<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
International Manufacturing Services, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
INTERNATIONAL MANUFACTURING SERVICES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 16, 1998
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
International Manufacturing Services, Inc. (the "Company"), a Delaware
corporation, will be held on September 16, 1998, at 10:00 a.m., local time, at
the Company's principal executive offices located at 2222 Qume Drive, San Jose,
California 95131, for the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected and qualified.
2. To consider, approve and ratify a proposal to amend the Company's 1997
Employee Stock Purchase Plan to provide for automatic annual increases
to the number of shares of the Company's Class A Common Stock (the
"Shares") reserved for issuance thereunder equal to (i) the number of
Shares granted under the 1997 Employee Stock Purchase Plan in the
immediately preceding year, or (ii) a lesser amount determined by the
Board of Directors.
3. To ratify the appointment of PricewaterhouseCoopers LLP as independent
auditors of the Company for the fiscal year ending April 30, 1999.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Each of these items will be discussed at the
annual meeting with adequate time allotted for stockholder questions. Only
stockholders of record at the close of business on July 31, 1998 are entitled to
notice of and to vote at the meeting.
All stockholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if he or she has previously returned a
proxy.
By Order of the Board of Directors
/s/ ROBERT G. BEHLMAN
ROBERT G. BEHLMAN
President, Chief Executive Officer and
Chairman of the Board of Directors
San Jose, California
August 19, 1998
<PAGE> 3
INTERNATIONAL MANUFACTURING SERVICES, INC.
2222 QUME DRIVE
SAN JOSE, CALIFORNIA 95131
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The Board of Directors of International Manufacturing Services, Inc. ("IMS"
or the "Company") is soliciting the enclosed proxy for use at the Annual Meeting
of Stockholders to be held September 16, 1998 at 10:00 a.m., local time or at
any postponement or continuation of the meeting, if applicable, or at any
adjournment thereof (the "Annual Meeting"), for the purposes set forth herein
and in the accompanying Notice of Annual Meeting of Stockholders. The Annual
Meeting will be held at the Company's principal executive offices located at
2222 Qume Drive, San Jose, California 95131.
These proxy solicitation materials were mailed on or about August 19, 1998
to all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND SHARE OWNERSHIP
Only stockholders of record at the close of business on July 31, 1998 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the Record Date, 16,055,169 shares of the Company's Class A Common Stock, par
value $0.001 per share, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person. Attendance at the meeting
will not, by itself, revoke a proxy.
VOTING AND SOLICITATION
Each stockholder is entitled to one (1) vote for each share of Class A
Common Stock on all matters presented at the Annual Meeting. The Company's
Amended and Restated Bylaws provide that a majority of all of the Shares
entitled to vote, whether present in person or represented by proxy, shall
constitute a quorum for the transaction of business at the Annual Meeting.
Shares that are voted "FOR," "AGAINST" or "ABSTAIN" with respect to a matter are
treated as being present at the Annual Meeting for purposes of establishing a
quorum and are also treated as Shares entitled to vote at the Annual Meeting
(the "Votes Cast") with respect to such matter.
While there is no definitive statutory or case law authority in Delaware as
to the proper treatment of abstentions, the Company believes that abstentions
should be counted for purposes of determining both (i) the presence or absence
of a quorum for the transaction of business and (ii) the total number of Votes
Cast with respect to a proposal (other than the election of directors and
ratification of appointment of the Company's independent public accountants). In
the absence of controlling precedent to the contrary, the Company intends to
treat abstentions in this manner. Accordingly, abstentions will have the same
effect as a vote against the proposal when considered as Votes Cast.
A broker "non-vote" occurs when a broker holding stock in "street name" for
a beneficial owner returns a proxy and votes for one or more (usually routine)
matters but refrains from voting on all matters. In a 1988 Delaware case, Berlin
v. Emerald Partners, the Delaware Supreme Court held that, while broker
non-votes should be counted for purposes of determining the presence or absence
of a quorum for the transaction of business, broker non-votes should not be
counted for purposes of determining the number of Votes Cast with
<PAGE> 4
respect to the particular proposal on which the broker has expressly not voted.
Accordingly, the Company intends to treat broker non-votes in this manner. Thus,
a broker non-vote will not affect the outcome of the voting on a proposal.
All valid proxies received prior to the Annual Meeting will be voted. All
shares represented by a proxy will be voted, and where a stockholder specifies
by means of the proxy a choice ("FOR," "AGAINST," "ABSTAIN" or "WITHHOLD") with
respect to any matter to be acted upon, the shares will be voted in accordance
with the specification so made. If no choice is indicated on the proxy, the
shares will be voted in favor of the proposal (other than instances of broker
non-votes).
The cost of this solicitation will be borne by the Company. In addition,
the Company may reimburse brokerage firms, banks and other fiduciaries
representing beneficial owners of Shares for expenses incurred in forwarding
solicitation material to such beneficial owners. Proxies also may be solicited
by certain of the Company's directors, officers and regular employees,
personally or by telephone or telecopier, without additional compensation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of security holders of the Company that are intended to be
presented by such stockholders at the annual meeting of the Company for the
fiscal year ending April 30, 1999 must be received by the Company no later than
May 19, 1998, in order to be included in the proxy statement and form of proxy
relating to such meeting.
INDEPENDENT AUDITORS
The independent auditors of the Company for the fiscal year ended April 30,
1998 were PricewaterhouseCoopers LLP. A representative of PricewaterhouseCoopers
LLP will attend the Annual Meeting for the purpose of responding to appropriate
questions.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
NOMINEES
A total of eight (8) directors are to be elected at the Annual Meeting.
Each nominee named below is currently a director of the Company. In the event
that any nominee of the Company becomes unavailable for any reason, or if a
vacancy should occur before election (which events the Company does not
anticipate), the Shares represented by the enclosed proxy may be voted for such
other person as may be determined by the holders of such proxy. The term of
office of each person elected as a director will continue until the next annual
meeting and until his successor has been elected and qualified.
The names of the nominees and certain biographical information relating to
the nominees are forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEES AGE POSITION(S) SINCE
---------------- --- ----------- --------
<S> <C> <C> <C>
Robert G. Behlman.......... 54 Chairman of the Board of Directors, 1994
President and Chief Executive Officer
William J. Almon........... 65 Director 1996
Dixon R. Doll.............. 55 Director 1996
John A. Downer............. 40 Director 1996
Fredric W. Harman.......... 38 Director 1996
Mark Rossi................. 42 Director 1996
J. Larry Smart............. 51 Director 1996
Paul J. Tufano............. 44 Director 1996
</TABLE>
Robert G. Behlman has been President, Chief Executive Officer and Chairman
of the Board of Directors of the Company since its formation in November 1994.
From July 1994 to November 1994, Mr. Behlman
2
<PAGE> 5
served as a consultant to Maxtor Corporation ("Maxtor"), a manufacturer of hard
disk drives. From September 1992 until May 1994, Mr. Behlman served as Vice
President and Chief Operating Officer of Sanmina Corporation, an integrated
electronics manufacturer. From August 1988 until September 1992, Mr. Behlman
held senior management positions at SCI Systems, Inc., a contract manufacturer
of electronic components, including Vice President of Business Development
(Western Region) from March 1991 to September 1992 and Vice President and
General Manager (San Jose, California plant) from August 1988 to March 1991. Mr.
Behlman received a B.S. in Industrial Engineering from California Polytechnic
University, Pomona.
William J. Almon has been a director of the Company since June 1996. He has
served as Chairman of the Board of Directors and Chief Executive Officer of
StorMedia Incorporated ("StorMedia"), a supplier of think film disks for hard
disk drives, since May 1994. Prior to joining StorMedia, Mr. Almon served as an
independent consultant from February 1993 to May 1994. From 1988 to February
1993, Mr. Almon was President and Chief Operating Officer of Conner Peripherals,
Inc., an independent disk drive manufacturer. Prior thereto, Mr. Almon served in
various management capacities, including Vice President, Low End Storage
Products, of International Business Machines Corporation ("IBM"). Mr. Almon is
also a director of Read-Rite Corporation, a supplier of thin film magnetic heads
for disk drives, and Sigma Designs, Inc., a provider of multimedia imaging
display systems. Mr. Almon received a B.S. in Electrical Engineering from the
United States Military Academy, West Point.
Dixon R. Doll has been a director of the Company since June 1996. He has
served as Managing General Partner of Doll Capital Management, a venture capital
investment firm since June 1996. From September 1994 to June 1996, Mr. Doll was
an independent venture capitalist. From 1985 to September 1994, Mr. Doll served
as General Partner of Accel Partners, a venture capital investment firm. Mr.
Doll has held various senior management positions at DMW Group LLC and
predecessor entities, an information systems and telecommunications firm,
including Chairman of the Board of Directors and Chief Executive Officer, from
1971 to the present. Mr. Doll is also a director of Network Equipment
Technologies, Inc., a manufacturer of multi-service communications products,
Racotek, Inc., a supplier of mobile data communication software, and a number of
private companies. Mr. Doll received a B.S. in Electrical Engineering from
Kansas State University and a M.S.E. and Ph.D. from the University of Michigan.
John A. Downer has been a director of the Company since June 1996. Since
December 1996, Mr. Downer has served as Managing Director of Cornerstone Equity
Investors, L.L.C. ("Cornerstone"), a venture capital firm and successor to
Prudential Equity Investors, Inc. ("Prudential"). From 1989 to December 1996,
Mr. Downer was a partner of various venture capital funds managed by Prudential.
Mr. Downer is also a director of StorMedia and MCMS, Inc. ("MCMS"), an
electronics manufacturing services provider. Mr. Downer received a B.A., M.B.A.
and J.D. from Harvard University.
Fredric W. Harman has been a director of the Company since June 1996. Mr.
Harman has served as General Partner of Oak Investment Partners, a venture
capital firm, since July 1994. From 1991 to July 1994, Mr. Harman was General
Partner of Morgan Stanley Venture Capital, Inc., a venture capital firm. Mr.
Harman is also a director of ILOG S.A., a provider of software components for
computer graphics and resource optimization, and SPSS Inc., a developer of
statistical software products. Mr. Harman received a B.S. and M.S. in Electrical
Engineering from Stanford University and a M.B.A. from Harvard University.
Mark Rossi has been a director of the Company since 1996. Mr. Rossi has
served as Senior Managing Director of Cornerstone since December 1996. From 1983
to 1996, Mr. Rossi was a partner of various venture capital funds managed by
Prudential. Mr. Rossi is also a director of StorMedia, Maxwell Technologies,
Inc. and MCMS. Mr. Rossi holds a B.A. from Saint Vincent College and a M.B.A.
from Northwestern University.
J. Larry Smart has been a director of the Company since June 1996. He has
served as Chief Executive Officer and a director of Visioneer, Inc., a developer
and marketer of intelligent paper input systems and image management software,
since April 1997. From July 1995 to March 1997, Mr. Smart served as Chief
Executive Officer, President and Chairman of the Board of Directors of
Streamlogic Corporation (formerly Micropolis Corporation), a developer and
marketer of data management solutions. From April 1994 to March 1995, Mr. Smart
served as President and Chief Executive Officer of Maxtor, and from 1991 to
February 1994, he
3
<PAGE> 6
was Chief Executive Officer and a director of Southwall Technologies, Inc., a
manufacturer of commercial, thin film materials. Mr. Smart is also a director of
Western Micro Technology, Inc., a computer systems distributor. Mr. Smart
received a B.S.I.M. from the Georgia Institute of Technology and a M.B.A. from
Southern Methodist University.
Paul J. Tufano has been a director of the Company since October 1996. Since
August 1996, Mr. Tufano has served as Vice President, Finance an Chief Financial
Officer of Maxtor. From 1979 to July 1996, Mr. Tufano held various management
positions at IBM, including manager of worldwide logistics for IBM's Storage
Systems Division from October 1995 to July 1996. Mr. Tufano holds a B.S. in
Economics from St. John's University and a M.B.A. from Columbia University.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the Votes Cast is required for
approval of each nominee listed above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" EACH NOMINEE LISTED ABOVE.
AMENDMENT TO THE 1997 EMPLOYEE STOCK PURCHASE PLAN
(PROPOSAL NO. 2)
As a result of a recent change in the financial accounting rules regarding
employee stock purchase plans, the Board of Directors determined that it is in
the best interests of the Company and its stockholders to amend the Company's
1997 Employee Stock Purchase Plan ("Purchase Plan") in order to provide for an
automatic share replenishment feature (described below) (the "Amendment"). The
Amendment provides for automatic annual increases of the number of shares of
Class A Common Stock reserved under the Purchase Plan equal to (i) the number of
shares granted under the Purchase Plan in the immediately preceding year, or
(ii) a lesser amount determined by the Board of Directors for issuance
thereunder.
As of the date of stockholder approval of the Purchase Plan, 95,299 shares
had been issued to employees of the Company pursuant to the Purchase Plan.
Description of the Purchase Plan
The Purchase Plan was adopted by the Board of Directors and stockholders of
the Company in August 1997. A total of 250,000 shares of Class A Common Stock
(the "Shares") (less any shares issued under the Company's 1997 Non-U.S.
Employee Stock Purchase Plan) has been reserved for issuance under the Purchase
Plan, plus annual increases equal to (i) the number of shares granted under the
Purchase Plan in the immediately preceding year, or (ii) a lesser amount
determined by the Board of Directors.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended, contains successive six-month
offering periods. The offering periods generally start on the first trading day
on or after June 1 and December of each year.
Employees are eligible to participate in the Purchase Plan if they are
customarily employed by the Company or any participating subsidiary for at least
20 hours per week and more than five months in any calendar year. However, any
employee who (i) immediately after grant owns stock possessing 5% or more of the
total combined voting power or value of all classes of the capital stock of the
Company, or (ii) whose rights to purchase stock under all employee stock
purchase plans of the Company accrues at a rate which exceeds $25,000 worth of
stock for each calendar year, may be not be granted an option to purchase stock
under the Purchase Plan. The Purchase Plan permits participants to purchase
Shares through payroll deductions of up to 10% of the participant's
"compensation." Compensation is defined as the participant's base straight time
gross earnings and commissions but exclusive of payments for overtime, profit
sharing payments, shift premium payments, incentive compensation, incentive
payments and bonuses. The maximum number of Shares a participant may purchase
during a single offering period is 20,000 Shares.
4
<PAGE> 7
Amounts deducted and accumulated by the participant are used to purchase
Shares at the end of each offering period. The price of stock purchased under
the Purchase Plan is 85% of the lower of the fair market value of the Common
Stock at the beginning or end of the offering period. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with the Company.
Rights granted under the Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the Purchase Plan. The Purchase Plan provides that, in
the event of a merger of the Company with or into another corporation or a sale
of substantially all of the Company's assets, each outstanding option may be
assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the outstanding options, the
offering period then in progress will be shortened and a new exercise date will
be set. The Purchase Plan will terminate in 2007. The Board of Directors has the
authority to amend or terminate the Purchase Plan. No amendment or termination
may adversely affect any outstanding rights to purchase stock under the Purchase
Plan unless the Board determines that an amendment is necessary to minimize any
potential adverse financial accounting consequences.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the Votes Cast is required for the
approval of the amendment to the Company's 1997 Employee Stock Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE "FOR" APPROVAL OF THE AMENDMENT TO THE COMPANY'S 1997 EMPLOYEE
STOCK PURCHASE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 3)
The Board of Directors of the Company has selected PricewaterhouseCoopers
LLP as independent auditors of the financial statements of the Company for the
fiscal year ending April 30, 1999. PricewaterhouseCoopers LLP has acted in such
capacity since its appointment by the Company in 1996. Notwithstanding this
selection, the Company's Board of Directors, in its sole discretion, may direct
the appointment of new independent auditors at any time during the year, if the
Board of Directors concludes that such change is in the best interest of the
Company and its stockholders. A representative of PricewaterhouseCoopers LLP is
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if the representative desires to do so, and is expected to be
available to respond to appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of a majority of the Votes Cast is required for
approval of this proposal.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 1999.
5
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT
The following table and footnotes thereto set forth the beneficial
ownership of Class A Common Stock of the Company as of the Record Date, by (a)
each director and nominee for director of the Company who owned shares as of
such date, (b) each of the Named Officers (defined below), (c) all directors and
executive officers of the Company as a group and (d) each person known by the
Company to be the beneficial owner of more than 5% of the outstanding shares of
Class A Common Stock of the Company:
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENT
NAME AND ADDRESS(1) OWNED OF TOTAL(%)(2)
------------------- ---------------- --------------
<S> <C> <C>
Prudential Private Equity Investors, III, L.P.(3)........... 4,535,370 28.25
John A. Downer(4)
Mark Rossi(4)
717 Fifth Avenue, 11th Floor
New York, New York 10022
Entities associated with Oak Investment Partners VI,
L.P.(5)................................................... 3,756,000 23.39
Fredric W. Harman(4)(5)
525 University Avenue, Suite 1300
Palo Alto, California 94031
Maxtor Corporation.......................................... 2,985,000 18.59
Paul Tufano(4)(6)
510 Cottonwood Drive
Milpitas, California 95035
Robert G. Behlman(4)(7)..................................... 934,484 5.57
2222 Qume Drive
San Jose, California 95131
Entities associated with Brinson Partners, Inc.(8).......... 769,980 4.80
N. K. Quek(9)............................................... 300,585 1.85
Nathan Kawaye(10)........................................... 268,359 1.65
Entities associated with Doll Technology
Investment Management LLC(11)............................. 211,400 1.32
Dixon R. Doll(4)
Anthony Pham(12)............................................ 201,797 1.25
J. Larry Smart(4)(13)....................................... 69,787 *
William J. Almon(4)(14)..................................... 32,227 *
All directors and executive officers as a group
(11 persons)(15).......................................... 13,295,010 82.50
</TABLE>
- ---------------
* Less than 1%.
(1) Determined in accordance with Rule 13d-3 under the Securities Exchange Act
of 1934, as amended. Under this rule, a person is deemed to be the
beneficial owner of securities that can be acquired by such person within
60 days from the Record Date upon the exercise of options. Each beneficial
owner's percentage ownership is determined by assuming that all options
held by such person (but not those held by any other person) that are
exercisable within 60 days from that date have been exercised. All persons
named in the table have sole voting and investment power with respect to
all shares issuable pursuant to stock options. Unless otherwise noted
below, the Company believes that all persons named in the table have sole
voting and investment power with respect to all shares of Class A Common
Stock beneficially owned by them.
(2) 16,055,169 shares of Class A Common Stock were outstanding as of the Record
Date.
(3) Includes 2,509,425 shares of the Company's Class B Common Stock. Messrs.
Downer and Rossi, directors of the Company, are Managing Director and
Senior Managing Director, respectively, of Cornerstone Equity Investors,
L.L.C. ("Cornerstone"), which acts as the investment advisor to Prudential
Private Equity Investors, III, L.P. ("PPEI") pursuant to an Investment
Advisory Agreement (the "Investment Advisory Agreement") dated as of July
19, 1996. The Investment Advisory
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<PAGE> 9
Agreement gives Cornerstone the authority to direct the voting and
disposition of the Common Stock owned by Prudential. Prudential and The
Prudential Insurance Company of America may restrict or terminate such
authority at any time. As a result of the authority granted pursuant to
the Investment Advisory Agreement, Cornerstone may be deemed to be a
beneficial owner of any shares of Common Stock held by PPEI. Each of
Messrs. Downer and Rossi disclaims any beneficial ownership of the shares
held by PPEI, except to the extent of his proportionate partnership
interests therein.
(4) The named person is a director of the Company.
(5) Includes 3,670,364 shares held by Oak Investment Partners VI, L.P. and
85,637 shares held by Oak VI Affiliates Fund, L.P. Mr. Harman disclaims any
beneficial ownership of the shares held by Oak Investment Partners VI, L.P.
and Oak VI Affiliates Fund, L.P., except to the extent of his pecuniary
interests in the respective entities.
(6) Mr. Tufano disclaims any beneficial ownership of the shares held by Maxtor
Corporation, except to the extent of his pecuniary interest therein.
(7) Includes 708,984 shares issuable pursuant to stock options which may be
exercised within 60 days.
(8) Includes 662,015 shares held by Brinson Venture Capital Fund III, L.P. and
107,966 shares held by Brinson Trust Company, as Trustee of the Brinson MAP
Venture Capital Fund III.
(9) Includes 225,586 shares issuable pursuant to stock options which may be
exercised within 60 days.
(10) Includes 193,359 shares issuable pursuant to stock options which may be
exercised within 60 days.
(11) Includes (i) 139,473 shares held by Doll Technology Investment Fund, (ii)
2,681 shares held by Doll Technology Affiliates Fund, (iii) 1,746 shares
held by Doll Technology Side Fund and (iv) 67,500 shares held personally by
Mr. Doll, of which 37,500 shares are subject to a repurchase right in favor
of the Company upon cessation of Mr. Doll's service to the Company. Mr.
Doll is the Managing Member of Doll Technology Investment Management LLC,
the general partner of Doll Technology Investment Fund, Doll Technology
Affiliates Fund and Doll Technology Side Fund. Mr. Doll disclaims any
beneficial ownership of the shares held by the entities associated with
Doll Technology Investment Management LLC, except to the extent of his
pecuniary interest therein.
(12) Includes 141,797 shares issuable pursuant to stock options which may be
exercised within 60 days.
(13) Includes 32,227 shares issuable pursuant to stock options which may be
exercised within 60 days and includes 24,000 shares held by the J. Larry
Smart and Cheryl L. Smart Trust.
(14) Includes 32,227 shares issuable pursuant to stock options which may be
exercised within 60 days. Excludes 60,000 shares transferred by Mr. Almon
to the William J. Almon, Jr. Irrevocable Trust in November 1996, and an
aggregate of 33,900 shares transferred by Mr. Almon to family members in
December 1996, all shares of which Mr. Almon disclaims beneficial
ownership.
(15) Includes 1,334,180 shares issuable pursuant to stock options which may be
exercised within 60 days.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of four meetings during
the fiscal year ended April 30, 1998.
The Board of Directors has two standing committees: an Audit Committee and
a Compensation Committee.
The Audit Committee of the Board of Directors consists of Messrs. Downer,
Smart and Tufano. The Audit Committee met two times during the last fiscal year.
This Committee recommends engagement of the Company's independent auditors and
is primarily responsible for reviewing the Company's financial controls,
evaluating the scope of the annual audit, reviewing audit results, consulting
with management and the Company's independent auditors prior to the presentation
of financial statements to stockholders and, as appropriate, initiating
inquiries into aspects of the Company's internal accounting controls and
financial affairs.
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<PAGE> 10
The Compensation Committee of the Board of Directors consists of Messrs.
Rossi, Harman and Almon. The Compensation Committee met four times during the
last fiscal year. The Compensation Committee makes recommendations to the Board
of Directors concerning the compensation for the Company's officers and
administers the Company's 1996 Stock Option Plan, 1997 Stock Plan, 1997 Director
Option Plan, 1997 Employee Stock Purchase Plan and 1997 Non-U.S. Employee Stock
Purchase Plan.
There is no nominating committee or other committee performing similar
functions.
During the fiscal year ended April 30, 1998, no director attended fewer
than 75% of the total number of meetings of the Board of Directors and of the
committee on which such director served.
DIRECTOR COMPENSATION
Directors receive no cash remuneration for serving on the Board of
Directors but are reimbursed for reasonable out-of-pocket expenses they incur in
attending board and committee meetings. Messrs. Almon, Doll and Smart each
received options to purchase 37,500 shares of Class A Common Stock upon their
initial elections pursuant to the 1996 Stock Option Plan. Upon the effective
date of the Company's initial public offering (the "IPO"), directors who were
then employees of the Company became eligible to receive stock options pursuant
to the Company's 1996 Stock Option Plan and 1997 Stock Plan, and non-employee
directors became eligible to receive stock options pursuant to the Company's
1997 Stock Plan and the 1997 Director Option Plan. Upon consummation of the
Company's IPO, each non-employee director was granted an option to purchase
10,000 shares of the Company's Class A Common Stock. Twenty-five percent (25%)
of such shares rest on the first anniversary of the grant date, and vest for
four years thereafter on a pro rata monthly basis.
In August 1997, the Company adopted a 1997 Director Option Plan (the
"Director Plan"), which became effective upon the consummation of the IPO. A
total of 225,000 shares of Class A Common Stock has been reserved for issuance
under the Director Plan. The Director Plan provides for the grant of
nonstatutory stock options to nonemployee directors of the Company (the "Outside
Directors"). The grants are made pursuant to an automatic, nondiscretionary
grant mechanism. The Director Plan provides that each Outside Director is
granted a nonstatutory stock option to purchase 25,000 shares of Common Stock on
the date upon which such person first becomes an Outside Director (the "First
Option"). Thereafter, each Outside Director is automatically granted an option
to purchase 10,000 shares of Class A Common Stock on the date such Outside
Director is reelected to the Board of Directors by the Company's stockholders at
the Company's annual meeting of stockholders (a "Subsequent Option"), if, on
such date, such Outside Director has served on the Company's Board of Directors
for at least six months. Outside Directors on the effective date of the IPO
receive nonstatutory stock options for 10,000 shares of Class A Common Stock
(the "IPO Option"). The Director Plan provides that the First Option, the IPO
Option and all Subsequent Options become exercisable as to 25% of the shares
subject to the option one year after the grant date and as to 1/48th of the
shares subject to the option for each month thereafter. The exercise price per
share of all options granted under the Director Plan is equal to the fair market
value of a share of the Class A Common Stock on the date of grant. Options
granted to Outside Directors under the Director Plan have a ten year term, but
terminate earlier upon termination of an Outside Director's status as a
director. In the event of the merger or sale of substantially all the assets of
the Company, all outstanding options must be assumed or substituted by the
successor corporation, or if they are not assumed or substituted for, they
become fully vested and exercisable. If the options are assumed or substituted
for, they also will become full exercisable if the director is terminated other
than upon voluntary termination. Until terminated earlier, the Director Plan has
a term of ten years.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership on Forms 3,
and reports of changes in ownership on Forms 4 and 5 of Class A Common Stock and
other equity securities of the
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<PAGE> 11
Company. Executive officers, directors and greater than ten percent stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely upon its review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended April 30, 1998, all Section 16(a)
filing requirements applicable to its officers, directors and ten percent
stockholders were complied with, except as follows: (i) Mr. Doll failed to
timely file a Form 4 with respect to certain transactions occuring in October
1997 (such transaction was subsequently reported on a late Form 4); and Mr. Pham
failed to timely file a Form 3 following his appointment as an executive officer
of the Company in February 1998 (a Form 3 with respect to such appointment was
filed in July 1998).
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following Summary Compensation Table sets forth compensation paid by
the Company for services rendered during the fiscal years ended April 30, 1998
and April 30, 1997 by the Company's Chief Executive Officer and each of its
other most highly compensated executive officers (the "Named Officers"), whose
aggregate salary and bonus exceeded $100,000 in fiscal 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------- ------------
OTHER ANNUAL SECURITIES
COMPENSATION UNDERLYING
NAME AND POSITION FISCAL YEAR SALARY($) BONUS($) ($)(1) OPTIONS(#)
----------------- ----------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Robert G. Behlman........................ 1998 228,846 54,000 -- --
Chairman of the Board of Directors, 1997 217,598 57,000 206,045(2) 825,000
President and Chief Executive Officer
Nathan Kawaye............................ 1998 182,870 43,199 -- 195,000
Senior Vice President and Chief 1997(3) 134,987 26,250 -- 225,000
Financial Officer
Neo Kia Quek............................. 1998 207,389 68,637 -- 195,000
Senior Vice President, 1997 220,578 95,811 -- 262,500
Manufacturing Operations
Anthony Pham(4).......................... 1998 141,586 31,786 -- 195,000
1997 125,256 54,253 -- 165,000
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits which for each Named
Executive Officer did not exceed the lesser of $50,000 or 10% of the total
annual salary and bonus for such executive officer.
(2) Consists of a release by the Company of Mr. Behlman's payment obligations
under a full recourse promissory note in connection with the purchase of
150,000 shares of the Company's Class A Common Stock and compensation in the
amount of Mr. Behlman's tax liability associated therewith.
(3) Mr. Kawaye's employment with the Company commenced August 1, 1996.
Accordingly, salary and bonus amounts for fiscal 1997 reflect service for
only that portion of fiscal 1997 in which Mr. Kawaye served as an employee
of the Company.
(4) Mr. Pham became an executive officer of the Company in February 1998.
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<PAGE> 12
AGGREGATED OPTION EXERCISES IN FISCAL 1998 AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES APRIL 30, 1998 APRIL 30, 1998
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE(#) UNEXERCISABLE($)(1)
---- --------------- ----------- ---------------- -------------------
<S> <C> <C> <C> <C>
Robert G. Behlman................ -- -- 708,984/116,016 6,301,125/1,031,093
Nathan Kawaye.................... -- -- 193,359/226,641 1,718,489/ 281,207
Neo Kia Quek..................... -- -- 225,586/231,914 2,004,903/ 328,075
Anthony Pham..................... -- -- 141,797/218,203 1,260,225/ 206,219
</TABLE>
- ---------------
(1) Calculated by determining the difference between the per share closing price
of the Class A Common Stock as of the fiscal year ended April 30, 1998
($9.625) and the per share exercise price of the options.
(2) Calculated by determining the difference between the fair market value of
the Class A Common Stock of the date of exercise and the exercise price.
OPTION GRANTS IN LAST FISCAL YEAR
The Company granted stock options to the Named Executive Officers during
the fiscal year ended April 30, 1998, as follows:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF PERCENT OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS GRANTED STOCK PRICE APPRECIATION FOR
UNDERLYING TO EMPLOYEES EXERCISE OPTION TERM ($)(5)
OPTIONS IN FISCAL YEAR PRICE PER EXPIRATION ----------------------------
NAME GRANTED(#)(1) (#)(2) SHARE($)(3) DATE(4) 5%($) 10%($)
---- ------------- ---------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Robert G. Behlman.... -- -- -- -- -- --
Nathan Kawaye........ 195,000 14.5% 11.50 10/22/07 1,410,296 3,573,967
Neo Kia Quek......... 195,000 14.5% 11.50 10/22/97 1,410,296 3,573,967
Anthony Pham......... 195,000 14.5% 11.50 10/22/97 1,410,296 3,573,967
</TABLE>
- ---------------
(1) All options were granted on October 22, 1997 under the Company 1997 Stock
Option Plan, were vested as to 25% of the shares on the first anniversary of
the date of grant, and continue to vest at the rate of 1/48th of the
remaining shares at the end of each monthly anniversary thereafter, subject
to continued service as an employee or consultant. The term of each option
is ten years.
(2) Based upon options to purchase an aggregate of 1,490,249 shares of Class A
Common Stock that were granted to employees, including the Named Executive
Officers, during the fiscal year ended April 30, 1998.
(3) The exercise price per share of each option was equal to the fair market
value of the underlying Class A Common Stock on the date of grant.
(4) Options may terminate before their expiration date if the optionee's status
as an employee or consultant is terminated or upon the death of the
optionee.
(5) Potential gains are not of the exercise price but before taxes associated
with the exercise. The 5% and 10% assumed annual rates of compounded stock
appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of the
future Class A Common Stock price. Actual gains, if any, on stock option
exercises are dependent on the future financial performance of the Company,
overall market conditions and the option holder's continued employment
through the vesting period.
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<PAGE> 13
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
composed only of non-employee directors. The Committee is responsible for
reviewing and recommending for approval by the Board of Directors the Company's
compensation practices, executive pay levels and variable compensation programs.
The Committee also administers the Company's 1996 Stock Option Plan, 1997 Stock
Plan, 1997 Director Option Plan, 1997 Employee Stock Purchase Plan and 1997
Non-U.S. Employee Stock Purchase Plan, within Board of Directors' approved
guidelines.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that cash compensation should vary
with performance of the Company and long-term incentives should be closely
aligned with the interests of the stockholders.
Cash compensation for the executives consists of base salary and a variable
compensation segment based on the achievement of specified income goals and
strategic objectives.
Long-term incentives are provided through the granting of stock options to
key employees, including the Named Executive Officers. The level of stock
options and stock purchase rights granted (i.e., the number of shares subject to
each stock option grant or purchase grant) is based on the employee's current
and anticipated future performance, skill set and ability to affect achievement
of strategic goals and objectives. Grants generally vest on a pro rata monthly
basis over a four-year period from the date of hire or date of grant, thus
providing an incentive to employees to remain in the Company's employ.
The Company maintains a qualified employee stock purchase plan, pursuant to
which employees can purchase Company stock through payroll deductions, which is
generally available to all employees. This plan allows participants to buy
Company stock at a discount from the market price on certain specified dates
with up to 10% of their base salaries.
In setting compensation levels for executives, the Compensation Committee
reviews specific information gathered by the Company from proxy statements of
particular companies that are considered generally comparable to the Company in
that they are high-growth contract manufacturers with similar revenue size and
age. Recommendations by management are examined in light of this information,
but the Compensation Committee makes no special attempt to set cash compensation
in any particular relationship to the survey data. Cash compensation is also set
for each fiscal year in light of salary levels that the Compensation Committee
believes are necessary to retain certain of the Company's executive officers.
The final fiscal 1998 base salary levels for the Named Executive Officers fall
within the industry standards for comparable positions.
BASE SALARY
For fiscal year 1998, the base salary of each executive officer was set
based upon the results of the executive's performance review. Each executive is
reviewed annually by the Chief Executive Officer and other members of management
and given specific objectives, with the objectives varying based upon the
executive's position and responsibilities and the specific objectives for that
position for the coming year. At the next annual review, the management of the
Company reviews the performance of the executive officer vis-a-vis the
established objectives. The results of this review are then reported to the
Compensation Committee along with management's compensation recommendation, and
the Compensation Committee determines whether base salary should be adjusted for
the coming year.
STOCK OPTIONS
Stock options are granted to aid in the retention of key employees and to
align the interest of key employees with those of the Company's stockholders.
Stock options are generally granted at a price equal to the fair market value on
the date of grant and generally vest on a pro rata monthly basis over four years
from
11
<PAGE> 14
the date of hire or date of grant. Options are granted to key employees,
including executives, based on such employee's skills, the current marketability
of those skills, the employee's current performance and anticipated future
contribution based on that performance, and the employee's ability to have an
effect on corporate and/or business unit results.
In fiscal 1998, in connection with the Company's grant of options to
purchase an aggregate of 1,490,249 shares of its Class A Common Stock to its
employees, Messrs. Kawaye, Quek and Pham each were granted an option to purchase
195,000 shares of Class A Common Stock. These options vest as to 25% of the
shares on the first anniversary of the date of grant, with the remaining shares
vesting on a pro-rata monthly basis over a three (3) year period.
CEO COMPENSATION
As described above, the Company's executive pay program is leveraged toward
achieving corporate goals and objectives. This principle of pay-for-performance
is exemplified by the pay package of the Company's Chief Executive Officer.
The Compensation Committee reviews Mr. Behlman's base salary annually,
considering Company performance, individual performance, and external pay
practices respecting similarly situated chief executive officers. In fiscal
1998, Mr. Behlman received a base salary of $228,846 with a bonus aggregating
$54,000. His total cash compensation for fiscal 1997 was $480,643, including a
base salary of $217,598, a bonus of $57,000 and $206,045 in the form of a
release by the Company of Mr. Behlman's payment obligations under a full
recourse promissory note in connection with the purchase of 150,000 shares of
the Company's Class A Common Stock and compensation in the amount of Mr.
Behlman's tax liability associated therewith. The Compensation Committee
believes that the compensation paid to Mr. Behlman in fiscal 1998 is comparable
to that paid to chief executive officers of similarly situated companies and is
consistent with the Committee's objective to attract, retain and reward the
executive talent necessary to achieve the Company's objectives.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors during the Last Fiscal
Year consisted of Messrs. Rossi, Harman and Almon. No member of the Compensation
Committee or executive officer of the Company has a relationship that
constitutes an interlocking relationship with executive officers or directors of
another entity.
COMPENSATION COMMITTEE:
Mark Rossi, Fredric W. Harman
and William J. Almon
12
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURNS
AMONG IMS, PEER GROUP AND NASDAQ MARKET
The graph below compares the cumulative total return of the Company's Class
A Common Stock with the NASDAQ market index and a self-determined peer group
index from October 22, 1997 to April 30, 1998. The peer group has been selected
by the Company in good faith. The Common Stocks of the peer group companies have
been included on a weighted basis to reflect the relative market capitalization
at the end of each period shown.
COMPARISON OF CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
SELF-
INTERNATIONAL DETERMINED
MANUFACTURING NASDAQ US PEER GROUP
<S> <C> <C> <C>
10/22/97 100 100 100
10/31/97 95 93 87
1/31/98 68 89 75
4/30/98 86 86 72
</TABLE>
- ---------------
SELF-DETERMINED PEER GROUP: ACT Manufacturing, Benchmark Electronics, CMC
Industries, DII Group, Inc., IEC Electronics, Jabil Circuit, Inc., Plexus Corp.
The graph above assumes that $100 was invested on October 22, 1997 in the
Company's Class A Common Stock, the NASDAQ National Market and in stocks of the
Company's self-determined peer group, with all dividends being reinvested. The
indexes are reweighted daily, using the market capitalization on the previous
trading day. The price performance of the Class A Common Stock shown above is
historical and not necessarily indicative of future price performance.
13
<PAGE> 16
OTHER MATTERS
The Board of Directors is not aware of any matters that will be presented
for consideration at the Annual Meeting other than those described in this Proxy
Statement. If any other matters properly come before the Annual Meeting, the
persons named on the accompanying Proxy will have the authority to vote on those
matters in accordance with their own judgment.
By Order of the Board of Directors
/s/ ROBERT G. BEHLMAN
ROBERT G. BEHLMAN
President, Chief Executive Officer and
Chairman of the Board of Directors
August 19, 1998
14
<PAGE> 17
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
INTERNATIONAL MANUFACTURING SERVICES, INC.
1998 ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of International Manufacturing Services,
Inc., a Delaware corporation (the "Company"), hereby appoints Robert G. Behlman
and Nathan Kawaye, and each of them, with full power of substitution to
represent the undersigned and to vote all the shares of the Company which the
undersigned is entitled to vote, at the 1998 Annual Meeting of Stockholders of
the Company to be held on September 16, 1998, at 10:00 a.m., local time, at the
Company's principal executive offices located at 2222 Qume Drive, San Jose,
California 95131, or any adjournment thereof, (1) as hereinafter specified upon
the proposals listed on the reverse side and as more particularly described in
Company's Proxy Statement, the receipt of which is hereby acknowledged, and (2)
in their discretion upon such other matters as may properly come before the
annual meeting.
(Continued and to be signed, on reverse side.)
<PAGE> 18
(Continued from other side)
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below [ ] to vote for all nominees listed below [ ]
(INSTRUCTION: To withhold authority to vote for any individual nominee mark the box next to the nominee's name below)
[ ] Robert G. Behlman [ ] William J. Almon [ ] Dixon R. Doll [ ] John A. Downer
[ ] Fredric W. Harman [ ] Mark Rossi [ ] J. Larry Smart [ ] Paul J. Tufano
2. PROPOSAL TO APPROVE THE AMENDMENT TO THE COMPANY'S 1997 EMPLOYEE STOCK
PURCHASE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSE COOPERS LLP AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 1999.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In the discretion of the proxy holder, to vote or otherwise represent the
shares on such other business as may properly come before the annual meeting or
any adjournment thereof.
This PROXY when properly executed will be voted as directed or, if no
direction is indicated, will be vote FOR Proposals 1, 2 and 3, and in the
discretion of the proxyholders, on such other business as may properly come
before the meeting or any adjournment thereof.
(This Proxy should be marked, dated and signed by the stockholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing as officers or in a fiduciary capacity (such as executors,
administrators, trustees, guardians, attorneys and corporate officers) should so
indicate. If shares are held by joint tenants or as community property, both
should sign.)
Signature__________________________ Date_____________
Signature__________________________ Date_____________
[ ] CHECK HERE FOR ADDRESS CHANGE
[ ] CHECK HERE IF YOU PLAN TO ATTEND THE ANNUAL MEETING
</TABLE>
