<PAGE> 1
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:
<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>
CMC Industries, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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
October 18, 1996
TO THE SHAREHOLDERS OF CMC INDUSTRIES, INC.
In connection with the Annual Meeting of Shareholders of CMC
Industries, Inc. to be held on November 15, 1996, we enclose a Notice of Annual
Shareholders' Meeting, a Proxy Statement, and a form of proxy.
At the meeting, you will be asked to elect two Class III directors to
serve until the Annual Meeting of Shareholders in 1999 or until their
successors are duly elected and qualified, to ratify, adopt and approve the
1996 Employee Stock Purchase Plan, to ratify, adopt and approve amendments to
the 1990 Equity Incentive Plan and to ratify the appointment of Price
Waterhouse LLP as the Company's independent accountants and auditors for the
fiscal year ending July 31, 1997. Information about these matters is contained
in the enclosed Proxy Statement.
Detailed information relating to the Company's activities and operating
performance during 1996 is contained in the Annual Report to Shareholders of
the Company, which is being mailed to you with this Proxy Statement, but is not
a part of the proxy soliciting material. If you do not receive or have access
to the 1996 Annual Report, please notify Lanny N. Lambert, Vice President and
Secretary, CMC Industries, Inc., 1801 Fulton Drive, Corinth, Mississippi 38834,
(601) 287-3771.
You are cordially invited to attend the Annual Meeting of Shareholders
in person. We would appreciate your completing the enclosed form of proxy so
that your shares can be voted in the event you are unable to attend the
meeting. If you are present at the meeting and desire to vote your shares
personally, your form of proxy will be withheld from voting upon your request
prior to balloting. We urge you to return your proxy card to us in the stamped
envelope as soon as possible.
Sincerely yours,
Lanny N. Lambert
Vice President and Secretary
<PAGE> 3
CMC INDUSTRIES, INC.
4950 Patrick Henry Drive
Santa Clara, CA 95054
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 15, 1996
Notice is hereby given that the Annual Meeting of Shareholders of CMC
Industries, Inc. (the "Company"), will be held on November 15, 1996, at 10:00
A.M., local time, in the offices of the Company's Mississippi Operations at
1801 Fulton Drive, Corinth, Mississippi 38834, for the following purposes:
1. To elect two (2) Class III directors to serve a three-year term
or until their successors have been duly elected and qualified.
2. To ratify, adopt and approve the Company's 1996 Employee Stock
Purchase Plan, under which a total of 250,000 shares have been
reserved for issuance, and which are to be increased annually
on the first day of each of the Company's fiscal years during
the term of the 1996 Employee Stock Purchase Plan in an amount
equal to the lesser of (i) 3.5% of the total issued and
outstanding shares of Common Stock calculated as of the last
day of the immediately preceding Company fiscal year, or (ii)
233,197 shares.
3. To ratify and approve amendments to the Company's 1990 Equity
Incentive Plan to (i) increase the number of shares reserved
for issuance thereunder, effective as of the first day of each
of the Company's fiscal years during the remaining term of the
1990 Equity Incentive Plan, by 5% of the Company Common Stock
outstanding on the last day of the immediately preceding fiscal
year, (ii) to limit the number of shares issuable under the
1990 Equity Incentive Plan to any participant in any fiscal
year of the Company to help qualify such awards as
"performance-based compensation" under Internal Revenue Code
Section 162(m), and (iii) to make various minor amendments to
update and improve the 1990 Equity Incentive Plan.
4. To ratify the appointment of Price Waterhouse LLP as the
Company's independent accountants and auditors for the
fiscal year ending July 31, 1997.
5. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on October 8, 1996 are
entitled to notice of, to attend and to vote at the Annual Shareholders'
Meeting and any adjournment thereof.
By Order of the Board of Directors,
Lanny N. Lambert
Secretary
IMPORTANT
WHETHER YOU EXPECT TO ATTEND THE MEETING OR NOT, PLEASE MARK, SIGN,
DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE STAMPED
ENVELOPE PROVIDED IN ORDER TO ENSURE REPRESENTATION OF YOUR SHARES.
<PAGE> 4
CMC INDUSTRIES, INC.
PROXY STATEMENT FOR THE
1996 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 15, 1996
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
CMC Industries, Inc. (the Company) for use at the Annual Meeting of
Shareholders (the Annual Meeting) to be held on November 15, 1996 at 10:00
a.m., local time, or at any adjournment(s) or postponement(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders. The Annual Meeting will be held at the offices of the Company's
Mississippi Operations at 1801 Fulton Drive, Corinth, Mississippi 38834. The
Company's telephone number at that location is (601) 287-3771.
These proxy solicitation materials and the Annual Report to
Shareholders, including financial statements, were first mailed on or about
October 18, 1996, to all shareholders entitled to vote at the Annual Meeting.
PURPOSES OF THE ANNUAL MEETING
The purposes of the Annual Meeting are (i) to elect two (2) Class III
directors to serve until the Annual Meeting in 1999 or until their successors
are duly elected and qualified; (ii) to ratify, adopt and approve the 1996
Employee Stock Option Plan; (iii) to ratify, adopt and approve the amendments
to the Company's 1990 Equity Incentive Plan (the Option Plan); (iv) to ratify
the appointment of Price Waterhouse LLP as independent accountants and auditors
of the Company for fiscal year 1997; and (v) to transact such other business as
may properly come before the meeting or any adjournment thereof.
RECORD DATE AND VOTING SECURITIES
Shareholders of record at the close of business on October 8, 1996
(Record Date) are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 6,665,946 shares of the Companys Common Stock, $.01 par value
per share, were issued and outstanding. No shares of the Companys Preferred
Stock, $.01 par value per share, were outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to the solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing a written notice of revocation bearing a later date than the proxy with
the Secretary of the Company at or before the taking of the vote at the Annual
Meeting, (ii) duly executing a later dated proxy relating to the same shares
and delivering it to the Secretary of the Company at or before the taking of
the vote at the Annual Meeting or (iii) attending the Annual Meeting and voting
in person (although attendance at the Annual Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be delivered to CMC Industries, Inc., 1801 Fulton
Drive, Corinth, Mississippi 38834, Attention: Lanny N. Lambert, Secretary, or
hand-delivered to a duly authorized officer of the Company at or before the
taking of the vote at the Annual Meeting.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share of Common Stock
owned on all matters presented at the Annual Meeting. Shareholders do not have
the right to cumulate votes in the election of directors.
The cost of this solicitation will be borne by the Company. The
Company may reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding solicitation material to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers and regular employees, without additional compensation,
personally or by telephone, telegram or letter.
<PAGE> 5
When proxies are properly dated, executed, and returned, the shares
they represent will be voted at the Annual Meeting in accordance with the
instructions of the shareholder. If no specific instructions are given, the
shares will be voted (i) FOR the election of the nominees for directors set
forth herein; (ii) FOR the adoption of the 1996 Employee Stock Option Plan;
(iii) FOR the amendments to the 1990 Equity Incentive Plan; (iv) FOR the
ratification of the appointment of Price Waterhouse LLP as independent
accountants and auditors for fiscal year 1997. No business other than that set
forth in the accompanying Notice of Annual Meeting of Shareholders is expected
to come before the Annual Meeting. Should any other matter requiring a vote of
shareholders properly arise, the persons named in the enclosed form of proxy
will vote such proxy as the Board of Directors may recommend.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual
Meeting is a majority of the votes eligible to be cast by holders of shares of
Common Stock issued and outstanding on the Record Date. Shares that are voted
FOR, AGAINST or WITHHELD FROM on 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). 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.
In a 1988 Delaware case, Berlin v. Emerald Partners, the Delaware
Supreme Court held that, while broker non-votes should be counted for purpose
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 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.
SHAREHOLDERS PROPOSALS FOR 1997 ANNUAL MEETING
The Company currently intends to hold its 1997 Annual Meeting of
Stockholders in mid-November 1997 and to mail Proxy Statements relating to such
meeting in mid-October 1997. The date by which shareholder proposals must be
received by the Company so that they may be considered for inclusion in the
Proxy Statement and form of proxy for its 1997 Annual Meeting is July 15, 1996.
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 30, 1996, the Company's records indicated that the
following number of shares were beneficially owned by (i) each person known by
the Company to beneficially own more than 5% of the Company's shares; (ii) each
director of the Company; (iii) each executive officer named in the Summary
Compensation Table ("Named Executive Officers"); and (iv) all directors and
executive officers of the Company as a group. Except as otherwise noted, the
Company knows of no agreements among its shareholders which relate to voting or
investment power of its Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP (1) PERCENT OF CLASS (1)
------------------------------------ ------------------------ --------------------
<S> <C> <C>
5% HOLDERS:
David S. Lee (2) 1,817,447 27.3%
4950 Patrick Henry Drive
Santa Clara, CA 94035
Wuthelam Industries (S) Pte Ltd (3) 444,445 6.7
Liang Court Complex
177 River Valley Road #05-01
Singapore 0617
Whitman Partners, L.P. (4) 454,746 6.7
One Sansome Street
San Francisco, CA 94104
Whitman Capital, Inc. (4) 454,746 6.7
One Sansome Street
San Francisco, CA 94104
Douglas F. Whitman (4) 438,824 6.5
One Sansome Street
San Francisco, CA 94104
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
David S. Lee 1,817,447 27.3
Karl Chang (5) 82,959 1.2
Matthew G. Landa (6) 70,139 1.0
Andrew J. Moley (7) 70,139 1.0
Frederick W. Gibbs 22,000 *
Lanny N. Lambert (8) 28,613 *
Jack O'Rear (9) 31,242 *
Directors and Executive Officers as a group (10) 2,122,539 30.8
(7 persons)
</TABLE>
______________________
* Less than 1%
<PAGE> 7
(1) Unless otherwise indicated, beneficial ownership consists of sole
voting and investing power based on 6,665,946 shares issued and
outstanding, excluding options and warrants to purchase 552,785 shares,
which options and warrants are exercisable or become exercisable within
60 days of September 30, 1996. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission, and
includes voting and investment power with respect to shares. Shares
subject to options currently exercisable or exercisable within 60 days
after September 30,1996 are deemed outstanding for computing the
percentage ownership of the person holding such options, but are not
deemed outstanding for computing the percentage ownership of any other
person.
(2) This amount does not include 12,500 shares of Common Stock owned by Mr.
Lee's children. Mr. Lee disclaims beneficial ownership of such shares.
(3) Wuthelam Industries (S) Pte Ltd, a conglomerate with investments
primarily in Asia, is privately held by Mr. Goh Cheng Liang of
Singapore and his family.
(4) Based upon information supplied by the beneficial owner in a Schedule
13D filed with the Securities and Exchange Commission on May 24,
1996, as amended by a Schedule 13D/A filed with the Securities and
Exchange Commission on May 28, 1996. This amount includes 96,018 shares
subject to a warrant exercisable within 60 days of September 30, 1996.
Whitman Partners, L.P., Whitman Capital, Inc. and Douglas F. Whitman
share voting and investment power.
(5) This amount includes 49,112 shares subject to options exercisable
within 60 days of September 30, 1996.
(6) This amount includes 70,139 shares subject to options exercisable
within 60 days of September 30, 1996.
(7) This amount includes 70,139 shares subject to options exercisable
within 60 days of September 30, 1996.
(8) This amount includes 12,813 shares subject to options exercisable
within 60 days of September 30, 1996.
(9) This amount includes 25,542 shares subject to options exercisable
within 60 days of September 30, 1996.
(10) This amount included 227,745 shares subject to options exercisable
within 60 days of September 30, 1996.
PROPOSAL 1. ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors currently consists of six persons
serving staggered three-year terms. Two Class III directors will be elected at
the Annual Meeting for a term of three years. The Class I directors, whose
terms will expire in 1997, are Mr. Frederick W. Gibbs and Mr. Ira Coron, and
the Class II directors, whose terms will expire in 1998, are Mr. Matthew G.
Landa and Mr. Andrew J. Moley.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the two (2) nominees named below, all of whom are
presently directors of the Company. In the event that any such nominee is
unable or declines to serve as a director at the time of the Annual Meeting,
the proxies will be voted for a nominee who shall be designated by the present
Board of Directors to fill the vacancy. In the event that additional persons
are nominated for election as directors, the proxy holders intend to vote all
proxies received by them in such a manner as will assure the election of as
many of the nominees listed below as possible, and, in such event, the specific
nominees to be voted for will be determined by the proxy holders. The Company
is not aware of any nominee who will be unable or will decline to serve as a
director. Each director elected at this Annual Meeting will serve a term of
three years or until such directors successor has been duly elected and
qualified.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of
the shares entitled to be voted shall be elected to the Board of Directors as
Class III Directors. An abstention will have the same effect as a vote
<PAGE> 8
withheld for the election of directors, and pursuant to Delaware law, a broker
non-vote will not be treated as voting in person or by proxy on the proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NOMINEES LISTED
BELOW:
Class III Directors (Term expiring 1999)
David S. Lee
Charles Holloway
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
directors and executive officers of the Company and its subsidiaries.
<TABLE>
<CAPTION>
Position(s) with the Director
Name Age Company Since
- ---- --- -------------------- --------
<S> <C> <C> <C>
DIRECTORS:
David S. Lee 60 Chairman of the Board 1990
Matthew G. Landa 31 President and Chief
Executive Officer 1995
Andrew J. Moley 32 Executive Vice President and 1995
Chief Financial Officer
Ira Coron 67 Director 1996
Frederick W. Gibbs 64 Director 1993
Charles Holloway 60 Director 1996
EXECUTIVE OFFICERS:
Karl Chang 41 Vice President,
President
California Operations
Lanny N. Lambert 47 Vice President
and Secretary
Jack O'Rear 55 Vice President and
Chief Operating Officer,
President
Mississippi Operations
</TABLE>
<PAGE> 9
Set forth below is certain additional biographical information concerning the
directors and executive officers of the Company:
DAVID S. LEE. Mr. Lee organized the Company in July 1990 and served as
its Chairman until 1993. He assumed the positions of Chairman of the Board,
Acting President and Chief Executive Officer from May 1995 until November 1995
and continues to hold the position of Chairman of the Board. Mr. Lee is the
Chairman of Cortelco Systems Holding Corp., a telecommunications company and
serves as a director of Linear Technology Corporation, an analog semiconductor
company. From 1983 to 1985, he served as a Vice President of ITT Corporation
("ITT") and as Group Executive and Chairman of its Business Information Systems
Group. In 1985, Mr. Lee became President and Chairman of DTC Data Technology
Corporation, a supplier of communications equipment.
MATTHEW G. LANDA. Mr. Landa has served as a director since November
1995 and as President and Chief Executive Officer since October 1995. From
1991 to 1994, Mr. Landa served as Chief Operating Officer and a member of the
Board of Directors of Silicon Valley Technology, an electronics manufacturing
services firm. From 1986 to 1989, Mr. Landa worked as a consultant at Monitor
Company, a strategic management consulting firm and in 1990 as an associate at
Morgan Stanley and Co., an investment bank.
ANDREW J. MOLEY. Mr. Moley has served as a director since November
1995. Mr. Moley also served as Chief Financial Officer and Chief Operating
Officer from October 1995 to August 1996 and currently serves as Executive Vice
President and Chief Financial Officer of the Company. From 1993 to 1994, Mr.
Moley served as Chief Financial Officer of Silicon Valley Technology, an
electronics manufacturing services firm. From 1991 to 1993, Mr. Moley worked
as a strategic consultant with Mercer Management Consulting and from 1986 to
1989, as the Chief Financial Officer of the Jim Waters Corp., a wholesale
building supplies company.
IRA CORON. Mr. Coron has served as a director since September 1996.
Since March 1994, Mr. Coron has served as Chairman of the Board and Chief
Executive Officer of California Amplifier, Inc., a communications equipment
manufacturing company. From 1989 to 1994, Mr. Coron was a independent
management consultant to several companies and venture capital firms. Mr.
Coron retired from TRW, Inc. after serving in numerous senior management
positions from June 1967 to July 1989, including Vice President and General
Manager of TRW's Electronic Components Group. He is also a director of a
private company and serves on the Board of Directors of the Wireless Cable
Association.
FREDERICK W. GIBBS. Mr. Gibbs has served as a director since September
1993. Mr. Gibbs is an attorney and partner with Gibbs and Gregory, Attorneys
at Law. From 1986 to 1988, Mr. Gibbs served as a consultant with ITT. In
1988, Mr. Gibbs founded Mulberry Hill Enterprises, a consulting firm which
specializes in telecommunications and electronics, business acquisition
analysis and international business. From 1980 to 1986, Mr. Gibbs served as
Executive Vice President of ITT and Senior Group Executive of
Telecommunications and Electronics, a division of ITT. From 1965 to 1980, Mr.
Gibbs served in various management positions with ITT.
CHARLES HOLLOWAY. Professor Holloway has served as a director since
August 1996. Professor Holloway has been affiliated with Stanford University
since 1968. Professor Holloway is the holder of the Kleiner, Perkins, Caufield
& Byers Professorship in Management at the Stanford University Graduate School
of Business. Professor Holloway serves as a board member and a consultant with
a range of technology firms, and has authored numerous books and articles on
the subjects of manufacturing and management.
KARL CHANG. Mr. Chang joined the Company as Vice President and
President - California Operations in January 1993 when the Company acquired
Topaz Industries, Inc. Mr. Chang served as President of Topaz Industries, Inc.
beginning in 1990. Prior to 1990, Mr. Chang held various manufacturing and
engineering positions with Vantronic Corporation, Sun Microsystems, Solectron
Corporation, Hewlett-Packard Company and AT&T.
LANNY N. LAMBERT. Mr. Lambert has been Vice President of the Company
since July 1990 and Secretary since June 1993. Mr. Lambert also served as
Chief Financial Officer from July 1990 to October 1995. Mr. Lambert joined ITT
in 1983 and held various positions in the financial department in the Corinth
facility, including Manager of Financial Analysis and Plant Controller. Mr.
Lambert was elected Vice President, Finance and Administration and Chief
Financial Officer of Corinth Telecommunication Corp., a subsidiary of Alcatel
n.v., in 1989. Mr. Lambert also served as Vice President and Chief Financial
Officer of Cortelco until August 1993.
<PAGE> 10
JACK O'REAR. Mr. O'Rear has been Chief Operating Officer of the
Company since August 1996 and Vice President since August 1994. Mr. O'Rear
became President of the Mississippi Operations in November 1994. From 1989
until joining the Company, Mr. O'Rear served as Vice President of North
American Operations for AVEX Electronics, an electronics manufacturing services
company.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Report of the Compensation Committee
The Compensation Committee is responsible for the design and
implementation of salary and incentive programs for executive officers and
other key executives. The Company's compensation objectives are to support the
Company's financial objectives and performance goals, provide compensation that
will attract and retain superior management and reward performance.
Rapid market and product diversification have caused the Company to
rely on hiring senior executives from outside the corporate organization,
rather than growing or training managers from within. In general, the
executive salary structure is based significantly on local economic
considerations for each market in which management level personnel are
retained. The Company makes it a practice to recruit the best possible talent
available to fill given positions.
Salaries and bonuses are negotiated on an individual basis, and
generally the executive compensation includes a base salary coupled with bonus
compensation. Bonus compensation takes into consideration not only revenues,
but also profitability. Additionally, the Company has adopted a stock option
plan for executives and the Board believes that equity participation should
play a significant role in compensation structure and has made it a practice to
provide its key executives with the opportunity to acquire stock of the
Company. Further, executive performance is reviewed on an annual basis with
each executive.
The compensation of the Chief Executive Officer is based upon
recommendation of the Compensation Committee based upon a determination of
whether the Company has achieved its overall corporate performance. In
particular, the Compensation Committee would consider corporate performance
factors including operating profit/loss, excluding non-recurring charges, the
Companys performance relative to peer companies and the ability of the Company
to achieve its business objectives. Base salary is determined by comparing
base salaries paid to other executive officers employed by companies in the
industry with the intent of maintaining the competitiveness of the Company in
retaining its Chief Executive Officer.
COMPENSATION COMMITTEE:
David S. Lee
Frederick W. Gibbs
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. David S. Lee nor Mr. Frederick W. Gibbs, the members of the
Company's Compensation Committee during fiscal 1996, is an executive officer of
any entity for which any executive officer of the Company serves as a director
or a member of the compensation committee. See Certain Relationships and
Related Transactions.
INFORMATION REGARDING MEETINGS OF DIRECTORS
During the last fiscal year, the Board of Directors held a total of
four meetings. No director attended fewer than 75% of the meetings of the
Board of Directors or committees of the Board of Directors held during fiscal
1996 during the period in which such directors were members of the Board of
Directors. Directors not otherwise employed by the Company received $1,000 per
quarter and $500 for each meeting attended. The Company also reimbursed such
directors for the expenses incurred in attending meetings.
The Board of Directors has a Compensation Committee and an Audit
Committee. The Board of Directors does not have a nominating committee or any
committee performing similar functions. Members of the Compensation Committee
during fiscal 1996 were Messrs. Lee and Gibbs. The Compensation Committee is
primarily responsible for reviewing and administering the Company's employee
benefit plans. The Compensation Committee held one meeting during fiscal 1996.
During fiscal 1996, the Audit Committee consisted of Messrs.
<PAGE> 11
Fowble and Gibbs. The Audit Committee is primarily responsible for engaging the
Company's independent auditors and reviewing audit fees, supervising matters
relating to audit functions, reviewing audit results with the auditors, and
reviewing the scope and results of the Company's internal auditing procedures
and the adequacy of the internal accounting controls.
EXECUTIVE COMPENSATION
The following table shows the aggregate cash compensation paid during
the three years ended July 31, 1996 to the Chief Executive Officer and the
Named Executive Officers of the Company, who each received cash compensation in
excess of $100,000 in fiscal 1996.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Long Term
Annual Compensation Compensation
----------------------------------------------- ------------
Other Annual
Name and Position Year Salary ($) Bonus ($) Compensation($) Options (#)
- ----------------- ---- ---------- --------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Matthew G. Landa 1996 $125,693(1) -0- $20,000(2) 150,000
President and Chief
Executive Officer
Andrew J. Moley 1996 $125,693(3) -0- $20,000(4) 150,000
Executive Vice President
and Chief Financial Officer
Jack O'Rear 1996 $175,011 -0- $ 5,604(5) 5,000
Vice President and 1995 $164,904(6) -0- $ 3,736(5) 40,000
Chief Operating Officer
President - MS Operations
Karl Chang 1996 $107,000 -0- -0- 5,000
Vice President, President- 1995 $101,000 -0- -0- 15,000
California Operations 1994 $ 96,000 -0- -0- -0-
Lanny N. Lambert 1996 $101,192 -0- -0- 1,500
Vice President 1995 $ 98,900 -0- -0- -0-
and Secretary 1994 $ 85,010 -0- -0- -0-
</TABLE>
_______________
(1) Mr. Landa joined the Company in October 1995.
(2) Includes consultant fees paid to Mr. Landa prior to his employment by the
Company.
(3) Mr. Moley joined the Company in October 1995.
(4) Includes consultant fees paid to Mr. Moley prior to his employment by the
Company.
(5) Includes automobile expense allowance for Mr. O'Rear.
(6) Mr. O'Rear joined the Company in August 1994
<PAGE> 12
<TABLE>
<CAPTION>
Option Grants in Fiscal 1996
----------------------------
Percent of total
options granted to Exercise or Potential realizable value at
Options employees in fiscal base assumed annual rate of stock
Name Granted (#) year price ($/sh) Expiration date price appreciation for option term
- ---- ----------- ------------------- ------------ --------------- ----------------------------------
5% ($) 10% ($)
------ -------
<S> <C> <C> <C> <C> <C> <C>
Matthew Landa 125,000 36% 3.72 10/16/05 $292,450 $741,063
25,000 7 3.25 10/13/98 $ 12,808 26,895
Andrew Moley 125,000 36 3.72 10/16/05 $292,450 $741,063
25,000 7 3.25 10/13/98 $ 12,808 26,895
Jack O'Rear 5,000 1 4.00 02/03/06 $ 12,578 $ 31,875
Karl Chang 5,000 1 4.00 02/03/06 $ 12,578 $ 31,875
Lanny N. Lambert 1,500 * 4.00 02/03/06 $ 3,773 $ 9,562
</TABLE>
_______________
* Less than 1%
<TABLE>
<CAPTION>
Year End Option Values(1)
-------------------------
Number of Unexercised Options Value of Unexercised In-The-Money
Shares acquired Value at Year End Options at Year End ($)
Name on exercise (#) realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- --------------- ------------ ----------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Matthew Landa -0- $-0- 56,250 / 93,750 $132,969 / $202,031
Andrew Moley -0- $-0- 56,250 / 93,750 $132,969 / $202,031
Jack O'Rear -0- $-0- 19,792 / 25,208 $ 56,277 / $ 68,098
Karl Chang -0- $-0- 43,806 / 19,861 $ 12,853 / $ 39,647
Lanny Lambert -0- $-0- 12,688 / 1,312 $ 353 / $ 2,460
</TABLE>
________________
Market values of the underlying securities at July 31, 1996, $5.875 per share,
minus exercise price of the unexercised options.
<PAGE> 13
Performance Graph
The following graph shows a comparison of cumulative total shareholder
return, calculated on a dividend reinvested basis, for the five-year period
beginning July 31, 1991 and ending July 31, 1996 for the Company, The Nasdaq
Stock Market (U.S. companies) Index (the "Nasdaq Index") and a peer group index
(the "Peer Group Index"), which is described in the legend to the graph. The
Peer Group consists of the following companies: Benchmark Electronics, Inc.,
Comptronix Corp., Dovatron International, Inc., Electronic Fab Technology
Corp., Flextronics International Ltd., Group Technologies Corp., I E C
Electronics Corp., Jabil Circuit, Inc., Plexus Corp., SCI Systems, Inc.,
Sanmina Corp. and Solectron Corp. The graph assumes that $100 was invested in
the Companys Common Stock, in the Nasdaq Index and in the Peer Group Index on
December 9, 1993 (the date of the closing of the Companys initial public
offering). Note that historic stock price performance is not necessarily
indicative of future stock price performance.
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had numerous transactions with its former affiliate and
largest customer, Cortelco Systems Holding Corp. ("Cortelco"), including the
transfer of certain assets and related liabilities associated with the
telephone business to Cortelco in exchange for 1,000,000 shares of Preferred
Stock of Cortelco in August 1993, the execution of an agreement to provide
certain products and related support services to customers of Cortelco and a
working capital loan which was paid in full in August 1993. In addition, Mr.
Lee, a director of the Company, is also a director of Cortelco. Mr. Lee is the
largest stockholder of each of the Company and Cortelco.
The Company, through its wholly-owned subsidiary, CMC Mississippi,
Inc., has entered into a four-year manufacturing services agreement with
Cortelco. Under the agreement, Cortelco is required to provide the Company
with a rolling 12-month forecast and a three-month rolling purchase order each
month. Products are sold to Cortelco at a price equal to the Company's
standard manufacturing cost plus 8% for telephone products and cost plus 10%
for telecommunications systems products. At the option of the parties, this
agreement may be renegotiated annually. At the expiration of the initial term
of the agreement, Cortelco has the option to renew for five additional periods
of one year each. Either party may terminate the agreement at any time on 90
days' prior written notice or, in the event of any default by the other party
(which is not cured in a timely manner), immediately upon written notice.
David S. Lee is President, Chairman of the Board and has an ownership
interest in Data Technology Corporation, a company which purchased goods from
the Company totaling $1,731,000 at a cost of $1,697,000 during fiscal 1996. As
of July 31, 1996, the Company had accounts receivable of $491,000 from this
customer.
The Company has, and expects to have, transactions in the ordinary
course of its business with directors and officers of the Company and their
affiliates, including members of their families or corporations, partnerships
or other organizations in which such officers or directors have a controlling
interest, on substantially the same terms (including price, or interest rates
and collateral) as those prevailing at the time for comparable transactions
with unrelated parties.
PROPOSAL 2. ADOPTION AND APPROVAL OF THE 1996
EMPLOYEE STOCK PURCHASE PLAN
In September 1996, the Board of Directors of the Company approved the
adoption of the Company's 1996 Employee Stock Purchase Plan (the "Purchase
Plan") and reserved a total of 250,000 shares, which number shall be increased
annually on the first day of each of the Company's fiscal years during the term
of the Purchase Plan in an amount equal to the lesser of (i) 3.5% of the
total issued and outstanding shares of Common Stock calculated as of the last
day of the immediately preceding Company fiscal year, or (ii) 233,197 shares,
for issuance thereunder.
At the Annual Meeting, the shareholders are being asked to approve the
Purchase Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required
to approve the adoption of the Purchase Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE THE PURCHASE PLAN.
The essential features of the Purchase Plan are outlined below.
General. The Purchase Plan is intended to allow employees of the
Company and designated subsidiaries to purchase Company Common Stock on a
tax-favored basis at regular intervals by means of wage deferrals. A total of
250,000 shares of Company Common Stock, increased annually on the first day of
each of the Company's fiscal years during the term of the Employee Stock
Purchase Plan in an amount equal to the lesser of (i) 3.5% of the total issued
and outstanding shares of Common Stock calculated as of the last day of the
immediately preceding Company fiscal year, or (ii) 233,197 shares has been
reserved for issuance under the Purchase Plan.
<PAGE> 15
Administration. The Purchase Plan, which is intended to qualify under
Section 423 of the Code, will be administered by the Board of Directors or its
Compensation Committee (the "Administrator"). All questions of interpretation
or application of the Purchase Plan are determined by the Administrator, and
its decisions are final, conclusive and binding upon all participants.
Eligibility and Participation. Company employees are eligible to
participate in the Purchase Plan if they are customarily employed for at least
20 hours per week and more than five months per year. Moreover, the Board may
designate that such employees of its subsidiaries are eligible to participate
in the Purchase Plan. However, no employee who owns five percent or more of
the total combined voting power or value of all classes of stock of the Company
or its subsidiaries is eligible to participate. Eligible employees become
participants in the Purchase Plan by filing with the payroll office of the
Company a subscription agreement authorizing payroll deductions prior to the
applicable offering date. The Company anticipates that approximately 1,025
employees will be eligible to participate in the first offering period under
the Purchase Plan. The benefits or amounts that will be received under the
Purchase Plan are not determinable.
Offering Periods. The Purchase Plan will be implemented by consecutive
and overlapping 24-month offering periods ("Offering Periods"), each divided
into four six-month exercise periods. Shares are purchased on the last day of
each six-month exercise period (the "Exercise Date"). A new Offering Period
commences every six months, generally on the first business day on or after
March 1 and September 1 of each year. The first Offering Period will commence
on December 1, 1996, will last for 27 months, ending on the last business day
in the period ending February 28, 1999, and will have five exercise periods.
The first exercise period will be three months long, ending on the last
business day in the period ending on February 28, 1997. The Administrator may
change the commencement date and duration of Offering Periods without obtaining
shareholder approval.
Purchase Price. The purchase price per share at which shares are sold
under the Purchase Plan is 85% of the lower of the fair market value of the
Company Common Stock (a) on the date of commencement of the Offering Period or
(b) on the applicable Exercise Date within such Offering Period. The
applicable "Exercise Date" is the last day of the particular six-month exercise
period within the Offering Period. The fair market value of the Company Common
Stock on a given date is based on the last reported sales price on the Nasdaq
National Market.
Automatic Transfer to Lower Price Offering Period. In the event that
the fair market value of the Company Common Stock on the last day of any
exercise period is less than on the first day of that Offering Period, all
employees participating in such Offering Period will be enrolled in the new
Offering Period commencing on the following business day.
Adjustment on Changes in Capitalization. In the event any change is
made in the Company's capitalization, such as a stock split or stock dividend,
which results in an increase or decrease in the number of outstanding shares of
Company Common Stock without receipt of consideration by the Company,
appropriate adjustments will be made by the Board of Directors in the shares
subject to purchase under the Purchase Plan and in the purchase price per
share. In the event of the proposed dissolution or liquidation of the Company,
the Offering Periods will terminate immediately prior to such dissolution or
liquidation, unless the Board provides otherwise. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the merger of
the Company with or into another corporation, any exercise periods then in
progress shall be shortened by setting a new Exercise Date (the "New Exercise
Date") and any Offering Periods then in progress shall end on the New Exercise
Date. The New Exercise Date shall be before the date of the Company's proposed
sale or merger.
Non-Assignability. No rights or accumulated payroll deductions of a
participant under the Purchase Plan may be pledged, assigned or transferred for
any reason, and any such attempt may be treated by the Company as an election
to withdraw from the Purchase Plan.
Amendment and Termination of the Plan. The Board of Directors may at
any time and for any reason terminate or amend the Purchase Plan. Except upon
a change in capitalization, no such termination can affect options previously
granted, provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the termination of
the Purchase Plan is in the best interests of the Company and its shareholders.
Except upon a change in capitalization, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code
(or any successor rule or provision or any other applicable law or regulation),
the Company shall obtain shareholder approval in such a manner and to such a
degree as required.
<PAGE> 16
TAX INFORMATION
The Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a
participant until the shares purchased under the Purchase Plan are sold or
otherwise disposed of. Upon sale or other disposition of the shares, the
participant will generally be subject to tax and the amount of the tax will
depend upon the holding period. If the shares are sold or otherwise disposed
of more than two years from the first day of the offering period and one year
from the date the shares are purchased, the participant will recognize ordinary
income measured as the lesser of (a) the excess of the fair market value of the
shares at the time of such sale or disposition over the purchase price, or (b)
an amount equal to 15% of the fair market value of the shares as of the first
day of the offering period. Any additional gain will be treated as long-term
capital gain. If the shares are sold or otherwise disposed of before the
expiration of these holding periods, the participant will recognize ordinary
income generally measured as the excess of the fair market value of the shares
on the date the shares are purchased over the purchase price. Any additional
gain or loss on such sale or disposition will be long-term or short-term
capital gain or loss, depending on the holding period. The Company is not
entitled to a deduction for amounts taxed as ordinary income or capital gain to
a participant except to the extent of ordinary income recognized by
participants upon a sale or disposition of shares prior to the expiration of
the holding period(s) described above.
The foregoing is only a summary of the effect of federal income
taxation upon the recipient and the Company with respect to the Purchase Plan,
does not purport to be complete, and does not discuss the tax consequences of
the participant's death or the income tax laws of any municipality, state or
foreign country in which an optionee may reside.
PROPOSAL 3. RATIFICATION AND APPROVAL OF AMENDMENTS TO THE
1990 EQUITY INCENTIVE PLAN
The 1990 Equity Incentive Plan (the "Plan") was originally adopted by
the Board of Directors of the Company on August 30, 1990 under which a total of
624,479 shares of Company Common Stock was reserved for issuance. By subsequent
amendments to the Plan, the shares reserved have been increased to 1,224,479
shares. As of September 30, 1996, options or rights covering 1,117,472 shares
of Company Common Stock have been granted pursuant to the Plan.
PROPOSED AMENDMENTS TO THE EQUITY INCENTIVE PLAN
The Board of Directors of the Company has proposed amendments to the
Company's 1990 Equity Incentive Plan (i) to increase the number of shares
reserved for issuance thereunder, effective as of the first day of each of the
Company's fiscal years during the remaining term of the Plan, by 5% of the
Company Common Stock outstanding on the last day of the immediately preceding
fiscal year, (ii) to limit the number of shares issuable under the Plan to any
participant in any fiscal year of the Company to help qualify such awards as
"performance-based compensation" under Internal Revenue Code Section 162(m),
and (iii) to make various minor amendments to update and improve the Plan.
VOTE REQUIRED
The affirmative vote of a majority of the Votes Cast will be required
to approve the amendments to the Plan.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE
PROPOSAL TO APPROVE THE AMENDMENTS TO THE PLAN.
The essential features of the Plan, as amended hereby, are outlined
below.
Purpose. The purpose of the Plan is to provide a means by which
selected key employees, directors and consultants of the Company may be given
an opportunity to benefit from increases in value of the stock of the Company.
It is intended that this purpose will be effected through the granting of (a)
incentive stock options, (b) nonstatutory stock options, (c) stock bonuses and
(d) purchases of restricted stock.
<PAGE> 17
Eligibility. Employees, directors and consultants of the Company and
its subsidiaries are eligible to receive awards under the Plan. Incentive
stock options may be granted only to employees of the Company or any parent or
subsidiary of the Company. The Company anticipates that approximately 1,030
employees, consultants and directors will be eligible to participate in the
Plan.
Administration. The Plan shall be administered by the Board or a
committee appointed by the Board (the "Administrator"). The Administrator
determines which of the persons eligible under the Plan shall be granted
awards, when and how such awards shall be granted, whether an award will be an
incentive stock option, a nonstatutory stock option, a stock bonus, a purchase
of restricted stock, or a combination of the foregoing and the provisions of
each award granted. To the extent that the Board determines it to be desirable
to qualify options granted under the Plan as "performance-based compensation"
within the meaning of Section 162(m) of the Code, the Plan shall be
administered solely by a Committee of two or more "outside directors" within
the meaning of Section 162(m). To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended, the transactions contemplated under the Plan shall be
structured to satisfy the requirements for exemption under Rule 16b-3.
Reserved Shares. The total number of shares of Common Stock reserved
and available for distribution under the Plan will be equal to 1,224,479 shares
of the Company's Common Stock, increased annually on the first day of each of
the Company's fiscal years during the term of the Plan (beginning in 1997) in
an amount equal to 5% of the Company's Common Stock issued and outstanding at
the close of business on the last day of the immediately preceding fiscal year
(the "Annual Replenishment"), with only the initial 1,224,479 shares and
subsequent annual increases in an amount equal to the lesser of (i) 1,224,479
shares, or (ii) the number of shares subject to the Annual Replenishment to be
available for issuance as incentive stock options, and with any amounts in
excess of such amount to be available for issuance as nonstatutory stock
options or as other awards hereunder. If any award granted under the Plan
shall for any reason expire or otherwise terminate without having been
exercised in full, the stock not issued or forfeited under such award shall
again become available for the Plan.
Stock Options. The Plan permits the granting of non-transferable stock
options that either qualify as incentive stock options under Section 422 of the
Code ("Incentive Stock Options" or "ISOs") or do not so qualify ("Nonstatutory
Stock Options" or "NSOs").
The term of each option will be fixed by the administrators but may not
exceed ten years from the date of grant in the case of ISOs, or five years from
the date of grant in the case of ISOs granted to the owner of Common Stock
possessing, on the date of such grant, more than 10% of the total combined
voting power of all classes of stock of the Company or any subsidiary.
Option Price. The option exercise price for each share covered by an
ISO will not be less than 100% of the fair market value of a share of Common
Stock on the date of grant of such option. In the case of ISOs granted to the
owner of Common Stock possessing, on the date of such grant, more than 10% of
the total combined voting power of all classes of stock of the Company or any
subsidiary, the option exercise price for each share covered by such option
will not be less than 110% of the fair market value of a share of Common Stock
on the date of grant. The option exercise price for each share covered by an
NSO will not be less than 85% of the fair market value of a share of Common
Stock on the date of grant of such option.
Consideration. The consideration to be paid for shares issued upon
exercise of options granted under the Plan, including the method of payment may
consist entirely of (1) cash, and, at the discretion of the Administrator, (2)
other shares of Common Stock which, in the case of shares acquired from the
Company, have been owned for at least six months, (3) according to a deferred
payment, or (4) such other consideration and methods as are permitted by
applicable laws.
Miscellaneous Provisions. Under the Plan, in the event of an
optionee's termination of employment, consulting or director relationship for
any reason other than death or total and permanent disability, an option may
thereafter be exercised, to the extent it was exercisable at the date of such
termination, for up to three months (or such lesser period as is set forth in
the option agreement), but only to the extent that the term of the option has
not expired. However, if an optionee's employment, consulting or director
relationship is terminated as a result of the optionee's permanent and total
disability, the option may (if set forth in the option agreement) be
exercisable for up to one year following such termination, but only to the
extent it was exercisable at the date of termination and to the extent that the
term of the option has not expired. If an optionee dies while providing
services to the Company, or
<PAGE> 18
within three months of the termination of his or her employment, consulting or
director relationship, the option may (if set forth in the option agreement) be
exercisable by the optionee's estate or successor for eighteen months following
death, but only to the extent it was exercisable at the date of death and to the
extent that the term of the option has not expired.
Restricted Stock. The Plan permits the Administrator to offer rights
to purchase Common Stock of the Company. The offer shall be accepted by
execution of a restricted stock purchase agreement between the Company and the
offeree. The purchase price under each stock purchase agreement shall be not
less than eighty-five percent (85%) of the fair market value of the stock on
the date the right is granted by the Administrator. The purchase price may be
paid in similar consideration to that allowed for exercising stock options
granted under the Plan.
Unless the Plan Administrators determine otherwise, the restricted
stock purchase agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the purchaser's
employment, consulting or director relationship with the Company.
Stock Bonus Awards. The Plan also permits the granting of stock bonus
awards. Such awards shall be granted for no cash consideration.
Stock Bonus Awards will be payable in Common Stock (including
restricted stock).
Merger or Other Consolidation. In the event of (1) a merger of
consolidation in which the Company is not the surviving corporation, or (2) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, then: (i) any surviving
corporation shall assume or substitute for any stock awards outstanding under
the Plan, or (ii) such stock awards shall continue in full force and effect.
In the event any surviving corporation refuses to assume or substitute such
stock awards, then the vesting of such stock awards shall be fully accelerated
and the stock awards terminated if not exercised prior to such event. In the
event of a dissolution or liquidation of the company, any options outstanding
under the Plan shall terminate if not exercised prior to such event.
Adjustment Upon Changes in Capitalization. If any change is made in
the stock subject to the Plan, or subject to any stock award granted under the
Plan through merger, consolidation, reorganization, recapitalization, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or otherwise, the Plan and outstanding stock awards will be
appropriately adjusted.
Amendment and Termination. The Board at any time may amend the Plan.
However, no amendment which will increase the number of shares reserved for
issuance under the Plan shall be effective unless approved by the shareholders
of the Company within twelve (12) months.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
Incentive Stock Options. No taxable income is recognized by the
optionee upon grant or exercise of an Incentive Stock Option except pursuant to
the alternative minimum tax. If Common Stock is issued to an optionee pursuant
to the exercise of an Incentive Stock Option, and if no disqualifying
disposition of such shares is made by such optionee within two years after the
date of grant or within one year after the transfer of such shares to such
optionee, then (a) upon sale of such shares, any amount realized in excess of
the option exercise price will be treated as a long-term capital gain and any
loss sustained will be a long-term capital loss, and (b) no deduction will be
allowed to the Company for federal income tax purposes.
If Common Stock acquired upon the exercise of an Incentive Stock Option
is disposed of before the expiration of either holding period described above,
generally (a) the optionee will recognize ordinary income in the year of
disposition in an amount equal to the excess of the fair market value of the
shares at exercise (or, if less, the amount realized on the disposition of the
shares) over the option exercise price paid for such shares, and (b) the
Company is entitled to a tax deduction in the same amount. Any further gain
(or loss) realized by the participant will be taxed as short-term or long-term
capital gain (or loss), as the case may be, and will not result in any
deduction by the Company. Different rules may apply if shares are purchased by
an optionee who is also an officer, director or more than 10% stockholder.
<PAGE> 19
Nonstatutory Stock Options. Except as noted below, with respect to
Nonstatutory Stock Options, (a) no income is recognized by the optionee at the
time the option is granted; (b) generally, at exercise, ordinary income is
recognized by the optionee in an amount equal to the difference between the
option exercise price paid for the shares and the fair market value of the
shares on the date of exercise, and the Company is entitled to a tax deduction
in the same amount; and (c) at disposition, any gain or loss is treated as
capital gain or loss. In the case of an optionee who is also an employee, any
income recognized upon exercise of a Nonstatutory Stock Option will constitute
wages for which withholding will be required. However, different rules may
apply if shares are purchased by an optionee who is also an officer, director
or more than 10% stockholder.
Stock Bonus Awards. A recipient who receives fully vested shares of
Common Stock pursuant to a Stock Bonus Award will generally recognize ordinary
income in the year of receipt equal the fair market value of the stock on the
date of grant. If the recipient receives restricted stock pursuant to a Stock
Bonus Award, the recipient will recognize ordinary income equal to the fair
market value of the stock at the time or times the restrictions lapse (unless a
Code Section 83(b) election is timely filed at the time of grant). Different
rules may apply if shares are awarded to a participant who is also an officer,
director or more than 10% stockholder.
If the recipient is an employee, any amount included in income will be
subject to withholding by the Company. As a general rule, the Company will be
entitled to a tax deduction in the amount and at the time the recipient
recognizes ordinary income with respect to the stock bonus award.
Restricted Stock. Stock issued upon exercise of a stock purchase right
is usually subject to the Company's right to repurchase such stock upon the
purchaser's termination of employment, consulting or director relationship with
the Company, which right lapses progressively over time. As a result, at the
time of purchase, this restricted stock is subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code. Accordingly, the
purchaser will not recognize ordinary income at the time of purchase. Instead,
the purchaser will recognize ordinary income on the date or dates when the
stock ceases to be subject to substantial risk of forfeiture. The stock will
generally cease to be subject to a substantial risk of forfeiture when it is no
longer subject to the Company's right to repurchase the stock (i.e., as it
"vests"). At such times, the purchaser will recognize the ordinary income
measured as the difference between the purchase price and the fair market value
of the stock on the vesting date. The ordinary income recognized by a
purchaser who is an employee will be treated as wages and will be subject to
tax withholding by the Company. Generally, the Company will be entitled to a
tax deduction in the amount and at the time the purchaser recognizes ordinary
income.
Notwithstanding the foregoing, a purchaser may accelerate the date of
his or her recognition of ordinary income, and the beginning of any capital
gain holding period, by timely filing an election pursuant to Section 83(b) of
the Code. In such event, the ordinary income recognized, if any, would be
equal to the difference between the purchase price and the fair market value of
the stock on the date of purchase, and the capital gain holding period would
commence on the purchase date.
Different rules may apply if shares are purchased by a participant who
is also an officer, director or more than 10% stockholder.
The foregoing is only a summary of the effect of federal income
taxation upon the recipient and the Company with respect to the Plan, does not
purport to be complete, and does not discuss the tax consequences of the
optionee's death or the income tax laws of any municipality, state or foreign
country in which an optionee may reside.
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF THE
INDEPENDENT ACCOUNTANTS AND AUDITORS
The Board of Directors has appointed Price Waterhouse LLP, independent
accountants and auditors, to audit the consolidated financial statements of the
Company for the fiscal year ending July 31, 1997 and recommends that the
shareholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection. Price Waterhouse LLP served as independent accountants and
auditors of the Company for the fiscal year ended July 31, 1996 and each year
since its inception. Representatives of the firm will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so and are expected to be available to respond to appropriate questions.
<PAGE> 20
The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Meeting is required to authorize the
foregoing proposal.
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" RATIFICATION OF THE
APPOINTMENT OF PRICE WATERHOUSE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
AND AUDITORS FOR THE FISCAL YEAR ENDING JULY 31, 1997.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The federal securities laws require the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
any securities of the Company. To the Company's knowledge and based solely on
the review of the copies of such reports furnished to the Company and
representations that no other reports were required, during the fiscal year
ended July 31, 1996, all of the Company's officers and directors made all
required filings.
OTHER MATTERS
The Board of Directors, at the time of the preparation of this Proxy
Statement, knows of no business to come before the Annual Meeting other than
that referred to herein. If any other matters properly come before the Annual
Meeting, it is the intention of the persons named in the enclosed proxy to vote
the shares they represent as the Board of Directors may recommend.
It is important that your stock be represented at the Annual Meeting,
regardless of the number of shares which you hold. You are, therefore, urged
to execute and return the accompanying proxy in the envelope which has been
enclosed, at your earliest convenience.
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF
COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING, THE COMPANY, WITHOUT
CHARGE, WILL PROVIDE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR
ENDED JULY 31, 1996, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
REQUESTS SHOULD BE DIRECTED TO LANNY N. LAMBERT, VICE PRESIDENT AND SECRETARY,
CMC INDUSTRIES, INC., 1801 FULTON DRIVE, CORINTH, MISSISSIPPI 38834.
BY ORDER OF THE BOARD OF DIRECTORS,
Corinth, Mississippi Lanny N. Lambert
October 18, 1996 Secretary
<PAGE> 21
CMC INDUSTRIES, INC.
1990 EQUITY INCENTIVE PLAN
AMENDED AND RESTATED AS OF THE DATE OF THE 1996 ANNUAL SHAREHOLDERS MEETING
1. Purpose.
(a) The purpose of this Second Amended and Restated 1990
Equity Incentive Plan (the "Plan") is to provide a means by which selected key
employees, directors and consultants of CMC Industries, Inc. (f/k/a/ Cortelco
Holdings, Inc. and f/k/a International Telecommunication Corp.) may be given an
opportunity to benefit from increases in value of the stock of the Company. It
is intended that this purpose will be effected through the granting of (a)
incentive stock options, (b) nonstatutory stock options, (c) stock bonuses, and
(d) purchases of restricted stock. The Plan was originally adopted by the Board
of Directors of the Company on August 30, 1990, and the First Amended and
Restated Plan was adopted by the Board as of June 1, 1992. The Second Amended
and Restated Plan was adopted by the Board as of October 2, 1993. The Second
Amended and Restated Plan was adopted to reflect certain changes in the
Company's name, capitalization and corporate structure and to reflect the
public offering of shares of the Company's common stock. The Plan was amended
and restated a third time effective as of the date of obtaining shareholder
approval of the Plan amendments in 1996.
(b) The word "Affiliate" as used in the Plan means any
parent corporation or subsidiary corporation of the Company, as those terms are
defined in Sections 424(e) and (f), respectively, of the Internal Revenue Code
of 1986, as amended from time to time (the "Code").
(c) The Company, by means of the Plan, seeks to retain the
services of persons now employed by or serving as consultants or directors to
the Company, to secure and retain the services of persons capable of filling
such positions, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(d) The Company intends that rights granted under the Plan
("Stock Awards") shall, in the discretion of the Board of Directors of the
Company (the "Board") or any committee to which responsibility for
administration of the Plan has been delegated pursuant to subparagraph 2(c), be
either (i) stock options granted pursuant to paragraph 5 hereof, including
incentive stock options as that term is used in Section 422 of the Code
("Incentive Stock Options"), or options which do not qualify as incentive stock
options ("Supplemental Stock Options") or (ii) stock bonuses or purchases of
restricted stock granted pursuant to paragraph 6 hereof.
2. Administration.
(a) The Plan shall be administered by the Board unless and
until the Board delegates administration to a committee, as provided in
subparagraph 2(c). Whether or not the Board has delegated administration, the
Board shall have the final power to determine all questions of policy and
expediency that may arise in the administration of the Plan.
<PAGE> 22
(b) The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the
persons eligible under the Plan shall be granted Stock Awards; when and how
Stock Awards shall be granted; whether a Stock Award will be an Incentive Stock
Option, a Supplemental Stock Option, a stock bonus, a purchase of restricted
stock, or a combination of the foregoing; the provisions of each Stock Award
granted (which need not be identical), including the time or times when a
person shall be permitted to purchase or receive stock pursuant to a Stock
Award; and the number of shares with respect to which Stock Awards shall be
granted to each such person.
(ii) To construe and interpret the Plan and Stock
Awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Board, in the exercise of this power,
may correct any defect, omission or inconsistency in the Plan or in any Stock
Award, in a manner and to the extent it shall deem necessary or expedient to
make the Plan fully effective.
(iii) To amend the Plan as provided in paragraph 11.
(iv) Generally, to exercise such acts as the Board
deems necessary or expedient to promote the best interests of the Company.
(c) The Board may delegate administration of the Plan to a
committee composed of not fewer than two (2) members (the "Committee"). To the
extent that the Board determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the meaning of Section
162(m) of the Code, the Plan shall be administered solely by a Committee of two
or more "outside directors" within the meaning of Section 162(m) of the Code.
To the extent desirable to qualify transactions hereunder as exempt under Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended, the
transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3. If administration is delegated to
a Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board, subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 10 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards granted under the Plan shall not exceed in the aggregate One
Million Two Hundred Twenty-Four Thousand Four Hundred Seventy- Nine (1,224,479)
shares of the Company's common stock, increased annually on the first day of
each of the Company's fiscal years during the term of the Plan (and subsequent
to the 1996 amendment and restatement of the Plan) in an amount equal to 5% of
the Company's common stock issued and outstanding at the close of business on
the last day of the immediately preceding fiscal year (the "Annual
Replenishment"), with only the initial 1,224,479 shares and subsequent annual
increases in an
<PAGE> 23
amount equal to the lesser of (i) 1,224,479 shares, or (ii) the number of
shares subject to the Annual Replenishment to be available for issuance as
Incentive Stock Options, with any amounts in excess of such amount to be
available for issuance as Supplemental Stock Options or as other awards
hereunder. If any option or right granted under the Plan shall for any reason
expire or otherwise terminate without having been exercised in full, the stock
not issued under such option or right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or
reacquired shares, bought on the market or otherwise.
4. Eligibility.
(a) Incentive Stock Options may be granted only to
employees (including officers) of the Company or its Affiliates. A director of
the Company shall not be eligible to receive Incentive Stock Options unless
such director is also an employee (including an officer) of the Company or any
Affiliate. Stock Awards other than Incentive Stock Options may be granted only
to directors, officers or employees of or consultants to the Company or its
Affiliates.
(b) No person shall be eligible for the grant of an
Incentive Stock Option under the Plan if, at the time of grant, such person
owns (or if deemed to own pursuant to Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or of any of its Affiliates unless the
exercise price of such option is at least one hundred ten percent (110%) of the
fair market value of such stock at the date of grant and the term of the option
does not exceed five (5) years from the date of grant.
(c) The following limitations shall apply to grants of
awards hereunder:
(i) No person shall be granted, in any fiscal year
of the Company, options or other rights to acquire more than 250,000 Shares.
(ii) However, in connection with his or her initial
service, a person may be granted options or other rights to acquire up to an
additional 250,000 Shares which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 10.
(iv) If an Option is canceled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 10), the canceled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will be
treated as a cancellation of the Option and the grant of a new Option.
<PAGE> 24
5. Terms of Stock Options. Each option shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall
deem appropriate. All options shall be separately designated Incentive Stock
Options or Supplemental Stock Options at the time of grant, and in such form as
issued pursuant to this paragraph 5. An option designated as a Supplemental
Stock option shall not be treated as an incentive stock option. The provisions
of separate options need not be identical, but each option shall include
(through incorporation of provisions hereof by reference in the option or
otherwise) the substance of each of the following provisions:
(a) The term of any option shall not be greater than ten
(10) years from the date it was granted.
(b) The exercise price of each Incentive Stock Option shall
be not less than one hundred percent (100%) of the fair market value of the
stock subject to the option on the date the option is granted. The exercise
price of each Supplemental Stock Option shall be not less than eighty-five
percent (85%) of the fair market value of the stock subject to the option on
the date the option is granted.
(c) The purchase price of stock acquired pursuant to an
option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the option is exercised, or (ii) at
the discretion of the Board or the Committee, either at the time of the grant
or exercise of the option, (A) by delivery to the Company of other common stock
of the Company which, in the case of common stock acquired from the Company,
has been owned by the optionee for more than six months on the date of
exercise, (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company which, in the case of common stock acquired from
the Company, has been owned by the optionee for more than six months on the
date of exercise) with the person to whom the option is granted or to whom the
option is transferred pursuant to subparagraph 5(d), or (C) in any other form
of legal consideration that may be acceptable to the Board or the Committee.
(d) Unless otherwise expressly stated in the option, an
option shall not be transferable except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to
whom the option is granted only by such person.
(e) The total number of stock subject to an option may, but
need not, be allotted in periodic installments (which may, but need not, be
equal). From time to time during each of such installment periods, the option
may become exercisable ("vest") with respect to some or all of the shares
allotted to that period, and may be exercised with respect to some or all of
the shares allotted to such period and/or any prior period as to which the
option was not fully exercised. During the remainder of the term of the option
(if its term extends beyond the end of the installment periods), the option may
be exercised from time to time with respect to any shares then remaining
subject to the option. The provisions of this subparagraph 5(e) are subject to
any option provisions governing the minimum number of shares as to which an
option may be exercised.
(f) An option shall terminate three (3) months after
termination of the optionee's employment or relationship as a director of or
consultant to the company or an Affiliate, unless
<PAGE> 25
(i) such termination is due to such person's permanent and total disability,
within the meaning of Section 422(c)(6) of the Code, in which case the option
may, but need not, provide that it may be exercised at any time within one (1)
year following such termination of employment or relationship as a director or
consultant; or (ii) the optionee dies while in the employ of or while serving
as a director of or consultant to the Company or an Affiliate, or within not
more than three (3) months after termination of such relationship, in which
case the option may, but need not, provide that it may be exercised at any time
within eighteen (18) months following the death of the optionee by the person
or persons to whom the optionee's rights under such option passes by will or by
the laws of descent and distribution; or (iii) the option by its terms
specifies either (a) that it shall terminate sooner than three (3) months after
termination of the optionee's employment or relationship as a director or
consultant, or (b) that it may be exercised more than three (3) months after
termination of the relationship with the Company or an Affiliate. This
subparagraph 5(f) shall not be construed to extend the term of any option or to
permit anyone to exercise the option or to permit anyone to exercise the option
after expiration of its term, nor shall it be construed to increase the number
of shares as to which any option is exercisable from the amount exercisable on
the date of termination of the optionee's employment or relationship as a
consultant or director.
(g) The option may, but need not, include a provision
whereby the optionee may elect at any time during the term of his or her
employment or relationship as a director or consultant to the Company or any
Affiliate to exercise the option as to any part or all of the shares subject to
the option prior the stated vesting date of the option or of any installment or
installments specified in the option. Any shares so purchased from any
unvested installment or option may be subject to a repurchase right in favor of
the Company or to any other restriction the Board or the Committee determines
to be appropriate.
6. Terms of Stock Bonuses and Purchase of Restricted Stock. Each
stock bonus or restricted stock purchase agreement shall be in such form and
shall contain such terms and conditions as the Board or the committee shall
deem appropriate. The terms and conditions of stock bonus or restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) The purchase price under each stock purchase agreement
shall be not less than eighty-five percent (85%) of the fair market value of
the stock on the date the stock purchase agreement is authorized by the Board
of the Committee. Notwithstanding the foregoing, the Board or the Committee
may determine that eligible participants in the Plan may be awarded stock
pursuant to a stock bonus agreement in consideration for past services actually
rendered to the company or for its benefit.
(b) No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the Plan,
either voluntarily or by operation of law, except where such assignment is
required by law or expressly authorized by the terms of the applicable stock
bonus or restricted stock purchase agreement.
<PAGE> 26
(c) The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either (i) in cash at the time of
purchase, or (ii) at the discretion of the Board or a Committee to which
administration of the Plan has been delegated, (A) according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other common stock of the Company
which, in the case of common stock acquired from the Company, has been owned by
the optionee for more than six months on the date of purchase) with the person
to whom the stock is sold, or (B) in any other form of legal consideration that
may be acceptable to the Board or the Committee in its discretion.
Notwithstanding the foregoing, the Board or the Committee to which
administration of the Plan has been delegated may award stock pursuant to a
stock bonus agreement in consideration for past services actually rendered to
the Company or for its benefit.
(d) Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) In the event a person ceases to be an employee of or
ceases to serve as a director of or consultant to the Company or an Affiliate,
the Company may repurchase or otherwise reacquire any or all of the shares of
stock held by that person which have not vested as of the date of termination
under the terms of the stock bonus or restricted stock purchase agreement
between the Company and such person.
7. Covenants of the Company.
(a) During the terms of any Stock Awards granted under the
Plan, the Company shall keep available at all times the number of shares of
stock required to satisfy such Stock Awards.
(b) The Company shall seek to obtain from each regulatory
commission or agency having jurisdiction over the Plan such authority as may be
required to issue and sell shares of stock upon grant or exercise of Stock
Awards under the Plan; provided, however, that this undertaking shall not
require the Company to register under the Securities Act of 1933, as amended
(the "Securities Act"), either the Plan, any Stock Award granted under the Plan
or any stock issued or issuable pursuant to any such Stock Awards. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the company deems
necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon
exercise of such Stock Awards unless and until such authority is obtained.
8. Use of Proceeds From Stock. Proceeds from the sale of stock
pursuant to Stock Awards granted under the Plan shall constitute general funds
of the Company.
9. Miscellaneous.
(a) The Board or the Committee shall have the power to
accelerate the time during which a Stock Award may be exercised or the time
during which any option or stock acquired
<PAGE> 27
pursuant to a Stock Award will vest, notwithstanding the provisions in the
Stock Award stating the time during which it may be exercised or the time
during which stock acquired pursuant thereto will vest.
(b) Neither a recipient of a Stock Award nor any person to
whom a Stock Award is transferred under subparagraphs 5(d) and 6(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms and is thereby entitled to receive shares of stock.
(c) Nothing in the Plan or any instrument executed or Stock
Award granted pursuant thereto shall confer upon any recipient any right to
continue in the employ of the Company or any Affiliate to terminate the
employment or consulting relationship ro directorship of any eligible employee
or recipient with or without cause. In the event that a Stock Award recipient
is permitted or otherwise entitled to take a leave of absence will be treated
as a termination of employment for purposes of his or her Stock Award, and (ii)
suspend or otherwise delay the time or times at which the shares subject to the
Stock Award would otherwise vest.
(d) To the extent provided by the terms of any Stock Award,
the recipient may satisfy any federal, state or local tax withholding
obligation relating to the exercise or receipt of such Stock Award by any of
the following means or by a combination of such means: (1) tendering a cash
payment; (2) authorizing the Company to withhold from the shares of the common
stock otherwise issuable to the participant as a result of the exercise of
receipt of the Stock Award cash or a number of shares having a fair market
value less than or equal to the amount of the withholding tax obligation; or
(3) delivering to the Company owned and unencumbered shares of the common stock
having a fair market value less than or equal to the amount of the withholding
tax obligation.
(e) In connection with each Stock Award made pursuant to
the Plan, the Company may require as a condition precedent to its obligation to
issue or transfer shares to an eligible participant, or to evidence the removal
of any restrictions on transfers or lapse of any repurchase right, that such
participant make arrangements satisfactory to the Company to insure that the
amount of any federal or other withholding tax required to be withheld with
respect to such sale or transfer, or such removal or lapse, is made available
to the Company for timely payment of such tax.
(f) The Company may, as a condition of transferring any
stock pursuant to the Plan, require any person who is to acquire such stock (1)
to give written assurances satisfactory to the Company as to the optionee's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of acquiring the stock; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock for such person's own account and not with any present
intention of selling or otherwise distributing the stock. These requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
(i) the issuance of the shares has been registered under a then currently
effective registration statement under the Securities Act, or (ii) as to any
particular requirement, a
<PAGE> 28
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws.
10. Adjustments Upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan,
or subject to any Stock Award granted under the Plan (through merger,
consolidation, reorganization, recapitalization, stock dividend, dividend in
property other than cash, stock split, liquidating dividend, combination of
shares, exchange of shares, change in corporate structure or otherwise), the
Plan and outstanding Stock Awards will be appropriately adjusted in the
class(es) and maximum number of shares subject to the Plan and the class(es)
and number of shares and price per share of stock subject to outstanding Stock
Awards.
(b) In the event of: (1) a merger of consolidation in
which the Company is not the surviving corporation, or (2) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar rights for those outstanding under the Plan, or
(ii) such Stock Awards shall continue in full force and effect. In the event
any surviving corporation refuses to assume or continue such Stock Awards, or
to substitute similar Stock Awards for those outstanding under the Plan, then,
with respect to Stock Awards held by persons then performing services as
employees or as consultants or directors for the Company, as the case may be,
the time during which such Stock Awards shall vest shall be accelerated and the
Stock Awards terminated if not exercised prior to such event. In the event of
a dissolution or liquidation of the company, any options outstanding under the
Plan shall terminate if not exercised prior to such event.
11. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend
the Plan. However, except as provided in paragraph 10 relating to adjustments
upon changes in stock, no amendment shall be effective unless approved by the
shareholders of the Company within twelve (12) months before or after the
adoption of the amendment, where the amendment will increase the number of
shares reserved for issuance under the Plan.
(b) With a view to making available the benefits provided
by Section 422 of the Code and/or Rule 16b-3 promulgated under the Exchange
Act, if deemed desirable by the Board, the Board in its discretion shall
determine at the time of each amendment of the Plan whether or not to submit
such amendment to the shareholders of the Company for approval.
(c) It is expressly contemplated that the Board may amend
the Plan in any respect the Board deems necessary or advisable to provide
eligible employees with the maximum benefits provided or to be provided under
the provisions of the Code and the regulations promulgated
<PAGE> 29
thereunder relating to employee incentive stock options and/or to bring the
Plan and/or incentive stock options granted under it into compliance therewith.
(d) Rights and obligations under any Stock Award granted
before amendment of the Plan shall not be altered or impaired by any amendment
of the Plan unless (i) the Company requests the consent of the person to whom
the Stock Award was granted and (ii) such person consents in writing.
12. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate ten (10) years from
the date the Plan is adopted by the Board or approved by the shareholders of
the Company, whichever is earlier. No Stock Awards may be granted under the
Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted
while the Plan is in effect shall not be altered or impaired by suspension or
termination of the Plan, except with the consent of the person to whom the
Stock Award was granted.
13. Effective Date of Plan. The Amended and Restate Plan shall
become effective as determined by the Board.
<PAGE> 30
CMC INDUSTRIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of CMC Industries, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase
Common Stock of the Company through accumulated payroll deductions. It is
the intention of the Company to have the Plan qualify as an "Employee
Stock Purchase Plan" under Section 423 of the Internal Revenue Code of
1986, as amended. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent
with the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean CMC Industries, Inc. and any Designated
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
and commissions, overtime, shift premiums, bonuses and other cash
compensation but shall not include income recognized pursuant to stock
options or Shares purchased hereunder or to imputed fringe benefit
income.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion
as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company
is at least twenty (20) hours per week and more than five (5) months
in any calendar year. For purposes of the Plan, the employment
relationship shall be treated as continuing intact while the individual
is on sick leave or other leave of absence approved by the Company.
- -1-
<PAGE> 31
Where the period of leave exceeds 90 days and the individual's
right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase
Period.
(j) "Fair Market Value" shall mean, as of any date, the value
of Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on
such exchange or system on the date of determination, as
reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported,
its Fair Market Value shall be the mean of the closing bid
and asked prices for the Common Stock on the date of such
determination, as reported in The Wall Street Journal or
such other source as the Board deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in
good faith by the Board.
(k) "Offering Periods" shall mean the periods of approximately
twenty-four (24) months during which an option granted pursuant to the
Plan may be exercised, commencing on the first Trading Day on or after
March 1 and September 1 of each year and terminating on the last
Trading Day in the periods ending twenty-four months later; provided,
however, that the first Offering Period shall be a period of
twenty-seven months, commencing on the first Trading Day on or after
December 1, 1996 and terminating on the last Trading Day in the period
ending February 28, 1999. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
- -2-
<PAGE> 32
(m) "Purchase Price" shall mean an amount equal to 85% of the
Fair Market Value of a share of Common Stock on the Enrollment Date or
on the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month
period commencing after one Exercise Date and ending with the
next Exercise Date, except that the first Purchase Period of any
Offering Period shall commence on the Enrollment Date and end with the
next Exercise Date; provided, however, that the first Purchase Period
under the first Offering Period under this Plan shall commence on the
first Trading Day on or after December 1, 1996 and shall end on the
last Trading Day in the period ending February 28, 1997 and the second
Purchase Period shall commence on the first Trading Day on or after
March 1, 1997 and end on the Exercise Date on the last Trading Day in
the Period ending August 31, 1997.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been
exercised and the number of shares of Common Stock which have been
authorized for issuance under the Plan but not yet placed under
option.
(p) "Subsidiary" shall mean a corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by
the Company or a Subsidiary, whether or not such corporation now exists
or is hereafter organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock
exchanges and the Nasdaq System are open for trading.
3. Eligibility.
(r) Any Employee (as defined in Section 2(g)), who shall be
employed by the Company on a given Enrollment Date shall be eligible to
participate in the Plan.
(s) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan
(i) to the extent that, immediately after the grant, such Employee
(or any other person whose stock would be attributed to such
Employee pursuant to Section 424(d) of the Code) would own capital
stock of the Company and/or hold outstanding options to purchase such
stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her
rights to purchase stock under all employee stock purchase plans of
the Company and its subsidiaries accrues at a rate which exceeds
twenty-five thousand dollars ($25,000) worth of stock (determined at
the fair market value of the shares at the time
- -3-
<PAGE> 33
such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the
first Trading Day on or after March 1 and September 1 each year, or on
such other date as the Board shall determine, and continuing thereafter
until terminated in accordance with Section 19 hereof; provided, however,
that the first Offering Period shall be a period of twenty-seven months,
commencing on the first Trading Day on or after December 1, 1996 and
terminating on the last Trading Day in the period ending February 28,
1999. The Board shall have the power to change the duration of Offering
Periods (including the commencement dates thereof) with respect to future
offerings without shareholder approval if such change is announced at
least two (2) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
- -4-
<PAGE> 34
5. Participation.
(t) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions
in the form of Exhibit A to this Plan and filing it with the Company's
payroll office prior to the applicable Enrollment Date.
(u) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last
payroll in the Offering Period to which such authorization is
applicable, unless sooner terminated by the participant as provided
in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay
day during the Offering Period in an amount not exceeding fifteen percent (15%)
of the Compensation which he or she receives on each pay day during the
Offering Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation
in the Plan as provided in Section 10 hereof, or may increase or decrease the
rate of his or her payroll deductions during the Offering Period by completing
or filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period commencing after the
Company's receipt of the new subscription agreement unless the Company elects
to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary
to comply with Section 423(b)(8) of the Code, Section 3(b) or Section 7 hereof,
a participant's payroll deductions may be decreased to zero percent (0%) at any
time during an Offering Period. Payroll deductions shall recommence at the
rate provided in such participant's subscription agreement at the beginning of
the first Purchase Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in
part, or at the time some or all of the Company's Common Stock issued under the
Plan is disposed of, the participant must make adequate provision for the
Company's federal, state, or other tax withholding obligations, if any, which
arise upon the exercise of the option or the disposition of the Common Stock.
At any time, theCompany may, but shall not be obligated to, withhold from the
participant's compensation the
- -5-
<PAGE> 35
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common
Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period
(at the applicable Purchase Price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated prior to such Exercise Date and retained in the Participant's
account as of the Exercise Date by the applicable Purchase Price; provided
that in no event shall an Employee be permitted to purchase during each
Purchase Period more than thirty thousand (30,000) shares and provided
further that such purchase shall be subject to the limitations set forth in
Sections 3(b) and 12 hereof and in Code Section 423(b)(8). Exercise of the
option shall occur as provided in Section 8 hereof, unless the participant
has withdrawn pursuant to Section 10 hereof. The option shall expire on the
last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of
shares shall be exercised automatically on the Exercise Date, and the
maximum number of full shares subject to option shall be purchased for such
participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased;
any payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Purchase Period or Offering Period, subject to
earlier withdrawal by the participant as provided in Section 10 hereof. Any
other monies left over in a participant's account after the Exercise Date
shall be returned to the participant. During a participant's lifetime, a
participant's option to purchase shares hereunder is exercisable only by him
or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option or shall cause an appropriate
entry to be made in participant's brokerage account reflecting the shares
purchased.
10. Withdrawal; Termination of Employment.
(v) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to
exercise his or her option under the Plan at any
- -6-
<PAGE> 36
time by giving written notice to the Company in the form of Exhibit B
to this Plan. All of the participant's payroll deductions credited to
his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the
Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering
Period. If a participant withdraws from an Offering Period, payroll
deductions shallnot resume at the beginning of the succeeding Offering
Period unless the participant delivers to the Company a new subscription
agreement.
(w) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, he or she shall be deemed to have
elected to withdraw from the Plan and the payroll deductions credited to
such participant's account during the Offering Period but not yet used to
exercise the option shall be returned to such participant or, in the case
of his or her death, to the person or persons entitled thereto under
Section 14 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who
receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary
number of hours per week of employment during the period in which the
participant is subject to such payment in lieu of notice.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(x) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be two
hundred and fifty thousand (250,000) shares, increased annually on the
first day of each of the Company's fiscal years during the term of the
Plan (beginning with August 1, 1997) in an amount equal to the lesser of
(i) 3.5% of the total issued and outstanding shares of Common Stock
calculated as of the last day of the immediately preceding Company fiscal
year, or (ii) 3.5% of the total issued and outstanding shares of Common
Stock calculated as of July 31, 1996. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised
exceeds the number of shares then available under the Plan, the Company
shall make a pro rata allocation of the shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
- -7-
<PAGE> 37
(y) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(z) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the
participant and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the
Board or a committee of members of the Board appointed by the Board. The
Board or its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the
full extent permitted by law, be final and binding upon all parties.
14. Designation of Beneficiary.
(aa) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's
account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior
to delivery to such participant of such shares and cash. In addition, a
participant may file a written designation of a beneficiary who is to
receive any cash from the participant's account under the Plan in the
event of such participant's death prior to exercise of the option. If a
participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(ab) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death
of a participant and in the absence of a beneficiary validly designated
under the Plan who is living at the time of such participant's death, the
Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the
Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant,
or if no spouse, dependent or relative is known to the Company, then to
such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a participant's
account nor any rights with regard to the exercise of an option or to
receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent
and distribution or as provided
- -8-
<PAGE> 38
in Section 14 hereof) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds
from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each participant
in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and
the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
Merger or Asset Sale.
(ac) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the Reserves, the amount of the annual
Plan share replenishment, the Purchase Period maximum share purchase
limitation set forth in Section 7, as well as the price per share and the
number of shares of Common Stock covered by each option under the Plan
which has not yet been exercised, shall be proportionately adjusted for
any increase or decrease in the number of issuedshares of Common Stock
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration". Such
adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect
to, the number or price of shares of Common Stock subject to an option.
(ad) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods shall
terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board.
(ae) Merger or Asset Sale. In the event of a proposed sale of all
or substantially all of the assets of the Company,
- -9-
<PAGE> 39
or the merger of the Company with or into another corporation, any
Purchase Periods then in progress shall be shortened by setting a new
Exercise Date (the "New Exercise Date") and any Offering Periods then in
progress shall end on the New Exercise Date. The New Exercise Date shall
be before the date of the Company's proposed sale or merger. The Board
shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the
participant's option has been changed to the New Exercise Date and that
the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn
from the Offering Period as provided in Section 10 hereof.
19. Amendment or Termination.
(af) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section
18 hereof, no such termination can affect options previously granted,
provided that an Offering Period may be terminated by the Board of
Directors on any Exercise Date if the Board determines that the
termination of the Plan is in the best interests of the Company and its
shareholders. Except as provided in Section 18 hereof, no amendment may
make any change in any option theretofore granted which adversely affects
the rights of any participant. To the extent necessary to comply with
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
(ag) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected,"
the Board (or its committee) shall be entitled to change the Offering
Periods, limit the frequency and/or number of changes in the amount
withheld during an Offering Period, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/oraccounting and crediting
procedures to ensure that amounts applied toward the purchase of Common
Stock for each participant properly correspond with amounts withheld from
the participant's Compensation, and establish such other limitations or
procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form
- -10-
<PAGE> 40
specified by the Company at the location, or by the person, designated by
the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares may then be listed,
and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment
and without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. If the Fair Market Value
of the Common Stock on any Exercise Date in an Offering Period is lower than
the Fair Market Value of the Common Stock on the Enrollment Date of such
Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the
exercise of their option on such Exercise Date and automatically re-enrolled in
the immediately following Offering Period as of the first day thereof.
- -11-
<PAGE> 41
EXHIBIT A
CMC INDUSTRIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original ApplicationEnrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ______________________________ hereby elects to participate in the 1996
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and
subscribes to purchase shares of the Company's Common Stock in accordance with
this Subscription Agreement and the 1996 Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 1 to 15%) during the Offering
Period in accordance with the Employee Stock Purchase Plan. (Please note that
no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will
be used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in all
respects subject to the terms of the Plan. I understand that my ability to
exercise the option under this Subscription Agreement is subject to shareholder
approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only):_______________
_____________________.
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the Offering
Period during which I purchased such shares) or one year after the Exercise
Date, I will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount equal to the
excess of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby agree to
notify the Company in writing within 30 days after the date of any disposition
of my shares and I will make adequateprovision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but
- -12-
<PAGE> 42
will not be obligated to, withhold from my compensation the amount necessary to
meet any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits attributable to
sale or early disposition of Common Stock by me. If I dispose of such shares at
any time after the expiration of the 2-year and 1-year holding periods, I
understand that I will be treated for federal income tax purposes as having
received income only at the time of such disposition, and that such income will
be taxed as ordinary income only to the extent of an amount equal to the lesser
of (1) the excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2) 15% of
the fair market value of the shares on the first day of the Offering Period.
The remainder of the gain, if any, recognized on such disposition will be taxed
as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan.
The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please print)_________________________________________________________
(First) (Middle) (Last)
_______________________________ __________________________________________
Relationship (Address)
Employee's Social Security Number:
__________________________________________
Employee's Address: __________________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:________________________ __________________________________________
Signature of Employee
__________________________________________
Spouse's Signature (If beneficiary
other than spouse)
- -13-
<PAGE> 43
EXHIBIT B
CMC INDUSTRIES, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CMC
Industries, Inc. 1996 Employee Stock Purchase Plan which began on ____________,
____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to
pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to
participate in succeeding Offering Periods only by delivering to the Company a
new Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
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<PAGE> 44
APPENDIX A
PROXY
CMC INDUSTRIES, INC
4950 PATRICK HENRY DRIVE, SANTA CLARA, CA 95054
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of CMC Industries, Inc. (the "Company")
appoints Lanny N. Lambert with full power of substitution and revocation as
Proxy to vote all shares of stock standing in my name on the books of the
Company at the close of business on October 8, 1996, which I would be entitled
to vote if personally present at the Annual Meeting of Shareholders of the
Company to be held in the Company's offices at 1801 Fulton Drive, Corinth,
Mississippi 38834, on November 15, 1996, at 10:00 A.M., local time, and at any
and all postponements or adjournments, upon the matters which the undersigned
would be entitled to vote, if then and there personally present, as set forth
in the notice of said meeting. The Proxy is further authorized to vote in his
discretion as to any other matters which may come before the meeting. The
Board of Directors at the time of preparation of the Proxy Statement knows of
no business to come before the meeting other than that referred to in Proxy
Statement.
THE SHARES COVERED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
INSTRUCTIONS GIVEN BELOW AND WHEN NO INSTRUCTIONS ARE GIVEN WILL BE VOTED FOR
EACH OF THE PROPOSALS DESCRIBED IN THE ACCOMPANYING NOTICE OF ANNUAL MEETING
AND PROXY STATEMENT AND ON THIS PROXY.
<TABLE>
<S> <C>
(1) Election of two (2) Class III Directors
/ / For all nominees listed below (except as indicated to the contrary below).
/ / WITHHOLD AUTHORITY to vote for all nominees listed below.
David S. Lee
Charles Holloway
Instruction: To withhold authority to vote for any individual nominee, write such nominee's name in the
space provided below.
----------------------------------------------------------------------------------------------------------------------------
(2) To ratify, adopt and approve the Company's 1996 Employee Stock Purchase Plan.
/ / For / / Against / / Abstain
----------------------------------------------------------------------------------------------------------------------------
(3) To ratify and approve amendments to the Company's 1990 Employee Incentive Plan.
/ / For / / Against / / Abstain
----------------------------------------------------------------------------------------------------------------------------
(4) To ratify the appointment of Price Waterhouse LLP as the Company's independent accountants and auditors for the
Fiscal year ending July 31, 1997.
/ / For / / Against / / Abstain
The undersigned hereby acknowledges receipt of notice of said meeting and the Proxy Statement.
Date: , 1996 Signed
----------------
-------------------------------------------
Number of Shares:
---------------- Signed
-------------------------------------------
Shareholder signs here exactly as shown on the label
affixed hereto. Administrator, Trustee, or Guardian,
please give full title. If more than one Trustee, all
should sign. All Joint Owners should sign.
</TABLE>
Please indicate if you plan to attend the Shareholders' Meeting.
Yes, I plan to attend the Shareholders' Meeting.
- --------
No, I do not plan to attend the Shareholders' Meeting.
- --------
PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
