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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /x/
Filed by a party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
KMG-B, 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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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KMG-B, INC.
10611 HARWIN, SUITE 402
HOUSTON, TEXAS 77036
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of Shareholders of KMG-B, Inc., a Texas corporation
(the "Company"), will be held at The Houstonian Hotel, 111 North Post Oak
Lane, Houston, Texas 77024 on November 19, 1997 at 1:00 p.m., Central
Standard Time:
1. To elect five (5) directors to hold office until the next annual
meeting of shareholders or until their respective successors have been duly
elected and qualified;
2. To consider and vote on an amendment to the Company's Restated and
Amended Articles of Incorporation to change the Company's name to "KMG
Chemicals, Inc.";
3. To ratify the appointment of Deloitte & Touche LLP as independent
accountants and auditors for the Company for fiscal year 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Shareholders of record at the close of business on October 19, 1997 are
entitled to notice of and to vote at this Annual Meeting of Shareholders or
any adjournment or postponement thereof.
All shareholders are cordially invited and urged to attend the Annual
Meeting of Shareholders in person. EVEN IF YOU PLAN TO ATTEND THE MEETING,
YOU ARE REQUESTED TO COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ADDRESSED ENVELOPE. A return of a blank proxy will be deemed a vote
in favor of the proposals contained in the Proxy Statement. If you attend,
your may vote in person if you wish, even though you have sent in your the
proxy.
By Order of the Board of Directors,
Fred C. Leonard III, Secretary
October 31, 1997
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KMG-B, INC.
10611 HARWIN, SUITE 402
HOUSTON, TEXAS 77036
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being
furnished to the shareholders of KMG-B, Inc., a Texas corporation (the
"Company"), in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held on November 19, 1997, at 1:00 p.m., Central
Standard Time, at The Houstonian Hotel, 111 North Post Oak Lane, Houston,
Texas 77024, and any adjournment or postponement thereof.
The matters to be considered and acted upon at the Annual Meeting are
described in the foregoing Notice of Annual Meeting and this Proxy Statement.
This Proxy Statement and the related form of proxy are being mailed on or
about November 7, 1997 to all shareholders of record as of October 19, 1997
(the "Record Date"). Shares of the Company's common stock, par value $.01
per share (the "Common Stock"), represented by proxies will be voted as
described in this Proxy Statement or as otherwise specified by a shareholder.
With respect to the election of directors, a shareholder may, by checking
the appropriate box on the proxy: (i) vote for all director nominees as a
group; (ii) withhold authority to vote for all director nominees as a group;
or (iii) vote for all director nominees as a group except those nominees
identified by the shareholder in the appropriate area. With respect to the
other proposals contained herein, a shareholder may, by checking the
appropriate box on the proxy: (i) vote for the proposal; (ii) vote against
the proposal; or (iii) abstain from voting on the proposal.
Any shareholder who executes and delivers a proxy may revoke it at any
time prior to its use by (i) giving written notice of revocation to the
Secretary of the Company, (ii) executing and delivering a proxy bearing a
later date or (iii) appearing at the Annual Meeting and voting in person.
If the proxy in the accompanying form is properly executed and not
revoked, the shares represented by the proxy will be voted in accordance with
the instructions thereon. If no instructions are given on the matters to be
acted upon, the shares represented by the proxy will be voted: (i) for
election of the directors nominated herein; (ii) for approval of an amendment
to the Company's Restated and Amended Articles of Incorporation (the
"Articles of Incorporation") to change the Company's name to "KMG Chemicals,
Inc."; (iii) for the ratification of the appointment of
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Deloitte & Touche LLP as independent accountants and auditors for the
Company for fiscal year 1998; and (iv) in the discretion of the proxy holders
as to any business that may properly come before the Annual Meeting or any
adjournment or postponement thereof.
VOTING RIGHTS
Only holders of record of outstanding shares of Common Stock at the close
of business on the Record Date are entitled to one vote for each share held
on all matters coming before the Annual Meeting or any adjournment or
postponement thereof. There were 7,000,169 shares of Common Stock
outstanding and entitled to vote on the Record Date.
VOTING REQUIREMENTS
To be elected, each director must receive the affirmative vote of the
holders of a plurality of the issued and outstanding shares of Common Stock
entitled to vote and represented at the Annual Meeting in person or by proxy.
The Company's name change must be approved by holders of a majority of the
issued and outstanding shares of Common Stock entitled to vote and
represented at the Annual Meeting in person or by proxy. To ratify the
appointment of Deloitte & Touche LLP as independent accountants and auditors
for the Company, the affirmative vote of a majority of the issued and
outstanding shares of Common Stock entitled to vote and represented at the
Annual Meeting in person or by proxy is required.
ELECTION OF DIRECTORS
NOMINEES FOR DIRECTOR
The nominees for directors are the current directors. Each director of
the Company will serve until the next annual meeting of shareholders or until
his successor is elected and qualified. Set forth below is a description of
the backgrounds of the nominees for director.
DAVID L. HATCHER, age 54, has served as a director and President of the
Company since its acquisition of KMG-Bernuth, Inc. ("KMG") in October 1996.
Mr. Hatcher has also served as a director and President of KMG since 1985.
Mr. Hatcher has worked in the wood treating industry since 1980 for
predecessors and affiliates of KMG in various capacities, including engineer,
general manager and President. Mr. Hatcher is also an officer and director
of KMG de Mexico, S.A. de C.V., KMG's subsidiary.
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BOBBY D. GODFREY, age 58, has served as a director and Vice President of
the Company since its acquisition of KMG in October 1996. Mr. Godfrey has
also served as a director and Vice President of KMG since 1985.
CHARLES M. NEFF, JR., age 51, has served as a director of the Company
since its acquisition of KMG in October 1996. Mr. Neff has also served as a
director of KMG since 1991 and as Treasurer since 1993. Mr. Neff has served
as the Chief Executive Officer and President of Houston National Bank, N.A.
since 1988.
FRED C. LEONARD III, age 52, has served as a director and Secretary of
the Company since its acquisition of KMG in October 1996. Mr. Leonard has
also served as a director of KMG since 1992 and as Secretary since 1993. Mr.
Leonard has served as the Chairman of the Board, Chief Executive Officer and
President of Valves Incorporated of Texas, Inc., a manufacturing company
located in Houston, Texas since 1972. Mr. Leonard also currently serves as
the Chairman of the Board and Treasurer of Agrimpex, Inc., a company that
acts as a manufacturers' representative promoting sales of equipment and
services in Turkey, and as Secretary of North Star Tours, Inc., a travel
agency specializing in tours to Turkey.
GEORGE W. GILMAN, age 55, has served as a director of the Company since
its acquisition of KMG in October 1996 and has also served as a director of
KMG since 1995. Mr. Gilman has served as the Chief Executive Officer,
President and as a director of Commerce Securities Corporation, a National
Association of Securities Dealers, Inc. member firm, since 1982 and has
practiced law with the law firm of George Gilman, P.C. since 1986.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has two committees, an Audit Committee and a
Compensation Committee, each composed of at least two independent directors.
The Audit Committee, composed of Messrs. Leonard, Neff and Gilman, makes
recommendations to the Board of Directors regarding the independent public
accountants of the Company and the annual audit of the Company's financial
statements and accounts. The Compensation Committee, composed of Messrs.
Leonard, Neff and Hatcher, makes recommendations to the Board of Directors
regarding compensation for the Company's executive officers, directors,
employees and agents. During fiscal 1997, the Audit Committee
and the Compensation Committee each held one meeting.
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COMPENSATION OF DIRECTORS
Each director, including directors who are employees of the Company,
receives a fee of $1,000 for attending each meeting of the Board of Directors.
Directors of KMG also receive a fee of $350 for each meeting. Directors are
reimbursed for out-of-pocket expenses incurred in attending meetings and for
other expenses incurred in performing in their capacity as directors. During
fiscal 1997 the Board of Directors held two meetings.
MANAGEMENT
Set forth below is a description of the backgrounds of certain
significant employees of the Company and KMG in addition to Messrs. Hatcher
and Godfrey, whose backgrounds are described above.
THOMAS H. MITCHELL, age 53, has served as Vice President of KMG since
1994. Mr. Mitchell has been employed by KMG since 1988 in various capacities,
including general sales manager.
JACK VERNIE, age 53, has served as Controller of the Company since its
acquisition of KMG in October 1996. Mr. Vernie has also served as Controller
of KMG since 1994. Prior to his employment with KMG, Mr. Vernie served as
Controller of Golden West Refining Company, a petroleum refining company
located in Santa Fe Springs, California, from 1983 to 1993.
EXECUTIVE COMPENSATION
The following table sets forth the cash and non-cash compensation paid to
its chief executive officer, its other most highly compensated executive
officer and an executive officer of a subsidiary of the Company for the
fiscal years ended July 31, 1997, 1996 and 1995. None of the Company's other
officers or directors received cash or non-cash compensation in excess of
$100,000 for the fiscal year ended July 31, 1997.
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SUMMARY COMPENSATION TABLE
Annual Compensation
Name and ------------------- All Other
Principal Position Year Salary Bonus Compensation (1)
- ----------------------------- ---- ------ ----- ----------------
David L. Hatcher . . . . . . 1997 $274,625 $155,500 $31,891
President 1996 274,733 122,000 42,673
1995 273,435 22,000 44,041
Bobby D. Godfrey . . . . . . 1997 84,241 17,500 12,325
Vice President 1996 88,899 12,100 16,726
1995 82,328 0 17,594
Thomas H. Mitchell . . . . . 1997 95,687 17,000 2,819
Vice President (KMG only) 1996 91,596 21,100 4,790
1995 84,200 9,511 3,400
(1) Includes payments made by the Company under its 401(k) Profit
Sharing Plan and, for David L. Hatcher and Bobby D. Godfrey, the economic
benefit of premiums paid by the Company under certain split dollar life
insurance agreements. In fiscal 1997, the economic benefit of the split
dollar agreements was $27,931 for Mr. Hatcher and $10,105 for Mr. Godfrey.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of October 10, 1997
with regard to the beneficial ownership of Common Stock by (i) each person
known to the Company to be the beneficial owner of 5% or more of its
outstanding Common Stock, (ii) the officers and directors of the Company
individually and (iii) the officers and directors of the Company as a group.
All addresses are in care of the Company, 10611 Harwin Drive, Suite 402,
Houston, Texas 77036.
NUMBER OF
NAME SHARES OWNED PERCENT
---- ------------ -------
David L. Hatcher . . . . . . . . . . . . . 5,078,503 72.05
Bobby D. Godfrey (1) (3). . . . . . . . . . 784,997 11.13
Fred C. Leonard III (2) (3) . . . . . . . . 652,000 9.25
George W. Gilman (3) . . . . . . . . . . . 1,000
Charles M. Neff, Jr.(3) . . . . . . . . . . 1,000
Thomas H. Mitchell (3) . . . . . . . . . . 43,671 .62
Directors and executive officers as a group
(6 persons) . . . . . . . . . . . . . . . 6,561,171 93.09
(1) Mr. Godfrey granted a right of first refusal to purchase 780,997
shares of Common Stock to Valves Incorporated of Texas, Inc., a company in
which Mr. Leonard is an officer and a principal shareholder.
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(2) Includes shares held by Valves Incorporated of Texas, Inc., a
company in which Mr. Leonard is an officer and a principal shareholder.
(3) The ownership shown in the table includes shares of Common Stock
that may be acquired within 60 days on the exercise of outstanding stock
options under the Company's 1996 Stock Option Plan as follows: Mr. Godfrey-
1,000 shares, Mr. Leonard-1,000 shares, Mr. Gilman-1,000 shares, Mr.
Neff-1,000 shares and Mr. Mitchell-43,671 shares; and the group-47,671.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company, the Company knows of no failure in Section 16(a)
beneficial ownership reporting compliance.
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND OTHERS
George W. Gilman, a director of the Company, is an employee of Gilman
Financial Corporation ("GFC") and the father of Jeffrey L. Gilman, an
officer, director and principal shareholder of GFC. GFC rendered services
to KMG in connection with its acquisition by the Company in October, 1996.
Persons selected by GFC were issued 137,695 shares of Common Stock in July
1997 pursuant to a Consulting Agreement ("GFC Consulting Agreement") with GFC
for those services. The shares were issued to persons selected by GFC but did
not include Mr. George W. Gilman. The services included (i) locating and
performing due diligence upon potential merger or acquisition candidates,
(ii) providing advice regarding the structure of the contemplated transaction
and the corporate structure of the resulting entity and (iii) reviewing the
transaction documents.
The Company initially advanced $218,000 to David L. Hatcher in fiscal
1992. That indebtedness plus advances in subsequent fiscal years is evidenced
by an unsecured promissory note dated July 15, 1994 in the principal amount
of $252,984. The promissory note provides for semimonthly payments of
$1,000, including interest at 6.5% per year, beginning on January 15, 1995.
The amount owing under the promissory note was $253,007 and $260,302 for the
fiscal years ended 1997 and 1996, respectively.
The Company entered into split dollar life insurance agreements in 1991
with David L. Hatcher and Bobby D. Godfrey respecting life insurance
policies. At the time the policies were obtained, David B. Hatcher II, the
son of David L. Hatcher, was the agent for the insurance company that issued
the policies. According to the split dollar life insurance agreements, the
Company is obligated to pay the entire premium due
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on the insurance policies and those payments are treated as advances to the
insured. All advances are to be repaid to the Company out of the proceeds of
the policy or upon termination of the agreements. Premiums totaling
approximately $75,000 were paid by the Company in each of fiscal years 1997
and 1996.
The Company's 401(k) Profit-Sharing Plan and its employee health
insurance plan are also provided to the Company by the insurance company
employing David B. Hatcher II. The Company believes that the premiums and
other terms of the split dollar insurance policies, the 401(k) Profit Sharing
Plan and its employee health insurance plan are comparable to those provided
by unrelated insurers.
PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
NAME CHANGE TO KMG CHEMICALS, INC.
The Board of Directors has adopted a resolution approving an amendment to
the Articles of Incorporation to change the Company's name to "KMG Chemicals,
Inc." The Board of Directors believes that the new name will better describe
the business of the Company. The following proposal will be presented for
action at the Annual Meeting:
RESOLVED, that Article One of the Restated and Amended Articles of
Incorporation be amended to read as follows:
ARTICLE ONE
NAME
The name of the Corporation is KMG Chemicals, Inc. (hereinafter the
"Corporation").
RESOLVED FURTHER, that the officers of the Company are hereby authorized
and instructed to execute any and all instruments and documents, including
but not limited to an Amendment to the Restated and Amended Articles of
Incorporation of the Company, and take such action, as may be necessary or
desirable in the discretion of such officers to accomplish and carry out
the foregoing resolution.
Assuming approval of the amendment to the Articles of Incorporation to change
the name of the Company, an amendment will be filed with the Secretary of
State of the State of Texas as soon as practicable after the date of the
Annual Meeting.
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EXCHANGE OF STOCK CERTIFICATES
It is not necessary for shareholders to exchange their stock
certificates, although they may do so if they wish. As soon as practicable
after the effective date of the amendment of the Articles of Incorporation,
the Company's transfer agent will send letters of transmittal to all
shareholders of record setting forth the optional exchange procedure. Upon
proper completion and execution of the letter of transmittal and return
thereof to the transfer agent, together with old certificates, each
shareholder of record will receive new certificates reflecting the new name.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CHANGE OF THE NAME.
PROPOSAL TO RATIFY THE APPOINTMENT
OF INDEPENDENT AUDITORS
The Board of Directors has appointed Deloitte & Touche LLP as independent
accountants and auditors to conduct the annual audit of the Company's
accounts for the fiscal year 1998. Although action by the shareholders in
this matter is not required, the Board of Directors believes that it is
appropriate to seek shareholder ratification of this appointment in light of
the important role played by the independent auditors in maintaining the
integrity of the Company's financial controls and reporting. If ratification
of the appointment is not approved, the Board of Directors will reconsider the
appointment.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire.
They will be available to respond to appropriate questions from shareholders
at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT ACCOUNTANTS AND AUDITORS.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 1998 Annual
Meeting of Shareholders must file such proposal with the Company by
June 30, 1998, for possible inclusion in the Company's proxy statement and
form of proxy relating to that meeting.
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OTHER MATTERS
The Board of Directors knows of no matters other than those stated above
which are to be brought before the Annual Meeting. However, if any such
other matters should be presented for consideration and voting, the persons
named in the proxy to vote thereon will do so in accordance with their
judgment.
By Order of the Board of Directors,
Fred C. Leonard III
Secretary
October 31, 1997
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Appendix
Form of Proxy
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KMG-B, INC.
10611 HARWIN, SUITE 402, HOUSTON, TEXAS 77036
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David L. Hatcher as proxy with power of
substitution to vote all shares of KMG-B, Inc. (the "Company") which the
undersigned is entitled to vote at an Annual Meeting of Shareholders on November
19, 1997, at the Company's offices at 10611 Harwin, Suite 402, Houston, Texas
77036, or any adjournment or postponement thereof, with all the powers the
undersigned would have if personally present as specified, respecting the
following matters described in the accompanying Proxy Statement and, in his
discretion, on other matters which come before such meeting.
1. To elect five directors to hold office until the next annual meeting
of shareholders or until their respective successors have been duly
elected and qualified.
<TABLE>
<S> <C> <C>
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY to / / FOR ALL NOMINEES EXCEPT:
vote for ALL nominees
listed below
</TABLE>
Instructions: To withhold authority to vote for (an) any individual(s),
choose the third box and write in the name of the nominee(s) on
this line
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Nominees: David L. Hatcher, Bobby D. Godfrey,
Fred C. Leonard III, George W. Gilman, Charles M. Neff, Jr.
2. To consider and vote on an amendment to the Company's Restated
Articles of Incorporation to change the Company's name to
"KMG Chemicals, Inc."
FOR / / AGAINST / / ABSTAIN / /
3. To ratify the appointment of Deloitte & Touche LLP as independent
accountants and auditors for the Company for fiscal year 1998; and
FOR / / AGAINST / / ABSTAIN / /
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
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This proxy will be voted in accordance with shareholder specifications.
Unless directed to the contrary, this proxy will be voted FOR each proposal and
in his discretion for any other matters coming before the meeting. A majority
(or if only one, then that one) of the proxies or substitutes acting at the
meeting may exercise the powers conferred herein. Receipt of accompanying
Notice of Meeting and Proxy Statement is hereby acknowledged.
Date: , 1997
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(Signature)
--------------------------------
--------------------------------
(Please print your name)
(PLEASE SIGN NAME AS FULLY AND
EXACTLY AS IT APPEARS OPPOSITE.
When signing in a fiduciary or
representative capacity, please
give full title as such. When more
than one owner, each owner should
sign. Proxies executed by a
corporation should be signed in
full corporate name by duly
authorized officer.)
PLEASE MARK, SIGN, DATE AND MAIL TO THE COMPANY AT THE ADDRESS STATED ABOVE.
