<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-12
KMG CHEMICALS, INC.
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(Name of Registrant as Specified In Its Charter)
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(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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<PAGE>
KMG CHEMICALS, INC.
10611 HARWIN, SUITE 402
HOUSTON, TEXAS 77036
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS
The Annual Meeting of Shareholders of KMG Chemicals, Inc., a Texas
corporation (the "Company"), will be held at The Houstonian Hotel, 111 North
Post Oak Lane, Houston, Texas 77024 on November 21, 2000 at 10:00 a.m.:
1. To elect six (6) directors to hold office until the next annual
meeting of shareholders or until their respective successors have been duly
elected and qualified;
2. To ratify the appointment of Deloitte & Touche LLP as independent
accountants and auditors for the Company for fiscal year 2001; and
3. 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 16, 2000 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, you may vote in
person if you wish, even though you have sent in your proxy.
By Order of the Board of Directors,
/s/ Fred C. Leonard III
Fred C. Leonard III, Secretary
October 27, 2000
<PAGE>
KMG CHEMICALS, 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 Chemicals, 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 21, 2000, at 10:00 a.m., 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
October 31, 2000 to all shareholders of record as of October 16, 2000 (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 in this Proxy
Statement, 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 the ratification of the appointment
of Deloitte & Touche LLP as independent accountants and auditors for the Company
for fiscal year 2001; and (iii) 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. 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.
<PAGE>
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 57, 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.
BOBBY D. GODFREY, age 61, 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 54, has served as a director of the Company
since its acquisition of KMG in October 1996. Mr. Neff also served as a director
of KMG from 1991 until 1997 and served as Treasurer of KMG from 1993 until 1997.
Mr. Neff served as the Chief Executive Officer and President of Houston National
Bank, N.A. from 1988 to 1998 and is currently a director and Chief Executive
Officer of Sterling Bank-Bayou Bend, President of National Health Capital, Ltd.
FRED C. LEONARD III, age 55, has served as a director and Secretary of
the Company since its acquisition of KMG in October 1996. Mr. Leonard also
served as a director of KMG from 1992 until 1997 and served as the Secretary of
KMG 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 58, has served as a director of the Company since
its acquisition of KMG in October 1996 and also served as a director of KMG from
1995 until 1997. 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. He practiced law with the law
firm of George Gilman, P.C. from 1986 to 1998 and since 1998 has practiced with
the law firm of Wilbanks and Gilman, P.C.
RICHARD L. URBANOWSKI, age 63, was elected as a director of the Company
upon the increase in the size of the Board of Directors in August 2000. Mr.
Urbanowski retired in 1998 as President and Chief Operating Officer of ISK
Biosciences Corporation, a specialty chemicals company selling crop protection
chemicals and wood preservative products. Mr. Urbanowski began his career with
Diamond Alkali Company where he held various positions in research and
development, engineering, operations, production and sales. He is currently a
member of the CoAg Advisory Council for the College of Agriculture at Auburn
University.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES FOR DIRECTOR.
2
<PAGE>
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 2000, the Audit Committee held one meeting
and the Compensation Committee held no meetings.
COMPENSATION OF DIRECTORS
Each director, including directors who were employees of the Company,
received a fee in fiscal 2000 for attending meetings of the Board of Directors
of $1,500 for each meeting. Directors of KMG also received 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 2000 the Board of Directors of the Company
held four meetings and the board of directors of KMG held one meeting.
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 56, has served as KMG's Vice President since
1994. Mr. Mitchell has been employed by KMG since 1988 in various capacities,
including general sales manager and since July, 1998, General Manager.
JACK VERNIE, age 56, 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 the Company's chief executive officer, its other most highly compensated
executive officer and an executive officer of a subsidiary for the fiscal years
ended July 31, 2000, 1999 and 1998. 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, 2000.
3
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
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SHARES
ANNUAL UNDERLYING
NAME AND COMPENSATION (1) OPTIONS ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS GRANTED COMPENSATION (2)
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<S> <C> <C> <C> <C> <C>
David L. Hatcher 2000 276,500 183,223 22,367
President 1999 276,350 181,363 22,017
1998 276,250 147,300 30,150
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Bobby D. Godfrey 2000 105,413 6,250 3,673
Vice President 1999 82,750 6,000 3,308
1998 81,250 148,281 1,000 14,869
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Thomas H. Mitchell 2000 125,000 63,993 5,000 5,370
Vice President (KMG only) 1999 125,000 63,171 15,000 5,027
1998 97,950 28,000 7,500 5,492
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</TABLE>
(1) Salary includes directors' fees paid to each of Mr. Hatcher and Mr.
Godfrey for serving as directors of the Company and KMG.
(2) Includes payments made by the Company under its 401(k) Profit
Sharing Plan and for David L. Hatcher the economic benefit of premiums paid by
the Company under a split dollar life insurance agreement. In fiscal 2000, the
economic benefit of the split dollar agreement for Mr. Hatcher was $16,382.
OPTION GRANTS IN FISCAL YEAR 2000
<TABLE>
<CAPTION>
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SHARES OF COMMON
STOCK UNDERLYING PERCENT OF TOTAL EXERCISE PRICE EXPIRATION
NAME OPTIONS GRANTED GRANTED TO EMPLOYEES ($/SH) DATE
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<S> <C> <C> <C> <C>
Thomas H. Mitchell 5,000 56.0% 4.25 (1)
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</TABLE>
(1) Options expire ten years after becoming vested. Vesting is twenty
percent of the total shares per year and the vesting period begins on the date
of grant, March 1, 2000.
AGGREGATE OPTION EXERCISES IN FISCAL YEAR 2000 AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
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VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS:
OPTIONS FY00: ($) EXERCISABLE/
SHARES ACQUIRED ON (#) EXERCISABLE/ UNEXERCISABLE
NAME EXERCISE (#) UNEXERCISABLE
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<S> <C> <C> <C>
Bobby D. Godfrey 0 1,000/0 $563/$0
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Thomas H. Mitchell 0 49,671/21,500 $212,050/$4,630
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</TABLE>
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 30,
2000 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 executive 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.
<TABLE>
<CAPTION>
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NUMBER OF
NAME SHARES OWNED PERCENT
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<S> <C> <C>
David L. Hatcher (3) 5,073,003 72.47
Bobby D. Godfrey (1) 426,497 6.09
Fred C. Leonard III (1) (2) 954,500 13.63
George W. Gilman (1) 22,000 .31
Charles M. Neff, Jr.(1) 29,237 .42
Richard L. Urbanowski 0 0.0
Thomas H. Mitchell (KMG executive
officer) (1) 54,171 .77
Directors and executive officers as a group
(7 persons) 6,559,408 92.93
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</TABLE>
(1) 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 - 54,171 shares; and for the entire group - 58,171
shares.
(2) Includes shares held by Valves Incorporated of Texas, Inc., a
company in which Mr. Leonard is an officer and a principal shareholder.
(3) On October 18, 2000, Mr. Hatcher sold 180,000 shares of Common
Stock to the Company. See "--Transactions with Executive Officers, Directors and
Others".
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3, 4 and 5 and amendments thereto
furnished to the Company, the Company knows of no failure in Section 16(a)
beneficial ownership reporting compliance except that due to an inadvertent
administrative oversight Mr. Godfrey's Form 4 for May 2000 was filed late.
TRANSACTIONS WITH EXECUTIVE OFFICERS, DIRECTORS AND OTHERS
On October 18, 2000, the Company purchased 180,000 shares of the Common
Stock of the Company from Mr. Hatcher at a price of $5.00 per share. The per
share purchase price was established by the Board of Directors on August 29,
2000 when it approved the purchase and was based on the then current price of
the Common Stock. Of the total purchase price of $900 thousand, Mr. Hatcher used
$674 thousand of the proceeds to purchase the Company's interest in a
participation loan by Sterling Bank to National Health
5
<PAGE>
Capital, Ltd. ("NHC"), to purchase a second loan to NHC and to repay loans made
to him by the Company in fiscal 1998 and 1992.
In fiscal 2000 the Company granted a warrant to purchase 25,000 shares
of Common Stock at $5.00 per share to the assignee of Gilman Financial
Corporation. The warrant expires March 6, 2009 and was issued as compensation
for the acquisition consulting services of Gilman Financial Corporation. Mr.
Gilman is an employee of Gilman Financial Corporation but he is not its officer,
director or shareholder.
In August, 1998, the Company purchased for $200 thousand a
participation in a loan by Sterling Bank to NHC, a limited partnership
engaged in purchasing medical receivables. In November, 1998, the Company
made a further loan of $200 thousand to NHC. At the time of these
transactions, Messrs. Hatcher, Neff and Gilman were directors of the general
partner of NHC, Messrs. Hatcher and Neff each 8% limited partners in NHC and
Mr. Neff was president of NHC. NHC ceased operations in 1999 and is now in
the process of recovering on its assets and winding up its business. The
Company agreed that beginning in January 1999 the participation loan and
second loan would bear no interest. The participation loan is due on August
20, 2000 and the second NHC loan is due on September 30, 2000. The
participation loan was partially guaranteed by Mr. Neff and both the
participation loan and the second loan were guaranteed by Mr. Hatcher. At the
end of fiscal 2000, the aggregate balance owing on the two loans was $263
thousand. Mr. Hatcher purchased both the participation and the second loan
made to NHC from the Company on October 18, 2000 for their then outstanding
balance of $241 thousand. The Company released Mr. Hatcher on his guaranty of
the two loans.
The Company loaned $200 thousand to David L. Hatcher in fiscal 1998.
That indebtedness was renewed, extended and modified as of May, 2000, payable in
seven annual installments of approximately $29 thousand plus interest at eight
percent (8%) per annum . As of the end of fiscal 2000, accrued interest on the
note was approximately $3 thousand and the principal balance was $200 thousand.
On October 18, 2000, Mr. Hatcher repaid in full the interest and principal of
$207 thousand then owing on the indebtedness.
The Company also loaned $218 thousand to Mr. Hatcher in fiscal 1992.
That indebtedness plus advances in subsequent fiscal years was evidenced by an
unsecured promissory note dated July 15, 1994 in the principal amount of
approximately $253 thousand. The promissory note provided for semimonthly
payments of $1 thousand, including interest at 6.5% per year, beginning on
January 15, 1995. The amount owing under the promissory note was approximately
$228 thousand and $237 thousand at the end of fiscal years 2000 and 1999,
respectively. On October 18, 2000, Mr. Hatcher repaid in full the interest and
principal of $226 thousand then owing on the indebtedness.
In February 1998, the split dollar insurance agreement between the
Company and Mr. Godfrey was terminated. The Company released the collateral
assignment of the insurance policy bought under the plan on Mr. Godfrey and he
signed a non interest bearing promissory note payable to the Company for
$170,899.54, the amount of insurance premiums paid on behalf of Mr. Godfrey by
the Company under the split dollar insurance plan. The amount owing on the
promissory note was $150,961 and $170,900 as of the end of fiscal 2000 and 1999,
respectively.
Mr. Godfrey entered into an employment agreement with the Company in
February 1998 having a term of seven years and containing a covenant not to
compete.
6
<PAGE>
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 2001. 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 2001 ANNUAL MEETING
Any shareholder who intends to present a proposal at the 2001 Annual
Meeting of Shareholders must file such proposal with the Company by June 30,
2001, for possible inclusion in the Company's proxy statement and form of proxy
relating to that meeting.
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,
/s/ Fred C. Leonard III
Fred C. Leonard III
Secretary
7
<PAGE>
KMG CHEMICALS, 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 Chemicals, Inc. (the "Company") which the
undersigned is entitled to vote at an Annual Meeting of Shareholders on
November 21,2000, at the Houstonian Hotel, 111 North Post Oak Lane, Houston,
Texas 77024, 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 six 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> <C> <C> <C>
/ / FOR the nominees listed below / / WITHHOLD AUTHORITY / / FOR ALL NOMINEES EXCEPT:
to 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., Richard L. Urbanowski
2. To ratify the appointment of Deloitte & Touche LLP as independent
accountants and auditors for the Company for fiscal year 2001; and
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
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.
<TABLE>
<S> <C> <C>
Date: ------------------------------------, 2000 ------------------------------------------------------------
(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.)
</TABLE>
PLEASE MARK, SIGN, DATE AND MAIL TO THE COMPANY AT THE ADDRESS STATED ABOVE.
