<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (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] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CMC INDUSTRIES, INC.
1801 FULTON DRIVE
CORINTH, MS 38834
TEL (601) 287-3771
FAX (601) 287-8416
October 20, 1998
TO THE SHAREHOLDERS OF CMC INDUSTRIES, INC.
In connection with the Annual Meeting of Shareholders of CMC
Industries, Inc. to be held on November 20, 1998, 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 three Class II directors to
serve until the Annual Meeting of Shareholders in 2000 or until their successors
are duly elected and qualified and to ratify the appointment of
PricewaterhouseCoopers LLP as the Company's independent accountants and auditors
for the fiscal year ending July 31, 1999. Information about these matters is
contained in the enclosed Proxy Statement.
Detailed information relating to the Company's activities and operating
performance during 1998 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 1998 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,
/s/ Lanny N. Lambert
----------------------------------
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 20, 1998
Notice is hereby given that the Annual Meeting of Shareholders of CMC
Industries, Inc. (the "Company"), will be held on November 20, 1998, 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 three (3) Class II directors to serve a three-year term or until
their successors have been duly elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants and auditors for the fiscal year ending July 31,
1999.
3. 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 12, 1998 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,
/s/ Lanny N. Lambert
----------------------------------
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.
1998 ANNUAL MEETING OF SHAREHOLDERS
November 20, 1998
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 20, 1998 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. The mailing
address of the principal executive offices of the Company is 4950 Patrick Henry
Drive, Santa Clara, California 95054. The Company's telephone number at that
location is (415) 982-9999.
These proxy solicitation materials and the Annual Report to
Shareholders, including financial statements, were first mailed on or about
October 20, 1998, 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 three (3) Class II
directors to serve until the Annual Meeting in 2001 or until their successors
are duly elected and qualified; (ii) to ratify the appointment of
PricewaterhouseCoopers LLP as independent accountants and auditors of the
Company for fiscal year 1999; and (iii) 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 12, 1998
("Record Date") are entitled to notice of and to vote at the Annual Meeting. At
the Record Date, 7,593,556 shares of the Company's Common Stock, $.01 par value
per share, were issued and outstanding. No shares of the Company's 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 ratification of the appointment of
PricewaterhouseCoopers LLP as independent accountants and auditors for fiscal
year 1999. 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 purposes
of determining the presence or absence of a quorum for the transaction of
business, broker non-votes should not be counted for purposes of determining the
number of Votes Cast with 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 1999 ANNUAL MEETING
The Company currently intends to hold its 1999 Annual Meeting of
Stockholders in mid-November 1999 and to mail Proxy Statements relating to such
meeting in mid-October 1999. 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 1999 Annual Meeting is July 15, 1999.
Pursuant to recent amendments to Rule 14a-4 under the Securities
Exchange Act of 1934, as amended, unless a stockholder proposal for the
Company's Annual Meeting in 1999 is submitted to the Company prior to September
5,1999, the Company may use its discretionary voting authority to vote proxies
on such proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of September 30, 1998, 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.
<PAGE> 6
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP (1) CLASS (1)
------------------------------------ ------------- ---------
<S> <C> <C>
5% HOLDERS:
David S. Lee (2) (3) 1,455,759 19.1%
4950 Patrick Henry Drive
Santa Clara, CA 94035
DIRECTORS AND NAMED EXECUTIVE OFFICERS:
David S. Lee (3) 1,455,759 19.1%
Matthew G. Landa (3) 201,861 2.6%
Andrew J. Moley (3)(4) 203,698 2.6%
Lanny N. Lambert (3) 41,114 *
Jack O'Rear (3) 69,635 *
Karl Chang (3) 112,148 1.5%
Frederick W. Gibbs (3) 41,712 *
Ira Coron (3) 7,812 *
Charles Holloway (3) 12,812 *
Richard M. Moley 309,200 4.1%
M. Kenneth Oshman 250,000 3.3%
Directors and Executive Officers as a group (3) 2,705,751 33.3%
(11 persons)
</TABLE>
- ----------
*Less than 1%
(1) Unless otherwise indicated, beneficial ownership consists of sole voting
and investing power based on 7,593,556 shares issued and outstanding,
excluding options to purchase 736,703 shares, which options are exercisable
or become exercisable within 60 days of September 30, 1998. 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, 1998 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 5,000 shares of Common Stock owned by Mr.
Lee's children. Mr. Lee disclaims beneficial ownership of such shares.
(3) Included in the table are shares of stock which may be acquired with 60
days of September 30, 1998, by exercise of stock options as follows: Mr.
Lee, 12,812; Mr. Landa, 170,185; Mr. Andrew Moley, 170,185; Mr. Lambert,
20,968; Mr. O'Rear, 61,561; Mr. Chang, 65,541; Mr. Gibbs, 12,812; Mr.
Coron, 4,812; Mr. Holloway, 12,812; all Directors and executive officers as
a group, 531,688.
(4) Included in the table for Mr. Andrew Moley are 4,753 shares owned by a
trust for which he serves as a co-trustee. Mr. Moley possesses shared
voting and investment power with respect to all of the shares held by such
trust.
<PAGE> 7
PROPOSAL 1. ELECTION OF DIRECTORS
NOMINEES
The Company's Board of Directors currently consists of eight persons
serving staggered three-year terms. Three Class II directors will be elected at
the Annual Meeting for a term of three years. The Class III directors, whose
terms will expire in 1999, are Mr. David S. Lee, Mr. Charles Holloway and Mr.
Richard M. Moley, and the Class I directors, whose terms will expire in 2000,
are Mr. Frederick W. Gibbs and Mr. Ira Coron.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the three (3) 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 director's successor has been duly elected and
qualified.
VOTE REQUIRED
The three 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 II Directors. An abstention will have the same effect as a vote 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 II Directors (Term expiring 2001)
Matthew G. Landa
Andrew J. Moley
M. Kenneth Oshman
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 61 Chairman of the Board 1990
Matthew G. Landa 33 President and Chief
Executive Officer 1995
Andrew J. Moley 34 Executive Vice President and 1995
Chief Financial Officer
Ira Coron 69 Director 1996
Frederick W. Gibbs 66 Director 1993
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
Position(s) with the Director
Name Age Company Since
- ---- --- ------- -----
<S> <C> <C> <C>
Charles Holloway 62 Director 1996
Richard M. Moley 59 Director 1998
M. Kenneth Oshman 58 Director 1998
EXECUTIVE OFFICERS:
Karl Chang 43 Vice President,
President
Asian Operations
Lanny N. Lambert 49 Vice President
and Secretary
Jack O'Rear 57 Vice President and
Chief Operating Officer,
</TABLE>
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 Award Software International, Centigram Communications
Corporation, DTC Data Technology Corporation and of Linear Technology
Corporation. 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
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 of California
Amplifier, Inc., a communications equipment manufacturing company. From 1994 to
1997, Mr. Coron also served as Chief Executive Officer of California Amplifier,
Inc. From 1989 to 1994, Mr. Coron was an 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 Made2manage Systems, Inc. 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
<PAGE> 9
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.
RICHARD M MOLEY. Mr. Moley has served as a director since January 1998.
Mr. Moley is presently a private investor. From 1996 to 1998, Mr. Moley served
as Senior Vice President and Director of Cisco Systems, Inc. Mr. Moley served as
President, Chief Executive Officer and Chairman of Stratacom, Inc. from its
inception in 1988 until its acquisition by Cisco in July 1996. Mr. Moley
currently serves on the Board of Directors of Linear Technology, Cidco, Echelon
and several private companies.
M. KENNETH OSHMAN. Mr. Oshman has served as a director since January
1998. Mr. Oshman is President, Chairman and Chief Executive Officer of Echelon
Corporation, a company that creates and provides technology and products for the
control network industry. Mr. Oshman, with three associates, founded ROLM
Corporation ("ROLM"), a telecommunications equipment company, in 1969. He was
Chief Executive Officer, President, and a director at ROLM from its founding
until its merger with IBM in 1984. Following the merger, he became a Vice
President of IBM and remained in that position until 1986. Mr. Oshman serves as
a director of Sun Microsystems, Knight-Ridder, Inc. and Snap/Track, Inc. Mr.
Oshman earned his B.A. and B.S. degrees from Rice University and M.S. and Ph.D.
degrees in Electrical Engineering from Stanford University. He has served as
Chairman of the Board of the Stanford Alumni Association, Chairman of the
American Electronics Association, the Santa Clara County Manufacturing Group and
the Community Foundation of Silicon Valley.
KARL CHANG. Mr. Chang has served as President of the Company's Asian
operations since September 1997. 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.
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.
<PAGE> 10
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
Company's 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 Ira Coron
Frederick W. Gibbs M. Kenneth Oshman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Neither Mr. David S. Lee, Mr. Frederick W. Gibbs, Mr. Ira Coron, nor
Mr. M. Kenneth Oshman, the members of the Company's Compensation Committee
during fiscal 1998, 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
five 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 1998
during the period which such directors were members of the Board of Directors.
Directors not otherwise employed by the Company received $2,000 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 1998 were Messrs. Lee, Gibbs, Coron and Oshman. The Compensation
Committee is primarily responsible for reviewing and administering the Company's
employee benefit plans. The Compensation Committee held one meeting during
fiscal 1998. During fiscal 1998, the Audit Committee consisted of Messrs.
Holloway, Gibbs and R. Moley. The Audit Committee is primarily responsible for
engaging the Company's independent accountants and 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. The Audit Committee held one meeting during
fiscal 1998
<PAGE> 11
EXECUTIVE COMPENSATION
The following table shows the aggregate cash compensation paid during
the three years ended July 31, 1998 to the Chief Executive Officer and the Named
Executive Officers of the Company, who each received cash compensation in excess
of $100,000 in fiscal 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------------------------------ ------------
Other Annual
Name and Position Year Salary ($) Bonus ($) Compensation ($) Options (#)
- ----------------- ---- ---------- --------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Matthew G. Landa 1998 $229,243 60,000(1) $ 119(2) 60,000
President and Chief 1997 $195,481 -0- $ 119(2) 41,667
Executive Officer 1996 $125,693(3) -0- $20,000(4) 150,000
Andrew J. Moley 1998 $206,880 50,000(1) $ 119(5) 60,000
Executive Vice President 1997 $179,712 -0- $ 119(5) 41,667
and Chief Financial Officer 1996 $125,693(6) -0- $20,000(7) 150,000
Jack O'Rear 1998 $202,138 40,000(1) $6,612(8) 40,000
Vice President and 1997 $182,079 16,000(1) $8,233(8) 15,000
Chief Operating Officer 1996 $175,011 -0- $5,604(8) 5,000
Karl Chang 1998 $117,700 5,000(1) $7,280(9) -0-
Vice President, President- 1997 $117,700 -0- -0- 10,000
Asian Operations 1996 $107,000 -0- -0- 5,000
Lanny N. Lambert 1998 $117,000 15,000(1) $5,561(10) 25.000
Vice President 1997 $105,279 8,000(1) $5,530(10) 6,000
And Secretary 1996 $101,192 -0- -0- 1,500
</TABLE>
- ----------
(1) Includes bonus earned in prior fiscal year.
(2) Includes life insurance premiums paid on behalf of Mr. Landa.
(3) Mr. Landa joined the Company in October 1995.
(4) Includes consultant fees paid to Mr. Landa prior to his employment by the
Company.
(5) Includes life insurance premiums paid on behalf of Mr. Moley.
(6) Mr. Moley joined the Company in October 1995.
(7) Includes consultant fees paid to Mr. Moley prior to his employment by the
Company.
(8) Includes automobile expense allowance, life insurance premiums and personal
airfare for Mr. O'Rear.
(9) Includes automobile expense allowance and insurance premiums for Mr. Chang
(10) Includes automobile expense allowance and insurance premiums for Mr.
Lambert.
<PAGE> 12
Option Grants in Fiscal 1998
<TABLE>
<CAPTION>
Percent of total Potential realizable value at
options granted to Exercise or assumed annual rate of stock
Options employees in fiscal base Expiration price appreciation
Name Granted (#) year price ($/sh) date for option term
- ---- ----------- ------------------- ------------ ---------- -----------------------------
5% ($) 10% ($)
--------- ----------
<S> <C> <C> <C> <C> <C> <C>
Matthew Landa 60,000 10% 10.125 10/15/07 $ 382,053 $ 968,198
Andrew Moley 60,000 10 10.125 10/15/07 $ 382,053 $ 968,198
Jack O'Rear 15,000 3 8.00 08/22/07 $ 75,467 $ 191,249
15,000 3 10.50 11/13/07 $ 99,050 $ 251,014
10,000 2 9.00 05/18/08 $ 56,600 $ 143,436
Lanny N. Lambert 5,000 1 8.00 08/22/07 $ 25,155 $ 63,749
20,000 3 9.00 05/18/08 $ 113,201 $ 286,873
</TABLE>
Year-end Option Values(1)
<TABLE>
<CAPTION>
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 25,000 $139,062 150,138 / 76,529 $332,864 / $ 30,261
Andrew Moley 25,000 $139,062 150,138 / 76,529 $332,864 / $ 30,261
Jack O'Rear -0- $-0- 55,310 / 44,690 $155,330 / $ 14,120
Karl Chang -0- $-0- 63,040 / 10,627 $ 80,749 / $ 21,593
Lanny Lambert -0- $-0- 17,426 / 27,574 $ 12,361 / $ 3,919
</TABLE>
- ----------
Market values of the underlying securities at July 31, 1998, $6.625 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, 1993 and ending July 31, 1998 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: ACT Manufacturing, Inc.,
Benchmark Electronics, Inc., Dovatron International, Inc., Flextronics
International Ltd., 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 Company's Common Stock, in the Nasdaq Index and in the Peer
Group Index on December 9, 1993 (the date of the closing of the Company's
initial public offering). Note that historic stock price performance is not
necessarily indicative of future stock price performance.
<TABLE>
<CAPTION>
Nasdaq Stock Market Self-Determined
Date CMC Industries, Inc. (US Companies) Peer Group
<S> <C> <C> <C>
07/31/93 92.358 80.819
08/31/93 97.132 87.143
09/30/93 100.025 96.491
10/31/93 102.273 96.721
11/30/93 99.223 101.297
12/09/93 100.000 100.000 100.000
12/31/93 97.143 101.989 102.234
01/31/94 114.286 105.085 105.806
02/28/94 112.857 104.104 111.734
03/31/94 65.714 97.702 99.828
04/30/94 58.571 96.435 95.299
05/31/94 40.000 96.670 92.816
06/30/94 35.714 93.135 86.429
07/31/94 40.000 95.045 90.002
08/31/94 34.286 101.105 101.721
09/30/94 34.286 100.846 99.242
10/31/94 45.714 102.828 96.167
11/30/94 55.714 99.417 95.253
12/31/94 60.000 99.696 94.062
01/31/95 52.857 100.254 89.233
02/28/95 50.000 105.556 88.738
03/31/95 44.286 108.685 97.761
04/30/95 25.714 112.107 101.469
05/31/95 25.714 114.998 104.081
06/30/95 31.429 124.317 118.519
07/31/95 37.143 133.455 133.409
08/31/95 37.143 136.160 137.233
09/30/95 48.571 139.291 147.868
10/31/95 48.571 138.492 149.772
11/30/95 50.714 141.744 154.910
12/31/95 48.571 140.990 149.820
01/31/96 45.714 141.685 153.404
02/29/96 58.571 147.079 161.633
03/31/96 58.571 147.566 154.408
04/30/96 71.429 159.809 169.906
05/31/96 94.286 167.147 169.325
06/30/96 73.571 159.612 146.209
07/31/96 67.143 145.396 129.195
08/31/96 87.143 153.542 150.710
09/30/96 85.714 165.287 185.006
10/31/96 98.571 163.460 191.251
11/30/96 105.714 173.566 207.745
12/31/96 110.000 173.408 203.022
01/31/97 137.143 185.732 233.873
02/28/97 102.857 175.478 203.210
03/31/97 105.714 164.027 199.708
04/30/97 95.714 169.152 255.850
05/31/97 87.143 188.326 253.260
06/30/97 85.714 194.094 291.438
07/31/97 75.714 214.561 336.902
08/29/97 118.571 214.207 385.299
09/30/97 125.000 226.867 431.517
10/31/97 114.286 215.116 358.209
11/28/97 137.143 216.195 349.259
12/31/97 67.143 212.741 347.592
01/30/98 101.429 219.413 353.021
02/27/98 112.857 240.014 402.159
03/31/98 117.143 248.864 332.188
04/30/98 107.143 253.081 366.438
05/29/98 104.286 239.192 327.141
06/30/98 84.286 256.044 339.946
07/31/98 75.714 253.187 365.027
</TABLE>
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has had numerous transactions with its former affiliate and
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.
In July 1998, the Company converted certain older accounts receivable
from Cortelco totaling $2.0 million into a note receivable. Under the terms of
the note, Cortelco agrees to pay the balance over a three-year term with monthly
payments of $50,000 plus interest and a final installment of $200,000 due at the
end of the three-year period. Interest accrues on the note at a rate of 9.0% per
annum. The Company continues to provide credit for manufacturing services sold
to Cortelco in the form of trade receivables.
During fiscal 1997, the Company executed an agreement and subsequently
acquired 42,500 shares of the Company's common stock in exchange for a $441,000
receivable due from DTC Data Technology Corporation ("DTC"), a company of which
Mr. Lee is President, Chairman of the Board and has an ownership interest. The
shares were acquired from a company affiliated through common ownership to DTC.
The number of shares was based on the fair market value of the stock at the time
of the transaction.
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. RATIFICATION OF APPOINTMENT OF THE
INDEPENDENT ACCOUNTANTS AND AUDITORS
The Board of Directors has appointed PricewaterhouseCoopers LLP,
independent accountants and auditors, to audit the consolidated financial
statements of the Company for the fiscal year ending July 31, 1999 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. PricewaterhouseCoopers LLP served as independent
accountants and auditors of the Company for the fiscal year ended July 31, 1998
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.
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 PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS AND AUDITORS FOR THE FISCAL YEAR ENDING JULY 31, 1999.
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, including
Forms 5 filed by the Company's Directors and Executive Officers in which, to the
Company's knowledge, any prior reporting defects were corrected, and
representations that no other reports were required, during the fiscal year
ended July 31, 1998, all of the Company's officers and directors made all
required filings.
<PAGE> 15
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, 1998, 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,
/s/ Lanny N. Lambert
----------------------------------
Corinth, Mississippi Lanny N. Lambert
October 20, 1998 Secretary
<PAGE> 16
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 12, 1998, 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 20, 1998, 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 the 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.
(1) Election of three (3) Class II Directors
[ ] For all nominees listed below (except as indicated to
the contrary below).
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
below.
Matthew G. Landa
Andrew J. Moley
M. Kenneth Oshman
Instruction: To withhold authority to vote for any individual nominee,
write such nominee's name in the space provided below.
- --------------------------------------------------------------------------------
(2) To ratify the appointment of PricewaterhouseCoopers
LLP as the Company's independent accountants and
auditors for the Fiscal year ending July 31, 1999.
[ ] For [ ] Against [ ] Abstain
The undersigned hereby acknowledges receipt of notice of said meeting and the
Proxy Statement.
Date , 1998 Signed
----------------------
---------------------------
Number of Shares:
-----------------
Signed
(Label to be placed here) ---------------------------
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.
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.
