Corporation Laws of California
and Delaware.
4
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Effect of the Reverse Split on Shareholders
(See Proposal No. 5 Amendment to
Certificate of Incorporation to Effect 1-for-20 Reverse SplitQuestions and Answers
Concerning the Reverse Split and Special Factors of the Reverse Split)
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Our shareholders must approve the Reincorporation for the reverse split to occur. Failure
of the shareholders to approve the Reincorporation will result in abandonment of the
proposed reverse split. If the Reincorporation and reverse split are both approved by our
shareholders, then as a result of the reverse split:
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Each share of common stock will automatically become and be converted
into 1/20
th
(or approximately 0.05) of a share of common stock. This
means that each twenty (20) shares of common stock that you own will automatically
become and be converted into one share of common stock.
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We will pay cash in lieu of fractional shares based on the average of
the closing prices of a share of our common stock during the 120 days prior to the
date of this proxy statement, which will be $[___] per share on a pre-reverse
split basis, or $[___] per share on a post-reverse split basis.
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If you own less than 20 shares of common stock, you will receive cash
in lieu of fractional shares, and you will cease to be a shareholder. As a result,
you will cease to have any direct or indirect ownership interest in the Company and
will not be able to participate in any of our future earnings or growth.
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If you hold our common stock in more than one account and you do not
consolidate your accounts, each account will be treated separately. As a result,
if you own less than 20 shares in each of several accounts but the total number of
shares which you own is more than 20 shares, you will cease to be a shareholder at
the effective time of the reverse split and you will receive cash in lieu of all of
your fractional shares.
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If you hold your shares of our common stock in street name (which is
how your stock is held if you keep your stock in your brokerage or nominee account)
you will receive cash and/or shares based on the number of shares held in your
brokerage or nominee account. The shares, if any, and cash in lieu of fractional
shares, will be determined separately for each account you hold in street name.
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The shares and cash in lieu of fractional shares will be separately
determined for each brokerage firm who holds our common stock either on its own
behalf or on behalf of its customers. Each account in each brokerage firm will be
treated as a separate account for determining how many shares and how much cash in
lieu of fractional shares will be paid.
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Reasons for the Reverse Split
(See Proposal No. 5 Amendment to Certificate of
Incorporation to Effect 1-for-20 Reverse SplitSpecial Factors of the Reverse
SplitReasons for the Reverse Split)
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Following the reverse split, we expect to have fewer than 300 shareholders. In such event,
we will terminate our registration under the Securities Exchange Act of 1934, as amended
(the Exchange Act). We estimate that as a result of the reverse split, the number of
shareholders of record of our common stock will be reduced to less than 300.
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Effect of the Reverse Split on Officers, Directors and Affiliates
(See Proposal No. 5
Amendment to Certificate of Incorporation to Effect 1-for-20 Reverse SplitSpecial Factors
of the Reverse SplitEffects of the Reverse Split on our Affiliates)
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5
Mark E. Schwarz, a director of the Company, is the Managing Member of Newcastle Capital
Group, L.L.C. (NCG), which is the general partner of Newcastle Capital Management, L.P.
(NCM). NCM is the general partner of Newcastle Partners, L.P. (Newcastle), which owns
120,524 shares of our common stock for which Mr. Schwarz disclaims beneficial ownership.
In addition, NCM is the general partner of BI Holdings, L.P. which holds a Second Amended
and Restated Convertible Promissory Note (the Amended Convertible Note) issued by us which
is currently convertible into 3,021,446 shares of our common stock (or approximately
87.5% of our outstanding common stock assuming conversion of the Amended Convertible Note)
for which Mr. Schwarz disclaims beneficial ownership. Following the reverse split,
Newcastle will own 6,026 shares of our common stock, and due to adjustment provisions of
the Amended Convertible Note, the note will be convertible into 151,072 shares of common
stock.
No other officer or director owns any significant number of shares of our common stock.
In addition to the shares owned by officers and directors, two of our directors hold options
to purchase a total of 1,000 shares of our common stock at an exercise price of $51.60 per
share. As a result of the reverse split, these options will entitle the holders to purchase
approximately 50 shares of our common stock at an exercise price of $1,032.00 per share.
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Fairness of the Reverse Split
(See Proposal No. 5 Amendment to Certificate of
Incorporation to Effect 1-for-20 Reverse SplitSpecial Factors of the Reverse
SplitReasons for the Reverse Split and Fairness of the Reverse Split to Unaffiliated
Shareholders)
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Our board, in approving the reverse split, believes that the reverse split is fair to us and
to our shareholders, including our unaffiliated shareholders, regardless of whether they
receive cash in lieu of fractional shares or continue as shareholders.
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Action Required by Shareholders
(See Proposal No. 5 Amendment to Certificate of
Incorporation to Effect 1-for-20 Reverse SplitAmendment to Certificate of Incorporation
to Effect Reverse SplitExchange of Certificates and Elimination of Fractional Share
Interests)
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You are not required to take any action before the reverse split becomes effective. If the
Reincorporation and reverse split are both approved by our shareholders, then once the
reverse split becomes effective, you will receive a letter of transmittal for you to receive
any shares and cash in lieu of fractional shares which are due to you as a result of the
1-for-20 reverse split.
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Tax Treatment of the Reverse Split
(See Proposal No. 5 Amendment to Certificate of
Incorporation to Effect 1-for-20 Reverse SplitAmendment to Certificate of Incorporation
to Effect Reverse SplitCertain Material U.S. Federal Income Tax Consequences)
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The exchange of one share of new common stock (the New Shares) for 20 shares of common
stock (the Old Shares) is intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the Code). Cash paid for
fractional shares will be treated as a payment in redemption of the fractional shares and
the shareholder will recognize capital gain or loss, as the case may be, on the difference
between the shareholders basis in the fractional share and the payment in lieu of the
fractional share.
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No Appraisal Rights
(See Proposal No. 5 Amendment to Certificate of Incorporation to
Effect 1-for-20 Reverse SplitAmendment to Certificate of Incorporation to Effect Reverse
SplitNo Appraisal Rights)
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You will not have any rights of appraisal with respect to the reverse split, which means
that you will not have any procedure to follow to challenge the valuation placed by us on
your common stock in paying cash in lieu of fractional shares.
6
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Funds for Payment of Cash in Lieu of Fractional Shares
(See Proposal No. 5 Amendment
to Certificate of Incorporation to Effect 1-for-20 Reverse SplitAmendment to Certificate
of Incorporation to Effect Reverse SplitExpenses)
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If the Reincorporation and reverse split are both approved by our shareholders, we will be
paying our shareholders who have fractional shares for the value of the fractional shares,
based on the average of the closing prices of a share of our common stock during the 120
days prior to the date of this proxy statement. We estimate that we will pay our
shareholders no more than approximately $50,000 for their fractional shares. We will pay
the costs associated with this proxy statement as well as the cash in lieu of fractional
shares from cash available to us.
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Accounting Consequences of the Reverse Split
(See Proposal No. 5 Amendment to
Certificate of Incorporation to Effect 1-for-20 Reverse SplitAmendment to Certificate of
Incorporation to Effect Reverse SplitAccounting Consequences of the Reverse Split)
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If the Reincorporation and reverse split are both approved by our shareholders, then as a
result of the reverse split:
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The number of outstanding shares of common stock will be reduced from
433,416 shares, which are outstanding on the date of this proxy statement, to
approximately 21,670 shares. The exact number of shares outstanding as of the
reverse split will be determined following the effectiveness of the reverse split.
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The purchase of the fractional shares will be treated as the purchase
of treasury stock and will be reflected in the shareholders equity section of our
balance sheet as a reduction of additional paid-in capital in the amount of our
payment in lieu of fractional shares, which is estimated at no more than
approximately $50,000.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This proxy statement includes forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Exchange Act
regarding, among other things, our plans, strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations reflected in or suggested by these
forward-looking statements are reasonable, we cannot assure you that we will achieve or realize
these plans, intentions or expectations. Forward-looking statements are inherently subject to
risks, uncertainties, and assumptions. Many of the forward-looking statements contained in this
proxy statement may be identified by the use of forward-looking words such as believe, expect,
anticipate, should, planned, will, may, and estimated, among others. Factors that could
cause actual results to differ materially from those anticipated by the forward-looking statements
we make in this proxy statement include, but are not limited to, the matters under Item 1A. Risk
Factors in our Annual Report on Form 10-K for the year ended December 31, 2009 and in other
reports or documents that we file from time to time with the SEC. All forward looking statements
attributable to us or a person acting on our behalf are expressly qualified in their entirety by
this cautionary statement. To the extent that there is any material change in the information
discussed in this proxy statement, the Company will promptly disclose the change if required by
applicable SEC rules and regulations.
PROPOSAL NO. 1 ELECTION OF DIRECTORS
Our board of directors currently consists of four members, three of whom are independent within the
director independence standards of the American Stock Exchange (AMEX). On the recommendation of
our nominating committee, we are proposing to elect all four of our existing board members.
Consequently, at the Annual Meeting, a total of four directors will be elected to hold office until
the 2011 annual meeting of shareholders and until their successors have been elected and qualified.
Unless otherwise instructed, the proxyholders will vote the proxies received by them for the four
nominees named below. If any of our nominees is unable or declines to serve as a director at the
time of the Annual Meeting, the
proxies will be voted for any nominee designated by the present board to fill the vacancy. It is
not presently expected that any of the nominees named below will be unable or will decline to serve
as a director. If additional persons are nominated for election as directors, the proxyholders
intend to vote all proxies received by them in a manner to assure the election of as many of the
nominees listed below as possible. In such event, the specific nominees to be voted for will be
determined by the proxyholders.
7
Information Regarding Nominees for Director
Biographical summaries and ages of our directors as of [___], 2010 are set forth
below. The biographies of each of the directors contain information regarding the persons service
as a director, business experience, director positions at publicly held corporations or investment
companies registered under the Investment Company Act of 1940 held currently or at any time during
the last five years, information regarding involvement in certain legal or administrative
proceedings, if applicable, and the experiences, qualifications, attributes or skills that caused
our nominating committee and our board of directors to conclude that such directors should serve as
members of our board. There is no family relationship among any of our directors or executive
officers.
Mark E. Schwarz,
age 50, has been a director of the Company since February 2000 and Chairman of the
board of directors since September 2004. Since 1993, Mr. Schwarz has served as general partner,
directly or through entities that he controls, of NCM, a private investment firm. Since December
2001, Mr. Schwarz has been the Managing Member of NCG, the general partner of NCM. Mr. Schwarz
currently serves as Chairman of the board of directors of Hallmark Financial Services, Inc., a
property-and-casualty insurance holding company, of Pizza Inn, Inc., a franchisor of and
distributor to a chain-wide system of pizza restaurants, and of Wilhelmina International, Inc., a
model and talent management company. Mr. Schwarz also presently serves as a director of SL
Industries, Inc., a power supply and power motion products manufacturer and several privately held
companies. During the past five years, Mr. Schwarz also served as a director of Medquist, Inc., a
provider of clinical documentation workflow solutions in support of electronic health records,
Nashua Corporation, a manufacturer of specialty papers and labels, Vesta Insurance Group, Inc., an
insurance company, and Web Financial Corporation, a specialty bank and finance company. He has
extensive experience in investment management and the management of publicly traded and privately
held companies engaged in a wide range of industries.
Michael R. Parks,
age 48, has been a director of the Company since June 2000. Since 1992, Mr. Parks
has been Chief Executive Officer of The Revere Group, an NTT Data company, a business and
technology consulting company. Mr. Parks presently serves on the boards of True Partners (privately
held company) and The Revere Group. He has extensive experience in the management of companies
engaged in providing technology services.
Clinton J. Coleman
, age 33, has been a director of the Company since January 2007 and currently
serves as Chief Executive Officer. Mr. Coleman served as our Interim Chief Executive Officer from
July 2007 until January 2010. He is also a Vice President of NCM, the general partner of
Newcastle. Mr. Coleman has also recently served as Interim Chief Financial Officer of Pizza Inn,
Inc. between July 2006 and January 2007. Prior to joining Newcastle, Mr. Coleman served as a
portfolio analyst with Lockhart Capital Management, L.P., an investment partnership, from October
2003 to June 2005. From March 2002 to October 2003 he served as an associate with Hunt Investment
Group, L.P., a private investment group. Previously, Mr. Coleman was an associate director with the
Mergers & Acquisitions Group of UBS. Mr. Coleman is also a director of Pizza Inn, Inc. and several
privately held companies. During the past five years, Mr. Coleman also served as a director of
Nashua Corporation. He has extensive experience in investment management and the management of
publicly traded and privately held companies engaged in a wide range of industries.
Dale A. Booth
, age 52, joined our board of directors in September 2008. Since 2009, Mr. Booth has
served as a Managing Director of TurnPoint Advisors, LLC, a consulting firm that provides C-level
leadership and advisory services to companies facing operational or financial stress. From 2004 to
2009, Mr. Booth served as a Managing Member of Booth Partners, L.L.C., a private investment and
consulting firm. From May 2007 to December 2008 he was Executive Chairman and Chief Executive
Officer of SensorLogic Inc., a leading provider of wireless data management and connectivity
solutions. Prior to that Mr. Booth served as President and Chief Executive Officer of privately
held NextiraOne LLC between 2004 and 2007. From 2003 to 2004 Mr. Booth served as President and
Chief Executive Officer of publically held Daisytek International, Inc. From 2000 to 2003, he
served as Chairman and Chief Executive Officer of privately held Enginex Networks, Inc. Mr. Booth
presently serves on the board of
Virgin Islands Telephone Company Inc. He previously served as a director of publicly held
Riverstone Networks Inc., publicly held Daisytek International, Inc. and privately held Telcove
Inc. He has extensive experience in the management of companies engaged in providing technology
services and developing technology products.
8
Under the terms of an agreement between Newcastle and us dated June 13, 2008, so long as Newcastle
either (a) beneficially owns more than 50% of the shares of our outstanding common stock (including
any common stock issuable upon conversion of the Amended Convertible Note) or (b) greater than 50%
of the initial principal amount of the Amended Convertible Note remains outstanding, we agree to
appoint to our board a number of designees of Newcastle constituting 50% of the then outstanding
board members (or, if the number of members of the board of directors is an odd integer, such
number of designees that is the lowest integer that is greater than 50% of our outstanding board
members). In addition, pursuant to a purchase agreement between Newcastle and us dated January 31,
2007, so long as Newcastle beneficially owns at least 5% of our outstanding common stock, Newcastle
is entitled to designate two members to our board of directors. Newcastles two designees are
Messrs. Schwarz and Coleman.
Recommendation of the Board
Our board of directors unanimously recommends that you vote FOR the election of each of the
nominees listed above. Proxies received will be so voted unless shareholders vote otherwise via the
Internet or by telephone or specify otherwise in their completed and returned proxy cards.
Corporate Governance
Director Independence
The board has determined that each of Messrs. Parks, Schwarz and Booth has no material relationship
with us which would interfere with the exercise of independent judgment as a director, which is
consistent with the AMEX director independence standards. In determining the independence of our
directors and of each member of our committees, we utilize the independence standards of the AMEX.
Our common stock had been listed on the AMEX until April 23, 2008. These independence standards are
applied consistently to all directors and committee members. Mr. Coleman does not meet the
aforementioned independence standards because he is our Chief Executive Officer.
Board Committees
The board has established an audit committee, a compensation committee and a nominating committee.
Other committees may be established by the board from time to time. Following is a description of
each of the committees and their composition.
Audit Committee.
Our audit committee currently consists of three directors: Messrs. Booth
(Chairman), Schwarz and Parks. The board has determined that:
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Mr. Booth qualifies as an audit committee financial expert, as defined by the SEC; and
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all members of the audit committee (i) are independent under the AMEX independence
standards, (ii) other than Mr. Schwarz, meet the criteria for independence as set forth in
the Exchange Act, (iii) have not participated in the preparation of our financial
statements at any time during the past three years and (iv) are financially sophisticated
as such term is defined in the American Stock Exchange Company Guide. Mr. Schwarz is not
independent as a result of his affiliation with Newcastle.
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The audit committee is governed by a charter, which was adopted by the board and is available on
our website at
www.bellind.com
. Among other things, the charter calls upon the audit
committee to:
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oversee our auditing, accounting and control functions, including having primary
responsibility for our financial reporting process;
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9
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monitor the integrity of our financial statements to ensure the balance, transparency
and integrity of published financial information;
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monitor our outside auditors independence, qualifications and performance;
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monitor our compliance with legal and regulatory requirements; and
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monitor the effectiveness of our internal controls and risk management system.
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It is not the duty of the audit committee to determine that our financial statements are complete
and accurate and are in accordance with generally accepted accounting principles. Our management is
responsible for preparing our financial statements, and our independent registered public
accounting firm is responsible for auditing those financial statements. Our audit committee does,
however, consult with management and our independent registered public accounting firm prior to the
presentation of financial statements to shareholders and, as appropriate, initiates inquiries into
various aspects of our financial affairs. In addition, the audit committee is responsible for
retaining, evaluating and, if appropriate, recommending the termination of our independent
registered public accounting firm and approving professional services provided by them. The audit
committee met four times during 2009.
Compensation Committee.
Our compensation committee consists of three members: Messrs. Schwarz
(Chairman), Booth and Parks. The board has determined that:
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all members of the compensation committee qualify as independent under the AMEX
independence standards;
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all members of the compensation committee, other than Mr. Schwarz, qualify as
non-employee directors under Rule
16b-3
of the Exchange Act; and
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all members of the compensation committee qualify as outside directors under Section
162(m) of the Code.
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The compensation committee is governed by a charter, which was adopted by the board and is
available on our website at
www.bellind.com.
Among other things, our compensation
committee determines the compensation of the Chief Executive Officer, reviews and approves
compensation for all other executive officers as presented by the Chief Executive Officer, reviews
and makes recommendations with respect to incentive compensation plans and equity-based plans, and
provides oversight and guidance for compensation and benefit programs for all of our employees. The
compensation committee does not use the services of any external consultant in determining either
executive or director compensation. The compensation committee met one time during 2009.
Nominating Committee.
Our nominating committee consists of three members: Messrs. Parks
(Chairman), Booth and Schwarz. The board has determined that all members of the nominating
committee qualify as independent under the AMEX independence standards. The nominating committee
is governed by a charter that was adopted by the board and is available on our website at
www.bellind.com.
Among other things, our nominating committee identifies individuals
qualified to become board members and recommends to the board the nominees for election to the
board. The nominating committee met one time during 2009.
The nominating committee does not have a specific written policy or process regarding the
nominations of directors, nor does it maintain minimum standards for director nominees. The
nominating committee will consider persons recommended by shareholders for nomination for election
as directors. The nominating committee will consider and evaluate a director candidate recommended
by a shareholder in the same manner as a committee-recommended nominee. Shareholders wishing to
recommend director candidates must follow the prior notice requirements as described under Other
Matters Shareholder Proposals in this proxy statement.
10
Board Leadership Structure
Our board of directors currently separates the role of Chairman of the Board from the role of Chief
Executive Officer because the board believes this provides an efficient and effective leadership
model for the Company. Separating the Chairman of the Board and Chief Executive Officer roles
strengthens our corporate governance by enhancing board independence and oversight. The separation
of these positions allows our Chief Executive Officer to better focus on his responsibilities of
running our day-to-day operations, communicating with our constituents, seeking to expand and
enhance our brand and implementing our strategy and other decisions of the board, while allowing
the Chairman of the Board to lead the board in its fundamental role of providing advice to and
independent oversight of management. A critical role of the board is to supervise the Chief
Executive Officer. Effective supervision cannot happen if the board is controlled by the very
person it is supposed to supervise. Because of the separation of the Chairman of the Board and
Chief Executive Officer positions, the board has determined it is not necessary, nor would it lead
to more effective corporate governance, to appoint a lead director.
The board evaluates its leadership structure on an ongoing basis and may change it as circumstances
warrant.
Board Role in Risk Oversight
One of the boards key functions is informed oversight of our risk management process. The board
does not have a formal risk management committee, but rather administers this oversight function
through various standing committees of the board that address risks inherent in their respective
areas of oversight. In particular, the audit committee focuses on financial and enterprise risk
exposures, including internal controls. The audit committee discusses with management, internal
audit, and the independent registered public accounting firm our major financial risk exposures,
including risks related to fraud, liquidity and regulatory compliance, our policies with respect to
risk assessment and risk management, and the steps management has taken to monitor and control such
exposures. The board also periodically receives information about our risk management activities
and the most significant risks we face. This is principally accomplished through audit committee
reports to the board and summary briefings provided by management. The audit committee members, as
well as each other director, also have access to our principal financial officer and any other
members of our management for discussions between meetings as warranted.
The boards other committees oversee risks associated with their respective areas of
responsibility. For example, the compensation committee assesses risk related to our compensation
policies and practices.
Code of Ethics
The board has established a corporate Code of Ethics which qualifies as a code of ethics as
defined by Item 406 of Regulation S-K of the Exchange Act. Among other matters, the Code of Ethics
is designed to deter wrongdoing and to promote:
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honest and ethical conduct, including the ethical handling of actual or apparent
conflicts of interest between personal and professional relationships;
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full, fair, accurate, timely and understandable disclosure in our SEC reports and other
public communications;
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compliance with applicable governmental laws, rules and regulations;
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prompt internal reporting of violations of the Code of Ethics to appropriate persons
identified in the code; and
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accountability for adherence to the Code of Ethics.
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Waivers to the Code of Ethics may be granted only by the board. In the event that the board grants
any waivers of the elements listed above to any of our officers, we expect to announce the waiver
on a Current Report on Form 8-K
within four business days following the date of the waiver. Our Code of Ethics is available without
charge, upon written request sent to Bell Industries, Inc., Attention: Secretary, at 8888 Keystone
Crossing, Suite 1700, Indianapolis, Indiana 46240 and is available on our website at
www.bellind.com.
11
Public Availability of Corporate Governance Documents
Our key corporate governance documents, including our Code of Ethics and the charters of our audit
committee, compensation committee and nominating committee are:
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available on our corporate website at
www.bellind.com
; and
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available in print to any shareholder who requests them from our Secretary.
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Director Attendance
The board held five meetings during 2009. Each director attended at least 75% of the meetings of
the board and of the committees on which he served.
Executive Sessions of the Board
Our independent directors meet regularly in executive session without management to review the
performance of management and our Company and any related matters. Generally, executive sessions
are held in conjunction with regularly scheduled meetings of the board. We expect the board to have
at least four executive sessions each year.
Communications to the Board
Shareholders interested in communicating with the board or to specified individual directors may do
so in writing to Bell Industries, Inc., 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana
46240; Attention: Chief Executive Officer. These communications will be forwarded to the
appropriate director or directors.
Shareholder Meeting Attendance
Directors are strongly encouraged to attend annual meetings of shareholders, but no specific policy
exists regarding attendance by directors at such meetings. All directors attended the 2009 Annual
Meeting of Shareholders.
Director Compensation
Directors are compensated for serving on the board and board committees through quarterly cash
payments and options to purchase shares of our common stock. The Chairman of the Board receives
annual cash compensation of $24,000. The Chairman of the audit committee receives total annual
cash compensation of $17,000, payable on a quarterly basis. Each director receives annual cash
compensation of $12,000, payable on a quarterly basis, for serving on the board and board
committees.
12
Director Compensation Table
The following table shows the compensation of the members of our board, other than Mr. Coleman,
during fiscal year 2009. The compensation earned by Mr. Coleman for his service as a director is
reported in the All Other Compensation column of our Summary Compensation Table. See Executive
CompensationSummary Compensation Table. Columns have been omitted from the table when there has
been no compensation awarded to, earned by or paid to any of the members of our board required to
be reported in that column.
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Fees Earned or Paid
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Name
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in Cash ($)
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Total ($)
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Mark E. Schwarz (1)
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24,000
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24,000
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Dale A. Booth
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17,000
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17,000
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Michael R. Parks (1)
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12,000
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12,000
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(1)
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At December 31, 2009, 1,000 stock options were outstanding for each of Messrs. Schwarz
and Parks.
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PROPOSAL NO. 2 AMENDMENT TO CHARTER TO ELIMINATE SUPERMAJORITY VOTING FOR
TRANSACTIONS WITH RELATED ENTITIES
Proposal No. 2 is an amendment to the California Articles (or, if the Reincorporation is effected,
the Delaware Certificate) to delete the supermajority voting requirements of Article Seven of the
California Articles (or, if the Reincorporation is effected, Article Eight of the Delaware
Certificate) in its entirety. Article Seven of the California Articles imposes a supermajority
approval requirement for transactions with certain related entities which is not otherwise required
by California (or Delaware) law and reads as follows
1
:
SEVEN: (1) Except as set forth in Section (2) of this Article Seven:
(a) any merger or consolidation of this corporation or any of its
subsidiaries with or into any other corporation, or,
(b) any sale, lease, exchange or other disposition of all or
substantially all of the property and assets of this corporation or any of
its subsidiaries to or with any other corporation, person or other entity,
or
(c) any sale, lease, exchange or other disposition to this corporation
or any of its subsidiaries of any assets, cash, securities or other property
of any other corporation, person or other entity in exchange for securities
of this corporation or any of its subsidiaries,
shall require the affirmative vote of the holders of shares representing (i) at
least seventy-five percent (75%) of all classes of stock of this corporation
entitled to vote in the election of directors, considered for the purposes of this
Article Seven as one class, and (ii) at least a majority of all such classes of
stock of this corporation considered for the purposes of this Article Seven as one
class, which are not beneficially owned, directly or indirectly, by such other
corporation, person or other entity, if as of the record date for the determination
of stockholders entitled to notice thereof and to vote thereon, such other
corporation, person or entity is the beneficial owner, directly or indirectly, of
shares possessing twenty percent (20%) or more of the votes of the outstanding
shares of stock of this corporation entitled to vote in the election of directors,
considered for the purposes of this Article Seven as one class. Such other
corporation, person or other entity is hereafter sometimes referred to as a related
entity. Such affirmative vote, as provided in this Article Seven, shall be in lieu
of any lesser vote of the holders of the stock of this corporation otherwise
provided by law or any agreement or contract to which this corporation is a party,
and shall be in addition to any class vote to which any class of stock of this
corporation may be entitled.
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1
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Article Eight of the Delaware Certificate contains
identical language.
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(2) The provisions of this Article Seven shall not apply to any transaction
described in clauses (a), (b) or (c) of Section (1) of this Article Seven if:
(a) the Board of Directors of this corporation shall have approved
such transaction prior to the time that such corporation, person or other
entity became a related entity, or
(b) a majority of the outstanding shares of stock of such other
corporation is owned of record or beneficially, directly or indirectly, by
this corporation or its subsidiaries.
(3) For the purposes of this Article Seven, and without limiting the
definition of beneficial owner or beneficially own, any corporation, person or
other entity shall be deemed to be the beneficial owner of or to beneficially
own any share of stock of this corporation (a) which it has the right to acquire
either immediately or at some future date pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise, or (b) which is
beneficially owned, directly or indirectly (including shares deemed owned through
application of the foregoing clause (a) of this Section (3), by any other
corporation, person or other entity either with which it or its affiliate or
associates have any apparent arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of stock of this corporation, or which is
its affiliate or associate as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934 as in effect
from time to time or any successor provision. Also for purposes of this Article
Seven, the outstanding shares of any class of stock of this corporation shall
include shares deemed owned through application of the foregoing clauses (a) and (b)
of this Section (3), but shall not include any other shares which may be issuable
either immediately or at some future date pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise; and the term
substantially all of the property and assets of this corporation or any of its
subsidiaries shall mean those properties and assets involved in any single
transaction or series of related transactions having an aggregate fair market value
of more than a majority of the total consolidated assets of this corporation and its
subsidiaries.
The Board of Directors of this corporation shall have the power and duty to
determine for the purposes of this Article Seven, on the basis of information known
to this corporation, whether (i) any corporation, person or other entity
beneficially owns, directly or indirectly, twenty percent (20%) or more of the
shares of stock of this corporation entitled to vote in the election of directors,
and (ii) any corporation, person or other entity is an affiliate or associate of
another. Any such determination made in good faith shall be conclusive and binding
for all purposes of this Article Seven.
(4) No amendment to the Certificate of Incorporation of this corporation
shall amend, alter, change or repeal any of the provisions of this Article Seven
unless the amendment effecting such amendment, alteration, change or repeal shall
receive the affirmative vote of (a) seventy-five percent (75%) of all classes of
stock of this corporation entitled to vote in the election of directors, considered
for the purposes of this Article Seven as one class, and (b) at least a majority of
all such classes of stock of this corporation, considered for the purposes of this
Article Seven as one class, which are not beneficially owned, directly or
indirectly, by a related entity.
Our board of directors has considered carefully the advantages and disadvantages of the
supermajority vote requirements for transactions with related entities set forth above. After its
review, the board of directors determined that the protection provided by the supermajority
approval requirement is unnecessary in view of other provisions of the CGCL (or DGCL) which apply
to certain transactions with interested or related parties. Accordingly, the board has proposed
and is recommending approval of an amendment to the California Articles (if the Reincorporation is
not effected) or the Delaware Certificate (if the Reincorporation is approved by our shareholders
and effected) that would delete Article Seven of the California Articles or Article Eight of the
Delaware Certificate in its entirety.
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Some supermajority vote provisions are intended to encourage a person making an unsolicited bid for
a company to negotiate with the board of directors to reach terms that are fair and in the best
interests of shareholders. Other provisions that require a supermajority vote to amend certain
provisions of the charter can be viewed as facilitating corporate governance stability by requiring
broad shareholder consensus to effect changes. However, many investors and others view these
provisions as inconsistent with principles of good corporate governance. Although these measures
can be beneficial, our board recognizes that the requirement of a supermajority vote can limit the
ability of a majority of our shareholders at any particular time to effect change by essentially
providing a veto to a large minority shareholder or group of shareholders. In addition, a lower
threshold for shareholder votes can increase shareholders ability to participate effectively in
corporate governance. Accordingly, our board has concluded that it is in the best interests of our
shareholders to eliminate the supermajority voting requirements for transactions with related
entities. The board has determined that elimination of these requirements further maximizes its
accountability to shareholders.
The removal of Article Seven from the California Articles (or Article Eight from the Delaware
Certificate) will have two principal effects on shareholder voting. First, those transactions that
would otherwise require a shareholder vote would require the vote of the holders of a majority of
our outstanding stock in accordance with the CGCL (or DGCL as the case may be), rather than a 75%
supermajority vote under Article Seven of the California Articles (and Article Eight of the
Delaware Certificate). Second, our board of directors will be able to effect, without obtaining
shareholder approval, any transactions currently covered by Article Seven of the California
Articles (or Article Eight of the Delaware Certificate) that do not otherwise require shareholder
approval under the CGCL (or DGCL, respectively).
The affirmative vote of holders of 75% of the shares of our common stock entitled to vote in the
election of directors is necessary to approval this proposal.
Recommendation of the Board
For the reasons described in this proxy statement, our board of directors unanimously recommends
that you vote FOR the approval of the amendment to our charter to eliminate supermajority voting
for transactions with related entities. Proxies received will be so voted unless shareholders vote
otherwise via the Internet or by telephone or specify otherwise in their completed and returned
proxy cards.
PROPOSAL NO. 3
AMENDMENT TO BYLAWS REGARDING SIZE OF BOARD
Proposal No. 3 is an amendment to remove limitations on the size of the board of directors from
Section 1.02 of our current bylaws, which reads as follows:
The number of directors of the corporation shall be not less than six nor more than
eleven with the initial number being seven. The number of directors may be changed
within the above parameters by a bylaw amending this Section 1.02 duly adopted by
the vote or written consent of a majority of the outstanding shares entitled to vote
or by a resolution adopted by a majority of the total number of authorized
directors; provided, however, that a bylaw reducing the minimum number of directors
to a number less than five cannot be adopted if the votes cast against its adoption
at a meeting or the shares not consenting in the case of action by written consent
are equal to more than 16
2
/
3
percent of the outstanding shares entitled to vote.
We are asking our shareholders to approve an amendment to Section 1.02, such that Section 1.02
would read in its entirety as follows:
The Board shall consist of at least four (4), but no more than seven (7) directors,
as shall be fixed from time to time by the affirmative vote of a majority of the
entire Board of Directors.
15
Our board currently has four members and, as a result, there is a vacancy on the board. The board
believes that its current size is appropriate for us, given our size, the attributes of the members
of the board and other considerations,
and provides an advantage in terms of efficiency, full discussion and participation by all members,
and greater flexibility in scheduling meetings. The board believes its size will continue to be
sufficient to ensure diversity of experience and viewpoints of board members and to be able to
satisfy current and future corporate governance requirements without compromising the efficiency of
the board, particularly in light of our size. However, because of Section 1.02, the board size
cannot be reduced without the shareholder vote described below. We have no knowledge of any
current efforts to obtain control of the Company, and this proposal is not intended to make a
takeover of the Company more difficult.
As stated above, changing the range requires the affirmative vote of a majority of our outstanding
shares of common stock. Since we are seeking to change the minimum number of directors to a number
less than five, the amendment cannot be adopted if the votes cast against its adoption are equal to
more than 16
2
/
3
% of the outstanding shares entitled to vote.
If this proposal is approved but the Reincorporation is not effected, then we would have to obtain
shareholder approval if, at a later date, we sought to effect another change to the stated range.
If the Reincorporation is approved and effected but this proposal is not approved by our
shareholders, the Delaware Bylaws will contain a provision identical to Section 1.02 of our current
bylaws.
Recommendation of the Board
For the reasons described in this proxy statement, our board of directors unanimously recommends
that you vote FOR the approval of the amendment to Section 1.02 of our bylaws regarding the size
of the board. Proxies received will be so voted unless shareholders vote otherwise via the
Internet or by telephone or specify otherwise in their completed and returned proxy cards.
PROPOSAL NO. 4 REINCORPORATION OF THE COMPANY FROM CALIFORNIA TO DELAWARE
Questions and Answers Concerning the Reorganization
Why are you electing to reincorporate from California to Delaware?
Our principal executive offices moved to Indianapolis, Indiana in 2006. Our operating subsidiaries
Bell Techlogix, Inc. and Bell IndustriesRecreational Products Group, Inc. are incorporated in
Delaware and Minnesota, respectively. Less than 2% of our revenues in 2009 were derived in
California. Our board believes it will also give us a greater measure of flexibility in corporate
governance than is currently available under California law and will help us attract and retain
directors and officers. Accordingly, the board of directors believes that there is no compelling
business reason to remain a California corporation. In addition, the Reincorporation in Delaware
will allow us to effect the reverse split. The principal reasons for the Reincorporation are
described in greater detail below under Reincorporation of the Corporation from California to
DelawarePrincipal Reasons for the Reincorporation.
What are the principal terms of the Reincorporation?
Pursuant to the Reincorporation Agreement:
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We will merge with and into Bell Delaware, with Bell Delaware as the surviving
corporation;
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Our separate corporate existence in California will cease upon the effectiveness of the
merger;
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Each outstanding share of our common stock automatically will be converted into one
share of Bell Delaware common stock;
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Bell Delaware will assume our stock option plans as well as our other employee
incentive plans, including the 2007 Stock Incentive Plan; and
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The existing holders of our common stock will own all of the outstanding shares of Bell
Delaware common stock and no change in ownership will result from the Reincorporation.
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Will you change your name as a result of the Reincorporation?
No. We will retain the name Bell Industries, Inc. but will be incorporated under the laws of the
state of Delaware.
Will the Reincorporation change your business?
No. The Reincorporation will not change our current business. Our principal executive offices will
remain located at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240. Only our state
of incorporation will change. The Reincorporation will not have any effect on our operating
subsidiaries, including Bell Techlogix, Inc. and Bell Industries Recreational Products Group,
Inc.
Will you have the same directors and executive officers that you currently have following the
Reincorporation?
Yes. Our executive officers and members of our board will not change as a result of the
Reincorporation.
Who are the parties to the Reincorporation?
Bell Industries, Inc., a California corporation
We operate our business through our two operating subsidiaries, Bell Techlogix, Inc., which
provides integrated technology product and service solutions, and Bell IndustriesRecreational
Products Group, Inc., which is a wholesale distributor of aftermarket parts and accessories for
recreational vehicles, boats, snowmobiles, motorcycles and ATVs. We were originally incorporated
in the State of Delaware, reincorporated in the State of California in 1995, and operate on a
calendar fiscal year.
Delaware Bell Industries, Inc., a Delaware Corporation
Delaware Bell Industries, Inc., a Delaware corporation, is our recently formed and wholly-owned
subsidiary. Bell Delaware was formed for the sole purpose of effecting the Reincorporation. Bell
Delaware presently has no operating history and has nominal assets, liabilities and capitalization.
The principal place of business of each of the Company and Bell Delaware is located 8888 Keystone
Crossing, Suite 1700, Indianapolis, Indiana 46240. The telephone number for each is 317-704-6000.
When is the Reincorporation expected to be completed?
We expect that the Reincorporation will become effective shortly following the Annual Meeting.
What if the Reincorporation is not approved by our shareholders?
The merger and Reincorporation will not occur, you will continue to hold shares of our common
stock, and we will continue to be incorporated in the State of California.
Does the Reincorporation affect my percent of ownership in the Company?
No. Upon consummation of the merger effecting the Reincorporation, each outstanding share of our
common stock automatically will be converted into one share of common stock of the surviving
corporation in the merger, Bell Delaware, the shares of Bell Delaware common stock held by the
Company will be cancelled, and no additional shares will be issued in the merger. Therefore, the
number of shares and the percentage of ownership you hold in the Company will not be changed by
virtue of the Reincorporation. If, however, the reverse split is also approved by our
shareholders, the number of shares and percent of ownership you hold in the Company will be
changed. See
Proposal No. 5 Amendment to Certificate of Incorporation to Effect 1-for-20 Reverse SplitSpecial
Factors of the Reverse SplitEffects of the Reverse Split on our Other Shareholders.
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How does the board of directors recommend that I vote?
Our board unanimously approved the Reincorporation and, accordingly, recommends that you vote your
shares
FOR
this proposal.
Reincorporation of the Company from California to Delaware
Overview
On September 9, 2010, our board approved the Reincorporation of the Company from California to
Delaware by means of a merger of the Company with and into Bell Delaware. Bell Delaware will
survive the merger and issue one share of its common stock, $0.01 par
value per share, for each outstanding share of our common
stock, without par value, in connection with the merger. The name of the Delaware corporation, which will be the
successor to the Company, will be Bell Industries, Inc. We intend to file a certificate of
amendment to the Delaware Certificate as soon as practicable following the effectiveness of the
merger to effect the name change, as well as, to the extent approved by our shareholders, to effect
the reverse split.
Shareholders are urged to read this proxy statement carefully, including the related appendices
referenced below and attached to this proxy statement, before voting on the Reincorporation. The
following discussion summarizes material provisions of the Reincorporation. This summary is subject
to and qualified in its entirety by the Reincorporation Agreement in substantially the form
attached hereto as Appendix A, the Delaware Certificate to be effective after the Reincorporation,
in substantially the form attached hereto as Appendix B, and the Delaware Bylaws to be effective
after the Reincorporation, in substantially the form attached hereto as Appendix C. Copies of our
California Articles and our California Bylaws are filed publicly as exhibits to our periodic
reports and are also available for inspection at our principal office. Copies will be sent to
shareholders free of charge upon written request to our Secretary at Bell Industries, Inc., 8888
Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240.
Mechanics of the Reincorporation
The Reincorporation will be effected by the merger of the Company with and into Bell Delaware, a
wholly-owned subsidiary of the Company that has been recently incorporated under the DGCL for
purposes of the Reincorporation. The Company will cease to exist as a result of the merger and Bell
Delaware will be the surviving corporation and will continue to operate our business as it existed
prior to the Reincorporation. Assuming approval by our shareholders, we currently intend to cause
the Reincorporation to become effective shortly following the Annual Meeting.
At the effective time of the Reincorporation (the Effective Time), we will be governed by the
Delaware Certificate, the Delaware Bylaws and the DGCL. Although the Delaware Certificate and the
Delaware Bylaws contain many similar provisions from the California Articles and the California
Bylaws, they nevertheless include provisions that are somewhat different from the provisions
contained in the current California Articles, California Bylaws or under the CGCL. See
Significant Differences Between the Corporation Laws of California and Delaware below.
In the event the Reincorporation is approved, upon the Effective Time, each outstanding share of
our common stock will automatically be converted into one share of common stock of Bell Delaware.
Each outstanding option to purchase shares of our common stock will be converted into an option to
purchase the same number of shares of Bell Delaware common stock with no other changes in the terms
and conditions of such option. Our other employee benefit arrangements will be continued by Bell
Delaware upon the terms and subject to the conditions specified in such plans. Each outstanding
share of Bell Delaware common stock prior to the Effective Time will be cancelled upon the
Effective Time and will thereafter be authorized and unissued common stock of Bell Delaware.
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CERTIFICATES CURRENTLY ISSUED FOR OUR SHARES WILL AUTOMATICALLY REPRESENT SHARES IN BELL DELAWARE
UPON COMPLETION OF THE MERGER, AND SHAREHOLDERS WILL NOT BE REQUIRED TO EXCHANGE STOCK CERTIFICATES
AS A RESULT OF THE REINCORPORATION.
Other than the change in corporate domicile, the Reincorporation will not result in any change in
our business, physical location, management, assets, liabilities or net worth, nor will it result
in any change in location of our current employees, including management. Upon consummation of the
Reincorporation, our daily business operations will continue as they are presently conducted at our
principal executive office located at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana
46240. The consolidated financial condition and results of operations of Bell Delaware immediately
after consummation of the Reincorporation will be the same as those of the Company immediately
prior to the consummation of the Reincorporation, with the exception
of immaterial changes to our balance sheet that will be made to
reflect the change in par value from zero to $0.01 per share. In addition, upon the effectiveness of the
merger, the board of directors of Bell Delaware will consist of those persons elected to our
current board of directors, and will continue to serve for the term of their respective elections
to our board, and the individuals serving as our executive officers immediately prior to the
Reincorporation will continue to serve as executive officers of Bell Delaware, without a change in
title or responsibilities. Upon effectiveness of the Reincorporation, Bell Delaware will be the
successor in interest to the Company and the shareholders will become shareholders of Bell
Delaware.
The Reincorporation Agreement provides that our board of directors may abandon the Reincorporation
at any time prior to the Effective Time if the board of directors determines that the
Reincorporation is inadvisable for any reason. For example, the DGCL or the CGCL may be changed to
reduce the benefits that we hope to achieve through the Reincorporation, or the costs of operating
as a Delaware corporation may be increased, although we do not know of any such changes.
Principal Reasons for the Reincorporation
The Company was originally incorporated under the laws of the State of Delaware. In 1995, we were
reincorporated in the State of California. At that time, our principal executive offices were
located in California. Since 2006, we have been headquartered in Indianapolis, Indiana, and our
largest shareholder is located in Texas. Our operating subsidiaries Bell Techlogix, Inc. and Bell
IndustriesRecreational Products Group, Inc. are incorporated in Delaware and Minnesota,
respectively. Less than 2% of our revenues in 2009 were derived in California. Accordingly, the
board of directors believes that there is no compelling business reason to remain a California
corporation.
In addition, the board believes that any direct benefit that the DGCL provides to a corporation
indirectly benefits the shareholders, who are our owners. The board believes that there are several
other reasons why the Reincorporation to Delaware is in the best interests of the Company and our
shareholders. As explained in more detail below, these reasons can be summarized as follows:
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greater predictability, flexibility and responsiveness of the DGCL to corporate needs
through a more highly developed and predictable body of corporate law;
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access to specialized courts;
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enhanced ability of Delaware corporations to attract and retain qualified directors
and executive officers; and
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allows us to effect the reverse split if approved by our shareholders.
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Highly Developed and Predictable Corporate Law.
Our board of directors believes Delaware has one of
the most modern statutory corporation laws, which is revised regularly to meet changing legal and
business needs of corporations. The Delaware legislature is responsive to developments in modern
corporate law and Delaware has proven sensitive to changing needs of corporations and their
shareholders. The Delaware Secretary of State is particularly flexible and responsive in its
administration of the filings required for mergers, acquisitions and other corporate transactions.
Delaware has become a preferred domicile for most major U.S. corporations and the DGCL
and administrative practices have become comparatively well-known and widely understood. As a
result of these factors, it is anticipated that the DGCL will provide greater efficiency,
predictability and flexibility in our legal affairs than is presently available under the CGCL.
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Access to Specialized Courts.
Delaware has a specialized Court of Chancery that hears corporate law
cases. As the leading state of incorporation for both private and public companies, Delaware has
developed a vast body of corporate law that helps to promote greater consistency and predictability
in judicial rulings. In addition, Chancery Court actions and appeals from Chancery Court rulings
proceed expeditiously. In contrast, California does not have a similar specialized court
established to hear only corporate law cases. Rather, disputes involving questions of California
corporate law are either heard by the California Superior Court, the general trial court in
California that hears all types of cases, or, if federal jurisdiction exists, a federal district
court.
Recruiting and Retention Benefits.
We are in competitive industries and compete for talented
individuals to serve on our management team and on our board. We believe that the better
understood and comparatively stable corporate environment afforded by Delaware will enable us to
compete more effectively with other public and private companies, many of which are incorporated in
Delaware, in the recruitment, from time to time, of talented and experienced directors and
officers.
Additionally, the parameters of director and officer liability are more extensively addressed in
Delaware court decisions and are therefore better defined and better understood than under the
CGCL. Our board believes that reincorporation in Delaware will enhance our ability to recruit and
retain directors and officers in the future, while providing appropriate protection for
shareholders from possible abuses by directors and officers. In this regard, it should be noted
that directors personal liability is not, and cannot be, eliminated under the DGCL for intentional
misconduct, bad faith conduct or any transaction from which the director derives an improper
personal benefit.
Reverse Split
. Converting to a Delaware corporation will also facilitate the board of directors
intention to effect the reverse split and terminate the registration of our common stock under the
Exchange Act. Due to the negative book value of our common stock, we would not be able to effect
the reverse split under the CGCL.
Except as set forth below, we are generally not seeking to materially change our current charter
and bylaw provisions through the Reincorporation and, except for those changes described below,
this proposal does not seek to materially alter the rights of our shareholders or the rules by
which we operate or by which our affairs are governed.
Possible Negative Considerations
Notwithstanding the belief of the board as to the benefits to the shareholders of the
Reincorporation, it should be noted that Delaware law has been criticized by some commentators and
institutional shareholders on the grounds that it does not afford minority shareholders the same
substantive rights and protections as are available in a number of other states. The
Reincorporation of the Company in Delaware may make it more difficult for minority shareholders to
elect directors and influence our policies. It also should be noted that the interests of the
board, management and affiliated shareholders in voting on the Reincorporation proposal may not be
the same as those of unaffiliated shareholders. For a comparison of shareholders rights and the
power of management under the CGCL and the DGCL, see The Charters and Bylaws of the Company and
Bell Delaware Compared and Contrasted and Significant Differences Between the Corporation Laws
of California and Delaware. In addition, franchise taxes in Delaware may be greater than in
California.
The board of directors has considered the potential disadvantages of the Reincorporation and has
concluded that the potential benefits outweigh the possible disadvantages.
The Charters and Bylaws of the Company and Bell Delaware Compared and Contrasted
With certain exceptions, the provisions of the Delaware Certificate and Delaware Bylaws are
generally consistent with those of the California Articles and California Bylaws. However, the
Reincorporation includes the implementation of certain provisions in the Delaware Certificate and
Delaware Bylaws which are required or
permitted by the DGCL and which may alter the rights of shareholders and the powers of management
and reduce shareholder participation in certain important corporate decisions.
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Certain of the provisions in the Delaware Certificate and the Delaware Bylaws, similar to those
contained the California Articles and California Bylaws, may, however, facilitate future efforts to
deter, delay or prevent changes in control of Bell Delaware. Such provisions include the following:
Delaware
Certificate.
The California Articles authorize us to issue
10,000,000 shares of common stock, without par value, and 1,000,000
shares of preferred stock, without par value. The Delaware Certificate authorizes
10,000,000 shares of common stock, $0.01 par value per share, and
1,000,000 shares of preferred stock, $0.01 par value per share. The
change in par value is to avoid the higher franchise tax payable in
Delaware for shares without par value. In addition, the Delaware
Certificate gives the board the
authority, within the limitations in the Delaware Certificate, to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any unissued series of
preferred stock. Shares of preferred stock could be issued in connection with a shareholder rights
plan, or poison pill or rights plan, which would allow shareholders (other than hostile parties) to
purchase Bell Delaware common stock at a discount to the then current market price, which would
have a dilutive effect on the hostile parties.
Shareholder Action by Written Consent.
The California Bylaws and the Delaware Bylaws both allow
shareholders to act without a meeting and without prior notice if a written consent setting forth
the action taken is signed by the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a duly called meeting
at which all shares entitled to vote thereon were present and voted. Under the California Bylaws,
notwithstanding the above, directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote for the election of directors. The Delaware Bylaws
do not have a similar provision requiring election of directors by unanimous written consent.
Change in Number of Directors.
Under the CGCL, although a change in the number of directors must
in general be approved by the shareholders, the board of directors may fix the exact number of
directors within a stated range set forth in either the articles of incorporation or bylaws, if
that stated range has been approved by the shareholders. Any change outside of the established
range or a change in the established range must be approved by the shareholders. The California
Bylaws provide that a change in the stated range must be approved by a vote of the holders of at
least a majority of the outstanding shares entitled to vote or by resolution adopted by a majority
of the total number of authorized directors; provided, however, that under the California Bylaws, a
bylaw reducing the minimum number of directors to a number less than five cannot be adopted if the
votes cast against its adoption at a meeting or the shares not consenting in the case of action by
written consent are equal to more than 16
2
/
3
% of the outstanding shares entitled to vote.
Under the DGCL, the number of directors shall be fixed by or in the manner provided in the bylaws,
unless the certificate of incorporation fixes the number of directors (in which case a change in
the number of directors may be made only by an amendment of such certificate, which would require a
vote of shareholders).
The California Bylaws establish a range of six to eleven directors and contain certain approval
requirements to fix the number of directors within the stated range and to change the range.
Separately in Proposal No. 3, we are asking our shareholders to approve an amendment to Section
1.02 of the California Bylaws to change the stated range to four to seven directors and to provide
that our board of directors may establish the size of our board. See Proposal No. 3 Amendment to
Bylaws Regarding Size of Board. If Proposal No. 3 is not approved by our shareholders, the
Delaware Bylaws will contain the same Section 1.02 as is currently in the California Bylaws.
Filling Vacancies on the Board of Directors.
Under the CGCL, any vacancy on the board of directors
other than one created by the removal of a director may be filled by the board. If the number of
directors is less than a quorum, a vacancy may be filled by the unanimous written consent of the
directors then in office, by the affirmative vote of a majority of the directors at a meeting held
pursuant to notice or waivers of notice, or by a sole remaining director. A vacancy created by the
removal of a director may be filled by the board only if authorized by a corporations articles of
incorporation or by a bylaw approved by the corporations shareholders. The California Bylaws
follow the CGCL and provide that all vacancies on the board, except for a vacancy caused by the
removal of a director, may be filled by a majority of the remaining directors or, if the number of
directors then in office is less than a quorum, by the unanimous written consent of the directors
then in office, the affirmative vote of a majority of the directors then in office at a meeting
held pursuant to notice or waivers of notice complying with the CGCL, or by a sole remaining
director. The California Bylaws also provide that our shareholders may elect a director at any
time to fill a vacancy
not filled by the directors, but any such election by written consent requires the consent of a
majority of the outstanding shares entitled to vote.
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Under the DGCL, vacancies and newly created directorships may be filled by a majority of the
directors then in office (even though less than a quorum) or by a sole remaining director, unless
otherwise provided in the certificate of incorporation or bylaws. The Delaware Bylaws follow the
DGCL and provide that vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then in office (even
though less than a quorum) or by a sole remaining director, unless the board of directors
determines that the shareholders shall fill any such vacancy or newly created directorship.
Shareholder Proposal Notice Provisions.
There is no specific statutory requirement under the CGCL
or the DGCL with regard to advance notice of director nominations and shareholder proposals. Absent
a bylaw restriction, director nominations and shareholder proposals are subject to federal
securities laws, which generally provide that shareholder proposals that the proponent wishes to
include in our proxy materials must be received not less than 120 days in advance of the
anniversary of the date on which the proxy statement was released in connection with the previous
years annual meeting.
The California Bylaws provide that notice containing the name of any person to be nominated by any
shareholder for election as a director of the Company together with other specified information
relating to the nominee shall be delivered to our Secretary not less than 120 calendar days prior
to the annual meeting. For other business to be properly brought before an annual meeting by a
shareholder, under the California Bylaws we 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 Delaware Bylaws provide that notice must be received by the Secretary at our principal
executive offices not later than the close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary of the preceding years annual meeting;
provided, however, that, in the event that the date of the annual meeting is advanced more than 30
days prior to or delayed by more than 30 days after the anniversary of the preceding years annual
meeting, notice by the shareholder to be timely must be so received not earlier than the close of
business on the 120th day prior to such annual meeting and not later than the close of business on
the later of the 90th day prior to such annual meeting or the 10th day following the day on which
public announcement of the date of such meeting is first made.
Cumulative Voting.
Under the CGCL, any shareholder may cumulate his or her votes in the election
of directors upon proper notice of his or her intention to do so, except that corporations with
securities listed on the New York Stock Exchange, the NYSE Amex, the NASDAQ Global Market or the
NASDAQ Capital Market may eliminate cumulative voting with shareholder approval. The California
Bylaws provide for cumulative voting for the election of directors. Under the DGCL, cumulative
voting in the election of directors is not mandatory and the Delaware Certificate does not provide
for cumulative voting.
In an election of directors under cumulative voting, each share of voting stock is entitled to vote
the number of votes to which such share would normally be entitled, multiplied by the number of
directors to be elected. A shareholder may then cast all such votes for a single candidate or may
allocate them among as many candidates as the shareholder may choose. Cumulative voting may enable
a minority shareholder or group of shareholders to elect at least one representative to the board.
Without cumulative voting, the holders of a majority of the shares present at an annual meeting
would have the power to elect all the directors to be elected at that meeting, and no person could
be elected without the support of a majority of the shareholders voting. Without cumulative voting,
any director or the entire board of directors of a corporation may be removed with or without cause
with the approval of a majority of the outstanding shares entitled to vote at an election of
directors.
Amendment to Bylaws
. The California Bylaws provide that any bylaw may be adopted, amended or
repealed by either our board of directors or the vote of shareholders entitled to exercise a
majority of the voting power of the Company. Similarly, the Delaware Bylaws provide that any bylaw
may be adopted, amended or repealed by either our board of directors or by the vote of the holders
of a majority of the authorized shares entitled to vote, except as otherwise provided by law or the
Certificate of Incorporation.
22
Except for those provisions being voted on in Proposal No. 2 and Proposal No. 3, approval by our
shareholders of the Reincorporation proposal will constitute approval of the Delaware Certificate
and Delaware Bylaws, including the inclusion of the provisions described herein. In addition,
certain other changes altering the rights of shareholders and powers of management could be
implemented in the future by amendment of the Delaware Certificate following shareholder approval
and certain such changes could be implemented by amendment of the Delaware Bylaws without
shareholder approval. For a discussion of such changes, see Significant Differences Between the
Corporation Laws of California and Delaware. This discussion of the Delaware Certificate and
Delaware Bylaws is qualified by reference to Appendix B and Appendix C attached hereto,
respectively.
Significant Differences Between the Corporation Laws of California and Delaware
The DGCL and the CGCL differ in many respects and, consequently, it is not practical to summarize
all of the differences in this proxy statement. The following provides a summary of major
substantive differences between the DGCL and the CGCL beyond those discussed under The Charters
and Bylaws of the Company and Bell Delaware Compared and Contrasted above. The following is not
intended to be an exhaustive description of all differences between the laws of the two states.
Accordingly, all statements herein are qualified in their entirety by reference to the DGCL and the
CGCL, respectively.
Shareholder Voting in Acquisitions.
The CGCL and the DGCL are substantially similar in terms of
when shareholder approval is required for a corporation to undertake various types of acquisition
transactions. Both the CGCL and the DGCL generally require that the holders of the outstanding
shares representing a majority of the voting power of both the acquiring and target corporations
approve a statutory merger. In addition, both the CGCL and the DGCL require that a sale of all or
substantially all of the assets of a corporation be approved by the holders of the outstanding
shares representing a majority of the voting power of the corporation selling its assets.
The DGCL does not require a shareholder vote of the surviving corporation in a merger (unless
provided otherwise in the corporations certificate of incorporation) if:
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The merger agreement does not amend the existing certificate of incorporation;
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Each share of stock of the surviving corporation outstanding immediately before the
transaction is an identical outstanding share after the merger; and
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no shares of common stock of the surviving corporation (and no shares,
securities or obligations convertible into such stock) are to be issued in the merger,
or
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the shares of common stock of the surviving corporation to be issued in the
merger (including shares issuable upon conversion of any other shares, securities or
obligations to be issued in the merger) do not exceed twenty percent (20%) of the
shares of common stock of the surviving corporation outstanding immediately prior to
the transaction.
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The CGCL contains a similar exception to its voting requirements for reorganizations, if the
shareholders or the corporation itself immediately prior to the reorganization will own immediately
after the reorganization equity securities constituting more than five-sixths (5/6
th
) of
the voting power of the surviving or acquiring corporation or its parent entity.
Limitations on Certain Business Combinations.
Delaware, like a number of states, has adopted
special laws designed to make certain kinds of unfriendly or hostile corporate takeovers, or
other non-board approved transactions involving a corporation and one or more of its significant
shareholders, more difficult.
23
Under Section 203 of the DGCL, a Delaware corporation is prohibited from engaging in a business
combination with an interested shareholder for three years following the date that such person
or entity becomes an interested shareholder. With certain exceptions, an interested shareholder is
a person or entity that owns, individually or with or through other persons or entities, fifteen
percent (15%) or more of the corporations outstanding voting stock (including rights to acquire
stock pursuant to an option, warrant, agreement, arrangement or understanding, or upon the exercise
of conversion or exchange rights, and also stock as to which the person has voting rights only).
The three-year moratorium imposed by Section 203 on business combinations does not apply if:
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Prior to the date on which the interested shareholder becomes an interested
shareholder, the board of directors of the corporation approves either the business
combination or the transaction that resulted in the person or entity becoming an interested
shareholder;
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Upon consummation of the transaction that makes the person or entity an interested
shareholder, the interested shareholder owns at least eighty-five percent (85%) of the
corporations voting stock outstanding at the time the transaction commenced (excluding,
for purposes of determining voting stock outstanding, shares owned by directors who are
also officers of the corporation and shares held by employee stock plans that do not give
employee participants the right to decide confidentially whether to accept a tender or
exchange offer); or
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On or after the date the person or entity becomes an interested shareholder, the
business combination is approved both by the board of directors and by the shareholders at
a meeting by at least sixty-six and two-thirds percent (66
2
/
3
%) of the outstanding voting
stock not owned by the interested shareholder.
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Unless a corporation opts into the applicability of Section 203 by a provision in its certificate
of incorporation, Section 203 does not apply to a corporation if the corporations voting stock is
not listed on a national securities exchange or held of record by 2,000 or more shareholders. Since
Bell Delaware will not satisfy these requirements and the Delaware Certificate does not opt into
the applicability of Section 203, such section will not apply to Bell Delaware immediately after
the Reincorporation. This would change if Bell Delaware meets one of the conditions to
applicability set forth above in the future.
The CGCL does not have a section similar to Delaware Section 203, but it does have different
provisions that may limit a corporations ability to engage in certain business combinations. The
CGCL requires that, in a merger of a corporation with a shareholder (or its affiliate) who holds
more than fifty percent (50%) but less than ninety percent (90%) of the corporations common stock,
the other shareholders of the corporation must receive common stock in the transaction, unless all
of the corporations shareholders consent to the transaction. This provision of the CGCL may have
the effect of making a cash-out merger by a majority shareholder (possibly as the second step in
a two-step merger) more difficult to accomplish. The DGCL does not have an analogous provision to
the CGCL in this respect. However, under some circumstances Section 203 does provide similar
protection to shareholders against coercive two-tiered bids for a corporation in which the
shareholders are not treated equally.
The CGCL also provides that, except in certain circumstances, when a tender offer or a proposal for
a reorganization or sale of assets is made by an interested party (generally a controlling or
managing party of the corporation), the interested party must provide the other shareholders with
an affirmative written opinion as to the fairness of the consideration to be paid to the
shareholders. This fairness opinion requirement does not apply to corporations that have fewer than
100 shareholders of record or to a transaction that has been qualified under California state
securities laws. Furthermore, if a tender of shares or a vote is sought pursuant to an interested
partys proposal and a later proposal is made by another party at least 10 days prior to the date
of acceptance of the interested partys proposal, the shareholders must be informed of the later
offer and be afforded a reasonable opportunity to withdraw their vote, consent or proxy, and to
withdraw any tendered shares. The DGCL has no comparable provision.
Removal of Directors.
In general, under the CGCL, any director, or the entire board of directors,
may be removed, with or without cause, with the approval of a majority of the outstanding shares
entitled to vote. In the case of a corporation with cumulative voting like the Company or whose
board is classified, however, no individual director may be removed (unless the entire board is
removed) if the number of votes cast against such removal would be sufficient to elect the director
under cumulative voting rules. In addition, shareholders holding at least ten percent
(10%) of the outstanding shares of any class may bring suit to remove any director in case of
fraudulent or dishonest acts or gross abuse of authority or discretion.
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Under the DGCL, any director, or the entire board of directors, of a corporation that does not have
a classified board of directors or cumulative voting may be removed, with or without cause, with
the approval of a majority of the outstanding shares entitled to vote at an election of directors.
In the case of a Delaware corporation whose board is classified, unless the certificate of
incorporation provides otherwise, shareholders may effect such removal only for cause. In addition,
as in California, if a Delaware corporation has cumulative voting, and if less than the entire
board is to be removed, a director may not be removed without cause by the shareholders if the
votes cast against such removal would be sufficient to elect the director under cumulative voting
rules. The DGCL also permits a Delaware corporation to include in its certificate of incorporation
a supermajority voting requirement in connection with the removal of directors.
Shareholder Power to Call Special Shareholders Meeting.
Under the CGCL, a special meeting of
shareholders may be called by the board of directors, the Chairman of the board, the President, the
holders of shares entitled to cast not less than 10% of the votes at such meeting and such persons
as are authorized by the articles of incorporation or bylaws. Under the DGCL, a special meeting of
shareholders may be called by the board of directors or by any other person authorized to do so in
the certificate of incorporation or the bylaws. Similar to the California Bylaws, the Delaware
Bylaws provide that a special meeting may be called by the Chairman of the board, the Chief
Executive Officer or holders of at least 10% of all the votes entitled to be cast on any issue
proposed to be considered at the meeting. Unlike the California Bylaws, the Delaware Bylaws do not
set forth a specific timeframe for notice of the meeting to be provided upon demand by the
shareholders.
Limitation of Liability and Indemnification.
California and Delaware have similar laws respecting
the liability of directors of a corporation and the indemnification by the corporation of its
officers, directors, employees and other agents for damages they incur. The laws of both states
also permit corporations to adopt a provision in their charters eliminating the liability of a
director to the corporation or its shareholders for monetary damages for breach of the directors
fiduciary duty of care. Nonetheless, as discussed below, there are certain differences between the
laws of the two states respecting indemnification and limitation of liability. In general, the DGCL
is somewhat broader in allowing corporations to indemnify and limit the liability of corporate
agents, which the board believes, among other things, helps Delaware corporations in attracting and
retaining outside directors.
Elimination of Director Personal Liability for Monetary Damages.
One provision of the DGCL permits
a corporation to include a provision in its certificate of incorporation which limits or eliminates
the personal liability of a director for monetary damages arising from breaches of his or her
fiduciary duties to the corporation or its shareholders, subject to certain exceptions. Such a
provision may not, however, eliminate or limit director monetary liability for:
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breaches of the directors duty of loyalty to the corporation or its shareholders;
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acts or omissions not in good faith or involving intentional misconduct or knowing
violations of law;
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the payment of unlawful dividends or unlawful stock repurchases or redemptions; or
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transactions in which the director derived an improper personal benefit.
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Such a limitation of liability provision also may not limit a directors liability for violation
of, or otherwise relieve a corporation or its directors from the necessity of complying with,
federal or state securities laws, or affect the availability of non-monetary remedies such as
injunctive relief or rescission.
The CGCL contains similar authorization for a corporation to eliminate the personal liability of
directors for monetary damages, except where such liability is based on:
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intentional misconduct or knowing and culpable violation of law;
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acts or omissions that a director believes to be contrary to the best interests of the
corporation or its shareholders or that involve the absence of good faith on the part of
the director;
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25
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receipt of an improper personal benefit;
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acts or omissions that show reckless disregard for the directors duty to the
corporation or its shareholders, where the director in the ordinary course of performing a
directors duties should be aware of a risk of serious injury to the corporation or its
shareholders;
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acts or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the directors duty to the corporation and its shareholders;
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transactions between the corporation and a director who has a material financial
interest in such transaction; and
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liability for improper distributions, loans or guarantees.
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The California Articles eliminate the liability of directors to the Company for monetary damages to
the fullest extent permissible under the CGCL. The Delaware Certificate similarly eliminates the
liability of directors for monetary damages to the extent permissible under Delaware law. As a
result, following the Reincorporation, directors of Bell Delaware cannot not be held liable for
monetary damages even for gross negligence or lack of due care in carrying out their fiduciary
duties as directors, so long as that gross negligence or lack of due care does not involve bad
faith or a breach of their duty of loyalty to the Company.
Indemnification.
The CGCL requires indemnification when the individual has defended the action
successfully on the merits. The DGCL requires indemnification of expenses when the individual being
indemnified has successfully defended any action, claim, issue or matter therein, on the merits or
otherwise. The DGCL generally permits indemnification of expenses, including attorneys fees,
actually and reasonably incurred in the defense or settlement of a derivative or third-party
action, provided there is a determination by a majority vote of a disinterested quorum of the
directors, by independent legal counsel or by the shareholders that the person seeking
indemnification acted in good faith and in a manner reasonably believed to be in best interests of
the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to
believe his action was unlawful. Without court approval, however, no indemnification may be made in
respect of any derivative action in which such person is adjudged liable for negligence or
misconduct in the performance of his or her duty to the corporation. Expenses incurred by an
officer or director in defending an action may be paid in advance under the DGCL or the CGCL, if
the director or officer undertakes to repay such amounts if it is ultimately determined that he or
she is not entitled to indemnification. In addition, the laws of both states authorize a
corporation to purchase indemnity insurance for the benefit of its officers, directors, employees
and agents whether or not the corporation would have the power to indemnify against the liability
covered by the policy.
The CGCL permits a California corporation to provide rights to indemnification beyond those
provided therein to the extent such additional indemnification is authorized in the corporations
articles of incorporation. Thus, if so authorized, rights to indemnification may be provided
pursuant to agreements or bylaw provisions which make mandatory the permissive indemnification
provided by the CGCL. The California Articles authorize indemnification to the fullest extent
permissible under California law. The DGCL also permits a Delaware corporation to provide
indemnification in excess of that provided by statute. The DGCL does not require authorizing
provisions in the certificate of incorporation.
Inspection of Shareholder Lists and Books and Records.
Both the CGCL and the DGCL allow any
shareholder to inspect a corporations shareholder list for a purpose reasonably related to the
persons interest as a shareholder. The CGCL provides, in addition, for an absolute right to
inspect and copy the corporations shareholder list by persons holding an aggregate of 5% or more
of the corporations voting shares, or shareholders holding an aggregate of 1% or more of such
shares who have contested the election of directors. The DGCL also allows the shareholders to
inspect the list of shareholders entitled to vote at a meeting within a ten-day period preceding a
shareholders
meeting for any purpose germane to the meeting. The DGCL, however, contains no provisions
comparable to the absolute right of inspection provided by the CGCL to certain shareholders.
26
Under the CGCL any shareholder may examine the accounting books and records and the minutes of the
shareholders and the board and its committees, provided that the inspection is for a purpose
reasonably related to the shareholders interests as a shareholder. The DGCL may be slightly more
favorable to shareholders in this respect, in that a shareholder with a proper purpose is not
limited to inspecting accounting books and records and minutes, and may examine other records as
well. In addition, the CGCL limits the right of inspection of shareholder lists to record
shareholders, whereas Delaware has extended that right to beneficial owners of shares.
Appraisal Rights.
Under both the CGCL and the DGCL, a shareholder of a corporation participating
in certain major corporate transactions may, under varying circumstances, be entitled to appraisal
rights, by which the shareholder may demand to receive cash in the amount of the fair market value
of his or her shares in lieu of the consideration he or she would otherwise receive in the
transaction.
Under the DGCL, fair market value is determined without reference to any element of value arising
from the accomplishment or expectation of the merger or consolidation, and appraisal rights are
generally not available to:
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shareholders with respect to a merger or consolidation by a corporation the shares of
which are either listed on a national securities exchange or are held of record by more
than 2,000 holders if such shareholders receive only shares of the surviving corporation or
shares of any other corporation that are either listed on a national securities exchange or
held of record by more than 2,000 holders;
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shareholders of a corporation surviving a merger if no vote of the shareholders of the
surviving corporation is required to approve the merger under the DGCL.
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The limitations on the availability of appraisal rights under the CGCL are different from those
under the DGCL. Shareholders of a California corporation whose shares are listed on a national
securities exchange generally do not have such appraisal rights unless the holders of at least 5%
of the class of outstanding shares claim the right or the corporation or any law restricts the
transfer of the shares to be received. Subject to certain exceptions, appraisal rights are also not
available if the shareholders of a corporation or the corporation itself, or both, immediately
prior to the reorganization will own immediately after the reorganization equity securities
representing more than 5/6
th
of the voting power of the surviving or acquiring
corporation or its parent entity. Appraisal rights are not available to our shareholders under the
CGCL with respect to the Reincorporation.
Dissolution.
Under the CGCL, the holders of 50% or more of a corporations total voting power may
authorize the corporations dissolution, with or without the approval of the corporations board of
directors, and this right may not be modified by the articles of incorporation. Under the DGCL,
unless the board of directors approves the proposal to dissolve, the dissolution must be
unanimously approved by all the shareholders entitled to vote on the matter. Only if the
dissolution is initially approved by the board of directors may the dissolution be approved by a
simple majority of the outstanding shares entitled to vote. In addition, the DGCL allows a Delaware
corporation to include in its certificate of incorporation a supermajority voting requirement in
connection with such a board-initiated dissolution. In the present case, however, the Delaware
Certificate contains no such supermajority voting requirement.
Interested Director Transactions.
Under both the CGCL and the DGCL, certain contracts or
transactions in which one or more of a corporations directors has an interest are not void or
voidable simply because of such interest, provided that certain conditions, such as obtaining
required disinterested approval and fulfilling the requirements of good faith and full disclosure,
are met. With certain minor exceptions, the conditions are similar under the CGCL and the DGCL.
Shareholder Derivative Suits.
The CGCL provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the transaction in
question, if certain tests are met under certain circumstances. Under the DGCL, a shareholder may
bring a derivative action on behalf of the corporation only if the shareholder was a shareholder of
the corporation at the time of the transaction in question or if his or her stock thereafter came
to be owned by him or her by operation of law.
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The CGCL also provides that the corporation or the defendant in a derivative suit may make a motion
to the court for an order requiring the plaintiff shareholder to furnish a security bond. Delaware
does not have a similar bonding requirement.
Dividends and Repurchases of Shares.
The DGCL is more flexible than the CGCL with respect to
payment of dividends and implementing share repurchase programs. The DGCL generally provides that a
corporation may redeem or repurchase its shares out of its surplus. In addition, the DGCL generally
provides that a corporation may declare and pay dividends out of surplus or, if there is no
surplus, out of net profits for the fiscal year in which the dividend is declared and/or for the
preceding fiscal year. Surplus is defined as the excess of a corporations net assets (i.e., its
total assets minus its total liabilities) over the capital associated with issuances of its common
stock. Moreover, the DGCL permits a board of directors to reduce its capital and transfer such
amount to its surplus.
Under the CGCL, a corporation may not make any distribution to its shareholders unless either:
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the corporations retained earnings immediately prior to the proposed distribution
equal or exceed the amount of the proposed distribution; or
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immediately after giving effect to the distribution, the corporations assets
(exclusive of goodwill, capitalized research and development expenses and deferred charges)
would be at least equal to one and one fourth (1
1
/
4
) times its liabilities (not including
deferred taxes, deferred income and other deferred credits), and the corporations current
assets would be at least equal to its current liabilities (or one and one fourth (1
1
/
4
) times
its current liabilities if the average pre-tax and pre-interest expense earnings for the
preceding two fiscal years were less than the average interest expense for such years).
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Even if these tests are met, a corporation may not make any distribution to its shareholders if the
corporation making the distribution is, or as a result thereof would be, likely to be unable to
meet its liabilities (except those whose payment is otherwise adequately provided for) as they
mature.
Application of the CGCL to Delaware Corporations
. With certain exceptions, Section 2115 of the
CGCL purports to apply certain substantive provisions of the CGCL to foreign corporations (i.e.,
corporations not organized under California law) having characteristics of ownership and operations
that indicate significant contacts with California, to the exclusion of the laws of the
corporations jurisdiction of incorporation. However, Bell Delaware does not plan to maintain
significant contacts with California that would make it subject to such section.
Interests of Our Directors and Executive Officers in the Reincorporation
In considering the recommendations of the board, our shareholders should be aware that certain of
our directors and executive officers have interests in the Reincorporation that are different from,
or in addition to, the interests of our shareholders generally. For instance, the Reincorporation
in Delaware may be of benefit to our directors and officers by reducing the potential personal
liability and increasing the scope of permitted indemnification of each director and officer, by
strengthening the directors ability to resist a takeover bid, and in other respects. The board was
aware of these interests and considered them, among other matters, in reaching its decision to
approve the Reincorporation and to recommend that our shareholders vote in favor of the
Reincorporation.
Certain Material U.S. Federal Income Tax Considerations of the Reincorporation
The following discussion addresses certain U.S. federal income tax considerations that are
generally applicable to U.S. holders (as defined below) of our common stock who receive common
stock of Bell Delaware in exchange for their shares of our common stock in the Reincorporation.
This discussion addresses only those shareholders who hold their common stock as a capital asset
within the meaning of Section 1221 of the Code and does not address all the U.S. federal income tax
consequences that may be relevant to particular shareholders in light of their individual
circumstances or to shareholders that are subject to special rules, including, without limitation:
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persons who are subject to special tax rules such as dealers in securities, mutual
funds, regulated investment companies, real estate investment trusts, insurance companies,
banks or other financial institutions;
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partnerships or other pass-through entities or investors in such entities;
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tax-exempt organizations;
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persons who hold their shares as a hedge or as part of a hedging, straddle or other
risk reduction strategy;
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persons who are not U.S. holders;
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persons who have a functional currency other than the U.S. dollar;
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persons who acquired their shares of common stock through the exercise of an employee
stock option;
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persons whose common stock is qualified small business stock for purposes of
Section 1202 of the Code; and
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persons who are subject to the alternative minimum tax.
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For purposes of this discussion, the term U.S. holder means a beneficial owner of our common
stock that is:
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an individual who is a citizen or resident of the United States;
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a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created or organized under the laws of the U.S. or any subdivision thereof;
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a trust (other than a grantor trust) if (i) a court within the United States is able to
exercise primary supervision over the administration of the trust and one or more U.S.
persons have the authority to control all substantial decisions of the trust or (ii) it has
a valid election in place to be treated as a U.S. person; or
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an estate the income of which is includible in gross income for U.S. federal income tax
purposes regardless of its source.
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The following discussion does not address the tax consequences of the Reincorporation under state,
local and foreign tax laws. Furthermore, the following discussion does not address the tax
consequences to holders of options to acquire our common stock or the tax consequences of
transactions effected prior to or after the Reincorporation (whether or not such transactions are
in connection with the Reincorporation).
This summary is based upon current provisions of the Code, existing Treasury Regulations under the
Code and current administrative rulings and court decisions, all of which are subject to change or
different interpretation. Any change, which may or may not be retroactive, could alter the tax
consequences to the Company or our shareholders as described in this summary. No ruling from the
Internal Revenue Service (the IRS) has been or will be requested in connection with the
Reincorporation. In addition, our shareholders should be aware that the IRS could adopt a contrary
position and a contrary position could be sustained by a court.
EACH SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE REINCORPORATION, INCLUDING TAX RETURN REPORTING
REQUIREMENTS AND THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
APPLICABLE TAX LAWS.
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We intend that the Reincorporation will be treated as a reorganization pursuant to Section 368(a)
of the Code. Subject to the limitations, qualifications and exceptions described herein, and
assuming the Reincorporation qualifies as a reorganization within the meaning of Section 368(a) of
the Code, the U.S. federal income tax consequences of the Reincorporation will be as follows:
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No gain or loss will be recognized by holders of our common stock upon receipt of
common stock of Bell Delaware pursuant to the Reincorporation;
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The aggregate tax basis of the common stock of Bell Delaware received by each of our
shareholders in the Reincorporation will be equal to the aggregate tax basis of our common
stock surrendered in exchange therefor;
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The holding period of the common stock of Bell Delaware received by each of our
shareholders will include the period for which such shareholder held our common stock
surrendered in exchange therefor, provided that such shares of our common stock were held
by such shareholder as a capital asset at the time of the Reincorporation; and
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No gain or loss will be recognized by the Company or Bell Delaware as a result of the
Reincorporation.
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A U.S. holder of our shares may be required to attach a statement to its tax returns for the year
of the Reincorporation that contains the information listed in Treasury Regulation Section
1.368-3(b) and may be required to maintain a permanent record of facts relating to the
Reincorporation. Such information includes, among other things, the shareholders tax basis in the
shareholders shares of our common stock and the fair market value of the shareholders shares of
our common stock immediately prior to the Reincorporation.
THE PRECEDING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF CERTAIN U.S. FEDERAL INCOME TAX
CONSEQUENCES OF THE REINCORPORATION AND IS NOT AN EXHAUSTIVE ANALYSIS OR DISCUSSION OF ALL
POSSIBLE U.S. FEDERAL INCOME TAX CONSIDERATIONS RELATING TO THE REINCORPORATION.
Intent to Vote
As of the record date, our directors and executive officers currently own [___] shares
of our common stock, which is [___]% of the outstanding shares. We expect that our directors
and executive officers will vote all their shares in favor of the Reincorporation. We also
understand that Newcastle intends to vote its 120,524 shares of common stock in favor of the
Reincorporation.
Accounting Consequences
We believe that there will be no material accounting consequences for us resulting from the
Reincorporation.
Recommendation of the Board
For the reasons described in this proxy statement, our board of directors unanimously recommends
that you vote FOR approval of the Reincorporation. Proxies received will be so voted unless
shareholders vote otherwise via the Internet or by telephone or specify otherwise in their
completed and returned proxy cards.
PROPOSAL NO. 5 AMENDMENT TO CERTIFICATE OF INCORPORATION TO EFFECT 1-FOR-20 REVERSE SPLIT
Questions and Answers Concerning the Reverse Split
The following questions and answers are intended to briefly address potential questions regarding
the reverse split. These questions and answers may not address all questions that may be important
to you as a shareholder. Please
refer to the more detailed information following these questions and answers, the appendices to
this proxy statement, and any information and documents referred to or incorporated by reference in
this proxy statement.
What will happen if the reverse split is approved by our shareholders but the Reincorporation is
not?
If the Reincorporation is not approved by our shareholders, the reverse split will not be effected
by the Company, even if it is approved by our shareholders.
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What will happen if the Reincorporation and the reverse split are both approved by our
shareholders?
If the Reincorporation and the reverse split are both approved by our shareholders, immediately
following the Annual Meeting, the Company and Bell Delaware will submit certificates of merger to
the offices of the Secretary of State of the States of Delaware and California. As soon as
practicable following shareholder approval and the effective time of the merger, we intend to file
a certificate of amendment to the Delaware Certificate with the Secretary of State of the State of
Delaware to effect the change of Bell Delawares name from Delaware Bell Industries, Inc. to
Bell Industries, Inc. and to effect the reverse split.
If you hold your stock in your brokerage account, how will your shares be treated in the reverse
split?
If the Reincorporation and reverse split are both approved by our shareholders, then if you hold
our common stock in a brokerage account or otherwise in a nominee account, the number of shares
that you will receive and the cash in lieu of fractional shares will be based on the number of
share in your account, as reported to us by your broker. If you advised your broker that the
broker is not authorized to provide us with your name, then your broker will not provide us with
your name, but will provide us with the number of shares held in each of your accounts. The
shares, if any, and cash in lieu of fractional shares, will be determined separately for each
account you hold in street name. The shares and cash in lieu of fractional shares will be
separately determined for each brokerage firm who holds our common stock either on its own behalf
or on behalf of its customers. Each account in each brokerage firm will be treated as a separate
account for determining how many shares and how much cash in lieu of fractional shares will be
paid.
How will your stock be treated if you hold your common stock in more than one account?
If the Reincorporation and reverse split are both approved by our shareholders, then if you hold
our common stock in more than one account or more than one name and you do not consolidate your
accounts, each account will be treated separately. For example, if shares are held in the names of
Jon Doe, Jonathan Doe and Jon P. Doe, each account will be treated separately. If you have less
than 20 shares in each of these accounts, you will receive cash in lieu of fractional shares for
all of your accounts and you will cease to be a shareholder at the effective time of the reverse
split. Similarly, if you have accounts at different brokerage firms, each account will be treated
separately.
Can you combine your accounts so that all of your shares are in one account?
If the Reincorporation and reverse split are both approved by our shareholders, then you can
combine your accounts either by yourself or through your brokerage firm.
If you hold shares in brokerage accounts, you should discuss with your broker the method of
combining your accounts. If you hold shares in your own name, you should contact our transfer
agent to obtain information as to combining your accounts.
Can you divide your accounts so that you will receive cash in respect of all of your shares?
If the Reincorporation and reverse split are both approved by our shareholders, then we will pay
cash in lieu of fractional shares to our shareholders of record and shareholders who hold shares in
a brokerage or nominee account on the effective date of the reverse split. Whether you divide or
combine your accounts, each account which is treated as a separate account on the effective date of
the reverse split will be treated separately in determining what shares or cash in lieu of
fractional shares are due to you.
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Should I send in my share certificates now?
No. Written instructions for exchanging your share certificates will be sent to you in a letter of
transmittal following the effectiveness of the reverse split. For additional information regarding
delivery of share certificates and cash payments in lieu of fractional shares, see Amendment to
Certificate of Incorporation to Effect Reverse SplitExchange of Certificates and Elimination of
Fractional Share Interests.
Who is our transfer agent?
Our transfer agent is Securities Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, TX
75034, telephone number 469-633-0101.
Why did the board of directors choose to adopt a reverse split?
Our board of directors approved the reverse split in order to enable us to reduce the number of our
shareholders and reduce our operating expenses by terminating the registration of our common stock
under the Exchange Act. We have a large number of shareholders who own very small quantities of
our common stock.
If the Reincorporation and reverse split are both approved by our shareholders, then as a result of
the reverse split, we expect to have fewer than 300 shareholders of record, and, in such event, we
would be able to terminate the registration of our common stock under the Exchange Act. Upon
filing a certification and notice of termination of registration under the Exchange Act, we will no
longer be required, and we do not intend, to file the annual, quarterly and current reports which
we are presently required to file and we will not be subject to provisions of the Sarbanes-Oxley
Act of 2002 (Sarbanes-Oxley).
How did we determine the amount that we will pay for fractional shares?
If the Reincorporation and reverse split are both approved by our shareholders, then the amount
that we will pay for fractional shares will be based on the average of the closing prices of a
share of our common stock during the 120 days prior to the date of this proxy statement, which will
be $[___] per share on a pre-reverse split basis, or $[___] per share on a post-reverse split
basis. See Market and Market Price of Our Common Stock. Given the thin trading market of our
common stock, the board believed that taking the average of the closing prices of a share of our
common stock over a longer period of time was more reflective of the fair value of our common
stock.
How did the board of directors determine the ratio for the reverse split?
The 1-for-20 ratio for the reverse split was based on our analysis of our outstanding stock and was
intended to result in our common stock being owned by less than 300 shareholders so we can
terminate our registration under the Exchange Act.
We did not receive any report, opinion or appraisal from an outside party related to the reverse
split.
Why does the board of directors want to terminate the registration of our common stock?
The decision by our board of directors to approve the reverse split was made after carefully
considering our operating environment, the performance and liquidity of our stock and our evolving
corporate structure. We believe that continued reporting pursuant to the Exchange Act imposes
significant costs of compliance on us, while not providing a material benefit to us or our
shareholders. Such costs are disproportionate relative to the total public float of our common
stock ($[___] in market capitalization as of [___], 2010). We estimate that
we will realize significant cost savings, approximately $500,000 annually, resulting from the
elimination of our Exchange Act reporting obligations. For additional factors considered by the
board with respect to terminating the registration of our common stock, see also Special Factors
of the Reverse SplitReasons for the Reverse Split.
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Did the board of directors appoint any representative to act on behalf of shareholders who are not
our affiliates?
The action to be considered at the Annual Meeting was unanimously approved by the board of
directors and will require the approval of the holders of a majority of the outstanding shares of
our common stock. The board did not appoint any person to act as representative for unaffiliated
shareholders.
Did the board of directors consider other alternatives to the reverse split?
The board considered maintaining the status quo. However, due to the significant costs of being a
public reporting company, and other considerations described herein, our board believed that
maintaining the status quo would be detrimental to all shareholders. We would continue to incur the
expenses of being a public company without realizing the full benefits of public company status.
If the Reincorporation and reverse split are both approved by our shareholders, when will the
reverse split become effective?
The reverse split will become effective upon the filing of a certificate of amendment to the
Delaware Certificate with the Secretary of State of the State of Delaware, which we intend to file
as soon as practicable following shareholder approval and the effective time of the merger.
If the reverse split is completed and I am still a shareholder, will I be able to buy or sell
shares in a public market?
After completing the reverse split, the liquidity of the shares in public markets will be reduced.
It is the intention of our board of directors that our common stock will continue to be quoted in
the Pink Sheets. However, if a qualified broker-dealer is not willing to quote our shares,
shareholders may be unable to use the Pink Sheets to trade shares.
What happens if I buy shares after [___], 2010?
Shares bought after [___], 2010 (the record date) will be subject to the reverse
split on its effective date.
Where can you get copies of this proxy statement and any other material that we have filed with the
SEC in connection with the reverse split?
We make all of our filings with the SEC, including this proxy statement and the Schedule 13E-3
relating to the reverse split, on the SECs EDGAR system. This information is available through the
SECs website at
www.sec.gov
. We also maintain copies of our filings with the SEC on our
corporate website. You can obtain access to these filings at
www.bellind.com
.
Shareholders of record and street name holders will have the ability to access all of our proxy
materials, including this proxy statement, at
www.proxyvote.com
.
Special Factors of the Reverse Split
Background
In October of 2008, in connection with preparing for our 2008 Annual Meeting of Shareholders, our
board of directors first discussed the significant financial benefits to the Company of terminating
our registration under the Exchange Act. We were then preparing to propose that our shareholders
approve a reverse split of our shares, given the stocks low nominal stock price at the time (less
than $0.10 as of October 2008). We had voluntarily delisted our common stock from the AMEX as of
April 2008, which resulted in reduced liquidity for our common stock. We investigated terminating
our registration under the Exchange Act at the time and concluded that a reverse split to reduce
the number of registered holders to below 300 (the requirement to terminate SEC registration) was
not practical at the time due to limitations under the CGCL. As a result, we decided to evaluate a
potential termination of registration at a later date.
In December 2008, we effected a 1-for-20 reverse split of our common stock.
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On December 30, 2009 and March 26, 2010, our board of directors again discussed the significant
benefits to the Company of terminating our registration under the Exchange Act, as well as the
increasingly limited benefits of remaining a public SEC reporting company.
Between March and August 2010, our management undertook a closer study of the process of
terminating our registration under the Exchange Act, including the possibility of reincorporating
in Delaware in connection with a reverse split followed by terminating our registration and/or
effecting a reverse split under the CGCL. It was concluded that, given the provisions restricting
our ability to effect a reverse split under the CGCL and the other benefits to reincorporating in
Delaware, it was in the best interests of the Company and our shareholders to reincorporate in
Delaware and then effect the reverse split and termination of registration under the Exchange Act.
On September 9, 2010, our board of directors approved a 1-for-20 reverse split in order to reduce
the number of shareholders of record of our common stock with an expectation that we will have
fewer than 300 shareholders of record and could proceed to terminate our registration under the
Exchange Act.
Purposes and Alternatives of the Reverse Split
The purpose of the reverse split is to reduce the number of shareholders of record of our common
stock so that we have fewer than 300 shareholders of record. If the reverse split is approved by
our shareholders, following the reverse split, we expect to have fewer than 300 shareholders of
record, and, in such event, we would be able to terminate our registration under the Exchange Act.
As a result of the termination of our registration under the Exchange Act:
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We will not be required, and we do not intend, to file annual, quarterly and current
reports which are due after we file the notice of termination of registration. We
currently file annual reports on Form 10-K, which include our audited year-end financial
statements, quarterly reports on Form 10-Q, which include unaudited quarterly and
year-to-date financial statements, and current reports on Form 8-K, which report
significant events.
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We will not be required to provide you with a proxy or information statement in
connection with a meeting of shareholders or with an information statement in connection
with action taken without a meeting. We would be required to give you notice of the
meeting or notice of action taken without a meeting under the DGCL, but we would not be
required to provide you with the information that is required to be included in a proxy or
information statement under the SECs rules and regulations.
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We would not be subject to provisions of Sarbanes-Oxley.
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Our officers, directors and 10% shareholders would not be required to file beneficial
ownership reports on Forms 3, 4 and 5.
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Holders who beneficially own 5% or more of our common stock would not be required to
file statements of beneficial ownership on Schedule 13D or 13G.
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In addition, many brokerage firms may have policies which discourage purchases and sales of stock
of companies that are not reporting companies; however, our common stock is already affected by
policies at many brokerage firms that discourage transactions in low price stocks.
As an alternative to the reverse split, the board considered maintaining the status quo. However,
due to the significant costs of remaining a public reporting company, and other considerations
described herein, our board believed that maintaining the status quo would be detrimental to all
shareholders. We would continue to incur the expenses of being a public company without realizing
the full benefits of public company status.
The ratio of 1-for-20 was intended to enable us to be satisfied that, following the reverse split,
we would have less than 300 shareholders of record, even if shareholders who hold shares in street
name elected to hold their shares in their own names.
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Reasons for the Reverse Split
Our board of directors considered many factors in unanimously approving the reverse split at this
time, including the following:
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The direct and indirect costs associated with the preparation and filing of our
periodic reports with the SEC, which we estimate at approximately $500,000 annually,
consisting of the following:
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Outside audit and Sarbanes-Oxley documentation costs
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$
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200,000
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Additional accounting and other personnel expenses relating
to maintenance of public company status
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$
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175,000
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Legal fees related to public filings
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$
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75,000
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EDGAR filing fees, director and officer insurance, and other costs
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$
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50,000
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We do expect to incur annual audit fees as a private company, and although the costs of such
services have yet to be determined, we anticipate that such fees will be less than those
incurred as a public company.
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The nature and limited extent of the trading in our common stock as well as the market
value that the public markets are currently applying to us.
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The lack of analyst coverage of, and institutional interest in, our common stock under
current and reasonably foreseeable market conditions.
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The fact that many other typical advantages of being a public company, including
enhanced access to capital and the ability to use equity securities to acquire other
businesses or to incentive employees, are not currently sufficiently available to us to
justify such costs because of our price, market capitalization and limited trading volume.
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The independence and self-sufficiency of our operating subsidiaries, which do not rely
in any material way on our corporate level holding company.
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The fact that our ownership is highly concentrated on a fully diluted basis (i.e.,
assuming conversion of the Amended Convertible Note held by BI Holdings, L.P.), and many of
our remaining unaffiliated shareholders hold extremely small, illiquid positions in the
Company, which are difficult to sell (with or without incurring meaningful brokerage
costs).
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We believe that continued reporting pursuant to the Exchange Act imposes significant compliance
costs on us without providing consummate benefits to our shareholders. As a result, we believe
that the Company and our shareholders, including our unaffiliated shareholders, would be better
served by applying our financial and management resources to our operations. For example,
following termination of the registration of our common stock under the Exchange Act, we will no
longer incur external auditor fees, consulting and legal fees related to being a public company,
including expenses related to compliance, planning, documentation and testing, in connection with
the internal control provisions of Section 404 of Sarbanes-Oxley. In addition, we will also no
longer be subject to the liability provisions of the Exchange Act that apply to public companies or
the provisions of Sarbanes-Oxley, including the requirement that our principal executive officer
and principal financial officer certify our compliance with certain sections of Sarbanes-Oxley.
Our director and officers insurance premiums are expected to be reduced.
In addition to the related direct financial burden from being a public company, the performance of
our stock price over the last several years and the thin trading market in our common stock have
not provided favorable returns or levels of liquidity to our shareholders, nor provided a
meaningful incentive for our key employees. The liquidity and performance of our stock have also
prevented us from using it as a currency for strategic transactions.
35
Also, our corporate structure has evolved to the point where our operating subsidiaries are largely
self-sufficient and do not derive material benefits on a regular basis from our corporate level
holding company. As a result, our holding company is principally in place to handle a public
company reporting function, which requires greater operating scale than we possess to employ
cost-effectively. Our board believes that the staffing, time and financial resources devoted to
such function are better used to build longer-term enterprise value through our operating
subsidiaries.
Finally, on a fully diluted basis, our equity ownership is highly concentrated, with BI Holdings,
L.P. (the holder of our Amended Convertible Note) and its affiliate Newcastle owning over 90% of
our common stock (assuming conversion of the Amended Convertible Note). Representatives of
Newcastle also have seats on our board under a contractual arrangement with us, and an employee of
NCM (the general partner of Newcastle) serves as our Chief Executive Officer. This ownership and
management structure in a public reporting company such as ours exacerbates our compliance
costsit results in the Company incurring significant, fixed public company costs for the
ostensible benefit of a disproportionately small group of unaffiliated shareholders (in terms of
ownership percentage on a fully diluted basis). In addition, as a result of our concentrated
ownership, a number of our remaining unaffiliated shareholders hold extremely small illiquid
positions in the Company, which are difficult to sell (with or without incurring meaningful
brokerage costs).
The detriments of the reverse split for us and our shareholders, including our unaffiliated
shareholders, are that our common stock will continue to trade, if at all, on the Pink Sheets. In
addition, shareholders who are cashed out will cease to have any direct or indirect ownership
interest in the Company and will not be able to participate in any of our future earnings or
growth. Companies that do not file annual, quarterly and current reports under the Exchange Act
are not eligible for listing on a national securities exchange or quotation on the Over-the-Counter
Bulletin Board. This is likely to have a negative effect on the trading and market for our common
stock, and could make it more difficult for us to obtain external financing. In addition, because
we will no longer file annual, quarterly and current reports under the Exchange Act, there will be
little public information available about us, which is also likely to have a negative effective
effect on the trading and market for our common stock, and may also make it more difficult for us
to obtain third party financing.
Notwithstanding the detriments described above, we believe that, based on our current public float,
we are unlikely to qualify for listing on any national securities exchange, notwithstanding being a
public reporting company. Further, our stock is already illiquid, making external equity financing
unrealistic. In addition, with respect to shareholders who are cashed out and thus unable to
participate in any of our future earnings or growth, we believe that any detriment as a result of
being cashed out is likely to be minor due to such shareholders de minimis interest in the Company
(currently valued at a market price of no more than $[___], based on the closing price of our
common stock as of [___], 2010). As a result, we believe that any detriment due to
terminating our registration under the Exchange Act will be minor and is outweighed by the benefits
set forth above.
We have in the past considered, are currently considering, and may in the future consider,
strategic transactions with respect to all or a material portion of our business. However, past
discussions with respect to any such transaction have not lead to a definitive agreement and we
cannot give any assurance that we would be able to sell or combine all or any part of our business.
The reasons for the structure of the reverse split are as follows:
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The 1-for-20 ratio for the reverse split was based on an analysis of our outstanding
stock and was intended to result in our common stock being owned by less than 300
shareholders.
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In such event, we would be able to terminate the registration of our common stock
under the Exchange Act.
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The price to be paid for fractional shares will be based on the average of the
closing prices of a share of our common stock during the 120 days prior to the date of
this proxy statement, which will be $[___] per share on a pre-reverse split basis, or
$[___] per share on a post-reverse split basis. Our board believes this is a
readily determinable and fair price andsince it is based on our market price for a
substantial trading periodis indicative of the value of the Company on a going concern
basis.
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Effects of the Reverse Split on our Affiliates
Mark E. Schwarz, a director of the Company, is the Managing Member of NCG, which is the general
partner of NCM. NCM is the general partner of Newcastle, which owns 120,524 shares of our common
stock for which Mr. Schwarz disclaims beneficial ownership. In addition, NCM is the general partner
of BI Holdings, L.P. which holds the Amended Convertible Note issued by us which is currently
convertible into 3,021,446 shares of our common stock (or approximately 87.5% of our
outstanding common stock assuming conversion of the Amended Convertible Note) for which Mr. Schwarz
disclaims beneficial ownership. Following the reverse split, Newcastle will own 6,026 shares of
our common stock, and due to adjustment provisions of the Amended Convertible Note, the note will
be convertible into 151,072 shares of our common stock.
No other officer or director owns any significant number of shares of our common stock.
In addition to the shares owned by officers and directors, two of our directors hold options to
purchase a total of 1,000 shares of our common stock at an exercise price of $51.60 per share. As
a result of the reverse split, these options will entitle the holders to purchase approximately
50 shares of our common stock at an exercise price of $1,032.00 per share.
Under the Code, our affiliates would recognize capital gain or loss on the cash issued in lieu of
fractional shares, based upon the difference between the proceeds received over the basis of the
shares. Since we expect to pay our shareholders no more than approximately $50,000 for their
fractional shares in the aggregate, the tax consequences to our affiliates will not be material.
Effects of the Reverse Split on our Other Shareholders
Each shareholder who owns 20 shares or an integral of 20 shares will receive one share for each 20
shares owned by the shareholder and no cash in lieu of fractional shares. Each shareholder who
owns less than 20 shares or who owns more than 20 shares in different accounts, with each account
holding less than 20 shares at the effective date of the reverse split will cease to be a
shareholder and will receive cash in lieu of fractional shares. The shareholder will receive a
payment of less than $[___] (which was the average of the closing prices of a share of our
common stock during the 120 days prior to the date of this proxy statement, as adjusted for the
reverse split) for each account, depending on the number of shares of common stock held in the
account. If you receive cash in lieu of all of your shares, you will not have the opportunity to
participate in and potentially benefit from any future earnings or growth or any business
combination.
Each shareholder who owns 20 or more shares will continue to be a shareholder and will receive both
stock and cash in lieu of fractional shares, if any. The shareholder will receive the whole number
of shares issuable as a result of the reverse split and a cash payment of less than $[___]
(which was the average of the closing prices of a share of our common stock during the 120 days
prior to the date of this proxy statement, as adjusted for the reverse split) for each account for
fractional shares.
If you continue to remain a shareholder, you will still retain the rights of a minority shareholder
under the DGCL and the directors will continue to have a fiduciary duty toward you as a
shareholder. However, you would not necessarily receive any financial or other information on us,
except to the limited extend required by the DGCL. We believe that the elimination of the expenses
resulting from the reverse split and the consequent termination of our registration under the
Exchange Act will improve our financial condition and results of operations.
Fairness of the Reverse Split to Unaffiliated Shareholders
Our board believes that the reverse split is fair, both substantively and procedurally, to our
unaffiliated shareholders. In determining that the reverse split is fair to the unaffiliated
shareholders, the directors considered the factors described above under Reasons for the Reverse
Split.
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In approving the reverse split, our directors also considered the following other factors in
determining that the reverse split is substantively fair to our unaffiliated shareholders,
including those who will be cashed out and those who will continue to own shares of our common
stock:
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The price paid for fractional shares will be based on the average of the closing prices
of a share of our common stock during the 120 days prior to the date of this proxy
statement. We believe that a price based on the recent market prices of our common stock,
rather than the net book value, is fair to our shareholders, because the market value is
indicative of our current value on a going concern basis, whereas book value is an
accounting concept based on historical cost. Furthermore, our net book value is currently
negative, as indicated by the shareholders deficit of $2,914,000 as of June 30, 2010. We
did not consider, and did not calculate, our liquidation value because we believe that, in
the event of a liquidation, shareholders would receive immaterial or no value for their
shares because, in liquidation, among other things: (1) we would be required to pay off our
creditors in full (including our secured lenders) and reserve for contingent liabilities
and (2) we would be unlikely to receive full value for our assets.
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The reverse split provides shareholders, including unaffiliated shareholders, who own
less than 20 shares with liquidity in a stock which has a limited trading market.
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Shareholders, including unaffiliated shareholders, who hold 20 or more shares retain an
interest in us. If these shareholders, including unaffiliated shareholders, desire to
obtain cash for their shares, they have the ability to divide their shares among different
accounts so that all accounts can be cashed out. Alternatively, if shareholders wish to
remain holders following the reverse split but hold less than 20 shares, such shareholders
can increase their holdings to more than 20 shares.
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In addition, we believe that the elimination of the expenses resulting from the consequent
termination of our registration under the Exchange Act will improve our financial condition and
results of operations and enable us to devote greater resources to building long term value for our
shareholders. As a result, shareholders (including unaffiliated shareholders) who continue to own
shares of our common stock would have the opportunity to participate in any such long term value
enhancement. However, we cannot assure you such value will be achieved.
Neither our board nor our independent directors has retained an unaffiliated representative to act
solely on behalf of unaffiliated security holders for purpose of negotiating the terms of the
reverse split and/or preparing any report concerning fairness. Nor are we seeking the approval of
the transaction by a majority of unaffiliated shareholders. Further, we did not receive any
report, opinion or appraisal from a third party in connection with the reverse split. We believe
that the cost of an unaffiliated representative or advisor to act on behalf of unaffiliated
shareholders, or of any report, opinion or appraisal from a third party in connection with the
reverse split, would significantly diminish the overall value to our shareholders of the reverse
split transaction, which is intended to lower our costs. Any such fees associated with the
foregoing would have been significantly more than the amount than we are proposing to spend (no
more than $50,000) to effect the reverse split.
We believe that the reverse split is nevertheless procedurally fair to all unaffiliated
shareholders, including those who will be cashed out and those who will continue to own shares of
our common stock, because of the following reasons:
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The amendment to the Delaware Certificate which effects the reverse split was
unanimously approved by our directors. Two of our four directors are independent, do not
have a significant equity interest in the Company and will not receive any significant
benefit from the reverse split.
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The reverse split will not affect shareholders differently on the basis of any
affiliate or unaffiliated status. The sole determining factor in whether a shareholder will
continue as a shareholder after the reverse split is the number of shares held by the
shareholder immediately prior to the reverse split.
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Since only an estimated 2% to 4% of the 433,416 issued and outstanding shares will be
eliminated as a result of the reverse split, the percentage ownership of all shareholders,
including affiliated holders such as director Mark Schwarz and Newcastle, will be
approximately the same as it was prior to the reverse split.
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The ownership percentage of each share of common stock held by a shareholder will increase
only nominally as a result of the reverse split.
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The reverse split requires the affirmative vote of the holders of a majority of our
outstanding shares of common stock (not a majority of a quorum). In addition, Newcastle,
which has two representatives on our board and holds approximately [28]% of our outstanding
shares, cannot control the outcome of such vote, requiring significant additional
unaffiliated shareholders to approve the transaction.
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Our directors did not assign particular weights to the factors described above or under Reasons
for the Reverse Split.
During the past two years, we have not received any firm offers relating to a merger or
consolidation of us with or into another company, the sale or other transfer of all or any
substantial part of our assets or a purchase of our securities that would enable the holder to
exercise control of us.
Amendment to Certificate of Incorporation to Effect Reverse Split
The Delaware Certificate presently authorizes the issuance of 10,000,000 shares of common stock and
1,000,000 shares of preferred stock (the preferred stock). As of [___], 2010,
433,416 shares of common stock and no shares of preferred stock were outstanding. In addition,
as of [___], 2010, 3,021,446 shares of common stock were issuable upon the
conversion of the Amended Convertible Note and 15,250 shares underlie outstanding options.
The number of authorized shares of common stock and preferred stock and the par value of our common
stock and preferred stock will not be affected by the amendment to the Delaware Certificate.
Because the number of issued and outstanding shares of common stock will decrease, the number of
shares of common stock remaining available for issuance will increase. Except with respect to the
Amended Convertible Note, we do not currently have any plans, proposals or arrangements to issue
any of our authorized but unissued shares of common stock.
By increasing the number of authorized but unissued shares of common stock, the reverse split
could, under certain circumstances, have an anti-takeover effect, although this is not the intent
of our board of directors. For example, it may be possible for the board of directors to delay or
impede a takeover or transfer of control of the Company by causing such additional authorized but
unissued shares to be issued to holders who might side with the board of directors in opposing a
takeover bid that the board of directors determines is not in the best interests of the Company or
our shareholders. The reverse split therefore may have the effect of discouraging unsolicited
takeover attempts. By potentially discouraging initiation of any such unsolicited takeover
attempts, the reverse split may limit the opportunity for our shareholders to dispose of their
shares at the higher price generally available in takeover attempts or that may be available under
a merger proposal. The reverse split may have the effect of permitting our current management,
including our current board of directors, to retain its position, and place it in a better position
to resist changes that shareholders may wish to make if they are dissatisfied with the conduct of
our business. However, the board of directors is not aware of any unsolicited attempt to take
control of the Company and the board of directors has not approved the reverse split with the
intent that it be utilized as a type of anti-takeover device.
If the reverse split is approved by our shareholders, it will become effective upon the filing of a
certificate of amendment to the Delaware Certificate with the Secretary of State of the State of
Delaware which states that, upon filing, each share of common stock then issued and outstanding
would automatically become and be converted into 1/20
th
of a share of common stock,
which is approximately 21,670 shares. Each option or warrant to purchase one share of common
stock will become an option to purchase 1/20
th
of a share of common stock at an exercise
price equal to 20 times the exercise price in effect immediately prior to the reverse split. The
number of shares of common stock underlying the Amended Convertible Note will decrease by a factor
of 20 and the conversion price of the Amended Convertible Note will increase by a factor by 20. We
intend to file this amendment to the Delaware Certificate, which also includes an amendment to
effect the name change of the successor corporation from Delaware Bell Industries, Inc. to Bell
Industries, Inc., in substantially the form attached hereto as Appendix D, as soon as practicable
following shareholder approval and the effective time of the merger. Our board of directors
may, however, abandon the reverse split at any time prior to filing the amendment to the Delaware
Certificate if the board of directors determines that the reverse split is inadvisable for any
reason.
39
As a result of the reverse split:
|
|
|
After deducting fractional shares that will be cashed out, we will have approximately
21,000 shares of common stock outstanding;
|
|
|
|
Approximately 763 shares of common stock will be issuable upon the exercise of
outstanding options with exercise prices ranging from $1,032.00 to $3,200.00.
|
|
|
|
Approximately 151,072 shares of common stock will be issuable upon conversion of the
Amended Convertible Note at a conversion price of $80.00.
|
The Amended Convertible Note is a pay in kind instrument. As a result, its principal accretes,
and the number of shares into which the note is convertible accordingly increases.
The reverse split will decrease the number of shares of common stock outstanding and presumably
increase the per share market price for our common stock. However, we cannot predict what effect,
if any, the reverse split will have on the market for or the price of our common stock. Because we
will cease to be a public reporting company, brokers may be reluctant to process trades in our
stock. Stocks that are not listed on a stock exchange or market or trade for less than $5.00 may be
subject to restrictions pursuant to the internal rules of many brokerage houses. These
restrictions tend to adversely impact a stocks marketability and, consequently, the stocks price.
Since our stock price is presently below that threshold, it is possible that some of these
restrictions may already affect our stock.
Exchange of Certificates and Elimination of Fractional Share Interests
On the effective date of the reverse split, each Old Share will automatically be combined and
changed into 1/20
th
of a New Share. No additional action on our part or on the part of
any shareholder will be required in order to effect the reverse split. We expect to obtain a new
CUSIP number for the New Shares effective at the time of the reverse split. Shareholders will be
requested to exchange their certificates representing Old Shares held prior to the reverse split
for new certificates representing New Shares issued as a result of the reverse split.
As soon as practicable after filing a certificate of amendment to the Delaware Certificate (which
we intend to file as soon as practicable following shareholder approval and the effective time of
the merger) and the amendment becoming effective, holders will be notified and sent a letter of
transmittal and instructed how to transmit their certificates representing Old Shares to our
transfer agent. Upon proper completion and execution of the letter of transmittal, and the return
of the letter of transmittal to the transfer agent, each shareholder entitled to receive payment
will receive payment from us as outlined in the letter of transmittal. Shareholders should allow
for approximately five business days after mailing for the transfer agent to receive the letter of
transmittal and approximately ten business days following receipt of materials by the transfer
agent for payment to be made. No interest will be made on cash payments from the effective date of
the reverse split and payment date. In the event we are unable to locate a shareholder, or if a
shareholder fails to properly complete, execute and return the letter of transmittal to the
transfer agent, any funds payable to such shareholder pursuant to the reverse split will be
administered in accordance with the relevant state abandoned property laws. Shareholders should
not submit any certificates until requested to do so.
Certificates representing Old Shares presented for transfer to our transfer agent following the
effective date of the reverse split will not be transferred on our books and records, but we will
effect the conversion of the Old Shares into New Shares.
40
As discussed above, no fractional New Shares will be issued to any shareholder. Accordingly, if you
would otherwise be entitled to receive fractional New Shares, you will be paid for your fractional
shares based on the average of the closing prices of a share of our common stock during the 120
days prior to the date of this proxy
statement, which will be $[___] per share on a pre-reverse split basis, or $[___] per share
on a post-reverse split basis. In order to receive such cash to which you may be entitled, you
must present your stock certificate for exchange. If you fail to deliver your stock certificate,
the cash payable in respect of your fractional shares will be held until you deliver your stock
certificate. However, if you have not delivered your stock certificate prior to the date on which
we pay unclaimed cash to a public official pursuant to relevant abandoned property laws, you will
have to comply with the provisions of the abandoned property laws in order to receive your cash.
We will not pay any interest on amounts due in lieu of fractional shares.
In the event any certificate representing Old Shares is not presented for exchange upon our
request, any dividends or other distributions that may be declared after the effective date of the
reverse split with respect to the New Shares represented by such certificate will be withheld by us
until the certificate for the Old Shares has been properly presented for exchange, at which time
all such withheld dividends which have not yet been paid to a public official pursuant to relevant
abandoned property laws will be paid to the holder thereof or his designee, without interest.
Possible Transactions Following Termination of Registration under the Exchange Act
We have in the past considered, are currently considering, and may in the future consider,
strategic transactions with respect to all or a material portion of our business. We will negotiate
in good faith with respect to proposals that the board of directors believes are in our best
interest. However, past discussions with respect to any such transaction have terminated without
any agreement and we cannot give any assurance that we would be able to reach any agreement, or
consummate any transaction, to sell or combine all or any part of our business.
Certain Material U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences of a reverse split.
It addresses only shareholders who hold the Old Shares and New Shares of common stock as capital
assets, as defined in the Code. The following is not an exhaustive analysis or discussion of all
possible U.S. federal income tax considerations relating to a reverse split. It does not address
shareholders subject to special rules, such as financial institutions, tax-exempt organizations,
insurance companies, partnerships, dealers in securities, mutual funds, shareholders who are not
U.S. persons for federal income tax purposes, shareholders who hold the Old Shares as part of a
straddle, hedge or conversion transaction, shareholders who are subject to the alternative minimum
tax provisions of the Code and shareholders who acquired their Old Shares pursuant to the exercise
of employee stock options or otherwise as compensation. In addition, it does not address tax
consequences under state, local, foreign or other laws.
This summary is based upon current provisions of the Code, existing Treasury Regulations under the
Code and current administrative rulings and court decisions, all of which are subject to change or
different interpretation. Any change, which may or may not be retroactive, could alter the tax
consequences to the Company or our shareholders as described in this summary. No ruling from the
IRS has been or will be requested in connection with the reverse split. In addition, our
shareholders should be aware that the IRS could adopt a contrary position and a contrary position
could be sustained by a court.
EACH SHAREHOLDER IS URGED TO CONSULT HIS, HER OR ITS OWN TAX ADVISOR TO DETERMINE THE PARTICULAR
TAX CONSEQUENCES TO SUCH SHAREHOLDER OF THE REVERSE SPLIT, INCLUDING TAX RETURN REPORTING
REQUIREMENTS AND THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER
APPLICABLE TAX LAWS.
A reverse split is intended to constitute a reorganization within the meaning of Section 368 of the
Code. Accordingly, except as provided below with respect to the rounding up of any fractional
shares, and provided that the fair market value of the New Shares is equal to the fair market value
of the Old Shares deemed surrendered in exchange therefor, a shareholder should not recognize any
gain or loss in a reverse split. The aggregate tax basis of the New Shares should be equal to the
aggregate tax basis of the Old Shares, reduced by the tax basis of the Old Shares which are
allocated to the fractional shares that are redeemed for cash. The holding period of the New
Shares received should include the holding period of the Old Shares.
41
Cash paid for fractional shares will be treated as a payment in redemption of the fractional shares
and the shareholder will recognize capital gain or loss, as the case may be, on the difference
between the shareholders basis in the fractional share and the payment in lieu of the fractional
share.
We will not recognize any gain or loss as a result of the reverse split.
No Appraisal Rights
An appraisal right is a right granted by the laws of the state of a corporations incorporation
which provide dissenting shareholders who follow a procedure set forth in the statute to seek to
obtain value for their shares. A reverse split is not a transaction which gives shareholders any
rights of appraisal under the DGCL. As a result, you will not have any rights of appraisal with
respect to the reverse split, or any other right with respect to the reverse split and the
termination of our registration under the Exchange Act other than the right to receive cash for
fractional shares as described in this proxy statement. If the reverse split had been effected
under the CGCL, our shareholders would not have had any appraisal rights.
Expenses
In addition to the amount we expect to pay in lieu of fractional shares (no greater than
approximately $50,000), we expect to incur legal, printing and transfer agent related expenses of
approximately $50,000 in connection with the reverse split. We will pay the costs associated with
this proxy statement as well as cash in lieu of fractional shares from cash available to us.
Intent to Vote
As of the record date, our directors and executive officers currently own [___] shares
of our common stock, which is [___]% of the outstanding shares. We expect that our directors
and executive officers will vote all their shares in favor of the reverse split. We also
understand that Newcastle intends to vote its 120,524 shares of common stock in favor of the
reverse split.
Accounting Consequences of the Reverse Split
As a result of the reverse split:
|
|
|
The number of outstanding shares of common stock will be reduced from 433,416 shares, which are outstanding as of the date of this proxy statement, to approximately
21,000 shares (after deducting fractional shares that will be cashed out). The exact
number of shares outstanding after the reverse split will be determined following the
effectiveness of the reverse split.
|
|
|
|
The purchase of the fractional shares will be treated as the purchase of treasury
stock and will be reflected in the shareholders deficit section of our balance sheet as a
reduction of additional paid-in capital in the amount of our payment in lieu of fractional
shares, which is estimated at no greater than approximately $50,000.
|
The
par value of our common stock will remain unchanged after the reverse
split. We do not anticipate that any other material accounting consequences will
arise as a result of the reverse split.
Recommendation of the Board
For the reasons described in this proxy statement, our board of directors unanimously recommends
that you vote FOR the approval of the amendment to the Delaware Certificate to effect a 1-for-20
reverse split. Proxies received will be so voted unless shareholders vote otherwise via the
Internet or by telephone or specify otherwise in their completed and returned proxy cards.
42
MARKET AND MARKET PRICE OF OUR COMMON STOCK
Our common stock is currently listed on the Pink Sheets under the symbol BLLI. On April 14, 2008,
we filed a Form 25 with the SEC in order to voluntarily delist our common stock from the AMEX. Our
last day of trading of our common stock on the AMEX was April 23, 2008. On December 9, 2008, our
board of directors approved a 1-for-20 reverse split. The reverse split became effective as of the
close of business on December 24, 2008. All references to share and per-share data for all periods
presented have been adjusted to give effect to this reverse split. The following table shows the
high and low sale prices for our common stock on the AMEX or the Pink Sheets, as appropriate, for
the periods indicated. The prices do not include retail markups, markdowns, or commissions.
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2008 ending December 31
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
18.80
|
|
|
$
|
12.00
|
|
Second Quarter
|
|
$
|
15.40
|
|
|
$
|
1.80
|
|
Third Quarter
|
|
$
|
4.20
|
|
|
$
|
1.20
|
|
Fourth Quarter
|
|
$
|
1.40
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2009 ending December 31
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
3.00
|
|
|
$
|
0.25
|
|
Second Quarter
|
|
$
|
1.10
|
|
|
$
|
0.60
|
|
Third Quarter
|
|
$
|
1.66
|
|
|
$
|
0.30
|
|
Fourth Quarter
|
|
$
|
1.40
|
|
|
$
|
0.74
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2010 ending December 31
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
2.00
|
|
|
$
|
1.05
|
|
Second Quarter
|
|
$
|
2.10
|
|
|
$
|
1.20
|
|
Third Quarter (thru [___], 2010)
On [___], 2010, the last reported sales price of our common stock was $[___] per share.
We did not declare or pay any cash dividends in 2009 or 2008, and we do not anticipate paying cash
dividends in the foreseeable future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review of Related Person Transactions
We do not have a written policy for reviewing transactions between the Company and our directors
and executive officers, their immediate family members and entities with which they have a position
or relationship; however, we adhere to certain general procedures to determine whether any such
related person transaction impairs the independence of a director or presents a conflict of
interest on the part of a director or executive officer.
We annually require each of our directors and executive officers to complete a directors and
officers questionnaire that elicits information about related person transactions. Our board and
outside legal counsel annually review all transactions and relationships disclosed in the director
and officer questionnaires, and the board makes a formal determination regarding each directors
independence.
Upon receiving notice of any transaction between the Company and an executive officer that may
present a conflict of interest, our Chief Executive Officer will discuss the transaction with the
Chairman (or, if the transaction involves the Chief Executive Officer, the Chairman of the audit
committee) to determine whether the transaction could present a conflict of interest. If the
transaction has already occurred and a determination is made that a conflict of interest exists,
the audit committee will determine the appropriate response. Our procedures for reviewing related
person transactions do not require the approval or ratification of such transactions.
43
Related Person Transactions
As we are currently a smaller reporting company within the meaning of Regulation S-K of the
Exchange Act, Item 404 of Regulation S-K requires disclosure of any transaction, since the
beginning of our 2008 fiscal year or any currently proposed transaction, in which we were or are to
be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the
average of our total assets at year end for the last two completed fiscal years, and in which a
related person had or will have a direct or indirect material interest. The term related person
is defined in Item 404 and includes our directors, nominees for director, executive officers and
each of their respective immediate family members, as well as any person that beneficially owns
more than 5% of any class of our voting stock and each such persons immediate family members,
where applicable.
Background of Newcastle Note and Rights
On January 31, 2007, we issued a $10,000,000 Convertible Promissory Note (Convertible Note) to
Newcastle pursuant to a purchase agreement. Under the purchase agreement, we granted Newcastle
certain governance and related rights so long as Newcastle beneficially owns at least 5% of our
outstanding common stock, including the right to designate two members to the board and a
pre-emptive right to acquire additional securities in the event we propose to issue any additional
securities. We also agreed to exempt Newcastle from any shareholder rights plan that may be adopted
in the future and exempted Newcastle from certain notice provisions with respect to shareholder
meetings and nominations of directors, as set forth in our bylaws. In connection with the purchase
of the Convertible Note, we and Newcastle also entered into a registration rights agreement,
pursuant to which Newcastle was granted demand and piggyback registration rights in respect of
shares of common stock that may be issued under the Convertible Note. As security for our
obligations under the Convertible Note, Newcastle was granted a subordinated security interest in
substantially all of our assets. Mr. Schwarz, the Chairman of our board of directors, indirectly
controls the general partner of Newcastle. In addition, Mr. Coleman, a member of our board and our
current Chief Executive Officer, is an employee of Newcastle, although Mr. Coleman was not a member
of our board of directors at the time of the issuance of the Convertible Note. Because of Mr.
Schwarzs position with Newcastle, we determined that the transaction represented a related person
transaction. The transaction was approved by the members of our board of directors, other than Mr.
Schwarz.
Related Person Transactions in 2008
On June 13, 2008, we completed the sale of substantially all of the assets related to our SkyTel
division to Velocita Wireless LLC (Velocita). In addition to other customary conditions to the
closing of the transaction with Velocita, the consents of our secured lenders were required under
the terms of the Asset Purchase Agreement, dated March 30, 2008, by and between us and Velocita, as
amended. Newcastle requested substantial modifications to the terms of its Convertible Note as
consideration for its consent to the transaction with Velocita, which represented the sale of a
substantial portion of the collateral that was securing our debt to Newcastle under the Convertible
Note.
Accordingly, we entered into a Waiver and Amendment Agreement and the Amended Convertible Note with
Newcastle. The amendment included: (i) a reduction to the conversion price of the Amended
Convertible Note from $76.20 per share to $4.00 per share; (ii) a reduction to the interest rate on
the Amended Convertible Note to 4% per annum from 8%; and (iii) the right to appoint 50% of the
members of our board of directors (or, if we have an odd number of directors, a number of directors
constituting a simple majority of the board) so long as (a) Newcastle has beneficial ownership of
more than 50% of our outstanding common stock (taking into account common stock issuable upon
conversion of the Amended Convertible Note) or (b) greater than 50% of the original principal
amount of the Amended Convertible Note remains outstanding. We also have the option (subject to the
consent of our senior lenders) to pay interest on the outstanding principal balance of the Amended
Convertible Note in cash at a higher interest rate if the weighted average market price is greater
than 200% of the conversion price. Upon a change of control (as defined in the Amended Convertible
Note), Newcastle (or its assignee) may require us to repurchase the Amended Convertible Note at a
premium price.
Because Mr. Schwarz and Mr. Coleman are affiliated with Newcastle, we determined that the proposed
modifications to the Convertible Note represented a related person transaction. As such, the
members of our board
of directors that are not affiliated with Newcastle formed a special committee to review and
analyze the Newcastle proposal, as well as other alternatives available to us.
44
On October 31, 2008, Newcastle assigned the Amended Convertible Note, together with its rights
under the applicable security agreements and the registration rights agreement, to BI Holdings,
L.P., a limited partnership of which NCM serves as general partner.
Related Person Transactions since January 1, 2009
On March 25, 2009, we entered into a First Amendment to the Amended Convertible Note. The First
Amendment revised the financial profitability covenants for each of the quarters during the year
ended December 31, 2009.
On February 11, 2010, we entered into the Second Amendment to the Amended Convertible Note. The
Second Amendment revised the financial profitability covenants for each of the quarters during the
year ended December 31, 2010 and increased the limitation on the indebtedness covenant to $13.0
million.
MANAGEMENT
Set forth below is information regarding our directors and executive officers. All of the ages are
as of [___], 2010. All of our directors and executive officers are citizens of the
United States.
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
Clinton J. Coleman
|
|
|
33
|
|
|
Chief Executive Officer and Director
|
Mark E. Schwarz
|
|
|
50
|
|
|
Director
|
Michael R. Parks
|
|
|
48
|
|
|
Director
|
Dale A. Booth
|
|
|
52
|
|
|
Director
|
The biography of each of the directors and our Chief Executive Officer is set forth above under
Proposal No. 1 Election of DirectorsInformation Regarding Nominees for Director. Clinton
Coleman is our only executive officer.
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY OWNERSHIP OF MANAGEMENT
As of [___], 2010, the record date of the Annual Meeting, there were approximately
433,416 shares of our common stock outstanding. The following table sets forth certain
information known to us with respect to the beneficial ownership of our common stock as of that
date by (i) each of our directors, (ii) each of our named executive officers named in this proxy
statement for the year ended December 31, 2009, (iii) each person who is known to us to
beneficially own more than 5% of our common stock and (iv) all of our directors and executive
officers as a group. The number of shares beneficially owned is determined under the SECs rules,
and the information is not necessarily indicative of beneficial ownership for any other purpose.
Under such rules, beneficial ownership includes any shares as to which the individual has the sole
or shared voting power or investment power and any shares which the individual has the right to
acquire within 60 days of [___], 2010 through the exercise of any stock option
or other right. Unless otherwise noted, we believe that each person has sole investment and voting
power (or shares such powers with his or her spouse) with respect to the shares set forth in the
following table:
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Percent
|
|
Beneficial Owner(1)
|
|
Beneficially Owned
|
|
|
of Class
|
|
|
|
|
|
|
|
|
|
|
Mark E. Schwarz(2)
|
|
|
3,142,970
|
|
|
|
91.0
|
%
|
Michael R. Parks(3)
|
|
|
1,000
|
|
|
|
*
|
|
Clinton J. Coleman
|
|
|
|
|
|
|
|
|
Dale A. Booth
|
|
|
|
|
|
|
|
|
All Directors and Executive Officers as a Group (4 Persons)(4)
|
|
|
3,143,970
|
|
|
|
91.0
|
%
|
5% Shareholders
|
|
|
|
|
|
|
|
|
Royce & Associates, LLC(5)
|
|
|
38,160
|
|
|
|
8.8
|
%
|
Berlin Financial, Ltd.(6)
|
|
|
22,693
|
|
|
|
5.2
|
%
|
Newcastle Capital Management, L.P.(7)
|
|
|
3,141,970
|
|
|
|
90.9
|
%
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
Each of our directors and executive officers may be reached at 8888 Keystone
Crossing, Suite 1700, Indianapolis, Indiana 46240, telephone number
317-704-6000.
|
45
|
|
|
(2)
|
|
Includes 500 shares issuable pursuant to currently exercisable stock
options. Includes (i) 120,524 shares held by Newcastle for which Mr.
Schwarz disclaims beneficial ownership and (ii) 500 shares held directly by
Mr. Schwarz. Includes 3,021,446 shares issuable pursuant to the Amended
Convertible Note held by BI Holdings, L.P. (of which NCM serves as general
partner) for which Mr. Schwarz disclaims beneficial ownership.
|
|
(3)
|
|
Includes 500 shares issuable pursuant to currently exercisable stock options.
|
|
(4)
|
|
Includes 1,000 shares issuable pursuant to currently exercisable stock
options and 3,021,446 shares issuable pursuant to the Amended Convertible
Note.
|
|
(5)
|
|
Based on the Schedule 13G/A filed on January 25, 2008 by Royce & Associates,
LLC, an investment advisor, whose address is 1414 Avenue of the Americas,
New York, New York 10019.
|
|
(6)
|
|
Based on the Schedule 13G filed on July 17, 2007 by Berlin Financial, Ltd.,
an investment advisor, whose address is 1325 Carnegie Ave., Cleveland, Ohio
44115.
|
|
(7)
|
|
Based on the Schedule 13D/A filed on July 27, 2010 by NCM and its
affiliates, whose address is 200 Crescent Court, Suite 1400, Dallas, Texas
75201.
|
EXECUTIVE COMPENSATION
This section of the proxy statement explains our compensation for the persons who served as our
Chief Executive Officer (our principal executive officer) and President and Chief Financial Officer
(our principal financial officer) during our fiscal year ended December 31, 2009. We refer to the
foregoing individuals collectively in this proxy statement as our named executive officers. We have
elected to use the smaller reporting company rules issued by the SEC regarding the disclosure of
executive compensation. Under these rules, we are providing executive compensation disclosure for
our named executive officers, the Summary Compensation Table for two years, the Outstanding Equity
Awards at Fiscal Year End Table, the Director Compensation Table and certain narrative disclosures.
Summary Compensation Table
The following table shows the cash and non-cash compensation awarded to or earned by our named
executive officers during fiscal years 2009 and 2008. Other than the individuals named below, we
did not have any other executive officers during fiscal year 2009. Columns have been omitted from
the table when there has been no compensation awarded to, earned by or paid to either of the named
executive officers required to be reported in that column.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal
|
|
|
|
|
|
|
|
|
|
Bonus
|
|
|
All Other
|
|
|
Total
|
|
Position
|
|
Year
|
|
|
Salary ($)
|
|
|
($)(3)
|
|
|
Compensation ($)(4)
|
|
|
($)
|
|
Clinton J. Coleman
|
|
|
2009
|
|
|
|
250,000
|
|
|
|
|
|
|
|
12,000
|
|
|
|
262,000
|
|
Chief Executive
Officer(1)
|
|
|
2008
|
|
|
|
250,000
|
|
|
|
|
|
|
|
12,000
|
|
|
|
262,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Thimjon
|
|
|
2009
|
|
|
|
275,000
|
|
|
|
90,000
|
|
|
|
1,312
|
|
|
|
366,312
|
|
President and Chief
Financial Officer(2)
|
|
|
2008
|
|
|
|
265,000
|
|
|
|
85,000
|
|
|
|
2,080
|
|
|
|
352,080
|
|
|
|
|
(1)
|
|
Mr. Coleman was appointed Interim Chief Executive Officer as of July 13, 2007 and was paid at an annual rate of $250,000. On
January 4, 2010, Mr. Clinton became Chief Executive Officer.
|
46
|
|
|
(2)
|
|
Mr. Thimjon was appointed as our Chief Financial Officer as of January 8, 2007 and promoted to President and Chief Financial
Officer on February 14, 2008. Mr. Thimjon resigned as President and Chief Financial Officer effective January 22, 2010.
|
|
|
|
|
|
|
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(3)
|
|
The bonus paid in 2008 represents a discretionary award paid to Mr. Thimjon in connection with his performance in 2007, which
bonus was subject to the closing of our sale of the SkyTel division. The bonus was paid to Mr. Thimjon after the closing of our
transaction with Velocita. The bonus paid in 2009 represents a discretionary bonus paid to Mr. Thimjon in connection with his
performance in 2008, which bonus was subject to our financial performance relative to objectives determined by the board of
directors.
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|
|
|
|
|
|
|
(4)
|
|
For Mr. Coleman, the amounts in this column represent the director fees paid to Mr. Coleman during 2009 and 2008, respectively.
For Mr. Thimjon, the amounts in this column represent our matching contributions under the Bell Industries Employees Savings
and Profit Sharing Plan during 2009 and 2008, respectively.
|
Narrative Disclosure To Summary Compensation Table
Employment Agreements or Arrangements
Clinton J. Coleman.
Mr. Colemans employment with us during 2008 and 2009 was not subject to an
employment agreement. During 2009, Mr. Coleman was paid an annual base salary rate of $250,000. His
annual base salary was increased to $300,000 in connection with his appointment as Chief Executive
Officer in January 2010.
Kevin J. Thimjon.
On January 5, 2007, we entered into an employment letter with Mr. Thimjon
pursuant to which Mr. Thimjon was employed as our Chief Financial Officer and Principal Financial
Officer for a term of two years, beginning January 8, 2007, subject to certain termination rights.
In 2007, Mr. Thimjon received an annual base salary of $210,000. On February 14, 2008, we amended
the employment letter to promote Mr. Thimjon to our President and Chief Financial Officer and to
increase his annual base salary to $275,000. On January 4, 2010, Mr. Thimjon submitted to the
board of directors his written notice of resignation as our President and Chief Financial Officer,
effective January 22, 2010. As a result of his resignation, our employment letter agreement with
Mr. Thimjon terminated effective January 22, 2010. We entered into a consulting agreement with Mr.
Thimjon following his departure that included aggregate compensation of up to $25,000, all of which
was subsequently paid.
Material Terms of Bonus Awards
Pursuant to his employment agreement, Mr. Thimjon was eligible to earn an annual performance award
of up to 50% of his base salary upon the achievement of performance objectives and other factors
determined by the compensation committee. Following the end of each fiscal year, the compensation
committee determined the bonus award by considering the degree to which our financial performance
met or exceeded the performance objectives and any other subjective factors that the compensation
committee believed were relevant for the determination of bonuses.
In 2008, Mr. Thimjon received a discretionary bonus, which is reflected in the Bonus column of
the Summary Compensation Table, based on his performance in 2007. This bonus was subject to our
sale of SkyTel, which occurred in 2008. In 2009, Mr. Thimjon received a discretionary bonus, which
is reflected in the Bonus column of the Summary Compensation Table, based on his performance in
2008.
47
Material Terms of Option Awards
Upon Mr. Thimjons appointment as our Chief Financial Officer in January 2007, we issued to Mr.
Thimjon non-qualified stock options to purchase 6,250 shares of our common stock. The terms of such
stock options are as set forth in the Outstanding Equity Awards at Fiscal Year End Table. These
options were cancelled in January 2010 upon Mr. Thimjons resignation.
Additional Compensation Disclosure
Savings and Profit Sharing Plan.
We established the Bell Industries Employees Savings and Profit
Sharing Plan (the PSP) in 1973 under which both the Company and employees may make contributions.
The PSP will continue until terminated by the board. The board determines our contribution to the
PSP in its discretion. Effective March 29, 2009, matching contributions to the PSP were suspended
and continue to be suspended. For the fiscal year ended December 31, 2009, we contributed $14,000
in matching contributions to the PSP.
Change of Control and Consulting Arrangements.
Under our employment letter with Mr. Thimjon, in
the event Mr. Thimjons employment was terminated by us without Cause (as such term was defined in
the employment letter) or if Mr. Thimjon resigned for Good Reason (as such term was defined in the
employment letter), we were required to pay him a severance amount equal to six months of his then
current annual base salary, payable in one lump sum, an additional 20% of any unvested stock
options held by him would vest and remain exercisable with respect to the vested portion for a
period of 45 days and we were required to provide certain health insurance benefits for the shorter
of six months or the date he becomes eligible to receive group health coverage under another
employers plan. In the event Mr. Thimjons employment was terminated by us without Cause or if Mr.
Thimjon resigned for
Good Reason within 12 months of a Change of Control (as such term was defined in the employment
letter), we were required to pay him a severance amount equal to one year of his then current
annual base salary plus full annual bonus, payable in one lump sum, all of the unvested stock
options held by him would vest and remain exercisable with respect to the vested portion for a
period of 45 days and we were required to provide certain health insurance benefits for the shorter
of one year or the date he becomes eligible to receive group health benefits under another
employers plan. Under the employment letter, Mr. Thimjon was subject to restrictive covenants
regarding non-disclosure of confidential information, non-competition and non-solicitation of our
employees and consultants.
As a result of his resignation, our employment letter agreement with Mr. Thimjon terminated
effective January 22, 2010. We entered into a consulting agreement with Mr. Thimjon following his
departure that included aggregate compensation of up to $25,00, all of which was subsequently paid.
Indemnification Agreements.
In addition to the indemnification provisions contained in our
California Articles and California Bylaws, we have entered into separate indemnification agreements
with each of our directors. These agreements require us, among other things, to indemnify each such
director against all costs, charges, expenses (including legal or other professional fees), damages
or liabilities incurred by such individual arising out of, in connection with, or incidental to,
any action, suit, demand, proceeding, investigation or claim by reason of such individuals status
or service as a director, regardless of whether sustained or incurred by reason of the individuals
negligence, default, breach of duty or failure to exercise due diligence. However, we will not
indemnify such director under these agreements if it is proved that such individuals failure to
act constituted a breach of his fiduciary duties as a director and such breach of those duties
involved intentional misconduct, fraud or a knowing violation of law. The agreements also require
us to advance expenses incurred by such individual in connection with any proceeding against such
individual with respect to which such individual may be entitled to indemnification by us.
48
Outstanding Equity Awards at Fiscal Year End Table
The following table shows the unexercised stock options held at the end of fiscal year 2009 by our
named executive officers. Columns have been omitted from the table where there is no outstanding
equity awards required to be reported in that column.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Underlying
|
|
|
|
|
|
|
Option
|
|
|
|
Options
|
|
|
Unexercised Options
|
|
|
Option Exercise
|
|
|
Expiration
|
|
Name
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
Price ($)
|
|
|
Date
|
|
Clinton J. Coleman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin J. Thimjon(1)
|
|
|
1,500
|
|
|
|
1,000
|
|
|
|
76.60
|
|
|
|
1/8/17
|
|
|
|
|
750
|
|
|
|
500
|
|
|
|
80.00
|
|
|
|
1/8/17
|
|
|
|
|
750
|
|
|
|
500
|
|
|
|
120.00
|
|
|
|
1/8/17
|
|
|
|
|
750
|
|
|
|
500
|
|
|
|
160.00
|
|
|
|
1/8/17
|
|
|
|
|
(1)
|
|
Each of these option grants were made as non-qualified option grants upon Mr. Thimjons appointment as our Chief
Financial Officer in January 2007. The grants were not issued under any shareholder approved option or equity incentive
plan; however, they were issued as inducement grants under the applicable rules of the AMEX. Each of these grants were to
become exercisable in increments of an additional 20% of the total number of shares underlying such options on January 8,
2010 and January 8, 2011. All unexercised options were cancelled in January 2010 upon Mr. Thimjons resignation.
|
REPORT OF THE AUDIT COMMITTEE
The audit committee reviews our financial reporting process on behalf of the board. Management has
the primary responsibility for the financial statements and the reporting process. Our independent
registered public accounting firm is responsible for expressing an opinion on the conformity of the
audited financial statements with generally accepted accounting principles.
In this context, the audit committee has reviewed and discussed with management and Crowe Horwath
LLP, our independent registered public accounting firm for the 2009 fiscal year (Crowe Horwath)
our audited consolidated financial statements for the fiscal year ended December 31, 2009 and the
notes thereto. It has discussed with Crowe Horwath the matters required to be discussed by
Statement of Auditing Standards No. 61, as amended (Codification of Statements on Auditing
Standards, AU 380), as adopted by the Public Company Accounting Oversight Board (PCAOB) in Rule
3200T including the quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments and the clarity of the disclosures in the financial
statements. The audit committee also received and discussed with Crowe Horwath the written
disclosures and the letter from Crowe Horwath required by applicable requirements of the PCAOB
regarding communications with the audit committee concerning independence, and has discussed with
Crowe Horwath its independence from us and our management. Based on such review and discussions,
the audit committee recommended to the board that our audited consolidated financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed
with the SEC.
The Audit Committee Of
The Board of Directors
Dale E. Booth
Michael R. Parks
Mark E. Schwarz
The above report of the audit committee shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any filing under the
Securities Act or the Exchange Act, except to the extent that we specifically incorporate this
information by reference, and shall not otherwise be deemed filed under the Securities Act or the
Exchange Act.
49
PROPOSAL NO. 6
RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Crowe Horwath LLP, previously doing business as Crowe Chizek and Company LLC (Crowe Horwath) has
been engaged by the audit committee to act in such capacity for the fiscal year ending December 31,
2010. Although it is not required to do so, our board of directors is asking our shareholders to
ratify the audit committees selection of Crowe Horwath. If our shareholders do not ratify the
selection of Crowe Horwath, another independent registered public accounting firm will be
considered by our audit committee. Even if the selection is ratified by our shareholders, the audit
committee may in its discretion change the appointment at any time during the year, if it
determines that such a change would be in the best interests of our Company and our shareholders.
Representatives of Crowe Horwath are expected to be present at the Annual Meeting. They will have
an opportunity to make a statement, if they desire to do so, and will be available to respond to
appropriate questions.
Crowe Horwath has served as our independent auditors since November 19, 2007. Since November 19,
2007, we have not consulted with Crowe Horwath regarding (1) the application of accounting
principles to any transaction, either completed or proposed; (2) the type of audit opinion that
might be rendered on our financial statements; or (3) any matter that was the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a reportable event (as defined
in Item 304(a)(1)(v) of Regulation S-K).
Audit Fees
We incurred the following fees for services performed by Crowe Horwath in 2009 and 2008.
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|
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|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
Audit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Audit
|
|
|
Related
|
|
|
Tax
|
|
|
All Other
|
|
|
|
|
Firm
|
|
Year
|
|
|
Fees ($)
|
|
|
Fees ($)
|
|
|
Fees ($)
|
|
|
Fees ($)
|
|
|
Total ($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crowe Horwath, LLP
|
|
|
2009
|
(1)
|
|
|
255,000
|
|
|
|
16,000
|
|
|
|
40,000
|
|
|
|
|
|
|
|
311,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
(2)
|
|
|
250,000
|
|
|
|
35,250
|
|
|
|
18,252
|
|
|
|
|
|
|
|
303,502
|
|
|
|
|
(1)
|
|
For the year ended December 31, 2009, Crowe Horwath billed us an aggregate of $210,000 for professional services in connection with the audit
of our consolidated financial statements and $45,000 for professional services in connection with the reviews of our consolidated interim
financial statements included in our Quarterly Report on Form 10-Q for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009.
For the year ended December 31, 2009, Crowe Horwath also billed us an aggregate of $16,000 for professional services rendered for audit-related
services related to our 401(k) plan. In addition, Crowe Horwath billed us $40,000 related to professional services rendered for the review of
our federal and state income tax returns during the year ended December 31, 2009.
|
|
(2)
|
|
For the year ended December 31, 2008, Crowe Horwath billed us an aggregate of $205,000 for professional services in connection with the audit
of our consolidated financial statements and $45,000 for professional services in connection with the reviews of our consolidated interim
financial statements included in our Quarterly Report on Form 10-Q for the periods ended March 31, 2008, June 30, 2008 and September 30, 2008.
Crowe Horwath also billed us an aggregate of $15,000 for professional services rendered for audit-related services related to our 401(k) plan
and $20,250 for professional services related to the audit of discontinued operations and the Amended Convertible Note during the year ended
December 31, 2008. In addition, Crowe Horwath billed us $18,252 related to professional services rendered for the review of our federal and
state income tax returns during the year ended December 31, 2008.
|
50
Policy for Pre-Approval of Independent Auditor Services
The audit committees policy is to pre-approve all audit and permissible non-audit services
provided by the independent auditor. These services may include audit services, audit-related
services, tax services and other services. Pre-approval is generally provided for up to one year
and any pre-approval is detailed as to the specific service or category of service and is generally
subject to a specific budget. The independent auditor and management are required to periodically
communicate to the audit committee regarding the extent of services provided by the independent
auditor in accordance with this pre-approval, and the fees for the services performed to date. The
audit committee may also pre-approve particular services on a case-by-case basis.
Vote Required
The affirmative vote of a majority of the shares of our common stock represented at the meeting and
entitled to vote is necessary to ratify the appointment of Crowe Horwath as our independent
registered public accounting firm.
Recommendation of the Board
Our board of directors unanimously recommends that you vote FOR the ratification of Crowe Horwath
as our independent registered public accounting firm for the fiscal year ending December 31, 2010.
Proxies received will be so voted unless shareholders vote otherwise via the Internet or by
telephone or specify otherwise in their completed and returned proxy cards.
OTHER MATTERS
The board of directors does not know of any matters other than those mentioned above to be
presented at the Annual Meeting. If any other matters do come before the Annual Meeting, the
persons named in the proxy will exercise their discretion in the voting thereof.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16 of the Exchange Act requires our executive officers, directors and persons who own more
than 10% of our common stock to file initial reports of ownership and reports of changes in
ownership with the SEC and to furnish us with copies of such reports. Based solely on our review of
the copies of such forms furnished to us and written representations from these officers and
directors, we believe that all Section 16(a) filing requirements for our executive officers,
directors and 10% shareholders were met during the year ended December 31, 2009.
Expenses of Proxy Solicitation
Brokerage firms and other custodians, nominees and fiduciaries will be requested to forward the
soliciting material to beneficial owners and to obtain authorization for the execution of proxies,
and we will reimburse such brokerage firms, other custodians, nominees and fiduciaries for
reasonable expenses incurred in sending proxy materials to beneficial owners of our common stock.
Our directors, officers and employees may solicit proxies by telephone, facsimile or electronic
communication or in person (but will receive no additional compensation for such solicitation). We
have also retained MacKenzie Partners, Inc. at an expected cost of $10,000 to assist in the
solicitation of proxies. We will bear the expense of this proxy solicitation.
Shareholder Proposals
In accordance with SEC rules, if a shareholder wishes to have a proposal printed in the proxy
statement to be used in connection with our next annual meeting of shareholders, such proposal must
be received by our Secretary at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240
prior to [___], 2011 in order to be included in our proxy statement and form of proxy
relating to that meeting. For any proposal that is not submitted for inclusion in next years proxy
statement but is instead sought to be presented directly at next years annual meeting, SEC rules
permit management to vote proxies in its discretion if (a) we receive notice of the proposal before
the close of business on [___], 2011 and advise shareholders in next years proxy
statement about the nature of the matter and how management intends to vote on the matter, or (b)
we do not receive notice of the proposal prior the close of business on [___], 2011.
51
In addition, shareholders may present proposals, which are proper subjects for consideration at an
annual meeting, even if the proposal is not submitted by the deadline for inclusion in the proxy
statement. To do so, the shareholder must comply with the procedures specified in our bylaws. Our
bylaws currently require that, for other business to be properly brought before an annual meeting
by a shareholder, we 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 shareholders
name and address, (c) the number of shares beneficially owned by such shareholder as of the date of
the shareholders 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.
If the proposal includes the nomination of a person to become a director, the nomination is
required to contain certain information about both the nominee and the shareholder making the
nomination as set forth in our bylaws. In addition, the notice of nomination must include
information regarding the recommended candidate relevant to a determination of whether the
recommended candidate would be considered independent under the independence standards of the
Exchange Act, or, alternatively, a statement that the recommended candidate would not be
independent. A nomination which does not comply with the above requirements will not be considered.
FINANCIAL INFORMATION
Our annual report on Form 10-K for the fiscal year ended December 31, 2009, including our audited
consolidated balance sheets and the related audited consolidated statements of operations,
shareholders deficit and cash flows for each of the two years ended December 31, 2009 and December
31, 2008 (the 2009 10-K), and our quarterly report on Form 10-Q for the three and six months
ended June 30, 2010, including our unaudited consolidated balance sheets and the related audited
consolidated statements of operations, shareholders deficit and cash flows for the three and six
months ended June 30, 2010 (the June 2010 10-Q), each of which was previously filed with the SEC,
are hereby incorporated by reference into this proxy statement.
A copy of our 2009 10-K (excluding the exhibits thereto) accompanies the proxy materials being
mailed to our shareholders. We will provide, without charge, upon the written or oral request of
any person to whom this proxy statement is delivered, by first class mail or other equally prompt
means within one business day of receipt of such request, a copy of any and all information that
has been incorporated by reference, including but not limited to the 2009 10-K and the June 2010
10-Q, without exhibits unless such exhibits are also incorporated by reference in this proxy
statement. You may obtain a copy of these documents and any amendments thereto by written request
addressed to our Secretary at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240, or
by calling 317-704-6000. These documents are also included in our SEC filings, which you can access
electronically at the SEC website located at
www.sec.gov
.
Pro forma financial information is not presented since the reverse split will not have any material
effect on our financial condition or the results of our operations.
The following is the ratio of earnings to fixed charges for the periods indicated: negative 0.5 and
negative 0.3 for the years ended December 31, 2009 and December 31, 2008, respectively, and
approximately zero for the six months ended June 30, 2010. The ratios are less than one because we
experienced negative pre-tax income during those periods. For the years ended December 31, 2009
and December 21, 2008 and the six months ended June 30, 2010, our earnings were less than our fixed
charges by approximately $1.8 million, $3.8 million, and $0.8 million, respectively.
Our book value per share, as of June 30, 2010, is approximately negative $6.72, based on
shareholders deficit of $2,914,000 and 433,416 shares of common stock outstanding as of June 30,
2010.
52
ADDITIONAL AVAILABLE INFORMATION
The reverse split will constitute a going-private transaction for purposes of Rule 13e-3 of the
Exchange Act. As a result, we have filed a Schedule 13E-3 which contains additional information
about us. Copies of the Schedule 13E-3 are available for inspection and copying at our principal
executive offices during regular business hours by any of our interested shareholders, or a
representative who has been so designated in writing, and may be inspected and copied, or obtained
by mail, by written request addressed to us at 8888 Keystone Crossing, Suite 1700, Indianapolis,
Indiana 46240.
We are subject to the information and reporting requirements of the Exchange Act and in accordance
with such act we file periodic reports, documents and other information with the SEC relating to
our business, financial statements and other matters. Such reports and other information may be
inspected and are available for copying at the public reference facilities of the SEC at 100 F
Street, N.E., Washington D.C. 20549, or may be accessed at
www.sec.gov
.
|
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|
|
By Order of the Board of Directors,
|
|
|
|
|
|
Clinton J. Coleman
Chief Executive Officer
|
|
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[___], 2010
|
53
APPENDIX A
FORM OF AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
OF BELL INDUSTRIES, INC.
(a California corporation)
AND
DELAWARE BELL INDUSTRIES, INC.
(a Delaware corporation)
This Agreement and Plan of Merger, dated as of [date], 2010 (the
Agreement
), is between Bell
Industries, Inc., a California corporation (
Bell California
), and Delaware Bell Industries, Inc.,
a Delaware corporation and wholly-owned subsidiary of Bell California (
Bell Delaware
). Bell
California and Bell Delaware are sometimes referred to herein as the
Constituent Corporations
.
RECITALS
A. Bell Delaware is a corporation duly organized and existing under the laws of the
State of Delaware and has an authorized capital of 11,000,000 shares, 10,000,000 of which are
designated common stock, $0.01 par value per share, and 1,000,000 of
which are designated preferred stock, $0.01 par value per share. The preferred stock of Bell Delaware is undesignated as to series, rights,
preferences, privileges or restrictions. As of [______], 2010, 1,000 shares of common stock were
issued and outstanding, all of which were held by Bell California, and no shares of preferred stock
were issued and outstanding.
B. Bell California is a corporation duly organized and existing under the laws of
the State of California and has an authorized capital of 11,000,000 shares, 10,000,000 of which are
designated common stock, without par value, and 1,000,000 of which are designated preferred stock,
without par value. The preferred stock of Bell California is undesignated as to series, rights,
preferences, privileges or restrictions. As of [______], 2010,
[______] shares of common stock and no shares of preferred stock were
issued and outstanding.
C. The Board of Directors of Bell California has determined that, for the purpose
of effecting the reincorporation of Bell California in the State of Delaware, it is advisable and
in the best interests of Bell California and its shareholders that Bell California merge with and
into Bell Delaware upon the terms and conditions herein provided.
D. The respective Boards of Directors of Bell Delaware and Bell California have
approved and declared the advisability of this Agreement, and have directed that this Agreement be
submitted to a vote of their respective sole shareholder and shareholders and executed by the
undersigned officers.
AGREEMENT
In consideration of the mutual agreements and covenants set forth herein, Bell Delaware and
Bell California hereby agree, subject to the terms and conditions hereinafter set forth, as
follows:
1. MERGER
1.1
Merger
. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law (
DGCL
) and the California General Corporation Law (
CGCL
), Bell
California shall be merged with and into Bell Delaware (the
Merger
), the separate existence of
Bell California shall cease and Bell Delaware shall survive the Merger and shall continue to be
governed by the laws of the State of Delaware, and Bell Delaware shall be, and is herein sometimes
referred to as, the Surviving Corporation. The name of the Surviving Corporation shall be Bell
Industries, Inc.
A-1
1.2
Filing and Effectiveness
. Subject to applicable law, the Merger shall
become effective when the following actions shall have been completed:
(a) This Agreement shall have been adopted by the sole shareholder of Bell Delaware
and the principal terms of this Agreement shall have been approved by the shareholders of Bell
California in accordance with the requirements of the DGCL and the CGCL, respectively;
(b) All of the conditions precedent to the consummation of the Merger specified in
this Agreement shall have been satisfied or duly waived by the party entitled to satisfaction
thereof; and
(c) A certificate of merger meeting the requirements of the DGCL (the
Certificate
of Merger
) shall have been filed with the Secretary of State of the State of Delaware and this
Agreement, together with a Certificate of Ownership as provided in Section 1110 of the CGCL or the
Certificate of Merger, shall have been filed with the Secretary of State of the State of California
or, in the case of the applicable requirements of California law, as otherwise provided by the
CGCL.
The date and time when the Merger shall become effective, as aforesaid, is herein called the
Effective Date of the Merger.
1.3
Effect of the Merger
. Upon the Effective Date of the Merger, the
separate existence of Bell California shall cease and Bell Delaware, as the Surviving Corporation,
(a) shall continue to possess all of its assets, rights, powers and property as constituted
immediately prior to the Effective Date of the Merger, (b) shall be subject to all actions
previously taken by its and Bell Californias Board of Directors, (c) shall succeed, without other
transfer, to all of the assets, rights, powers and property of Bell California in the manner more
fully set forth in Section 259 of the DGCL, (d) shall continue to be subject to all of the debts,
liabilities and obligations of Bell Delaware as constituted immediately prior to the Effective Date
of the Merger, and (e) shall succeed, without other transfer, to all of the debts, liabilities and
obligations of Bell California in the same manner as if Bell Delaware had itself incurred them, all
as more fully provided under the applicable provisions of the DGCL and the CGCL.
2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1
Certificate of Incorporation
. The Certificate of Incorporation of Bell
Delaware as in effect immediately prior to the Effective Date of the Merger shall continue in full
force and effect as the Certificate of Incorporation of the Surviving Corporation until duly
amended in accordance with the provisions thereof and applicable law.
2.2
Bylaws
. The Bylaws of Bell Delaware as in effect immediately prior to
the Effective Date of the Merger shall continue in full force and effect as the Bylaws of the
Surviving Corporation until duly amended in accordance with the provisions thereof and applicable
law.
2.3
Directors and Officers
. The directors and officers of Bell California
immediately prior to the Effective Date of the Merger shall be the directors and officers of the
Surviving Corporation serving in the same class of directors until their successors shall have been
duly elected and qualified or until as otherwise provided by law or the Certificate of
Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation.
3. MANNER OF CONVERSION OF STOCK
3.1
Bell California Common Stock
. Upon the Effective Date of the Merger,
each share of Bell California common stock issued and outstanding immediately prior thereto shall,
by virtue of the Merger and without any action by the Constituent Corporations, the holder of such
shares or any other person, be converted into one (1) fully paid and nonassessable share of common
stock, $0.01 par value per share, of the Surviving Corporation.
A-2
3.2
Bell California Options, Equity Incentive Plan Awards and Restricted
Stock
.
(a) Upon the Effective Date of the Merger, the Surviving Corporation shall assume
and continue the 2007 Stock Incentive Plan, as amended (to the extent stock awards continue to
remain outstanding and subject to the terms of such plan), the 2001 Stock Option Plan (to the
extent stock awards continue to remain outstanding and subject to the terms of such plan) and all
other employee benefit plans of Bell California (collectively, the
Incentive Plans
). Each
outstanding and unexercised option or other right to purchase or receive, or a security convertible
into, Bell California common stock shall become an option or right to purchase or receive, or a
security convertible into, the Surviving Corporations common stock on the basis of one share of
the Surviving Corporations common stock for each share of Bell California common stock issuable
pursuant to any such option, right to purchase or convertible security, on the same terms and
conditions and at an exercise price per share equal to the exercise price applicable to any such
Bell California option, stock purchase right or convertible security at the Effective Date of the
Merger. There are no options, purchase rights for or securities convertible into preferred stock of
Bell California under the Incentive Plans.
(b) A number of shares of the Surviving Corporations common stock shall be
reserved for issuance under the Incentive Plans equal to the number of shares of Bell California
common stock so reserved immediately prior to the Effective Date of the Merger.
3.3
Bell Delaware Common Stock
. Upon the Effective Date of the Merger,
each share of common stock of Bell Delaware issued and outstanding immediately prior thereto shall,
by virtue of the Merger and without any action by Bell Delaware, the holder of such shares or any
other person, be canceled and returned to the status of authorized but unissued shares, without any
consideration being delivered in respect thereof.
3.4
Exchange of Certificates
. After the Effective Date of the Merger, each
holder of a certificate representing shares of Bell California common stock outstanding immediately
prior to the Effective Date of the Merger may, at such shareholders option, surrender the same for
cancellation to an exchange agent designated by the Surviving Corporation (the
Exchange Agent
),
and each such holder shall be entitled to receive in exchange therefor a certificate or
certificates representing the number of shares of the Surviving Corporations common stock into
which the shares formerly represented by the surrendered certificate were converted as herein
provided. Unless and until so surrendered, each certificate representing shares of Bell California
common stock outstanding immediately prior to the Effective Date of the Merger shall be deemed for
all purposes, from and after the Effective Date of the Merger, to represent the number of shares of
the Surviving Corporations common stock into which such shares of Bell California common stock
were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation or the Exchange
Agent of any shares of stock represented by such certificate shall, until such certificate shall
have been surrendered for transfer or conversion or otherwise accounted for to the Surviving
Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights
with respect to and to receive dividends and other distributions upon the shares of common stock of
the Surviving Corporation represented by such certificate as provided above.
Each certificate representing common stock of the Surviving Corporation so issued in the
Merger shall bear the same legends, if any, with respect to the restrictions on transferability as
the certificates of Bell California so converted and given in exchange therefor, unless otherwise
determined by the Board of Directors of the Surviving Corporation in compliance with applicable
laws, or other such additional legends as agreed upon by the holder and the Surviving Corporation.
4. CONDITIONS
4.1 The obligations of Bell California under this Agreement shall be conditioned
upon the occurrence of the following events:
(a)
Shareholder Approval
. The principal terms of this Merger Agreement
shall have been duly approved by the shareholders of Bell California; and
A-3
(b)
Consents, Approvals or Authorizations
. Any consents, approvals or
authorizations that Bell California deems necessary or appropriate to be obtained in connection
with the consummation of the Merger shall have been obtained, including, but not limited to,
approvals with respect to federal and state securities laws.
5. GENERAL
5.1
Covenants of Bell Delaware
. Bell Delaware covenants and agrees that it
will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of California and
in connection therewith appoint an agent for service of process as required under the provisions of
Section 2105 of the CGCL;
(b) File the Certificate of Merger with the Secretary of State of the State of
Delaware;
(c) File this Agreement, together with the Certificate of Ownership, or the
Certificate of Merger, with the Secretary of State of the State of California; and
(d) Take such other actions as may be required by the CGCL.
5.2
Further Assurances
. From time to time, as and when required by Bell
Delaware or by its successors or assigns, there shall be executed and delivered on behalf of Bell
California such deeds and other instruments, and there shall be taken or caused to be taken by Bell
Delaware and Bell California such further and other actions as shall be appropriate or necessary to
vest or perfect in or conform of record or otherwise by Bell Delaware the title to and possession
of all the property, interests, assets, rights, privileges, immunities, powers, franchises and
authority of Bell California and otherwise to carry out the purposes of this Agreement, and the
officers and directors of Bell Delaware are fully authorized in the name and on behalf of Bell
California or otherwise to take any and all such action and to execute and deliver any and all such
deeds and other instruments.
5.3
Abandonment
. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board
of Directors of either Bell California or of Bell Delaware, or of both, notwithstanding the
approval of the principal terms of this Agreement by the shareholders of Bell California or the
adoption of this Agreement by the sole shareholder of Bell Delaware, or by both.
5.4
Amendment
. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the Effective Date of the Merger, provided that an
amendment made subsequent to applicable shareholder approval shall not, unless approved by such
shareholders as required by law:
(a) Alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the shares of any class or
series thereof of such Constituent Corporation;
(b) Alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger; or
(c) Alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of any class or series of capital stock of
any Constituent Corporation.
5.5
Governing Law
. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the State of Delaware and,
so far as applicable, the merger provisions of the CGCL.
5.6
Counterparts
. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
A-4
IN WITNESS WHEREOF, this Agreement having first been approved by the resolutions of the Board
of Directors of Bell Industries, Inc., a California corporation, and Delaware Bell Industries,
Inc., a Delaware corporation, is hereby executed on behalf of each of such two corporations and
attested by their respective officers thereunto duly authorized.
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BELL INDUSTRIES, INC., a California corporation
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DELAWARE BELL INDUSTRIES, INC., a Delaware
corporation
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A-5
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
DELAWARE BELL INDUSTRIES, INC.
The undersigned, a natural person (the Sole Incorporator), for the purpose of organizing a
corporation to conduct the business and promote the purposes hereinafter stated, under the
provisions and subject to the requirements of the laws of the State of Delaware hereby certifies
that:
ONE: The name of this corporation is DELAWARE BELL INDUSTRIES, INC.
TWO: The purpose of this corporation is to engage in any lawful act or activity for which a
corporation may be organized under the Delaware General Corporation Law (the DGCL).
THREE: The corporations registered office in the state of Delaware is at Corporation Trust
Center, 1209 Orange Street, in the City of Wilmington, County of Newcastle. The name of its
registered agent at such address is The Corporation Trust Company.
FOUR: This corporation is authorized to issue two classes of shares designated, respectively,
Common Stock and Preferred Stock. The number of shares of Common Stock authorized to be issued
is ten million (10,000,000), $0.01 par value per share, and the number of shares of Preferred Stock authorized to be issued is
one million (1,000,000), $0.01 par value per share.
The Preferred Stock may be divided into such number of series as the Board of Directors may
determine. The Board of Directors is authorized to determine and alter the rights, preferences,
privileges and restrictions granted to and imposed upon any wholly unissued series of Preferred
Stock, and to fix the number of shares of any series of Preferred Stock and the designation of any
such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated
in any resolution of the Board of Directors originally fixing the number of shares constituting any
series, may increase or decrease (but not below the number of shares of such series then
outstanding) the number of shares of any series subsequent to the issue of shares of that series.
FIVE: A director shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except, if required by the DGCL, as
amended from time to time, for liability (a) for any breach of the directors duty of loyalty to
the corporation or its stockholders, (b) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (c) under Section 174 of the DGCL, or (d) for
any transaction from which the director derived an improper personal benefit. Neither the amendment
nor repeal of this Article Five shall eliminate or reduce the effect of this Article Five in
respect of any matter occurring, or any cause of action, suit or claim that, but for this Article
Five would accrue or arise, prior to such amendment or repeal.
SIX: Each person who (a) is or was or had agreed to become a director or officer of the
corporation, and each person who is or was serving or who had agreed to serve at the request of the
corporation as a director or officer of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise (including the heirs, executor, administrators or estate
of such person), shall be indemnified by the corporation, and (b) is or was or who had agreed to
become an employee or agent of the corporation or who is or was serving or who had agreed to serve
at the request of the corporation as an employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise (including the heirs, executor,
administrators or estate of such person) may be indemnified by the corporation, in each case in
accordance with the corporations bylaws, to the full extent permitted from time to time by the
DGCL as the same exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the corporation to provide broader indemnification rights
than said law permitted the corporation to provide prior to such amendment) or any other applicable
laws as presently or hereafter in effect. Without limiting the generality or the effect of the
foregoing, the corporation may enter into one or more agreements with any person which provide for
indemnification greater or
different than that provided in this Article Six. Any amendment or repeal of this Article Six
shall not adversely affect any right or protection existing hereunder immediately prior to such
amendment or repeal.
B-1
SEVEN: The business and affairs of the corporation shall be managed by and under the
direction of the Board of Directors. The Board of Directors shall consist of such number of
directors as is set forth in the corporations bylaws.
EIGHT
2
: (1) Except as set forth in Section (2) of this Article Eight:
(a) any merger or consolidation of this corporation or any of its subsidiaries
with or into any other corporation, or,
(b) any sale, lease, exchange or other disposition of all or substantially all
of the property and assets of this corporation or any of its subsidiaries to or with
any other corporation, person or other entity, or
(c) any sale, lease, exchange or other disposition to this corporation or any
of its subsidiaries of any assets, cash, securities or other property of any other
corporation, person or other entity in exchange for securities of this corporation
or any of its subsidiaries,
shall require the affirmative vote of the holders of shares representing (i) at least
seventy-five percent (75%) of all classes of stock of this corporation entitled to vote in
the election of directors, considered for the purposes of this Article Eight as one class,
and (ii) at least a majority of all such classes of stock of this corporation considered for
the purposes of this Article Eight as one class, which are not beneficially owned, directly
or indirectly, by such other corporation, person or other entity, if as of the record date
for the determination of stockholders entitled to notice thereof and to vote thereon, such
other corporation, person or entity is the beneficial owner, directly or indirectly, of
shares possessing twenty percent (20%) or more of the votes of the outstanding shares of
stock of this corporation entitled to vote in the election of directors, considered for the
purposes of this Article Eight as one class. Such other corporation, person or other entity
is hereafter sometimes referred to as a related entity. Such affirmative vote, as
provided in this Article Eight, shall be in lieu of any lesser vote of the holders of the
stock of this corporation otherwise provided by law or any agreement or contract to which
this corporation is a party, and shall be in addition to any class vote to which any class
of stock of this corporation may be entitled.
(2) The provisions of this Article Eight shall not apply to any transaction
described in clauses (a), (b) or (c) of Section (1) of this Article Eight if:
(a) the Board of Directors of this corporation shall have approved such
transaction prior to the time that such corporation, person or other entity became a
related entity, or
(b) a majority of the outstanding shares of stock of such other corporation is
owned of record or beneficially, directly or indirectly, by this corporation or its
subsidiaries.
(3) For the purposes of this Article Eight, and without limiting the definition of
beneficial owner or beneficially own, any corporation, person or other entity shall be
deemed to be the beneficial owner of or to beneficially own any share of stock of this
corporation (a) which it has the right to acquire either immediately or at some future date
pursuant to any agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, or (b) which is beneficially owned, directly or indirectly (including shares
deemed owned through application of the foregoing clause (a) of this Section (3), by any
other corporation, person or other entity either with which it or its affiliate or
associates have any apparent arrangement or understanding for the purpose of acquiring,
holding, voting or disposing
of stock of this corporation, or which is its affiliate or associate as those terms
are defined in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934 as in effect from time to time or any successor provision. Also for purposes
of this Article Eight, the outstanding shares of any class of stock of this corporation
shall include shares deemed owned through application of the foregoing clauses (a) and (b)
of this Section (3), but shall not include any other shares which may be issuable either
immediately or at some future date pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise; and the term substantially all of the property
and assets of this corporation or any of its subsidiaries shall mean those properties and
assets involved in any single transaction or series of related transactions having an
aggregate fair market value of more than a majority of the total consolidated assets of this
corporation and its subsidiaries.
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If Proposal No. 2 is approved by our shareholders at
the Annual Meeting, we will file an amendment to this Certificate of
Incorporation to delete this Article Eight in its entirety and replace it with
EIGHT: REMOVED AND RESERVED.
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B-2
The Board of Directors of this corporation shall have the power and duty to determine
for the purposes of this Article Eight, on the basis of information known to this
corporation, whether (i) any corporation, person or other entity beneficially owns,
directly or indirectly, twenty percent (20%) or more of the shares of stock of this
corporation entitled to vote in the election of directors, and (ii) any corporation, person
or other entity is an affiliate or associate of another. Any such determination made in
good faith shall be conclusive and binding for all purposes of this Article Eight.
(4) No amendment to the Certificate of Incorporation of this corporation shall
amend, alter, change or repeal any of the provisions of this Article Eight unless the
amendment effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of (a) seventy-five percent (75%) of all classes of stock of this
corporation entitled to vote in the election of directors, considered for the purposes of
this Article Eight as one class, and (b) at least a majority of all such classes of stock of
this corporation, considered for the purposes of this Article Eight as one class, which are
not beneficially owned, directly or indirectly, by a related entity.
NINE: (1) The affirmative vote of the holders of shares of voting stock of this
corporation representing at least a majority of the Disinterested Shares (as hereinafter defined)
of this corporation shall be required before this corporation may purchase any outstanding shares
of stock of this corporation at a price known by this corporation to be above Market Price (as
hereinafter defined) from a Person known by this corporation to be a Selling Stockholder (as
hereinafter defined), unless the purchase is made by this corporation on the same terms and
conditions and as a result of a duly authorized offer to purchase to the holders of all shares of
stock of this corporation of the same class.
(2) For purposes of this Article Nine:
(a) A Person is deemed to Beneficially Own any shares of capital stock
of this corporation (i) which it has the right to acquire, hold or vote pursuant to
any agreement, arrangement or undertaking or upon exercise of conversion rights,
warrants, options or otherwise, or (ii) which are beneficially owned, directly or
indirectly (including shares deemed owned through application of the foregoing
clause (i)) by any other Person (x) with which it or its Affiliate (as hereinafter
defined) or Associate (as hereinafter defined) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of shares
of capital stock of this corporation, or (y) which is its Affiliate or Associate.
(b) Disinterested Shares means all shares of capital stock of this
corporation entitled to be cast in the election of directors, considered for
purposes hereof as one class, which are not Beneficially Owned by the Selling
Stockholder proposing to enter into a transaction described in Section (1) above.
(c) Market Price for any share of stock of this corporation means the
highest closing sale price of a share of such stock during the 30-day period
immediately preceding the relevant date, as reported on the composite tape or
similar reporting system, for issues listed on such national securities exchange
upon which the stock is listed as may be designated by the Board of Directors for
the purposes hereof or, if the stock is not listed on any national securities
exchange, the highest closing bid quotation with respect to a share of such stock
during the 30-day period preceding the relevant date in the over-the-counter market
as reported by Pink OTC Market
Inc. or a similar organization. When no price can be determined in the
foregoing manner for the stock, its Market Price shall mean the price of such
stock as determined by the Board of Directors in its absolute discretion.
B-3
(d) Person means any corporation, individual, person, partnership or
other person or entity (including a group within the meaning of Section 13(d) of
the Securities Exchange Act of 1934).
(e) Selling Stockholder means any Person which Beneficially Owns in the
aggregate more than five percent (5%) of the voting power of stock of this
corporation.
(f) Affiliate and Associate have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934 as in effect from time to time or under any successor
provision.
(3) Nothing contained in this Article Nine shall be construed to relieve any
Selling Stockholder from any fiduciary obligation imposed by law.
(4) The Board of Directors of this corporation shall have the power to determine
the application of or compliance with this Article Nine, including without limitation (a)
whether a Person is a Selling Stockholder; (b) whether a Person is an Affiliate or Associate
of another; (c) whether Section (1) is or has become applicable with respect to a proposed
transaction; (d) what is the Market Price and whether a price is above Market Price; and (e)
when or whether a purchase or agreement to purchase any share of shares of stock of this
corporation has occurred and when or whether a Person has become a Beneficial Owner of any
share or shares of stock of this corporation. Any decision or action taken by the Board of
Directors arising out of or in connection with the construction, interpretation and effect
of this Article Nine shall lie within its absolute discretion and shall be conclusive and
binding except in circumstances involving bad faith.
(5) The affirmative vote of the holders of shares of voting stock of this
corporation representing at least a majority of the Disinterested Shares, voting together as
a single class, shall be required to amend or repeal, or adopt any provision inconsistent
with, this Article Nine.
TEN: The name and mailing address of the Sole Incorporator is as follows: Clinton J.
Coleman, 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240.
IN WITNESS WHEREOF, the undersigned, being the Sole Incorporator of the Corporation designated
in Article Ten, has executed this Certificate of Incorporation on September 30, 2010.
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By:
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Clinton J. Coleman
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B-4
APPENDIX C
BYLAWS
OF
DELAWARE BELL INDUSTRIES, INC.
Section 1.01 Principal Executive Office. The principal executive office of the corporation
shall be located at 8888 Keystone Crossing, Suite 1700, Indianapolis, Indiana 46240. The Board of
Directors shall have the power to change the principal office to another location and may fix and
locate one or more subsidiary offices within or without the State of Delaware.
Section 1.02
3
Number of Directors. The Board shall consist of at least four (4),
but no more than seven (7) directors, as shall be fixed from time to time by the affirmative vote
of a majority of the entire Board of Directors.
ARTICLE II. SHARES AND STOCKHOLDERS
Section 2.01 Meetings of Stockholders.
(a) Place of Meetings. Meetings of the stockholders of the corporation may be held at
such place, either within or without the State of Delaware, as may be determined from time to
time by the Board of Directors. The Board of Directors may, in its sole discretion, determine
that the meeting shall not be held at any place, but may instead be held solely by means of
remote communication as provided under the Delaware General Corporation Law (DGCL).
(b) Annual Meetings.
(1) The annual meeting of the stockholders of the corporation, for the purpose of
election of directors and for such other business as may properly come before it, shall be
held on such date and at such time as may be designated from time to time by the Board of
Directors. Nominations of persons for election to the Board of Directors of the corporation
and the proposal of business to be considered by the stockholders may be made at an annual
meeting of stockholders: (A) pursuant to the corporations notice of meeting of stockholders
(with respect to business other than nominations); (B) brought specifically by or at the
direction of the Board of Directors; or (C) by any stockholder of the corporation who was a
stockholder of record at the time of giving the stockholders notice provided for in Section
2.01(b)(2) below, who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 2.01(b). For the avoidance of doubt, clause (C) above shall
be the exclusive means for a stockholder to make nominations and submit other business
(other than matters properly included in the corporations notice of meeting of stockholders
and proxy statement under Rule 14a-8 under the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder (the 1934 Act)) before an annual meeting of
stockholders.
(2) At an annual meeting of the stockholders, only such business shall be conducted as
is a proper matter for stockholder action under Delaware law and as shall have been properly
brought before the meeting.
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This presumes that Proposal No. 3 was approved by our
shareholders at the Annual Meeting. If Proposal No. 3 is not approved by our
shareholders, this section will be amended by our board of directors as soon as
practicable following the Annual Meeting to include the language currently set
forth in Section 1.02 of the Bylaws of Bell Industries, Inc., a California
corporation.
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(A) For nominations for the election to the Board of Directors to be properly
brought before an annual meeting by a stockholder pursuant to clause (C) of
Section 2.01(b)(1) of these Bylaws, the stockholder must deliver written notice to the
Secretary at the principal executive offices of the
corporation on a timely basis as set forth in Section 2.01(b)(2)(C) and must update
and supplement such written notice on a timely basis as set forth in Section 2.01(b)(3).
Such stockholders notice shall set forth: (i) as to each nominee such stockholder
proposes to nominate at the meeting: (1) the name, age, business address and residence
address of such nominee, (2) the principal occupation or employment of such nominee, (3)
the class and number of shares of each class of capital stock of the corporation which
are owned of record and beneficially by such nominee, (4) the date or dates on which
such shares were acquired and the investment intent of such acquisition, (5) a statement
whether such nominee, if elected, intends to tender, promptly following such persons
failure to receive the required vote for election or re-election at the next meeting at
which such person would face election or re-election, and (6) such other information
concerning such nominee as would be required to be disclosed in a proxy statement
soliciting proxies for the election of such nominee as a director in an election contest
(even if an election contest is not involved), or that is otherwise required to be
disclosed pursuant to Section 14 of the 1934 Act and the rules and regulations
promulgated thereunder (including such persons written consent to being named as a
nominee and to serving as a director if elected); and (ii) the information required by
Section 2.01(b)(2)(D). The corporation may require any proposed nominee to furnish such
other information as it may reasonably require to determine the eligibility of such
proposed nominee to serve as an independent director of the corporation or that could be
material to a reasonable stockholders understanding of the independence, or lack
thereof, of such proposed nominee.
(B) Other than proposals sought to be included in the corporations proxy materials
pursuant to Rule 14a-8 under the 1934 Act, for business other than nominations for the
election to the Board of Directors to be properly brought before an annual meeting by a
stockholder pursuant to clause (C) of Section 2.01(b) of these Bylaws, the stockholder
must deliver written notice to the Secretary at the principal executive offices of the
corporation on a timely basis as set forth in Section 2.01(b)(2)(C), and must update and
supplement such written notice on a timely basis as set forth in Section 2.01(b)(3).
Such stockholders notice shall set forth: (i) as to each matter such stockholder
proposes to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the meeting, and
any material interest (including any anticipated benefit of such business to any
Proponent (as defined below) other than solely as a result of its ownership of the
corporations capital stock, that is material to any Proponent individually, or to the
Proponents in the aggregate) in such business of any Proponent; and (ii) the information
required by Section 2.01(b)(2)(D).
(C) To be timely, the written notice required by Section 2.01(b)(2)(A) or (B) must
be received by the Secretary at the principal executive offices of the corporation not
later than the close of business on the ninetieth (90th) day nor earlier than the close
of business on the one hundred twentieth (120th) day prior to the first anniversary of
the preceding years annual meeting;
provided, however,
that, subject to the last
sentence of this Section 2.01(b)(2)(C), in the event that the date of the annual meeting
is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days
after the anniversary of the preceding years annual meeting, notice by the stockholder
to be timely must be so received not earlier than the close of business on the one
hundred twentieth (120th) day prior to such annual meeting and not later than the close
of business on the later of the ninetieth (90th) day prior to such annual meeting or the
tenth (10th) day following the day on which public announcement of the date of such
meeting is first made. In no event shall an adjournment or a postponement of an annual
meeting for which notice has been given, or the public announcement thereof has been
made, commence a new time period for the giving of a stockholders notice as described
above.
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(D) The written notice required by Section 2.01(b)(2)(A) or (B) shall also set
forth, as of the date of the notice and as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a
Proponent and collectively, the Proponents): (i) the name and address of each
Proponent, as they appear on the corporations books; (ii) the class, series and number
of shares of the corporation that are owned beneficially and of record by each
Proponent; (iii) a description of any agreement, arrangement or understanding (whether
oral or in writing) with respect to such nomination or proposal between or among any
Proponent and any of its affiliates or associates, and any others (including their
names) acting in concert, or otherwise under the
agreement, arrangement or understanding, with any of the foregoing; (iv) a
representation that the Proponents are holders of record or beneficial owners, as the
case may be, of shares of the corporation entitled to vote at the meeting and intend to
appear in person or by proxy at the meeting to nominate the person or persons specified
in the notice (with respect to a notice under Section 2.01(b)(2)(A)) or to propose the
business that is specified in the notice (with respect to a notice under Section
2.01(b)(2)(B)); (v) a representation as to whether the Proponents intend to deliver a
proxy statement and form of proxy to holders of a sufficient number of holders of the
corporations voting shares to elect such nominee or nominees (with respect to a notice
under Section 2.01(b)(2)(A)) or to carry such proposal (with respect to a notice under
Section 2.01(b)(2)(B)); (vi) to the extent known by any Proponent, the name and address
of any other stockholder supporting the proposal on the date of such stockholders
notice; and (vii) a description of all Derivative Transactions (as defined below) by
each Proponent during the previous twelve (12) month period, including the date of the
transactions and the class, series and number of securities involved in, and the
material economic terms of, such Derivative Transactions.
For purposes of Sections 2.01(b) and (c), a Derivative Transaction means any agreement,
arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any
Proponent or any of its affiliates or associates, whether record or beneficial:
(w) the value of which is derived in whole or in part from the value of any
class or series of shares or other securities of the corporation,
(x) which otherwise provides any direct or indirect opportunity to gain or
share in any gain derived from a change in the value of securities of the corporation,
(y) the effect or intent of which is to mitigate loss, manage risk or benefit
of security value or price changes, or
(z) which provides the right to vote or increase or decrease the voting power
of, such Proponent, or any of its affiliates or associates, with respect to any securities
of the corporation,
which agreement, arrangement, interest or understanding may include, without limitation, any
option, warrant, debt position, note, bond, convertible security, swap, stock appreciation
right, short position, profit interest, hedge, right to dividends, voting agreement,
performance-related fee or arrangement to borrow or lend shares (whether or not subject to
payment, settlement, exercise or conversion in any such class or series), and any proportionate
interest of such Proponent in the securities of the corporation held by any general or limited
partnership, or any limited liability company, of which such Proponent is, directly or
indirectly, a general partner or managing member.
(3) A stockholder providing written notice required by Section 2.01(b)(2)(A) or (B)
shall update and supplement such notice in writing, if necessary, so that the information
provided or required to be provided in such notice is true and correct in all material
respects as of (A) the record date for notice of the meeting and (B) the date that is five
(5) business days prior to the meeting and, in the event of any adjournment or postponement
thereof, five (5) business days prior to such adjourned or postponed meeting. In the case of
an update and supplement pursuant to clause (A) of this Section 2.01(b)(3), such update and
supplement shall be received by the Secretary at the principal executive offices of the
corporation not later than five (5) business days after the record date for notice of the
meeting. In the case of an update and supplement pursuant to clause (B) of this Section
2.01(b)(3), such update and supplement shall be received by the Secretary at the principal
executive offices of the corporation not later than two (2) business days prior to the date
for the meeting, and, in the event of any adjournment or postponement thereof, two (2)
business days prior to such adjourned or postponed meeting.
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(4) Notwithstanding anything in Section 2.01(b)(2)(C) to the contrary, in the event
that the number of directors in an Expiring Class is increased and there is no public
announcement of the appointment of a director to such class, or, if no appointment was made,
of the vacancy in such class, made by the corporation at least ten (10) days before the last
day a stockholder may deliver a notice of nomination in
accordance with Section 2.01(b)(2)(C), a stockholders notice required by this
Section 2.01(b) and which complies with the requirements in Section 2.01(b)(2)(A), other
than the timing requirements in Section 2.01(b)(2)(C), shall also be considered timely, but
only with respect to nominees for any new positions in such Expiring Class created by such
increase, if it shall be received by the Secretary at the principal executive offices of the
corporation not later than the close of business on the tenth (10th) day following the day
on which such public announcement is first made by the corporation. For purposes of this
section, an Expiring Class shall mean a class of directors whose term shall expire at the
next annual meeting of stockholders.
(5) A person shall not be eligible for election or re-election as a director unless the
person is nominated either in accordance with clause (B) of Section 2.01(b)(1), or in
accordance with clause (C) of Section 2.01(b)(1). Only such business shall be conducted at
an annual meeting as shall have been brought before the meeting in accordance with the
procedures set forth in this section. Except as otherwise required by law, the chairman of
the meeting shall have the power and duty to determine whether a nomination or any business
proposed to be brought before the meeting was made, or proposed, as the case may be, in
accordance with the procedures set forth in these Bylaws and, if any proposed nomination or
business is not in compliance with these Bylaws, or the Proponent does not act in accordance
with the representations in Sections 2.01(b)(2)(D)(iv) and (v), to declare that such
proposal or nomination shall not be presented for stockholder action at the meeting and
shall be disregarded, notwithstanding that proxies in respect of such nominations or such
business may have been solicited or received.
(6) Notwithstanding the foregoing provisions of this Section 2.01(b), in order to
include information with respect to a stockholder proposal in the proxy statement and form
of proxy for a stockholders meeting, a stockholder must also comply with all applicable
requirements of the 1934 Act and the rules and regulations thereunder. Nothing in these
Bylaws shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the corporations proxy statement pursuant to Rule 14a-8 under the 1934 Act;
provided, however,
that any references in these Bylaws to the 1934 Act or the rules and
regulations thereunder are not intended to and shall not limit the requirements applicable
to proposals and/or nominations to be considered pursuant to Section 2.01(b)(1)(C) of these
Bylaws.
(7) For purposes of Sections 2.01(b) and (c),
(A) public announcement shall mean disclosure in a press release reported by the
Dow Jones News Service, Associated Press or comparable national news service or in a
document publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the 1934 Act; and
(B) affiliates and associates shall have the meanings set forth in Rule 405
under the Securities Act of 1933, as amended (the 1933 Act).
(c) Special Meetings.
(1) Special meetings of the stockholders of the corporation may be called, for any
purpose as is a proper matter for stockholder action under Delaware law, by the Board of
Directors pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board of Directors for adoption), the
Chairman of the Board, the Chief Executive Officer or upon delivery to the Secretary of the
corporation of one or more written demands for a special meeting of the stockholders
describing the purposes of that meeting and signed and dated by the holders of at least 10%
of all the votes entitled to be cast on any issue proposed to be considered at that meeting.
(2) For a special meeting called pursuant to Section 2.01(c), the Board of Directors
shall determine the time and place of such special meeting. Following determination of the
time and place of the meeting, the Secretary shall cause a notice of meeting to be given to
the stockholders entitled to vote, in accordance with the provisions of subsection (d) below
of these Bylaws. No business may be transacted at a special meeting otherwise than as
specified in the notice of meeting.
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(3) Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected (A) by or at the
direction of the Board of Directors or (B) by any stockholder of the corporation who is a
stockholder of record at the time of giving notice provided for in this paragraph, who shall
be entitled to vote at the meeting and who delivers written notice to the Secretary of the
corporation setting forth the information required by Section 2.01(b)(2)(A). In the event
the corporation calls a special meeting of stockholders for the purpose of electing one or
more directors to the Board of Directors, any such stockholder of record may nominate a
person or persons (as the case may be), for election to such position(s) as specified in the
corporations notice of meeting, if written notice setting forth the information required by
Section 2.01(b)(2)(A) of these Bylaws shall be received by the Secretary at the principal
executive offices of the corporation not later than the close of business on the later of
the ninetieth (90th) day prior to such meeting or the tenth (10th) day following the day on
which public announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. The stockholder
shall also update and supplement such information as required under Section 2.01(b)(3). In
no event shall an adjournment or a postponement of a special meeting for which notice has
been given, or the public announcement thereof has been made, commence a new time period for
the giving of a stockholders notice as described above.
(4) Notwithstanding the foregoing provisions of this Section 2.01(c), a stockholder
must also comply with all applicable requirements of the 1934 Act and the rules and
regulations thereunder with respect to matters set forth in this Section 2.01(c). Nothing in
these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of
proposals in the corporations proxy statement pursuant to Rule 14a-8 under the 1934 Act;
provided, however,
that any references in these Bylaws to the 1934 Act or the rules and
regulations thereunder are not intended to and shall not limit the requirements applicable
to nominations for the election to the Board of Directors to be considered pursuant to
Section 2.01(c)(3) of these Bylaws.
(d) Notice of Meetings. Except as otherwise provided by law, notice, given in writing
or by electronic transmission in the manner provided in Section 232 of the DGCL, of each meeting
of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting as of the record date
for determining the stockholders entitled to notice of the meeting, such notice to specify the
place, if any, date and hour of the meeting, the means of remote communications, if any, by
which stockholders and proxy holders may be deemed to be present in person and vote at any such
meeting, the record date for determining the stockholders entitled to vote at the meeting, if
such date is different from the record date for determining the stockholders entitled to notice
of the meeting and, in the case of special meetings, the purpose or purposes of the meeting. If
mailed, notice is given when deposited in the United States mail, postage prepaid, directed to
the stockholder at such stockholders address as it appears on the records of the corporation.
Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in
writing, signed by the person entitled to notice thereof, or by electronic transmission by such
person, either before or after such meeting, and will be waived by any stockholder by his or her
attendance thereat in person, by remote communication, if applicable, or by proxy, except when
the stockholder attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of
any such meeting in all respects as if due notice thereof had been given. All such waivers
shall be filed with the corporate records or made a part of the minutes of the meeting.
(e) Adjourned Meeting and Notice Thereof. Any meeting of stockholders, whether annual
or special, may be adjourned from time to time either by the chairman of the meeting or by the
vote of a majority of the voting power of the shares present in person, by remote communication,
if applicable, or represented by proxy at the meeting. When a meeting is adjourned to another
time or place, if any, notice need not be given of the adjourned meeting if the time and place,
if any, thereof, and the means of remote communications, if any, by which stockholders and proxy
holders may be deemed to be present in person and vote at such adjourned meeting are announced
at the meeting at which the adjournment is taken. At the adjourned meeting, the corporation may
transact any business which might have been transacted at the original meeting. If the
adjournment is for more than forty-five (45) days, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting. If after the adjournment a
new record date for stockholders entitled to vote is fixed for the adjourned meeting, the Board
of Directors shall fix a new record date for notice
of such adjourned meeting in accordance with Section 2.08 hereof, and shall give notice of
the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting
as of the record date fixed for notice of such adjourned meeting.
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(f) Quorum. At all meetings of stockholders, except where otherwise provided by
statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person, by
remote communication, if applicable, or by proxy duly authorized, of the holders of a majority
of the voting power of all of the outstanding shares of stock entitled to vote shall constitute
a quorum for the transaction of business. In the absence of a quorum, any meeting of
stockholders may be adjourned, from time to time, either by the chairman of the meeting or by
vote of the holders of a majority of the voting power of the shares represented thereat, but no
other business shall be transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.
Except as otherwise provided by statute, or by the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the majority of the
voting power of shares present in person, by remote communication, if applicable, or represented
by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of
the stockholders. Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the shares present in
person, by remote communication, if applicable, or represented by proxy at the meeting and
entitled to vote generally on the election of directors. Where a separate vote by a class or
classes or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the voting power of the outstanding
shares of such class or classes or series, present in person, by remote communication, if
applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take
action with respect to that vote on that matter. Except where otherwise provided by statute or
by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority
(plurality, in the case of the election of directors) of the voting power of the shares of such
class or classes or series present in person, by remote communication, if applicable, or
represented by proxy at the meeting shall be the act of such class or classes or series.
Section 2.02 Stockholder Action Without a Meeting. Unless otherwise provided in the
Certificate of Incorporation, any action required by the DGCL to be taken at any annual or special
meeting of stockholders of the corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is signed by the holders
of outstanding stock having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice, as required by the DGCL, of the taking of the corporate action without a
meeting by written consent shall be given to those stockholders who have not consented in writing.
If the action that is consented to is such as would have required the filing of a certificate under
any section of the DGCL if such action had been voted on by stockholders at a meeting thereof, then
the certificate filed under such section shall state, in lieu of any statement required by such
section concerning any vote of stockholders, that written notice and written consent have been
given as provided in Section 228 of the DGCL.
Section 2.03 List of Stockholders. The officer who has charge of the stock ledger of the
corporation or the transfer agent shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting;
provided, however
, if the record date for determining the stockholders entitled to vote is less
than ten (10) days before the meeting date, the list shall reflect the stockholders entitled to
vote as of the tenth (10th) day before the meeting date, arranged in alphabetical order, showing
the address of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane
to the meeting, for a period of at least ten (10) days prior to the meeting (a) on a reasonably
accessible electronic network, provided that the information required to gain access to such list
is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal
place of business of the corporation. In the event that the corporation determines to make the list
available on an electronic network, the corporation may take reasonable steps to ensure that such
information is available only to stockholders of the corporation. If the meeting is to be held at a
place, then a list of stockholders entitled to vote at
the meeting shall be produced and kept at the time and place of the meeting during the whole
time thereof and may be examined by any stockholder who is present. If the meeting is to be held
solely by means of remote communication, then such list shall be open to examination of any
stockholder during the whole time of the meeting on a reasonably accessible electronic network and
the information required to access such list shall be provided with the notice of the meeting.
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Section 2.04 Voting Rights. For the purpose of determining those stockholders entitled to
vote at any meeting of the stockholders or execute consents, except as otherwise provided by law,
only persons in whose names shares stand on the stock records of the corporation on the record
date, as provided in Section 2.03 of these Bylaws, shall be entitled to vote at any meeting of
stockholders. Every person entitled to vote or execute consents shall have the right to do so
either in person, by remote communication, if applicable, or by an agent or agents authorized by a
proxy granted in accordance with Delaware law. An agent so appointed need not be a stockholder. No
proxy shall be voted or acted upon after three (3) years from its date of creation unless the proxy
provides for a longer period.
Section 2.05 Inspectors of Election.
(a) Appointment. In advance of any meeting of stockholders the Board may appoint
inspectors of election to act at the meeting and any adjournment thereof. If inspectors of
election are not so appointed, or if any persons so appointed fail to appear or refuse to act,
the chairman of any meeting of stockholders may, and on the request of any stockholder or a
stockholders proxy shall, appoint inspectors of election (or persons to replace those who so
fail or refuse) at the meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more stockholders or proxies, the majority of
shares represented in person or by proxy shall determine whether one or three inspectors are to
be appointed.
(b) Duties. The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting, the existence
of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or
consents, hear and determine all challenges and questions in any way arising in connection with
the right to vote, count and tabulate all votes or consents, determine when the polls shall
close, determine the result and do such acts as may be proper to conduct the election or vote
with fairness to all stockholders. The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as is practical.
If there are three inspectors of election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. Any report or certificate
made by the inspectors of election is prima facie evidence of the facts stated therein.
Section 2.06 Joint Owners of Stock. If shares or other securities having voting power stand
of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership,
joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more
persons have the same fiduciary relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, their acts with respect to
voting shall have the following effect: (a) if only one (1) votes, his or her act binds all; (b) if
more than one (1) vote, the act of the majority so voting binds all; or (c) if more than one (1)
vote, but the vote is evenly split on any particular matter, each faction may vote the securities
in question proportionally, or any person voting the shares, or a beneficiary, if any, may apply to
the Delaware Court of Chancery or such other court as may have jurisdiction for relief as provided
in the DGCL, Section 217(b). If the instrument filed with the Secretary shows that any such tenancy
is held in unequal interests, a majority or even-split for the purpose of subsection (c) shall be a
majority or even-split in interest.
Section 2.07 Organization
(a) At every meeting of stockholders, the Chairman of the Board of Directors, or, if a
Chairman has not been appointed or is absent, the Chief Executive Officer, or if the Chief
Executive Officer is absent, a chairman of the meeting chosen by a majority of the voting power
of the shares, present in person, by remote communication, if applicable, or represented by
proxy at the meeting and entitled to vote shall act as chairman. The Secretary, or, in his or
her absence, any other person directed to do so by the chairman of the meeting, shall act as
secretary of the meeting.
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(b) The Board of Directors of the corporation shall be entitled to make such rules or
regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate
or convenient. Subject to such rules and regulations of the Board of Directors, if any, the
chairman of the meeting shall have the right and authority to prescribe such rules, regulations
and procedures and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including, without limitation,
establishing an agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on participation
in such meeting to stockholders of record of the corporation and their duly authorized and
constituted proxies and such other persons as the chairman shall permit, restrictions on entry
to the meeting after the time fixed for the commencement thereof, limitations on the time
allotted to questions or comments by participants and regulation of the opening and closing of
the polls for balloting on matters which are to be voted on by ballot. The date and time of the
opening and closing of the polls for each matter upon which the stockholders will vote at the
meeting shall be announced at the meeting. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not be required to be
held in accordance with rules of parliamentary procedure.
Section 2.08 Record Date.
(a) In order that the corporation may determine the stockholders entitled to notice of
any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date shall, subject
to applicable law, not be more than sixty (60) nor less than ten (10) days before the date
of such meeting. If the Board of Director so fixes a date, such date shall also be the
record date for determining the stockholders entitled to vote at such meeting unless the
Board of Directors determines, at the time it fixes such record date, that a later date on
or before the date of the meeting shall be the date for making such determination. If no
record date is fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of and to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if notice is waived,
at the close of business on the day next preceding the day on which the meeting is held. A
determination of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting;
provided, however,
that the
Board of Directors may fix a new record date for determination of stockholders entitled to
vote at the adjourned meeting, and in such case shall also fix as the record date for
stockholders entitled to notice of such adjourned meeting the same or an earlier date as
that fixed for determination of stockholders entitled to vote in accordance with the
foregoing provisions of this Section 2.08 at the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled to express
consent to corporation action in writing without a meeting, the Board of Directors may fix,
in advance, a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not more than
sixty (60) days prior to such action. If no record date is fixed, the record date for
determining stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the board of directors is necessary, shall be the day on
which the first written consent is delivered to the corporation by delivery to its principal
place of business, or an officer or agent of the corporation having custody of the books in
which proceedings of meetings of stockholders are recorded.
(c) In order that the corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a
record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted, and which record date shall be not more than sixty (60) days
prior to such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
(d) Registered Stockholders
.
The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to receive
dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
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Section 2.09 Shares of Stock. The shares of the corporation shall be represented by
certificates, or shall be uncertificated if so determined by the Board of Directors. Certificates
for the shares of stock, if any, shall be in such form as is consistent with the Certificate of
Incorporation and applicable law. Every holder of stock of the corporation represented by
certificate shall be entitled to have a certificate signed by or in the name of the corporation by
the Chairman of the Board of Directors, or the Chief Executive Officer or any Vice President and by
the Secretary or any Treasurer, Assistant Treasurer or Assistant Secretary, certifying the number
of shares owned by him or her in the corporation. Any or all of the signatures on the certificate
may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be such officer,
transfer agent, or registrar before such certificate is issued, it may be issued with the same
effect as if he or she were such officer, transfer agent, or registrar at the date of issue.
Section 2.10 Transfer of Certificates. Transfers of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney duly authorized, and,
in the case of stock represented by certificate, upon the surrender of a properly endorsed
certificate or certificates for a like number of shares and proper evidence of compliance with
other conditions of applicable law, by contract or otherwise to the rightful transfer. Upon
receipt of proper transfer instructions and proper evidence of compliance with other conditions of
applicable law, by contract or otherwise to rightful transfer from the registered owner of the
uncertificated or certificated shares, any certificates representing the shares so transferred
shall be cancelled, and issuance of a stock certificate or uncertificated shares shall be made to
the person entitled thereto and the transaction shall be recorded upon the books of the
corporation. The corporation shall have power to enter into and perform any agreement with any
number of stockholders of any one or more classes of stock of the corporation to restrict the
transfer of shares of stock of the corporation of any one or more classes owned by such
stockholders in any manner not prohibited by the DGCL.
Section 2.11 Lost Certificates. A new certificate or certificates shall be issued in place
of any certificate or certificates theretofore issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the
certificate of stock to be lost, stolen, or destroyed and on such terms and conditions as the
corporation may require. The corporation may require, as a condition precedent to the issuance of a
new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or
certificates, or the owners legal representative, to agree to indemnify the corporation in such
manner as it shall require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the corporation with respect to
the certificate alleged to have been lost, stolen, or destroyed.
ARTICLE III. DIRECTORS
Section 3.01 Powers. The business and affairs of the corporation shall be managed by or
under the direction of the Board of Directors, except as may be otherwise provided by statute or by
the Certificate of Incorporation.
Section 3.02 Committees of the Board.
(a) The Board of Directors may, from time to time, appoint such committees as may be
permitted by law. Such committees appointed by the Board of Directors shall consist of one (1)
or more members of the Board of Directors and shall have such powers and perform such duties as
may be prescribed by the resolution or resolutions creating such committees, but in no event
shall any such committee have the power to (1) approve or adopt, or recommend to the
stockholders, any action or matter (other than the election or removal of directors) expressly
required by the DGCL to be submitted to stockholders for approval, (2) adopt, amend or repeal
any Bylaw of the corporation, (3) fill vacancies on the Board of Directors or any committee, (4)
approve a distribution to the shareholders of the corporation except at a rate or within a price
range determined by the Board of Directors, or (5) appoint other committee of the Board of
Directors or members thereof.
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(b) Term. The Board of Directors, subject to any requirements of any outstanding series of
Preferred Stock and the provisions of subsection (a) of this Section 3.02, may at any time
increase or decrease the number of members of a committee or terminate the existence of a
committee. The membership of a committee member shall terminate on the date of his or her death
or voluntary resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member and the Board of
Directors may fill any committee vacancy created by death, resignation, removal or increase in
the number of members of the committee. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or disqualification of
any member of a committee, and any alternate member in his or her place, the member or members
thereof present at any meeting and not disqualified from voting, whether or not he, she or they
constitute a quorum, may unanimously appoint another member of the Board of Directors to act at
the meeting in the place of any such absent or disqualified member.
(c) Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of
the Executive Committee or any other committee appointed pursuant to this Section 3.02 shall be
held at such times and places as are determined by the Board of Directors, or by any such
committee, and when notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of any such committee
may be held at any place which has been determined from time to time by such committee, and may
be called by any director
who is a member of such committee, upon notice to the members
of such committee of the time and place of such special meeting given in the manner provided for
the giving of notice to members of the Board of Directors of the time and place of special
meetings of the Board of Directors. Notice of any special meeting of any committee may be waived
in writing or by electronic transmission at any time before or after the meeting and will be
waived by any director by attendance thereat, except when the director attends such special
meeting for the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or convened. Unless
otherwise provided by the Board of Directors in the resolutions authorizing the creation of the
committee, a majority of the authorized number of members of any such committee shall constitute
a quorum for the transaction of business, and the act of a majority of those present at any
meeting at which a quorum is present shall be the act of such committee.
Section 3.03 Election and Term of Office. The directors shall be elected at each annual
meeting of stockholders but, if any such annual meeting is not held or the directors are not
elected thereat, the directors may be elected at any special meeting of stockholders held for that
purpose. Each director, including a director elected to fill a vacancy, shall hold office until
the expiration of the term for which elected and until a successor has been elected and qualified.
Section 3.04 Vacancies. Unless otherwise provided in the Certificate of Incorporation or by
applicable law, and subject to the rights of the holders of any series of Preferred Stock, any
vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or
other causes and any newly created directorships resulting from any increase in the number of
directors shall, unless the Board of Directors determines by resolution that any such vacancies or
newly created directorships shall be filled by stockholders, be filled only by the affirmative vote
of a majority of the directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director, and not by the stockholders,
provided, however
, that
whenever the holders of any class or classes of stock or series thereof are entitled to elect one
or more directors by the provisions of the Certificate of Incorporation, vacancies and newly
created directorships of such class or classes or series shall, unless the Board of Directors
determines by resolution that any such vacancies or newly created directorships shall be filled by
stockholders, be filled by a majority of the directors elected by such class or classes or series
thereof then in office, or by a sole remaining director so elected, and not by the stockholders.
Any director elected in accordance with the preceding sentence shall hold office for the remainder
of the full term of the director for which the vacancy was created or occurred and until such
directors successor shall have been elected and qualified. A vacancy in the Board of Directors
shall be deemed to exist under this Section 3.04 in the case of the death, removal or resignation
of any director.
Section 3.05 Removal. Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances and any limitation imposed by law, any
individual director or directors may
be removed with or without cause by the affirmative vote of the holders of a majority of the
voting power of all then outstanding shares of capital stock of the corporation entitled to vote
generally at an election of directors.
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Section 3.06 Resignation. Any director may resign at any time by delivering his or her
notice in writing or by electronic transmission to the Secretary, such resignation to specify
whether it will be effective at a particular time. If no such specification is made, it shall be
deemed effective upon receipt by the Secretary. When one or more directors shall resign from the
Board of Directors, effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become effective, and each
Director so chosen shall hold office for the unexpired portion of the term of the Director whose
place shall be vacated and until his or her successor shall have been duly elected and qualified.
Section 3.07 Meetings of the Board of Directors and Committees.
(a) Regular Meetings. Unless otherwise restricted by the Certificate of Incorporation,
regular meetings of the Board of Directors may be held at any time or date and at any place
within or without the State of Delaware which has been designated by the Board of Directors and
publicized among all directors, either orally or in writing, by telephone, including a
voice-messaging system or other system designed to record and communicate messages, facsimile,
telegraph or telex, or by electronic mail or other electronic means. No further notice shall be
required for regular meetings of the Board of Directors.
(b) Organization Meeting. Immediately following each annual meeting of stockholders the
Board of Directors shall hold a regular meeting for the purpose of organization, election of
officers, and the transaction of other business. Notice of such meetings is hereby dispensed
with.
(c) Special Meetings. Unless otherwise restricted by the Certificate of Incorporation,
special meetings of the Board of Directors may be held at any time and place within or without
the State of Delaware whenever called by the Chairman of the Board, the Chief Executive Officer,
any Vice President, the Secretary or any two directors.
(d) Meetings by Electronic Communications Equipment. Any member of the Board of
Directors, or of any committee thereof, may participate in a meeting by means of conference
telephone or other communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall constitute
presence in person at such meeting.
(e) Notice of Special Meetings. Notice of the time and place of all special meetings of
the Board of Directors shall be delivered orally or in writing, by telephone, including a voice
messaging system or other system or technology designed to record and communicate messages,
facsimile, telegraph or telex, or by electronic transmission, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting. If notice is sent by US
mail, it shall be sent by first class mail, charges prepaid, at least three (3) days before the
date of the meeting.
(f) Waiver of Notice. Notice of any meeting may be waived in writing, or by electronic
transmission, at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or wherever held,
shall be as valid as though it had been transacted at a meeting duly held after regular call and
notice, if a quorum be present and if, either before or after the meeting, each of the directors
not present who did not receive notice shall sign a written waiver of notice or shall waive
notice by electronic transmission. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
(g) Adjournment. A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If the meeting is adjourned for
more than 24 hours, notice of such
adjournment to another time and place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of adjournment.
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(h) Quorum.
(1) Unless the Certificate of Incorporation requires a greater number, and except with
respect to questions related to indemnification arising under Section 6.01 for which a
quorum shall be one-third of the total number of directors fixed from time to time, a quorum
of the Board of Directors shall consist of a majority of the total number of authorized
directors fixed from time to time by the Board of Directors in accordance with the
Certificate of Incorporation;
provided, however,
at any meeting whether a quorum be present
or otherwise, a majority of the directors present may adjourn from time to time until the
time fixed for the next regular meeting of the Board of Directors, or such earlier date,
without notice other than by announcement at the meeting.
(2) At each meeting of the Board of Directors at which a quorum is present, all
questions and business shall be determined by the affirmative vote of a majority of the
directors present, unless a different vote be required by law, the Certificate of
Incorporation or these Bylaws.
Section 3.08 Action Without Meeting. Unless otherwise restricted by the Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting, if all members of
the Board of Directors or committee, as the case may be, consent thereto in writing or by
electronic transmission, and such writing or writings or transmission or transmissions are filed
with the minutes of proceedings of the Board of Directors or committee. Such filing shall be in
paper form if the minutes are maintained in paper form and shall be in electronic form if the
minutes are maintained in electronic form.
Section 3.09 Fees and Compensation. Directors shall be entitled to such compensation for
their services as may be approved by the Board of Directors, including, if so approved, by
resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for
attendance at each regular or special meeting of the Board of Directors and at any meeting of a
committee of the Board of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer, agent, employee, or
otherwise and receiving compensation therefor.
Section 3.10 Committee Meetings. The provisions of Sections 3.07 and 3.08 of these Bylaws
apply also to committees of the Board and action by such committees, mutatis mutandis.
Section 3.11 Loans to Officers. Except as otherwise prohibited by applicable law, the
corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or
other employee of the corporation or of its subsidiaries, including any officer or employee who is
a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to benefit the
corporation. The loan, guarantee or other assistance may be with or without interest and may be
unsecured, or secured in such manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or
under any statute.
ARTICLE IV. OFFICERS
Section 4.01 Officers. The officers of the corporation shall include, if and when designated
by the Board of Directors, a Chairman of the Board, the Chief Executive Officer, one or more Vice
Presidents, the Secretary, and such additional officers as may be elected or appointed in
accordance with Section 4.03 of these Bylaws and as may be necessary to enable the corporation to
sign instruments and share certificates. The Board of Directors may assign such additional titles
to one or more of the officers as it shall deem appropriate. Any one person may hold any number of
offices of the corporation at any one time unless specifically prohibited therefrom by law. The
salaries and other compensation of the officers of the corporation shall be fixed by or in the
manner designated by the Board of Directors.
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Section 4.02 Elections. All officers shall hold office at the pleasure of the Board of
Directors and until their successors shall have been duly elected and qualified, unless sooner
removed. Any officer elected or appointed by the Board of Directors may be removed at any time by
the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may
be filled by the Board of Directors.
Section 4.03 Other Officers. The Board of Directors, the Chairman of the Board, or Chief
Executive Officer at their or his discretion, may appoint one or more vice presidents, one or more
assistant secretaries, a treasurer, one or more assistant treasurers, or such other officers as the
business of the corporation may require, each of whom shall hold office for such period, have such
authority and perform such duties as the Board of Directors, the Chairman of the Board, or the
Chief Executive Officer, as the case may be, may from time to time determine.
Section 4.04 Removal. Any officer may be removed from office at any time, either with or
without cause, by the affirmative vote of a majority of the directors in office at the time, or by
the unanimous written or electronic consent of the directors in office at the time, or by any
committee of the Board of Directors or by the Chief Executive Officer or by other superior officers
upon whom such power of removal may have been conferred by the Board of Directors.
Section 4.05 Resignation. Any officer may resign at any time by giving notice in writing or
by electronic transmission to the Board of Directors or to the Chief Executive Officer or to the
Secretary. Any such resignation shall be effective when received by the person or persons to whom
such notice is given, unless a later time is specified therein, in which event the resignation
shall become effective at such later time. Unless otherwise specified in such notice, the
acceptance of any such resignation shall not be necessary to make it effective. Any resignation
shall be without prejudice to the rights, if any, of the corporation under any contract with the
resigning officer.
Section 4.06. Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for
regular appointments to such office.
Section 4.07 Chairman of the Board. The Chairman of the Board, if there shall be such an
officer, shall, if present, preside at all meetings of the Board of Directors and exercise and
perform such other powers and duties as may be from time to time assigned to him by the Board of
Directors.
Section 4.08 Chief Executive Officer. The Chief Executive Officer shall preside at all
meetings of the stockholders, unless the Chairman of the Board of Directors has been appointed and
is present. The Chief Executive Officer shall, subject to the control of the Board of Directors,
have general supervision, direction and control of the business and officers of the corporation.
The Chief Executive Officer shall perform other duties commonly incident to the office and shall
also perform such other duties and have such other powers, as the Board of Directors shall
designate from time to time.
Section 4.09 Vice President. The Vice Presidents may assume and perform the duties of the
Chief Executive Officer in the absence or disability of the Chief Executive Officer or whenever the
office of Chief Executive Officer is vacant. The Vice Presidents shall perform other duties
commonly incident to their office and shall also perform such other duties and have such other
powers as the Board of Directors or the Chief Executive Officer shall designate from time to time.
Section 4.10 Secretary. The Secretary shall attend all meetings of the stockholders and of
the Board of Directors and shall record all acts and proceedings thereof in the minute book of the
corporation. The Secretary shall give notice in conformity with these Bylaws of all meetings of the
stockholders and of all meetings of the Board of Directors and any committee thereof requiring
notice. The Secretary shall perform all other duties provided for in these Bylaws and other duties
commonly incident to the office and shall also perform such other duties and have such other
powers, as the Board of Directors shall designate from time to time. The Chief Executive Officer
may direct any Assistant Secretary or other officer to assume and perform the duties of the
Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform
other duties commonly incident to the office and shall also perform such other duties and have such
other powers as the Board of Directors or the Chief Executive Officer shall designate from time to
time.
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ARTICLE V. EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION
Section 5.01 Execution Of Corporate Instruments.
(a) The Board of Directors may, in its discretion, determine the method and designate the
signatory officer or officers, or other person or persons, to execute on behalf of the
corporation any corporate instrument or document, or to sign on behalf of the corporation the
corporate name without limitation, or to enter into contracts on behalf of the corporation,
except where otherwise provided by law or these Bylaws, and such execution or signature shall be
binding upon the corporation.
(b) Unless otherwise specifically determined by the Board of Directors or otherwise
required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness
of the corporation, and other corporate instruments or documents requiring the corporate seal,
if any, and certificates of shares of stock owned by the corporation, shall be executed, signed
or endorsed by the Chairman of the Board of Directors, or the Chief Executive Officer or any
Vice President, and by the Secretary or any Treasurer, Assistant Secretary or Assistant
Treasurer. All other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other manner as may be
directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the credit of the
corporation or in special accounts of the corporation shall be signed by such person or persons
as the Board of Directors shall authorize so to do.
Unless authorized or ratified by the Board of Directors or within the agency power of an
officer, no officer, agent or employee shall have any power or authority to bind the corporation
by any contract or engagement or to pledge the corporations credit or to render it liable for
any purpose or for any amount.
Section 5.02 Voting Of Securities Owned By The Corporation. All stock and other securities
of other corporations owned or held by the corporation for itself, or for other parties in any
capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person
authorized so to do by resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, or any Vice
President.
ARTICLE VI. INDEMNIFICATION
Section 6.01 Indemnification of Directors, Officers, Employees and Other Agents.
(a) Directors
and Officers
.
The corporation shall indemnify its directors
and officers to the extent not prohibited by the DGCL or any other applicable law;
provided,
however,
that the corporation may modify the extent of such indemnification by individual
contracts with its directors and officers; and,
provided, further,
that the corporation shall
not be required to indemnify any director officer in connection with any proceeding (or part
thereof) initiated by such person unless (1) such indemnification is expressly required to be
made by law, (2) the proceeding was authorized by the Board of Directors of the corporation,
(3) such indemnification is provided by the corporation, in its sole discretion, pursuant to the
powers vested in the corporation under the DGCL or any other applicable law or (4) such
indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The corporation shall have power to indemnify its employees
and other agents as set forth in the DGCL or any other applicable law. The Board of Directors
shall have the power to delegate the determination of whether indemnification shall be given to
any such person, to such officers or to other persons as the Board of Directors shall determine.
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(c) Expenses. The corporation shall advance to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that
he or she is or was a director or officer
,
of the
corporation, or is or was serving at the request of the corporation as a director or
executive officer of another corporation, partnership, joint venture, trust or other enterprise,
prior to the final disposition of the proceeding, promptly following request therefor, all
expenses incurred by any director or officer in connection with such proceeding;
provided,
however
, that if the DGCL requires, an advancement of expenses incurred by a director or
officer in his or her capacity as a director or officer
(and not in any other capacity
in which service was or is rendered by such indemnitee, including, without limitation, service
to an employee benefit plan) shall be made only upon delivery to the corporation of an
undertaking (hereinafter an undertaking), by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial decision from which
there is no further right to appeal (hereinafter a final adjudication) that such indemnitee is
not entitled to be indemnified for such expenses under this section or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of
this section, no advance shall be made by the corporation to an officer of the corporation
(except by reason of the fact that such officer is or was a director of the corporation in which
event this paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and promptly made
(1) by a majority vote of directors who were not parties to the proceeding, even if not a
quorum, or (2) by a committee of such directors designated by a majority vote of such directors,
even though less than a quorum, or (3) if there are no such directors, or such directors so
direct, by independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly and
convincingly that such person acted in bad faith or in a manner that such person did not believe
to be in or not opposed to the best interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express contract, all rights to
indemnification and advances to directors or officers under this Bylaw shall be deemed to be
contractual rights and be effective to the same extent and as if provided for in a contract
between the corporation and the director or officers. Any right to indemnification or advances
granted by this section to a director or officers shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (1) the claim for
indemnification or advances is denied, in whole or in part, or (2) no disposition of such claim
is made within ninety (90) days of request therefor. To the extent permitted by law, the
claimant in such enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting the claim. In connection with any claim for
indemnification, the corporation shall be entitled to raise as a defense to any such action that
the claimant has not met the standards of conduct that make it permissible under the DGCL or any
other applicable law for the corporation to indemnify the claimant for the amount claimed. In
connection with any claim by an officer of the corporation (except in any action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that
such officer is or was a director of the corporation) for advances, the corporation shall be
entitled to raise a defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or not opposed to
the best interests of the corporation, or with respect to any criminal action or proceeding that
such person acted without reasonable cause to believe that his or her conduct was lawful.
Neither the failure of the corporation (including its directors who are not parties to such
action, a committee of such directors, independent legal counsel or its stockholders) to have
made a determination prior to the commencement of such action that indemnification of the
claimant is proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the DGCL or any other applicable law, nor an actual determination by the
corporation (including its directors who are not parties to such action, a committee of such
directors, independent legal counsel or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption that
the claimant has not met the applicable standard of conduct. In any suit brought by a director
or officer to enforce a right to indemnification or to an advancement of expenses hereunder, or
brought by the corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the director or officer is not entitled to be
indemnified, or to such advancement of expenses, under this section or otherwise shall be on the
corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this Bylaw shall not
be exclusive of any other right which such person may have or hereafter acquire under any
applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of its directors,
officers,
employees or agents respecting indemnification and advances, to the fullest extent not
prohibited by the DGCL, or by any other applicable law.
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(f) Survival of Rights. The rights conferred on any person by this Bylaw shall continue as
to a person who has ceased to be a director, officer, employee or other agent and shall inure to
the benefit of the heirs, executors and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any other applicable law, the
corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this section.
(h) Amendments. Any repeal or modification of this section shall only be prospective and
shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of
any action or omission to act that is the cause of any proceeding against any agent of the
corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be invalidated on any ground
by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each
director and officer to the full extent not prohibited by any applicable portion of this section
that shall not have been invalidated, or by any other applicable law. If this section shall be
invalid due to the application of the indemnification provisions of another jurisdiction, then
the corporation shall indemnify each director and officer to the full extent under any other
applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following definitions shall
apply:
(1) The term
proceeding
shall be broadly construed and shall include, without
limitation, the investigation, preparation, prosecution, defense, settlement, arbitration
and appeal of, and the giving of testimony in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative.
(2) The term
expenses
shall be broadly construed and shall include, without
limitation, court costs, attorneys fees, witness fees, fines, amounts paid in settlement or
judgment and any other costs and expenses of any nature or kind incurred in connection with
any proceeding.
(3) The term the
corporation
shall include, in addition to the resulting corporation,
any constituent corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such constituent corporation,
or is or was serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this section with
respect to the resulting or surviving corporation as he or she would have with respect to
such constituent corporation if its separate existence had continued.
(4) References to a
director
,
executive officer
,
officer
,
employee
, or
agent
of the corporation shall include, without limitation, situations where such person is
serving at the request of the corporation as, respectively, a director, executive officer,
officer, employee, trustee or agent of another corporation, partnership, joint venture,
trust or other enterprise.
(5) References to
other enterprises
shall include employee benefit plans; references
to fines shall include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to serving at the request of the corporation shall include
any service as a director, officer, employee or agent of the corporation which imposes
duties on, or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person who acted in
good faith and in a manner he or she reasonably believed to be in the interest of the
participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a manner
not opposed to the best interests of the corporation as referred to in this section.
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ARTICLE VII. NOTICES
Section 7.01 Notices
(a) Notice To Stockholders. Notice to stockholders of stockholder meetings shall be given
as provided in Section 2.01(d) herein. Without limiting the manner by which notice may otherwise
be given effectively to stockholders under any agreement or contract with such stockholder, and
except as otherwise required by law, notice to stockholders for purposes other than stockholder
meetings may be sent by US mail or electronic transmission in the manner provided in Section 232
of the DGCL.
(b) Notice To Directors. Any notice required to be given to any director may be given by
the method stated in subsection (a), as otherwise provided in these Bylaws, or by overnight
delivery service, facsimile, telex or telegram, except that such notice other than one which is
delivered personally shall be sent to such address as such director shall have filed in writing
with the Secretary, or, in the absence of such filing, to the last known post office address of
such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by the Secretary or the
Assistant Secretary or the transfer agent appointed with respect to the class of stock affected,
or other agent, specifying the name and address or the names and addresses of the stockholder or
stockholders, or director or directors, to whom any such notice or notices was or were given,
and the time and method of giving the same, shall in the absence of fraud, be prima facie
evidence of the facts therein contained.
(d) Methods of Notice. It shall not be necessary that the same method of giving notice be
employed in respect of all recipients of notice, but one permissible method may be employed in
respect of any one or more, and any other permissible method or methods may be employed in
respect of any other or others.
(e) Notice To Person With Whom Communication Is Unlawful. Whenever notice is required to be
given, under any provision of law or of the Certificate of Incorporation or Bylaws of the
corporation, to any person with whom communication is unlawful, the giving of such notice to
such person shall not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom communication
is unlawful shall have the same force and effect as if such notice had been duly given. In the
event that the action taken by the corporation is such as to require the filing of a certificate
under any provision of the DGCL, the certificate shall state, if such is the fact and if notice
is required, that notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(f) Notice to Stockholders Sharing an Address. Except as otherwise prohibited under DGCL,
any notice given under the provisions of DGCL, the Certificate of Incorporation or the Bylaws
shall be effective if given by a single written notice to stockholders who share an address if
consented to by the stockholders at that address to whom such notice is given. Such consent
shall have been deemed to have been given if such stockholder fails to object in writing to the
corporation within sixty (60) days of having been given notice by the corporation of its
intention to send the single notice. Any consent shall be revocable by the stockholder by
written notice to the corporation.
C-17
ARTICLE VIII. MISCELLANEOUS
Section 8.01 Amendments. Subject to the limitations set forth in Section 6.01 (h) of these
Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly
empowered to adopt, amend or repeal the Bylaws of the corporation. Any adoption, amendment or
repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a
majority of the total number of authorized directors. The stockholders also shall have power to
adopt, amend or repeal the Bylaws of the corporation by the vote of the holders of a majority of
the authorized shares entitled to vote, except as otherwise provided by law or the Certificate of
Incorporation.
Section 8.02 Fiscal Year. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors. In the absence of such resolution, the fiscal year shall be the calendar
year.
Section 8.03 Construction and Definitions. Unless the context otherwise requires, the
general provisions, rules of construction and definitions contained in the DGCL shall govern the
construction of these Bylaws. Without limiting the generality of the foregoing, the masculine
gender includes the feminine and neuter, the singular number includes the plural and the plural
number includes the singular, and the term person includes a corporation as well as a natural
person.
C-18
APPENDIX D
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
DELAWARE BELL INDUSTRIES, INC.
The corporation organized and existing under and by virtue of the General Corporation Law of
the State of Delaware (the DGCL) does hereby certify:
FIRST:
That the Board of Directors of Delaware Bell Industries, Inc. (the corporation) at a
meeting duly called and held adopted resolutions proposing and declaring advisable the following
amendments to the Certificate of Incorporation (the Certificate of Incorporation) of the
corporation and calling a meeting of the stockholders of the corporation for consideration thereof:
RESOLVED,
that Article One of the Certificate of Incorporation of the corporation shall be
amended and restated in its entirety as follows:
ONE: The name of this corporation is Bell Industries, Inc.
RESOLVED
, that the Certificate of Incorporation of the corporation shall be amended by adding
the following paragraph to Article Four:
At close of business on the Effective Date (as defined below), of filing of this
Certificate of Amendment with the Delaware Secretary of State, each twenty (20)
shares of the corporations common stock, $0.01 par value per
share (the Common Stock)
that are issued and outstanding shall, automatically and without any action on the
part of the respective holders thereof, be combined and converted into one (1) share
of Common Stock of the corporation and the authorized shares of the corporation
shall remain as set forth in the Certificate of Incorporation. No fractional shares
shall be issued in connection with the foregoing reverse stock split. To the extent
that a stockholder holds a number of shares of Common Stock immediately after the
Effective Date that is not a whole number, such stockholder shall receive cash in
lieu of a fractional share, based on a stock price of $[_____] per share.
[RESOLVED,
that Article Eight of the Certificate of Incorporation of the corporation shall be
amended and restated in its entirety as follows:
EIGHT: REMOVED AND RESERVED.]
4
The remaining provisions of the Certificate of Incorporation shall remain unchanged
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Further,
as a result of the reverse split, any outstanding options, warrants and rights as of the Effective
Date that are subject to adjustment will be adjusted accordingly.
SECOND:
That thereafter, pursuant to the resolution of its Board of Directors, a meeting of
the stockholders of the corporation was duly called and held upon notice in accordance with Section
222 of the DGCL, at which meeting the necessary number of shares as required by the DGCL were voted
in favor of the amendment.
THIRD
: That the aforesaid amendment was duly adopted in accordance with the applicable
provisions of Section 242 of the DGCL.
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4
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To be included in the Certificate of Amendment only if
Proposal No. 2 is approved by our shareholders at the Annual Meeting.
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D-1
FOURTH:
That this Certificate of Amendment of the Certificate of Incorporation shall be
effective on
_____, 2010 (the Effective Date).
IN WITNESS WHEREOF, the corporation has caused this certificate to be signed this
_____ day of _____, 2010.
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DELAWARE BELL INDUSTRIES, INC.
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By:
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Name:
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Clinton J. Coleman
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Its:
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Chief Executive Officer
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D-2
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Notice &
Proxy Statement, Annual Report is/are available at
www.proxyvote.com
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BELL INDUSTRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS
December 10, 2010 12:00 P.M.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a shareholder of Bell Industries, Inc., a California corporation, hereby appoints
CLINTON J. COLEMAN the proxy of the undersigned, with the power to appoint his substitute, and
hereby authorizes him to represent and to vote for the undersigned all the shares of Bell
Industries, Inc. common stock held of record on
[
], 2010 by the undersigned at the
Annual Meeting of Shareholders to be held on December 10, 2010 or any postponements or
adjournments thereof as follows on the reverse side of this proxy card. Unless otherwise specified
on the reverse side, this proxy authorizes the proxy to cumulate all votes that the undersigned is
entitled to cast at the Annual Meeting of Shareholders for, and to allocate such votes among, one
or more of the nominees listed on the reverse side as the proxy determines in his discretion. To
specify a different method of cumulative voting, write cumulate for and the number of shares and
the name(s) of the nominee(s) in the space provided on the reverse side and mark the box next to
the instructions at the bottom.
THIS PROXY WILL BE VOTED AS DIRECTED OR IF NO CONTRARY DIRECTION IS INDICATED WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES AS DIRECTORS, FOR EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS SAID PROXY DEEMS ADVISABLE.
Address change/comments:
(If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.)
(Continued and to be signed on the reverse side)
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VOTE BY INTERNET www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic
delivery of information up until 11:59 P.M. Eastern Time the day before the
cut-off date or meeting date. Have your proxy card in hand when you access
the web site and follow the instructions to obtain your records and to
create an electronic voting instruction form.
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BELL INDUSTRIES, INC.
8888 KEYSTONE CROSSING, STE 1700
INDIANAPOLIS, IN 46240
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Electronic Delivery of Future PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing
proxy materials, you can consent to receiving all future proxy statements,
proxy cards and annual reports electronically via e-mail or the Internet.
To sign up for electronic delivery, please
follow the instructions above to vote using the Internet and, when
prompted, indicate that you agree to receive or access proxy materials
electronically in future years.
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VOTE BY PHONE 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until
11:59 P.M. Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in hand when you call and then follow the
instructions.
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VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid
envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
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CONTROL #
à
000000000000
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NAME
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THE COMPANY NAME INC. -
COMMON
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SHARES
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS A
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS B
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS C
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS D
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS E
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - CLASS F
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123, 456, 789, 012. 12345
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THE COMPANY NAME INC. - 401 K
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123, 456, 789, 012. 12345
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PAGE 1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
x
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KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
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THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
The Board of Directors recommends that you vote FOR the following:
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To cumulate your votes for one or more nominees, see the instruction below.
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1.
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Election of Directors
Nominees
01 Mr. Dale A. Booth _____
02 Mr. Clinton J. Coleman _____
03 Mr. Michael R. Parks _____
04 Mr. Mark E. Schwarz _____
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FOR ALL
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WITHHOLD
ALL
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FOR ALL
EXCEPT
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To withhold authority to vote
for any individual
nominee(s), mark For All
Except and write the
number(s) of the nominee(s)
on the line below.
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The Board of Directors recommends you vote FOR the following proposal(s):
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2.
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To approve an amendment to the Companys charter to eliminate the supermajority
voting requirements for transactions with related entities
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FOR
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AGAINST
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ABSTAIN
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3.
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To approve an amendment to Section 1.02 of the Companys bylaws regarding the
size of the Board of Directors
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FOR
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AGAINST
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ABSTAIN
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4.
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To approve the reincorporation of the Company from California to Delaware (the
Reincorporation) by means of a merger with and into a wholly-owned Delaware
subsidiary
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FOR
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AGAINST
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ABSTAIN
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5.
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To approve, in the event that the Reincorporation is effected, an amendment to
the Companys certificate of incorporation to effect a 1-for-20 reverse stock
split
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FOR
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AGAINST
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ABSTAIN
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6.
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To ratify the appointment of Crowe Horwath LLP as the Companys independent
registered public accounting firm for the fiscal year ending December 31, 2010
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FOR
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AGAINST
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ABSTAIN
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7.
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If necessary, to adjourn the Annual Meeting to permit further solicitation of
proxies if there are not sufficient votes to approve the Reincorporation and/or
the reverse stock split
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FOR
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AGAINST
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ABSTAIN
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NOTE:
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In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the Annual Meeting.
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To cumulate your vote for one or more of the above nominee(s), write the manner in
which such votes shall be cumulated in the space to the right
of the nominee(s) name(s). If you are cumulating your vote, please mark the box.
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For address change/comments, mark here.
(see reverse for instructions)
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If you plan to attend the Annual Meeting, please mark the
WILL ATTEND box
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WILL
ATTEND
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Signature of
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Signature of
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Shareholder (if
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Shareholder:
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Date:
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shares held jointly)
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Date:
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NOTE:
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,
administrator, or other fiduciary, please give full title as such. Joint owners should each sign
personally. All holders must sign. If a corporation or partnership, please sign in full corporate
or partnership name, by authorized officer.